2020
ANNUAL
REPORT
2
KEY FIGURES
Results and orders (NOK million)
Revenue and other income
EBITDA
EBITDA margin (percent)
Net profit (loss) from continuing operations
Net profit (loss)
NIBD
Equity ratio (percent)
Order intake
Order backlog
Share (NOK)
Share price December 31
Basic/ Diluted earnings per share
Employees (Full time equivalents)
Employees including hired-ins
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)
2020
2019
4 577
331
7.2
(469)
(584)
1 357
40
3 789
2 375
5 361
492
9.2
147
93
692
41
5 250
3 166
7.08
(2.14)
9.94
0.37
1 947
2 272
1.0
1.7
2.7
0.8
1.5
2.4
Net capital employed
NOK million
Revenue
NOK million
EBITDA
NOK million
Other
990
MHWirth
2 801
2000
AGR
148
AKOFS
Offshore
1 063
1500
1000
500
0
1 557
1 424
1 254
200
150
153
137
926
973
100
50
0
71
66
57
Q4 19 Q1 20 Q2 20 Q3 20 Q4 20
Q4 19
Q1 20
Q2 20
Q3 20
Q4 20
Annual Report 2020 3
TABLE OF CONTENTS
01. BOARD OF DIRECTORS' REPORT
02. DECLARATION BY THE BOARD
OF DIRECTORS AND CEO
03. CORPORATE GOVERNANCE STATEMENT
– AKASTOR ASA
04. FINANCIALS AND NOTES
a. Akastor Group
b. Akastor ASA
05. AUDITOR'S REPORT
06. ALTERNATIVE PERFORMANCE
MEASURES
07. BOARD OF DIRECTORS
08. MANAGEMENT
09. COMPANY INFORMATION
4
13
14
23
23
86
98
102
104
107
108
Annual Report 2020
4
01. 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. The shares of Akastor
are traded on the Oslo Stock Exchange under the ticker AKAST.
The Akastor portfolio of companies had a total net capital
employed of NOK 5.0 billion at the end of 2020.
Highlights 2020
2020 was dominated by the outbreak of the COVID-19 virus,
and the following turmoil in the oil and gas markets. Akastor
has focused on mitigating operational effects and minimizing
negative financial consequences for its portfolio companies
while preserving liquidity and assuring financial flexibility.
In the first quarter, Step Oiltools (wholly owned by Akastor)
was integrated with MHWirth to strengthen MHWirth’s solids
control offering and increase its footprint in Russia and Asia-
Pacific. This follows the growth strategy of MHWirth
announced in 2019.
In August, Akastor announced that it would assume full
ownership of a restructured DOF Deepwater AS. As part of
this transaction, DOF Deepwater AS changed its name to
DDW Offshore AS (DDW). The restructuring
involved
conversion of 50 percent of the debt into shares in the
company, with remaining debt maturing in Q4 2023. As part of
the restructuring agreement, DDW will target to realize vessel
values at or around maturity date, with sales proceeds to be
shared 50/50 between the lenders and DDW. Closing of the
transaction was completed in October 2020. From that date,
DDW is consolidated into Akastor as a subsidiary.
In September, NES Global Talent, in which Akastor held an
economic interest of around 17 percent, joined forces with the
Fircroft Group (Fircroft) to create NES Fircroft (NES), a leading
human capital solutions business for engineering and technical
talent globally. Following the transaction, Akastor’s economic
interest in the combined entity was reduced to 15.6 percent.
In December, MHWirth received notification of a contract
award for delivery of topside drilling equipment to be installed
onboard a research drillship operated by Guangzhou Marine
Geological Survey (GMGS) with delivery in December 2023.
The contract value is around USD 80 million and signing of the
contract is expected in Q1 2021. The award is strategically
important for MHWirth to secure activity within its project
department and confirms the company’s competitiveness and
technical competence within drilling topside equipment.
completed. Following this, Aker Holdings AS and the Norwegian
government controlled 36.7 percent and 12.1 percent of the
shares outstanding in Akastor respectively through separate
accounts.
Akastor’s total revenue was reduced from NOK 5.4 billion in
2019 to NOK 4.6 billion in 2020, a decrease of 15 percent. The
drop in revenues was primarily a result of lower activity in
MHWirth following the challenging market situation especially
affecting equipment sales. The year-on-year reduction in
revenues for MHWirth’s life cycle service and digital technology
segment, DLS & Digital Technology, was only 5 percent,
reflecting the resilience of this business segment through a
very challenging year.
Company Overview
Aker Holdings AS (previously Aker Kværner Holding AS),
wholly owned by Aker ASA, is the largest shareholder of
Akastor with a shareholding of 36.7 percent. Akastor is
primarily focused on the oilfield services sector. The portfolio
per 2020 covers several industrial holdings in this sector,
including:
MHWirth, which provides drilling systems and lifecycle
services. Ownership interest is 100 percent (see infor-
mation under “Subsequent Events”).
AKOFS Offshore, a subsea well installation and inter-
vention services provider. Ownership interest is 50
percent.
AGR, which delivers well-, reservoir- and software ser-
vices to the offshore drilling industry. Economic inter-
est is 64 percent.
Cool Sorption, a supplier of vapour recovery units and
systems. Ownership interest is 100 percent.
Each above-mentioned Akastor portfolio company is organized
as an independent business which is self-sufficient and with its
own dedicated management team fully responsible for all
aspects of its operational activities. All portfolio companies
have separate boards of directors, consisting of appointed
Akastor investment managers, including, for some companies,
external board members and employee representatives. This
governance model provides for strong management of
operational activities and a good foundation for close
cooperation between Akastor, the portfolio companies and
their employees.
Also in December, Aker ASA announced that the dissolution of
the joint ownership with the Norwegian government of Aker
Holdings AS (previously Aker Kværner Holding AS) was
In addition to its portfolio of industrial holdings, Akastor has
several financial investments, including:
Annual Report 2020 | Board of Directors' ReportBoard of Directors’ Report 5
DDW Offshore, which owns and operates five offshore
vessels. Ownership interest is 100 percent.
NES Fircroft, a technical and engineering staffing com-
pany. Economic interest is 15.6 percent.
Odfjell Drilling, preferred equity instrument with carry-
ing amount of USD 85.2 million plus a warrant struc-
ture of up to 5.9 million shares.
Awilco Drilling, ownership interest is 5.6 percent.
The Akastor corporate organization is based at Fornebu, just
outside of Oslo in Norway, with a team of 15 employees,
working closely with the boards and management of its
portfolio companies.
Akastor has a total of 1 947 employees (including hired-ins)
with presence in approximately 20 countries at year-end 2020.
Strategy
Akastor is an investment company, employing an independent
its
approach for each portfolio company to optimize
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
operational activity, 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.
The business models of the portfolio companies are
decentralized with each entity being self-sufficient, but as part
of the Akastor portfolio, all companies share a common
foundation based on Akastor’s values, governing documents
and compliance structure.
Akastor seeks to maximize value by combining strategic,
operational and financial measures. Akastor’s strategy as an
investment company is to generate an acceptable return on
existing investments. Further investments may be made in the
existing portfolio companies in order to strengthen the
companies and prepare for a future exit. The ultimate goal is to
return the capital to the shareholders of Akastor upon
divestments of assets, but at the same time ensure that Akastor
has a solid capital structure.
Market Outlook
global pandemic by World Health Organization. This outbreak
caused significant disruption to the global economy through
reduced industrial activity, extensive travel restrictions and
mandatory quarantines. The oil and gas market was strongly
affected by negative demand development following lower
global activity as well as turmoil on the supply side, resulting in
a sharp decline in oil prices in the beginning of 2020. This
added additional pressure on the global economy, with direct
effects on the investment level of oil companies and following
consequences for the oilfield services industry. For Akastor,
these events have especially affected the capital equipment
segment of MHWirth through a lower demand for single
equipment as well as a muted rig newbuilding market. The
service and digital technology segments of MHWirth which
together accounted for 58 percent of revenues in 2020, up
from 50 percent in 2019, has proven resilient through the
market turmoil with a relatively low decline in nominal revenues.
In 2021, Akastor will continue to focus strongly on minimizing
the spread of the virus and mitigate substantial disruptions to
operations throughout the portfolio. Akastor management is
cautiously optimistic that market situation will improve through
2021 as a result of increased rate of COVID-19 vaccination,
which in turn should lead to increased global activity and thus
increased demand for products and services offered by the
Akastor group of companies. Still, it is expected that the
COVID-19 virus will have negative impact on the global economy
and the operational activities in Akastor’s portfolio companies
also in 2021. The financial impact as a result of this remains
uncertain as it still is difficult to predict the duration of the virus
outbreak and the long-term impact on the financial markets
and the industrial activity level. From an accounting perspective,
these factors could impact future assessments of recoverable
amounts of Akastor’s assets if the current volatility results in a
negative long-term market outlook.
Since the last downturn started in 2014, Akastor has focused
on reducing costs and maintaining a flexible cost base. During
2020, Akastor has carried out cost reduction programs across
all portfolio companies to preserve earnings and reduce impact
of the market turmoil. At the same time, Akastor has focused
on preserving key competencies to remain relevant when
markets improve.
Technology development remains a clear strategic target for
Akastor for all portfolio companies. In recent years, MHWirth
has, through
its business segment Digital Technology,
developed new solutions optimizing operations of the drilling
equipment and reducing energy consumption and today has
several systems successfully installed and in operation onboard
drilling rigs. The solutions receive good feedback from
customers and Digital Technology continues to be a key priority
for MHWirth going forward.
Akastor’s portfolio companies operate mainly in the oilfield
services industry. During 2020, this industry was heavily
affected by the outbreak of the COVID-19 virus, declared as a
Based on the current footprint of the portfolio, the oilfield
services industry will remain the primary market for Akastor for
some time. However, Akastor will, as an active owner, in parallel
focus on developing its offering within non-oil markets and the
Annual Report 2020 | Board of Directors' Report 6
renewable space to further diversify the portfolio. Akastor is
also targeting to support the industry’s transition to more
energy-efficient operations for its clients through development
of new solutions. As an example, MHWirth is working to
optimize and reduce fuel consumption and carbon footprint for
its clients through delivering more efficient drilling solutions
while both the engineering division and Digital Technology are
seeking opportunities within industries outside of oil and gas.
Group Financial Performance
Akastor presents its consolidated financial statements in
accordance with
International Financial Reporting
Standards (IFRS) as adopted by the European Union.
the
All amounts below refer to the consolidated financial
statements for the group, unless otherwise stated.
Income Statement
Revenue and other income for 2020 decreased by 15 percent
to NOK 4 577 million. Operating profit before interest, tax,
depreciation and amortization (EBITDA) decreased by NOK 161
million to NOK 331 million.
Depreciation, amortization and impairment was NOK 278
million in 2020, compared to NOK 270 million in the previous
year.
Net financial expenses were NOK 436 million in 2020 compared
to NOK 30 million in the previous year. The net financial
expenses included Akastor’s share of net loss of NOK 256
million from the equity-accounted investees DOF Deepwater
(DDW Offshore prior to consolidation) and AKOFS Offshore,
dividend income of NOK 77 million from equity investment,
unrealized loss of NOK 94 million in fair value changes of
financial investments, as well as impairment of NOK 120 million
related to receivables. In addition, net financial items in 2020
included net financial charges on leases of NOK 36 million.
The board of directors has resolved to propose to the annual
general meeting that no dividend is distributed for 2020.
Financial Position
Total assets of Akastor amounted to NOK 9.1 billion as of
December 31, 2020, compared with NOK 10.6 billion at year-
end 2019. The decrease is mainly related to changes in current
operating assets, partly mitigated by the consolidation of DDW
Offshore AS as a subsidiary.
Net debt (excluding lease liabilities) was NOK 1.5 billion at the
end of the period, while net interest-bearing debt (NIBD) was
NOK 1.4 billion. NIBD increased through the year, primarily
explained by the consolidation of DDW Offshore including its
net debt of NOK 426 million per year end 2020.
Total equity amounted to NOK 3.7 billion at year-end 2020, of
which non-controlling interests were NOK 11 million. The equity
ratio was 40 percent as of December 31, 2020, slightly
decreased from 41 percent in 2019.
Cash Flow
As of December 31, 2020, Akastor had cash of NOK 275 million,
compared to NOK 555 million in 2019. The net cash flow from
operating activities was positive NOK 211 million, compared to
operating cash flow of NOK 406 million in the previous year.
The positive net cash flow from operating activities comprises
of cash inflow generated from operating activities of NOK 369
million offset by net payments of NOK 158 million for interest
costs and income tax.
Net cash flow from investing activities was negative NOK 219
million, compared to negative NOK 555 million in 2019. The
cash flow from investing activities included payments related to
contingent considerations from divestments in previous years.
Capex investments were NOK 67 million compared to NOK 127
million in 2019.
The pre-tax loss for the year was NOK 383 million, compared to
a gain of NOK 191 million the previous year.
Net cash flow from financing activities amounted to negative
NOK 227 million and included payment of lease liabilities of
NOK 139 million.
The income tax expenses for 2020 were NOK 86 million,
compared to a tax expense of NOK 44 million in 2019. The
effective tax rate is impacted by several items, such as
impairment of deferred tax assets, non-tax deductible items as
well as mix of revenue generated in various jurisdictions with
different tax rates.
Net loss from continuing operations was NOK 469 million,
while net loss from discontinued operations was NOK 115
million. The net loss from discontinued operations was mainly
related to negative effects on re-assessment of the provision
for guaranteed preferred return to our joint venture partners in
AKOFS Offshore as well as contingent considerations related
to previously divested Managed Pressure Operations Ltd
(MPO). The group had an operating loss of NOK 584 million for
the year.
Going Concern
The world is currently in the middle of the COVID-19 outbreak,
and how this will unfold remain uncertain. Akastor
is
continuously monitoring the development and will continue to
take measures to mitigate the negative impacts for the
company, including measures required to meet restrictions
from governmental authorities. However, there is a risk that the
COVID-19 outbreak may have substantial negative effects on
the global economy which are worse than current estimates, in
which case this will also have increased negative effects on
Akastor.
The COVID-19 outbreak gives higher uncertainty for the going
concern assumption for most companies. This is also the case
for Akastor. Based on current financial forecasts, there is a risk
Annual Report 2020 | Board of Directors' Report 7
for breaching the ICR covenant in the first quarter of 2021. This
is driven by lower earnings following the COVID-19 outbreak as
well as the consolidation of DDW which from Q4 2020 has
contributed negative EBITDA and increased interest cost in
Akastor’s consolidated financial statements. To mitigate this
risk, Akastor has obtained a waiver of the ICR covenant in
March 2021 for the remaining period of the current financing.
The waiver is contingent on closing of the refinancing of
Akastor following the creation of a joint venture between
MHWirth AS and Baker Hughes’ Subsea Drilling Systems
business as described below.
On March 2, 2021, Akastor announced an agreement with
Baker Hughes to create a joint venture company that will bring
together Akastor’s wholly owned subsidiary, MHWirth AS and
Baker Hughes’ Subsea Drilling Systems business. The
transaction will require refinancing of Akastor’s existing
corporate credit facility. Akastor has received commitments for
a total of NOK 1 250 million in revolving credit facilities that will
be entered into prior to closing of the transaction, which is
expected to take place in the second half of 2021. Please see
“Subsequent events” below for more information of the
transaction.
Based on the received ICR covenant waiver and committed
refinancing of the group following the MHWirth transaction,
management believes that the risk of additional covenant
breach is low and that the group will continue as a going
concern for the foreseeable future.
Therefore, in accordance with the Norwegian Accounting Act,
the board of directors confirms that the going concern
assumption, on which the consolidated financial statements
have been prepared, is appropriate.
Subsequent events
On March 2, 2021, Akastor announced an agreement with
Baker Hughes to create a joint venture company (Company)
that will bring together Akastor’s wholly owned subsidiary,
MHWirth AS (MHWirth) and Baker Hughes’ Subsea Drilling
Systems (SDS) business. The Company will deliver a global full-
service offshore drilling equipment offering that will provide
customers with a broad portfolio of products and services.
The Company shall be owned 50/50 by Akastor and Baker
Hughes. Akastor shall contribute its shares in MHWirth to the
Company in return for 50% of the shares of the Company and
USD 120 million in consideration, of which USD 100 million is
payable in cash at closing. Baker Hughes shall contribute the
SDS business to the Company in return for the other 50% of
the shares and USD 200 million in consideration, of which USD
120 million is payable in cash at closing. The Company shall
issue notes to Akastor and Baker Hughes representing the
balance of the consideration owed to them. The notes shall be
subordinated to the Company’s external debt financing. The
Company will finance the cash consideration payable to Baker
Hughes and Akastor by way of a USD 220 million bank facility.
In addition, the Company will be financed by a USD 80 million
working capital facility.
The transaction agreement entered into by Akastor and Baker
Hughes provides for customary terms for agreements of this
nature, including representations and warranties relating to the
businesses being contributed as well as an agreed form
shareholders agreement customary for a 50/50 joint venture,
including governance and exit provisions. Completion of the
transaction is subject to customary conditions, including
regulatory approval. Closing of the transaction is expected to
take place in the second half of 2021. Following completion of
the transaction, it is expected that Akastor shall account for the
Company as a joint venture using the equity method.
The transaction will require the refinancing of Akastor’s existing
corporate credit facility. Akastor has received commitments for
a total of NOK 1 250 million in revolving credit facilities that will
be entered into prior to closing of the transaction.
The Akastor Portfolio
MHWirth
MHWirth is a global provider of drilling solutions, engineering,
projects, equipment and services. MHWirth has activities on
five continents with presence in 18 countries. At year-end 2020,
the company employed 1 581 people; 46 percent of the
workforce is employed in Norway. The company’s operations
are divided in five main business areas: Projects, Products,
Drilling Lifecycle Services, Digital Technology and Engineering
Services (Frontica Engineering). MHWirth is Akastor’s largest
portfolio company both in terms of sales revenue and
employees.
Key Figures 1)
Amounts in NOK million
Revenue and other income
EBITDA
EBIT
CAPEX and R&D capitalization
NCOA
Net capital employed
Order intake
Order backlog
Employees (FTE)
2020
3 760
2019
4 442
401
184
94
692
2 801
3 029
1 849
1 581
497
287
121
736
2 908
4 540
2 582
1 766
1) Step Oiltools, previously part of “Other holdings”, is included in “MHWirth”.
Comparable figures in 2019 have been restated
The revenue for 2020 of NOK 3 760 million was down 15
percent from 2019. Step Oiltools, which was consolidated with
MHWirth in 2020, contributed with NOK 245 million in
revenues this year. Revenues from Projects and Products
combined decreased with around 27 percent to NOK 1 522
million in 2020, largely due to lower order intake from single
equipment sales to offshore market, as well as lower revenues
from the Project segment following the schedule of ongoing
projects without any significant new order intake having been
booked within this segment in 2020. Revenues from Drilling
Annual Report 2020 | Board of Directors' Report 8
Lifecycle Services (DLS) was NOK 2 169 million in 2020, at
same level as in 2019. The number of active rigs with complete
drilling packages from MHWirth decreased from 53 rigs on
average through 2019 to 46 in 2020, however revenues
remained on par with 2019 driven by higher spend per unit,
highlighting the resilience of this business area. EBITDA
decreased from NOK 497 million in 2019 to NOK 401 million in
2020. The EBITDA margin ended at 10.7 percent for 2020, only
slightly down from 11.2 percent in 2019, highlighting the
importance of the service segment and flexible cost base of the
company.
The offshore drilling market was strongly affected by the
decrease in oil price and global turmoil during 2020 and
continues to be suffering from overcapacity of offshore drilling
rigs. Order intake within Projects and Products declined
significantly in 2020, driven by lower investment levels and
delayed investment decisions from clients especially within the
offshore markets. No significant order intake was booked
within Projects in 2020. However, MHWirth in December 2020
received notification of a contract award for delivery of a drilling
equipment package which is expected to be converted to order
intake in 2021. The contract value is around USD 80 million.
Total order intake in MHWirth ended at NOK 3.0 billion,
compared with NOK 4.5 billion in 2019. The order backlog was
NOK 1.8 billion as per end of 2020.
Since the downturn started in 2014, the number of employees
has been reduced substantially and other cost cuts have also
been made in order to adjust capacity and costs to a new
activity level. In 2020, the workforce decreased from 1 766 to 1
581 employees, as a result of adjustments in light of decreased
activity level.
Despite lower investment level in 2020 compared to 2019 also
within Digital Technology, focus from customers on making the
drilling equipment more efficient, thereby reducing energy
consumption and the costs of drilling a well, continues to be
strong. MHWirth focused on rolling out existing solutions as
well as developing new interfaces and software applications for
the automation of operations onboard the rigs and is receiving
good feedback from clients. MHWirth has a strong pipeline of
opportunities within this area per end of 2020.
Following the announced agreement to create a joint venture
which will combine MHWirth with Baker Hughes’ SDS business
(see Subsequent events for more details), a main focus area for
MHWirth through 2021 will be to secure a successful integration
with SDS following completion of this transaction. A strategy
and business plan for the combined company will be established
together with Baker Hughes. It is expected that the new
company will focus on growth through both organic initiatives
as well as M&A. The new company will mainly focus on the
global offshore and onshore drilling markets, but it will also
seek to pursue opportunities within the renewable sector and
further expand its offering to non-oil markets. It is expected
that the company’s broader scope of services will provide a
more solid foundation for participating in the oil and gas
industry’s transition towards more energy-efficient solutions,
and this will form a key area in the strategy of the new
combined company.
AKOFS Offshore
AKOFS Offshore is a provider of vessel-based subsea well
installation and intervention services to the oil and gas industry.
The company operates three specialized offshore vessels,
Skandi Santos, Aker Wayfarer and AKOFS Seafarer, and
employs 294 people at the end of 2020.
Akastor owns 50 percent of the shares in AKOFS Offshore,
with the remaining shares owned by Mitsui & Co and Mitsui
O.S.K. Lines, each with 25 percent. AKOFS Offshore is classified
as a joint venture and consolidated using equity method in the
consolidated financial statements.
Key Figures 1)
Amounts in NOK million
Revenue and other income
EBITDA
EBIT
CAPEX and R&D capitalization
NCOA
Net capital employed
Order intake
Order backlog
Employees (FTE)
2020
1 000
414
(134)
213
344
3 744
263
3 827
294
2019
1 093
560
237
618
49
3 734
-
5 013
311
1) The figures are presented at 100 percent basis.
The company’s revenue was NOK 1 000 million in 2020,
around 9 percent lower than previous year, driven by adjusted
terms on the Skandi Santos contract extension. The EBITDA
decreased by NOK 146 million to NOK 414 million in 2020.
AKOFS Offshore has, through 2020, focused strongly on
mitigating operational effects of the ongoing COVID-19
pandemic through strict regulations regarding crew handling.
Despite these efforts, AKOFS has been directly affected
through reduced utilization because of two virus outbreaks on
board one of its vessels. Also, the market situation for AKOFS
has been negatively affected through reduced oil price
following lowered investment levels among oil companies.
This is affecting longer term prospects and opportunities for
the company.
Both of the vessels Skandi Santos and Aker Wayfarer operate
on contracts with Petrobras in Brazil for subsea equipment
installation work. In March 2020, the contract of Skandi Santos
expired after ten years of operations in Brazil. The contract
was first extended to November 2020, and later to November
2021. However, terms for the extension reflect that the vessel
is currently doing mostly ROV work and revenues from Santos
were thus lower than in 2019. Utilization for both vessels in
Brazil has in general been high throughout the year, however
negatively affected by two separate outbreaks of COVID-19
onboard Aker Wayfarer as well as an engine issue causing
some downtime for Skandi Santos in November.
Annual Report 2020 | Board of Directors' Report In October, AKOFS Seafarer commenced its five-year contract
with Equinor for Light Well Intervention services in the North
Sea. The vessel and the subsea workover system have been
upgraded through substantial investments, financed by a
separate non-recourse bank loan that was established in
October 2019. The commencement was somewhat delayed
due to the pandemic as well as certain specific challenges
related to equipment, with effect on 2020 financials for the
company.
Going forward, AKOFS will continue to focus on delivering high
uptime/utilization on its existing contracts. Further, evaluation
of options regarding the Skandi Santos vessel, for which the
contract expires in 2021, will be a key focus area in 2021. The
company is continuously evaluating opportunities to grow
through further leveraging its competencies within subsea well
construction and intervention services.
AGR
AGR is the result of the merger of First GEO AS (previously
owned 100 percent by Akastor) and AGR AS which was
completed in April 2019. At year-end 2020, Akastor held 100
percent of the shares and 64 percent of the economic interest
in the company (55 percent in 2019). Nordea and DNB held the
remaining 36 percent economic interest.
Key Figures 1)
Amounts in NOK million
Revenue and other income
EBITDA
EBIT
CAPEX and R&D capitalization
NCOA
Net capital employed
Order intake
Order backlog
Employees (FTE)
2020
637
2019
573
31
13
10
(7)
148
618
483
319
14
(1)
6
12
170
434
502
438
1) Prior to the acquisition of AGR in April 2019, the figures include First Geo only.
AGR had total revenues of NOK 637 million in 2020, while the
revenues in 2019 were NOK 573 million for the periods after
the acquisition in April 2019. EBITDA in 2020 ended at NOK 31
million, up from 14 million in 2019.
During 2020, the activity level in AGR was affected by the
market turmoil through lower activity within the consultancy
business segment. The Norwegian market remains the largest
area in AGR, constituting around 60 percent of revenues in
2020. The company managed to deliver positive earnings
despite lower activity level driven by cost cutting programs
across all segments, however especially targeting to mitigate
effects and
international
segments. Due to the market situation, profitability in certain
segments outside of Norway remains weak. Going forward, the
focus is to make all geographical segments profitable. Also, the
company is aiming to further develop its software business
which is providing solutions to enhance the efficiency of
logistics and planning of drilling and well operations for oil
improve profitability within
its
9
companies. These solutions are receiving good feedback and
increasing attention in the market.
Other Holdings
Other Holdings mainly include 100 percent ownership of Cool
Sorption, 100 percent ownership of DDW Offshore AS from
October 2020, 15.6 percent economic interest of NES Fircroft,
5.6 percent shareholding in Awilco Drilling, and a preferred
equity instrument of USD 85.2 million in Odfjell Drilling. In
addition, this segment includes corporate functions and certain
long-term office lease contracts that remained in Akastor after
the demerger from Aker Solutions in 2014.
Key Figures 1)
Amounts in NOK million
Revenue and other income
EBITDA
EBIT
CAPEX and R&D capitalization
NCOA
Net capital employed
Order intake
Order backlog
Employees (FTE)
2020
2019
186
(102)
(145)
1
(158)
990
142
43
47
354
(20)
(64)
-
(137)
957
275
82
68
1) Step Oiltools, previously part of “Other holdings”, is included in “MHWirth”.
Comparable figures in 2019 have been restated.
Total EBITDA for Other Holdings for the year was negative
NOK 102 million. Cool Sorption delivered an EBITDA of NOK 6
million in 2020, down from NOK 19 million in 2019. DDW
Offshore contributed negatively with NOK 11 million in 2020,
after consolidation of this business as from October 2020. The
remaining negative EBITDA in this segment is mainly related to
corporate overhead costs, as well as some legacy costs. In
2020, corporate overhead costs included around NOK 60
million in M&A costs related to the creation of a joint venture
involving MHWirth announced in March 2021 (see details on
this transaction under Subsequent Events).
Parent Company 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
and management of all subsidiaries. Akastor ASA has
outsourced all management functions to other companies
within the group, mainly Akastor AS. However, assets and
liabilities related to the Akastor Treasury function are held by
Akastor ASA. Akastor ASA has a net profit of NOK 724 million
in 2020, including dividend and financial income of NOK 750
million from investments in subsidiaries.
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
Annual Report 2020 | Board of Directors' Report 10
activities, expected cash flow, capital expenditure plans,
financing requirements and appropriate financial flexibility. The
board thereby proposes the following allocation of the net profit
(amounts in NOK million):
Dividends:
To other equity:
Total allocated:
Risk Management
0
724
724
Akastor and 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.
Akastor’s risk management model is designed on the basis that
Akastor is an investment company with an overall objective of
securing its shareholders’ investments and developing the
group’s assets in order to provide the shareholders with a solid
return. Akastor’s current investment portfolio is focused on
the oilfield services industry. This focus is mainly driven by the
company’s experience, expertise and track-record within this
industry. Although Akastor has a flexible mandate, it has
traditionally not sought to spread risk by investing in different
industries. Instead, Akastor has focused on mitigating its
vulnerability to the risk environment inherent to the oilfield
services industry through sound risk management systems.
As expected, the covid-19 pandemic continued throughout
2020, causing a challenging situation for the entire group. The
pandemic impacted the group on a global scale, resulting in
necessary cost reductions such as temporary layoffs as well as
substantial hindrances to markets and operations. In spite of
the difficult situation, the portfolio companies managed the
situation well and several delivered fairly solid results for 2020.
However, the situation remains a significant risk as it is unclear
when and to which extent the situation will normalize.
Following the initiatives taken in 2019 to improve the climate
risk awareness throughout the group, Akastor has in 2020
further developed this work by performing a more detailed
assessment of climate risks and opportunities, as described
below. Such assessment will, in the future, be an integrated
part of the annual risk assessment.
On the operational side, risks are primarily mitigated by a
combination of technology developments that support a
transition towards more sustainable operations as well as
securing new orders and sound project execution by the
portfolio companies. 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.
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. Moreover,
the entire transaction process, including the process from
signing to closing as well as proper integration of new business
operations, entails a set of risks for Akastor that will need to be
managed and mitigated.
in
its portfolio companies
To manage and mitigate risks within Akastor, risk evaluation is
an integral part of all business activities, including when making
decisions regarding mergers and acquisitions and other
investment matters. As an owner, Akastor actively supervises
risk management
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 and are reviewed annually. The overall responsibility
for ensuring sound internal control and an appropriate
framework for risk management in Akastor lies with its board
of directors. A risk review is presented to and reviewed by the
audit committee and the board of directors of Akastor on an
annual basis.
Financial Risks
Akastor is exposed to a variety of financial market risks such as
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
income statement. Risk
financial
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 employees
Annual Report 2020 | Board of Directors' Report 11
Even though Akastor and the portfolio companies managed
the COVID-19 situation during 2020 well, it still remains
uncertain when the situation will normalize. Restrictions with
regard to operations and travel will most likely continue until at
least Q3 2021. The risk of full suspension of operations is
however
limited as vaccinations have started and the
companies have adapted well to the new “normal” showing
that they are capable to work under severe restrictions.
Environmental, Social and Governance
Akastor’s operating model reflects the fact that the portfolio
companies are
independent companies which operate
different business models and therefore face different
Environmental, Social and Governance (ESG) risks and
expectations from stakeholders. As a holding company,
Akastor is responsible for setting the overall ESG priorities and
providing the appropriate risk management framework and
policies applicable for the portfolio. Akastor Sustainability
Policy describes how Akastor aims to integrate sustainability in
its
in the
governance of its organisation. The policy includes the
investment policy and how Akastor engages with the portfolio
companies. In turn, and based on these expectations, each
portfolio company is responsible for defining their own ESG
strategy with relevant activities and, where necessary,
supporting policies.
investment processes, own operations, and
Akastor also focuses on 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.
Within the ESG efforts, Akastor is focused on areas that build
financial and non-financial value in the portfolio companies.
Akastor’s ESG strategy is based on four main priorities: working
against corruption, respecting human rights, addressing health
and safety and minimizing adverse impact on the environment.
Particularly the latter priority has seen an increased focus in
2020, where Akastor wants to take part in the industry’s
transition towards more sustainable operations. All the
portfolio companies have completed climate risk and
opportunities assessments and are responsible for working
these possibilities and
systematically and managing
consequences. The portfolio companies are defining their own
ESG strategies encompassing these priorities. Akastor is
continuously monitoring the implementation and integration
of the priorities of the ESG strategy, Code of Conduct,
Sustainability Policy and Integrity Policy across all the portfolio
companies. For in-depth reporting on each portfolio company’s
approach to ESG,
including their Health, Safety and
Environment work, refer to the Akastor ESG Report for 2020.
The full report is available on our website www.akastor.com.
must complete an annual Code of Conduct training program.
In addition, all Akastor managers and office-based staff are
required to conduct integrity e-learning training and participate
in classroom courses. For employees in specific functions,
where chance of facing integrity risk is considered higher than
normal, additional training has been tailored for their role and
responsibilities. Hired-in personnel 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.
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.
Climate risks
The main climate-related risks in Akastor are with our industrial
investments due to the fact that the industry is in a state of
accelerated transition to a lower-carbon intensive industry.
Governmental regulation of GHG emissions is expected to
increase and it will continue to be challenging to get necessary
financing with potential lenders electing not to invest in the oil
and gas market but rather move capital to new green markets.
Unless these risks are met with mitigating measures, we could
face a scenario where many of Akastor’s portfolio companies
lose its market positions and/or are left with product lines that
are obsolete and replaced by more energy efficient/green
alternatives. However, this transition to low carbon intensive
industry will also create several opportunities, which the
portfolio companies are addressing, for example MHWirth’s
deliveries to offshore windfarms and AGR’s Carbon Capture
and management services.
Each portfolio company addresses climate-related risks and
opportunities within its yearly risk assessment. In 2020, the
assessment related to climate change has been facilitated by
external consultants. It has been a bottom-up exercise where
all industrial portfolio companies have done its assessment in
consultation with the external consultant, who in turn has
summarized the results for Akastor.
COVID-19 impacts
A key element of Akastor’s risk management in 2021 will be to
continue to monitor the development of the COVID-19
outbreak and continuously seek to implement necessary
mitigating measures. This 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).
Annual Report 2020 | Board of Directors' Report 12
Research, Innovation and Technology Development
NOK 38 million was capitalized in 2020, compared to NOK 71
million in 2019, related to development activities. In addition,
research and development costs of NOK 12 million were
expensed during the year because the criteria for capitalization
were not met (NOK 31 million in 2019).
All research,
initiatives are
innovation and development
performed by the Akastor portfolio companies. Akastor ASA
and Akastor AS performed no such activity in 2020.
People and Teams
Akastor
is committed to equal opportunity and non-
discrimination. This commitment is described in Akastor’s
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 2012 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. In 2020, as in previous years, no events violating
these agreements were reported.
As of year-end 2020, Akastor ASA’s board comprised eight
directors inclusive three employee elected directors, of whom
three shareholders elected directors are female directors.
Akastor and the portfolio companies had a total of 1 947
employees (FTE) as of December 31, 2020. AKOFS Offshore
had a total of 294 employees (FTE) as of December 31, 2020.
In Akastor AS, the male/female ratio was 63/27. The male/
female ratio (excluding hired ins) in the major portfolio
companies and Akastor Group were as follows:
MHWirth
17%
83%
AKOFS
Offshore
11%
89%
Female
Male
Akastor
Group (incl.
AKOFS
Offshore)
18%
82%
AGR
30%
70%
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
supporting programs dedicated to equal opportunity. Akastor
and its portfolio companies are not aware of any employees
that work involuntary part time. Akastor ASA fulfils the
requirements of the Norwegian Companies Act with regards
to gender representation on the board of directors, as three
out of five shareholder elected directors are women.
Aggregated sick leave in Akastor was 2.7 percent in 2020.
There were no fatal injuries in any of the portfolio companies.
The total recordable incident frequency was low, and Akastor
has thoroughly analysed all incidents and taken actions to
avoid similar situations going forward. Caring for employee’s
health and safety is an integrated part of the group’s culture.
See figures below for details.
MH-
Wirth
AKOFS
Offshore
AGR
Akastor
Group (incl.
AKOFS
Offshore)
Lost time Incident
Frequency (LTIF)*
Total Recordable Incident
Frequency (TRIF)*
Fatalities incl. subcontractors
Sick leave (percent)
1.4
2.1
-
2.9
-
1.4
-
3.1
-
-
-
1.6
1.0
1.7
-
2.7
* 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 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 designed to secure the shareholders’ investment through
value creation and to ensure good control with the portfolio
companies. The corporate governance principles are included
in this annual report and available on the company’s website
www.akastor.com.
Fornebu, March 18, 2021 I Board of Directors of Akastor ASA
Kristian Røkke | Chairman
Lone Fønss Schrøder | Deputy Chairman
Svein Oskar Stoknes | Director
Kathryn M. Baker | Director
Sarah Ryan | Director
Henning Jensen | Director
Asle Christian Halvorsen | Director
Stian Sjølund | Director
Karl Erik Kjelstad | CEO
Annual Report 2020 | Board of Directors' Report 13
02. 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, 2020. 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 2020 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 its parent company’s
assets, liabilities, profit and overall financial position as of December 31, 2020.
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 18, 2021 I Board of Directors of Akastor ASA
Kristian Røkke | Chairman
Lone Fønss Schrøder | Deputy Chairman
Svein Oskar Stoknes | Director
Kathryn M. Baker | Director
Sarah Ryan | Director
Henning Jensen | Director
Asle Christian Halvorsen | Director
Stian Sjølund | Director
Karl Erik Kjelstad | CEO
Annual Report 2020 | Declaration by the Board of Directors and CEODeclaration by the Board of Directors and CEO 14
03. 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 17 October 2018 (the «Code of Practice»),
the regulations set out in the Rulebook II of 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 Oslo
Børs Rulebook II may be found at www.euronext.com.
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 statement1)
Governance Structure
Akastor is an oilfield services investment company with a
portfolio of industrial holdings and other investments. The
company has a flexible mandate for active ownership and long-
term value creation. Completed transactions in 2020 include
in addition to internal reorganisations, Akastor’s takeover of
DDW Offshore AS (previously known as DOF Deepwater AS)
in October 2020, with Akastor becoming the sole owner of
the company. Akastor currently has an active investment
portfolio within the oilfield services industry consisting of
MHWirth including STEP Oiltools, AGR, Cool Sorption, DDW
Offshore, 50 percent of the shares in AKOFS Offshore, a 15.6
percent economic ownership in NES Fircroft, in addition to
other holdings and investments (see below), with a total net
capital employed of NOK 5.0 billion. MHWirth is a global
provider of drilling solutions, engineering, projects, equipment
and services. AKOFS Offshore is a provider of subsea well
installation and intervention services. AGR is a leading provider
of well and reservoir consultancy services as well as software
and technical manpower for its clients. Cool Sorption is a
provider of vapour recovery units and systems. DDW Offshore
operates five offshore vessels. NES Fircroft is a global technical
and engineering staff provider. Other investments mainly
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.
Annual Report 2020 | Corporate Governance StatementCorporate Governance Statement
include investments in Odfjell Drilling and Awilco Drilling, a
subletting portfolio through Akastor Real Estate and an
investment in Aker Pensjonskasse.
It is the responsibility of the board of directors of Akastor ASA
to ensure that Akastor and its portfolio of companies
implement 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 eleven corporate policies providing
business practice guidance within a number of key areas, all of
which are reviewed and updated on an annual basis. These
policy documents express the overall position of the group
with regard to for
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.
instance compliance,
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.
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 provides a framework of
core corporate values which reflects Akastor’s prudent business
practice and shall be reflected in every aspect of our operations.
The ethical guidelines and other governing documents of the
group have been drafted on the basis of these core corporate
values.
15
2. Business
The objectives of the company, as defined in its articles of
association, are «to own or carry out industrial and other
associated businesses, management of capital, and other
functions for the group, and to participate in or acquire other
businesses». The articles of association are available at www.
akastor.com.
The principal strategies of the group are presented in the
annual report. To ensure value creation for its shareholders,
the board of directors annually performs a designated strategy
process where it sets objectives and targets for the company,
assesses risk, evaluates the existing strategy and approves any
significant changes.
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 prudent
business decisions, with minimum risk to reputation, brand and
the future sustainability of our business. The main focus of
corporate responsibility activities in Akastor, defined in our
group-wide integrity policy, is to work against corruption, to
respect human rights and to care for health, safety and the
environment. In the Akastor Sustainability Policy it is described
how Akastor aims to integrate sustainability in its investment
processes and engages with the portfolio companies. Akastor’s
primary stakeholders are the shareholders (existing and
potential), customers of its portfolio companies and employees
of the Akastor group. Akastor has an ongoing stakeholder
dialogue, media analysis and investor presentations, which
provide important input to Akastor’s work on corporate
responsibility topics. All our portfolio companies are expected
to ensure integration of stakeholder engagement and a strong
corporate responsibility in their operations. Akastor recognizes
and respects the United Nations’ 17 Sustainable Development
Goals (SDGs), and has identified four SDGs that Akastor
positively impacts. A self-assessment is used to identify where
Akastor has the most opportunity to contribute to the SDGs.
Akastor identified 8, 12, 13 and 17 as priority SDGs and
encourages the portfolio companies to identify and work
towards relevant SDGs in their work and strategy.
Akastor
is 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.
Annual Report 2020 | Corporate Governance Statement 16
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 Environmental, Social and
Governance (ESG) report published simultaneously as the
company’s annual report for 2020.
3. Equity and Dividends
Equity
The management and the board regularly monitor that the
group’s equity and liquidity are appropriate for its objectives,
strategy and risk profile. The book equity of the group as per
December 31, 2020 is NOK 3 669million, which represents an
equity ratio of 40 percent. The management of financial risk is
further described in the annual report..
Dividend Policy
The board proposes the level of dividend payment to the
general meeting who in turn is the decisive corporate body for
dividend decisions.
Over time, the aim is that Akastor’s shareholders shall receive
a competitive return on their investment either through cash
dividends or increase 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 authorizations
for share capital increases, share buy-backs or similar shall be
for defined purposes, such as share purchase programs and
acquisitions of companies, and shall remain in effect until the
next annual general meeting.
treasury shares are valid for the period until the date of the
annual general meeting of 2021. No shares were bought by
the company in 2020 pursuant to the authorizations to the
board of directors. As of December 31, 2020, the company
holds 2 390 215 own shares.
In addition, the annual general meeting in 2020 granted the
board of directors the mandate to approve the distribution of
dividends based on the company’s annual accounts for 2019
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 2021.
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.
Share Purchase Programs
Share purchase programs in Akastor include Akastor ASA and
Akastor AS (and not the portfolio companies).
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.
In December 2020, the joint ownership in Aker Kværner
Holding AS between Aker ASA and the Norwegian state was
dissolved. As of December 31, 2020, Aker ASA therefore holds
100 percent of the shares of Aker Holdings AS (previously
Aker Kværner Holding AS) which holds 36,7 percent of the
shares of Akastor. Aker ASA no longer holds any shares directly
in Akstor, while the Norwegian state holds 12.08 percent of
the shares in Akastor directly. Due to this restructuring, Akastor
is no longer a subsidiary, but an associated company of Aker
ASA.
The company’s annual general meeting on 15 April 2020
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
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
Annual Report 2020 | Corporate Governance Statement 17
context is subject to confidentiality undertakings and disclosure
regulations in compliance with applicable laws.
Aker ASA and Aker Solutions ASA (or their subsidiaries) are
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.
In respect of the above, 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. There are no restrictions on the party’s
ability to own, trade or vote for shares in the company.
6. General Meetings
Attendance, Agenda and Voting
The company normally encourages shareholders to attend the
general meetings. However, due to the public health
requirements following the ongoing COVID-19 outbreak, the
company will also this year urge its shareholders to not meet
and rather use the available means of voting by proxy. For the
same reason, it is also the intention for this year’s general
meeting that only the minimum representatives required by
law will attend the general meeting. Notices convening general
meetings, including comprehensive documentation relating to
the items on the agenda, including the recommendation of the
nomination committee, shall be sought made available on the
company’s website no later than 21 days prior to the general
meeting. The articles of association of the company stipulate
that documents pertaining to matters to be deliberated by the
general meeting shall only be made available on the company’s
website, and not normally be sent physically by post to the
shareholders unless required by statute.
The following matters are typically decided at the annual
general meeting, in accordance with the articles of association
of Akastor ASA and Norwegian background law:
Election of the nomination committee and stipulation
of the nomination committee's fees;
election of shareholder representatives to the board of
directors as well as stipulation of fees to the board of
directors;
election of the external auditor and approval 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. As mentioned above, shareholders are this
year urged to vote by proxy. Moreover, information concerning
both the registration procedure and the filing of proxies is
included in the notice convening the general meeting and on
the registration form. The company also aims to structure, to
the extent practicable, the proxy form such as to enable the
shareholders to vote on each individual item on the agenda.
Chairman
The articles of association stipulate that the general meetings
shall be chaired by the chairman of the board of directors or a
person appointed by said chairman. According to the Code of
Practice the board should however «make arrangements to
ensure an independent chairman for the general meeting».
Thus, the articles of Akastor ASA deviate from the Code of
Practice in this respect. This has its background in a long-
lasting tradition in Akastor. Having the chairman of the board
chairing the general meeting also simplifies the preparations
for the general meetings significantly.
Election of Directors
It is a priority for the nomination committee that the board of
directors shall work in the best possible manner as a team, and
that the background and competence of the directors shall
complement each other. As a consequence, the nomination
committee will propose that the shareholders are invited to
vote on the full board composition proposed by the nomination
committee as a group, and not on each director separately.
Hence, Akastor deviates from the Code of Practice stipulating
that one should make «appropriate arrangements for the
general meeting to vote separately on each candidate
nominated for election to the company’s corporate bodies».
Physical Attendance and Electronic Voting
It is a priority for the general meeting to be conducted in a
sound manner, with all shareholder votes to be cast, to the
extent possible, on the basis of the same information. The
company has thus far not deemed it advisable to recommend
the introduction of an electronic attendance, i.e. arranging for
general meetings to be held as physical meetings with online
coverage allowing for shareholders to participate via web.
However, as already mentioned above, due to the COVID-19
Annual Report 2020 | Corporate Governance Statement 18
outbreak and in order to meet public health recommendations,
the company will consider the possibility of introducing such
arrangements, but will in any event urge its shareholders to
cast votes electronically in advance of general meetings
(however, not during the meeting) or by proxy.
Minutes
Minutes of general meetings will be published as soon as
practicable on the announcement system of Oslo Børs, www.
newsweb.no (ticker: AKAST), 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),
Georg Fr. Rabl, Ingebret Hisdal and Ove A. Taklo. The two
members Leif-Arne Langøy and Georg Fr. Rabl are up for
election at the annual general meeting 2021, while Ingebret
Hisdal and Ove Taklo will be up for election at the annual
general meeting 2022. Langøy is deputy chairman of the board
in TRG Holding AS and The Resource Group TRG AS. Ove A.
Taklo is Group Corporate Controller of Aker ASA. 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 in 2010 adopted guidelines
governing the duties of the nomination committee. According
to these guidelines, the committee shall emphasize that
candidates for the board have the necessary experience,
competence, and capacity to perform their duties in a
satisfactory manner. A reasonable representation with regard
to gender and background should also be emphasized.
The chairman of the nomination committee has the overall
responsibility for the work of the committee. In the exercise of
its duties, the nomination committee may contact, among
others, shareholders, the board, management, and external
advisors. The nomination committee shall also ensure that its
recommendations are endorsed by the largest shareholders.
Information concerning the nomination committee and
deadlines for making suggestions or proposing candidates for
directorships will be made available on the company’s website,
www.akastor.com when there are candidates up for election.
8. Composition and Independence of the Board of
Directors
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, 2020, 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, 2020 will be set out in the «Management
remunerations» note to the consolidated financial statements
in the annual report for 2020. The chairman Kristian M. Røkke
and the directors Lone Fønss Schrøder, Kathryn M. Baker,Sarah
Ryan and Svein Oskar Stoknes 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 2020.
The appointment of employee representatives to the board of
directors is conducted as prescribed by the Public Limited
Liability Companies Act and the Representation Regulations.
The board of directors has appointed a designated election
committee charged with implementing the appointment of
such employee representatives.
Independence
A majority of the directors elected by the shareholders are
independent of the executive personnel and important business
associates of Akastor ASA. None of the executive personnel of
the company are members of the board of directors.
Annual Report 2020 | Corporate Governance Statement 19
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
For each calendar year, the board plans for its work and
meetings. 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.
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 each director is 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 are established, the relevant
board member will, as a ground rule, 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.
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 six ordinary board meetings in
2020. The aggregate attendance rate at the board meetings
was close to 100 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. Endeavours are made to prepare and present matters in
such a way that the board of directors is provided with an
adequate basis for its deliberations. The board of directors has
overall responsibility for the management of Akastor and shall,
through the Chief Executive Officer, ensure that its activities
are organized in a sound manner. The board of directors shall
adopt plans and budgets for the business, and keep itself
informed of the financial position of, and development within,
the company. This encompasses the annual planning process
of Akastor, with the adoption of overall goals and strategic
choices for the group, as well as financial plans, budgets, and
forecasts for the group and the portfolio companies. The
board of directors performs annual evaluations of its work and
its know-how.
Audit Committee
Akastor will have an audit committee comprising two to four
of the directors. The audit committee currently comprises the
directors Lone Fønss Schrøder (chairman), Kathryn M. Baker
Annual Report 2020 | Corporate Governance Statement 20
and Henning Jensen. 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, 2020, there are no other
board committees than the audit committee. The board does
not envisage appointing any further board committees in 2021.
The board evaluate its performance and qualification annually.
A summary of the evaluation was made available to the
nomination committee.
10. Risk Management and Internal Control
Governing Principles
The board of directors shall ensure that Akastor has sound
internal control and systems for risk management that are
appropriate in relation to the extent and nature of the
company’s activities. The audit committee supports the board
of directors in safeguarding that the company has internal
procedures and systems that ensure good corporate
governance, stakeholder engagement, effective
internal
controls and proper risk management, particularly in relation
to financial reporting. The Chief Financial Officer reports
directly to the audit committee on matters relating to financial
reporting, financial risks and internal controls.
Akastor has implemented an internal system for reporting
serious matters such as breaches of ethical guidelines and
violations of the law, which is also available to external parties
at www.akastor.com.
Risk Management
Akastor and its portfolio companies are exposed to a variety of
market, operational and financial risks. 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.
Being an investment company, the main objective of Akastor is
to create value for its shareholders. Potential impacts on the
net asset value, share price or predictability of earnings are
therefore key parameters in the board’s risk evaluation. Sound
risk management throughout the organization is recognized
by Akastor as an invaluable tool in the process of achieving
strategic, financial and operational goals while at the same
time ensuring compliance with regulatory requirements and
adherence to high integrity standards.
Risk evaluation is an integral part of all business activities and
Akastor employs a decentralized 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 authorization 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. Management of operational risk
primarily rests with the underlying portfolio companies,
although Akastor acts as an active driver through
its
involvement on the boards and through support and follow-up
by the various Akastor corporate functions towards relevant
functions in the portfolio companies.
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
risk management, market conditions,
Annual Report 2020 | Corporate Governance Statement 21
provide a solid foundation for Akastor’s assessment of its
overall financial and operational risk.
A key risk in one of the smaller portfolio companies may still be
negligible on the group level, whereas important risks in the
largest portfolio companies may have a serious impact on the
group as a whole. Akastor’s decentralized approach to
operational risk management, as described above, raises a
need for management to process and calibrate the insight
obtained through various
interfaces with the portfolio
companies prior to the board’s annual risk review. The objective
of such exercise is to ensure that risks are reported in a format
that allows the board to acquire a true and fair view of the
overall risk environment of the Akastor group in an efficient
manner and to focus its attention on risks that are material on
an aggregated group level.
Prior to the board’s review of risk reporting, the audit
committee reviews the reported risks and associated risk-
reducing measures. The audit committee also reviews the
company’s in-house reporting systems and internal control and
risk management, and prepares the board’s review of financial
reporting.
Financial Reporting
The Akastor financial reporting division reports to the Chief
Financial Officer and is responsible for the external reporting
process and the internal management financial reporting
process. This also includes assessing financial reporting risks
and internal controls over financial reporting in the group.
The consolidated external financial statements are prepared in
accordance with IFRS and IAS standards as approved by the
EU. The existing policies and standards governing the annual
and quarterly financial reporting in the group, including the
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 2020 financial year, clearing
meetings with the portfolio companies were held in October
2020 and January 2021. 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.
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 contains
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 the «Management remunerations»
note to the consolidated financial statements for the group in
the annual report for 2020. 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 6, 2018. The board of directors’ policy on the
remuneration of executive personnel for 2021 will be a
separate item on the agenda for the annual general meeting
on April 15, 2021 and will be updated based on new legal
requirements to such guidelines.
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
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.
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.
Regular reports for Akastor ASA and the portfolio companies
The company’s reporting of financial and other information is
based on openness and the equal treatment of all securities
Annual Report 2020 | Corporate Governance Statement 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
and are also reported to the general meeting. The auditor’s
fees relating to auditing are subject to approval by the general
meeting.
22
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 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 at www.newsweb.no. 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.
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 activities 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.
The board of directors has not deemed it appropriate to adopt
specific guidelines for take-over situations as long as Aker
Holdings AS continues to be the dominant shareholder of
Akastor ASA. This represents a deviation from the Code of
Practice.
15. Auditors
The external auditor presents a plan for the performance of
the audit work to the audit committee annually. In addition, the
auditor provides the audit committee with an annual written
confirmation to the effect that the independence requirement
is met. 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.
Annual Report 2020 | Corporate Governance Statement a.04. FINANCIALS AND NOTES
AKASTOR GROUP
Akastor Group | Consolidated income statement
Akastor Group | Consolidated statement of comprehensive income
Akastor Group | Consolidated statement of financial position
Akastor Group | Consolidated statement of changes in equity
Akastor Group | Consolidated statement of cash flow
General
Note 1
Note 2
Note 3
Note 4
| Corporate information
| Basis for preparation
| Significant accounting principles
| Significant accounting estimates and judgements
Performance of the year
| Business combinations
| Operating segments
| Revenue and other income
| Salaries, wages and social security costs
| Other operating expenses
Note 5
Note 6
Note 7
Note 8
Note 9
Note 10 | Net finance expenses
Note 11
| Income tax
Note 12 | Earnings per share
Assets
Note 13 | Property, plant and equipment
Note 14 | Intangible assets
Note 15 | Impairment testing of goodwill
Note 16 | Equity-accounted investees
Note 17 | Other non-current assets
Note 18 | Other investments
Note 19 | Non-current interest-bearing receivables
Note 20 | Inventories
Note 21 | Trade and other receivables
Note 22 | Cash and cash equivalents
Equity and liabilities
Note 23 | Capital and reserves
Note 24 | Borrowings
Note 25 | Other non-current liabilities
Note 26 | Employee benefits - pension
Note 27 | Provisions
Note 28 | Trade and other payables
Financial risk management
Note 29 | Capital management
Note 30 | Financial risk management and exposures
Note 31 | Derivative financial instruments
Note 32 | Financial instruments
Other
Note 33 | Leases
Note 34 | Group companies
Note 35 | Related parties
Note 36 | Management remunerations
Note 37 | Events after the reporting date
23
23
24
25
26
27
28
28
29
36
38
41
44
48
48
49
49
52
53
54
55
56
57
58
58
58
59
60
60
61
62
63
66
66
67
68
72
74
77
78
80
82
84
Annual Report 2020 | Financials and Notes | Akastor GroupFinancials and Notes | Akastor Group
24
Akastor Group | Consolidated income statement
For the year ended December 31
Amounts in NOK million
Revenue and other income
Materials, goods and services
Salaries, wages and social security costs
Other operating expenses
Operating expenses
Operating profit before depreciation, amortization and impairment
Depreciation, amortization and impairment
Operating profit (loss)
Finance income
Finance expenses
Profit (loss) from equity-accounted investees
Impairment loss on external receivables
Net finance expenses
Profit (loss) before tax
Income tax benefit (expense)
Profit (loss) from continuing operations
Profit (loss) from discontinued operations (net of income tax)
Profit (loss) for the period
Profit (loss) for the period attributable to:
Equity holders of the parent company
Non-controlling interests
Basic / diluted earnings (loss) per share (NOK)
Basic / diluted earnings (loss) per share continuing operations (NOK)
Basic / diluted earnings (loss) per share discontinued operations (NOK)
Note
6, 7
8
9
2020
2019
4 577
5 361
(1 938)
(1 668)
(640)
(4 246)
331
(2 586)
(1 719)
(564)
(4 870)
492
13, 14, 33
(278)
(270)
53
222
222
(282)
321
(192)
(256)
(160)
(120)
(436)
-
(30)
(383)
191
(86)
(469)
(115)
(584)
(44)
147
(54)
93
(581)
100
(3)
(7)
(2.14)
(1.72)
(0.42)
0.37
0.57
(0.20)
16
10
11
12
12
12
Annual Report 2020 | Financials and Notes | Akastor Group
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
Total change in fair value 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
Share of OCI from equity-accounted investees
Total change in currency translation reserve, net of tax
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
26
Total other comprehensive income, net of tax
Total comprehensive income (loss) for the period, net of tax
Attributable to:
Equity holders of the parent company
Non-controlling interests
25
Note
2020
2019
93
20
(4)
41
(9)
48
17
34
(99)
(2)
(11)
(78)
(13)
(46)
9
(36)
(49)
44
51
(7)
(584)
48
(10)
(2)
1
38
(42)
(60)
(7)
-
(20)
(86)
(90)
(37)
7
(30)
(120)
(704)
(701)
(3)
Annual Report 2020 | Financials and Notes | Akastor Group
26
Akastor Group | Consolidated statement of financial position
For the year ended December 31
Amounts in NOK million
Deferred tax assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Equity-accounted investees
Other investments
Non-current interest-bearing receivables
Non-current finance lease receivables
Other non-current assets
Total non-current assets
Current tax assets
Inventories
Trade and other receivables
Derivative financial instruments
Current finance lease receivables
Cash and cash equivalents
Total current assets
Total assets
Issued capital incl. treasury shares
Other capital paid in
Reserves
Retained earnings
Equity attributable to equity holders of the parent company
Non-controlling interests
Total equity
Non-current borrowings
Non-current lease liabilities
Employee benefit obligations
Deferred tax liabilities
Other non-current liabilities
Provisions, non-current
Total non-current liabilities
Current borrowings
Current lease liabilities
Current tax liabilities
Provisions, current
Trade and other payables
Derivative financial instruments
Total current liabilities
Total liabilities
Total equity and liabilities
Note
2020
11
13
14
33
16
18
19
33
17
20
21
31
33
22
23
24
33
26
11
25
27
24
33
27
28
31
2019
388
760
1 593
537
1 051
1 643
201
16
65
329
1 017
1 595
468
1 064
1 469
115
15
29
6 100
6 256
28
485
10
528
2 191
3 177
61
7
43
9
275
555
3 047
9 147
4 322
10 578
161
1 538
151
1 808
3 657
11
3 669
628
433
388
10
478
50
1 986
1 119
159
8
109
161
1 538
240
2 415
4 353
18
4 371
1 444
516
359
11
491
51
2 873
3
160
11
119
2 060
2 974
37
65
3 492
5 479
9 147
3 333
6 206
10 578
Fornebu, March 18, 2021 I Board of Directors of Akastor ASA
Kristian Røkke | Chairman
Lone Fønss Schrøder | Deputy Chairman
Svein Oskar Stoknes | Director
Kathryn M. Baker | Director
Sarah Ryan | Director
Henning Jensen | Director
Asle Christian Halvorsen | Director
Stian Sjølund | Director
Karl Erik Kjelstad | CEO
Annual Report 2020 | Financials and Notes | Akastor Group
Akastor Group | Consolidated statement of changes in equity
Share
capital
Treasury
shares
Other
capital
paid in
Hedging
reserve 1)
Fair
value
reserve 1)
Currency
translation
reserve 1)
Retained
earnings
Amounts in NOK million
2019
27
Equity
attributable
to equity
holders of
the parent
company
Non-
controlling
interests
(NCI)
Total
equity
Equity as of January 1, 2019
162
(2)
1 534
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
-
-
(65)
-
48
48
-
-
-
(28)
346
2 362
-
17
17
-
-
-
-
(78)
(78)
-
-
-
100
(36)
64
-
(11)
-
4 310
100
(49)
51
4
(11)
-
-
4 310
(7)
-
(7)
-
27
(3)
93
(49)
44
4
16
(3)
162
(2)
1 538
(17)
(10)
268
2 415
4 353
18
4 371
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
162
(2)
1 538
-
38
38
-
-
21
-
(42)
(42)
-
-
-
(86)
(86)
-
-
(581)
(30)
(612)
2
4
(581)
(120)
(701)
2
4
(3)
(584)
-
(120)
(3)
(704)
-
(4)
2
-
(52)
182
1 808
3 657
11
3 669
Profit (loss) for the period
Other comprehensive income
Total comprehensive income
Sale of treasury shares
Acquisition of subsidiaries
with NCI 2)
Acquisition of NCI
Equity as of December 31,
2019
2020
Profit (loss) for the period
Other comprehensive income
Total comprehensive income
Repayment of dividend
Acquisition of NCI
Equity as of December 31,
2020
1) See Note 23 Capital and reserves
2) See Note 5 Business combinations
Annual Report 2020 | Financials and Notes | Akastor Group 28
Akastor Group | Consolidated statement of cash flow
For the year ended December 31
Amounts in NOK million
Note
2020
2019
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
Depreciation, amortization and impairment
(Gain) loss on disposal of subsidiaries
(Gain) 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
Net Interest paid for leases
Income taxes paid
Net cash from operating activities
Cash flow from investing activities
Acquisition of property, plant and equipment
Payments for capitalized development
Proceeds from sale of property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
Payments of contingent considerations for previous divestments
Acquisition of other investments
Proceeds of receivables from equity-accounted investees
Payments to equity-accounted investees
Other changes in interest-bearing receivables
Net cash from investing activities
Cash flow from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of lease liabilities
Repayment of dividends/Proceeds from sale of treasury shares
Acquisition of non-controlling interests
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 restricted cash
The statement included cash flows from discontinued operations prior to the disposal.
(469)
(115)
(584)
86
45
278
120
(2)
256
106
305
63
369
(122)
45
(34)
(47)
211
(29)
(38)
9
37
(77)
-
-
(120)
(1)
(219)
227
(316)
(139)
2
-
(227)
(45)
(280)
555
275
6
13, 14, 33
16
13
14
24
24
33
23
22
147
(54)
93
44
141
270
54
(2)
160
(244)
516
24
541
(131)
76
(34)
(47)
406
(56)
(71)
3
(236)
(209)
(11)
560
(556)
20
(555)
1 135
(469)
(151)
4
(3)
517
(11)
357
198
555
11
Annual Report 2020 | Financials and Notes | Akastor Group
29
Note 1 | Corporate information
Akastor ASA is a limited liability company incorporated and domiciled in
Functional and presentation currency
Norway and whose shares are publicly traded. The registered office is
The consolidated financial statements are presented in NOK, which is
located at Oksenøyveien 10, Bærum, Norway. The largest shareholder is
Akastor ASA’s functional currency. All financial information presented in
Aker Holdings AS (previously Aker Kværner Holding AS) which is wholly
NOK has been rounded to the nearest million (NOK million), except when
owned by Aker ASA as of December 31, 2020.
otherwise stated. The subtotals and totals in some of the tables in these
consolidated financial statements may not equal the sum of the amounts
The consolidated financial statements of Akastor ASA and its subsidiaries
shown due to rounding.
(collectively referred as Akastor or the group, and separately as group
companies) for the year ended December 31, 2020 were approved by the
When the functional currency in a reporting unit is changed, the effect of
board of directors and CEO on March 18, 2021. The consolidated financial
the change is accounted for prospectively.
statements will be authorized by the Annual General Meeting on April 15,
2021.
Use of estimates and judgements
The group is an oilfield services investment company with a portfolio of
management to make judgements, estimates and assumptions that affect
industrial holdings and other investments. Akastor is listed on the Oslo
the application of policies and reported amounts of assets and liabilities,
Stock Exchange under the ticker AKAST. Information on the group’s
income and expenses. Although management believes these assumptions
structure is provided in Note 34 Group companies. Information on other
to be reasonable, given historical experience, actual amounts and results
related party relationships of the group is provided in Note 35 Related
could differ from these estimates. The items involving a higher degree of
The preparation of financial statements in conformity with IFRS requires
parties.
Note 2 | Basis for preparation
Basis of accounting
judgement or complexity, and items where assumptions and estimates are
material to the consolidated financial statements, are disclosed in Note 4
Significant accounting estimates and judgements.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the period in
The consolidated financial statements have been prepared in accordance
which the estimate is revised and in any future periods affected.
with International Financial Reporting Standards as adopted by the
European Union (IFRS), their interpretations adopted by the International
Adoption of new and revised standards and interpretations
Accounting Standards Board (IASB) and the additional requirements of
The accounting policies adopted are consistent with those of the previous
the Norwegian Accounting Act as of December 31, 2020.
financial year. The following standards and interpretations were adopted
with effect from January 1, 2020, with no implementation impact on the
Going concern basis of accounting
group’s consolidated financial statements:
The consolidated financial statements have been prepared on a going
concern basis, which assumes that the group will be able to meet the
mandatory terms and conditions of the banking facilities as disclosed in
Note 29 Capital management.
Basis of measurement
The consolidated financial statements have been prepared on the historical
cost basis except for the following material items, which are measured on
Amendments to References to Conceptual Framework.
Definition of Material (Amendments to IAS 1 and IAS 8).
Definition of a Business (Amendments to IFRS 3).
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS
an alternative basis on each reporting date:
39 and IFRS 7).
Derivative financial instruments are measured at fair value.
Standards issued but not yet effective
Non-derivative financial instruments at Fair Value through Profit
annual periods beginning after January 1, 2020. The group has not early
or Loss (FVTPL) are measured at fair value.
adopted any new or amended standards and they are not expected to
The following amended standards and interpretations are effective for
have a significant impact on the group’s consolidated financial statements.
Debt instrument at Fair Value through Other Comprehensive
Income (FVOCI) are measured at fair value.
Contingent considerations assumed in business disposals are
COVID-19-Related Rent Concessions (Amendment to IFRS 16).
Interest Rate Benchmark Reform – Phase 2 (Amendments to
measured at fair value.
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16).
Net defined benefit (asset) liability is recognized at fair value
Onerous Contracts – Cost of Fulfilling a Contract (Amendments
of plan assets less the present value of the defined benefit
to IAS 37).
obligation.
Annual Report 2020 | Financials and Notes | Akastor Group 30
Annual Improvements to IFRS Standards 2018–2020.
accounted investee or as an available-for-sale financial asset depending
on the level of influence retained.
Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16).
Any contingent consideration receivable is measured at fair value at the
disposal date. Changes in the fair value of the contingent consideration
Classification of Liabilities as Current or Non-current
from divestment of a subsidiary for transactions will be recognized in
(Amendments to IAS 1).
Other income as gain or loss.
IFRS 17 Insurance Contracts and amendments to IFRS 17
Investments in joint ventures and associates
Insurance Contract.
The group’s interests in equity-accounted investees comprise interests in
joint ventures and associates.
Note 3 | Significant accounting policies
A joint venture is an arrangement in which the group has joint control,
whereby the group has rights to the net assets of the arrangement, rather
Summary of significant accounting policies
to its assets and obligations for its liabilities. Joint control is established
The principal accounting policies applied in the preparation of these
by contractual agreement requiring unanimous consent of the ventures
consolidated financial statements are set out below. These policies have
for strategic, financial and operating decisions. An associate is an entity in
been consistently applied to all the years presented, unless otherwise stated.
which the group has significant influence, but not control or joint control,
Basis of consolidation
Subsidiaries
over the financial and operating policies.
Interests in joint ventures and associates are accounted for using the
Subsidiaries are entities controlled by the group. The group controls an
equity method. They are initially recognized at cost, which includes
entity when it is exposed to, or has rights to, variable returns from its
transaction costs. Subsequent to initial recognition, the consolidated
involvement with the entity and has the ability to affect those returns
financial statements include the group’s share of the profit and loss and
through its power over the entity. The financial statements of subsidiaries
other comprehensive income of the equity-accounted investees. The
are included in the consolidated financial statements from the date on
group’s investment includes goodwill identified on acquisition, net of
which control commences until the date of which control ceases.
any accumulated impairment losses. When the group’s share of losses
Business combinations
exceeds its interest in an equity-accounted investee, the carrying amount
of that interest, including any long-term investments, is reduced to zero,
Business combinations are accounted for using the acquisition method
and further losses are not recognized except to the extent that the group
as of the acquisition date, which is the date when control is transferred
incurs legal or constructive obligations or has made payments on behalf
to the group. The consideration transferred in the acquisition is generally
of the investee.
measured at fair value, as are the identifiable net assets acquired. Any
goodwill that arises is tested annually for impairment.
The purpose of the investment determines the presentation of the group’s
share of profit and loss of the equity-accounted investee in the income
Transaction costs, other than those associated with the issue of debt or
statement. When the entity is established to share risk in executing a
equity securities incurred in connection with a business combination are
project or is closely related to Akastor’s operating activities, the share
expensed as incurred.
of profit or loss is reported as part of Other income in Operating Profit.
Share of the profit or loss of a financial investment is reported as part of
Any contingent consideration payable is measured at fair value at the
Net finance expenses.
acquisition date. Changes in the fair value of the contingent consideration
from acquisition of a subsidiary or non-controlling interest for transactions
Transactions eliminated on consolidation
will be recognized in Other income as gain or loss, except for the obligation
Intra-group balances and transactions, and any unrealized gains and
that is classified as equity.
Non-controlling interests
losses or income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements. Unrealized
gains arising from transactions with associates and joint ventures are
Non-controlling interests are measured initially at their fair value at
eliminated to the extent of the group’s interest in the entity. Unrealized
the date of acquisition. Changes in the group’s ownership interest in a
losses are eliminated in the same way as unrealized gains, but only to the
subsidiary that do not result in a loss of control are accounted for as equity
extent that there is no evidence of impairment.
transactions.
Loss of control
Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities,
On the loss of control, the group derecognizes the assets and liabilities of
that are expected to be recovered primarily through sale rather than
the subsidiary, any non-controlling interests and the other components of
through continuing use, are classified as held for sale. This condition is
equity. Any resulting gain or loss is recognized in the income statement.
regarded as met only when the sale is highly probable and the asset or
Any interest retained in the former subsidiary is measured at fair value
disposal group is available for immediate sale in its present condition.
when control is lost. Subsequently it is accounted for as an equity-
Management must be committed to the sale, which should be expected
Annual Report 2020 | Financials and Notes | Akastor Group 31
to qualify for recognition as a completed sale within one year from the
Assets and liabilities, including goodwill and fair value adjustments,
date of classification.
are translated at the closing exchange rate at the reporting date.
Non-current assets and disposal groups classified as held for sale are
Income statements are translated at average exchange rate for
measured at the lower of their carrying amount and fair value less costs to
the year, calculated on the basis of 12 monthly end rates.
sell. Property, plant and equipment and intangible assets once classified
as held for sale are not depreciated or amortized, but are considered in
Exchange differences arising from the translation of the net investment
the overall impairment testing of the disposal group.
in foreign operations, and of related hedges, are included in other
comprehensive income as currency translation reserve. These translation
No reclassifications are made for years prior to the year when non-current
differences are reclassified to the income statement upon disposal of the
assets or disposal groups are classified as a held for sale.
related operations or when settlement is likely to occur in the near future.
Discontinued operations
Monetary items that are receivable from or payable to a foreign operation
A discontinued operation is a component of the group’s business that
are considered as part of the net investment in that foreign operation,
represents a separate major line of business or geographical area
when the settlement is neither planned nor likely to occur in the
of operations that has been disposed of or is held for sale, or is a
foreseeable future. Exchange differences arising from these monetary
subsidiary acquired exclusively with a view to resale. Classification as
items are recognized in other comprehensive income.
a discontinued operation occurs upon disposal or when the operation
meets the criteria to be classified as held for sale, if earlier.
Current/non-current classification
In the consolidated income statement, income and expenses from
intended for sale or consumption in the group’s normal operating cycle,
discontinued operations are reported separately from income and
it is held primarily for the purpose of being traded, or it is expected/due
expenses from continuing operations, down to the level of profit after
to be realized or settled within twelve months after the reporting date.
An asset is classified as current when it is expected to be realized or is
taxes. When an operation is classified as a discontinued operation, the
Other assets are classified as non-current.
comparative income statement is restated as if the operation had been
discontinued from the start of the comparative year.
A liability is classified as current when it is expected to be settled in the
The statement of cash flow includes the cash flow from discontinued
traded, the liability is due to be settled within twelve months after the
operations prior to the disposal. Cash flows attributable to the
reporting period, or if the group does not have an unconditional right
operating, investing and financing activities of discontinued operations
to defer settlement of the liability for at least twelve months after the
are presented in the notes to the extent these represent cash flows
reporting period. All other liabilities are classified as non-current.
group’s normal operating cycle, is held primarily for the purpose of being
with third parties.
Foreign currency
Financial assets, financial liabilities and equity
On initial recognition, a financial asset is classified as measured at
Foreign currency transactions and balances
amortized costs, FVOCI or FVTPL. The classification depends on the
Transactions in foreign currencies are translated at the exchange
group’s business model for managing the financial assets and the
rate at the date of the transaction. Monetary assets and liabilities
contractual terms of the cash flows.
denominated in foreign currencies at the reporting date are translated
to the functional currency at the exchange rate on that date. Foreign
A financial asset is measured at amortized costs if the business
exchange differences arising on translation are recognized in the
model is to hold the asset to collect contractual cash flows, and
income statement. Non-monetary assets and liabilities measured in
the contractual cash flows are solely payments of principal and
terms of historical cost in a foreign currency are translated using the
interests (SPPI criterion).
exchange rate on the date of the transaction. Non-monetary assets and
liabilities denominated in foreign currencies that are measured at fair
A debt instrument is classified at FVOCI if the business model is
value are translated to the functional currency at the exchange rates on
both collecting contractual cash flows and selling the financial
the date the fair value is determined.
asset, and it meets the SPPI criterion.
Investments in foreign operations
All financial assets not classified as measured at amortized cost
Items included in the financial statements of each of the group’s entities
or FVOCI are measured at FVTPL.
are measured using the currency of the primary economic environment
in which the entity operates. The results and financial positions of all
Financial assets are not reclassified subsequent to their
initial
the group entities that have a functional currency different from the
recognition unless the group changes its business model for managing
group’s presentation currency are translated into the presentation
financial assets.
currency as follows:
Annual Report 2020 | Financials and Notes | Akastor Group 32
Other investments
Derivative financial instruments
Other investments include equity and debt investments in companies
The group uses derivative financial instruments such as currency forward
where the group has neither control nor significant influence, usually
contracts and currency swaps to hedge its exposure to foreign exchange
represented by
less than 20 percent of the voting power. The
risks arising from operational, financial and
investment activities.
investments are categorized as financial assets measured at FVTPL or
These derivative financial instruments are accounted for as cash flow
FVOCI and recognized at fair value at the reporting date. Subsequent
hedges since highly probable future cash flows are hedged (rather than
to initial recognition, changes in financial assets measured at FVTPL are
committed revenues and expenses). The group also has embedded
recognized in profit and loss.
foreign exchange derivatives which have been separated from their
ordinary commercial contracts. Derivative financial instruments are
When a debt instrument is classified as financial asset measured at
recognized initially at fair value. Derivatives are subsequently measured
FVOCI, interest income calculated using the effective interest method,
at fair value, and changes in fair value are accounted for as described
foreign exchange gains and losses and impairment losses are recognized
below.
in profit and loss. Other changes in fair value are recognized in other
comprehensive income and presented as part of fair value reserve. When
Cash flow hedge
financial asset measured at FVOCI is derecognized, the gain or loss
Hedging of the exposure to variability in cash flows that is attributable
accumulated in other comprehensive income is reclassified to profit and
to a particular risk or a highly probable future cash flow is defined as a
loss.
Trade and other receivables
cash flow hedge. The effective portion of changes in the fair value is
recognized in other comprehensive income as a hedge reserve. All foreign
exchange exposure is hedged. Any gain or loss relating to the ineffective
Trade and other receivables are generally classified as financial assets
portion of derivative hedging instruments is recognized immediately in
measured at amortized costs. They are recognized at the original
the income statement as finance income or expense.
invoiced amount, less loss allowance made for credit losses. The interest
rate element is disregarded if insignificant, which is the case for the
Hedge accounting is discontinued when the hedge no longer qualifies for
majority of the group’s trade receivables.
hedge accounting. Disqualification occurs when the hedging instrument
Interest-bearing receivables
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
Interest-bearing receivables include loans to related parties and are
is disqualified, the cumulative gain or loss that was recognized in the
generally classified as financial assets measured at amortized costs.
hedge reserve is recognized immediately in the income statement unless
Such financial assets are recognized initially at fair value and subsequent
it relates to a future cash flow that is likely to occur, but don’t qualify for
measurement at amortized cost using the effective interest method, less
hedge accounting, in which the accumulated hedge reserve remains in
any impairment losses.
Cash and cash equivalents
other comprehensive income until the hedged cash flow is recognized
in income statement. For cash flow hedges associated with forecast
transactions that subsequently result in recognition of a non-financial
Cash and cash equivalents include cash on hand, demand deposits held
asset, the amounts accumulated in the cash flow hedge reserve and the
at banks and other short-term highly liquid investments with original
cost of hedging reserve are included directly in the initial cost of the non-
maturity of three months or less.
financial asset when recognized.
Trade and other payables
Net investment hedge
Trade payables are recognized at the original invoiced amount. Other
Hedge of net investment in a foreign operation is accounted for
payables are recognized initially at fair value. Trade and other payables
similarly to cash flow hedges. Gains or losses arising from the hedging
are valued at amortized cost using the effective interest rate method.
instruments relating to the effective portions of the net investment
The interest rate element is disregarded if it is insignificant, which is the
hedge are recognized in other comprehensive income as currency
case for the majority of the group’s trade payables.
translation reserves. These translation reserves are reclassified to
Interest-bearing borrowings
the income statement upon disposal of the hedged net investments,
offsetting the translation differences from these net investments. Any
Interest-bearing borrowings are recognized initially at fair value less
ineffective portion is recognized immediately in the income statement
attributable transaction costs. Subsequent to initial recognition, interest-
as finance income or expenses. Gains and losses accumulated in other
bearing borrowings are measured at amortized cost with any difference
comprehensive income are reclassified to the income statement when
between cost and redemption value being recognized in the income
the foreign operation is partially disposed of or sold.
statement over the period of the borrowings on an effective interest
basis.
Share capital
Embedded derivatives
Embedded derivatives are derivatives that are embedded in other
financial instruments or other non-financial host contracts. Under certain
Ordinary shares are classified as equity. Repurchase of share capital is
conditions, the embedded derivative must be separated from its host
recognized as a reduction in equity and is classified as treasury shares.
contract and the derivative is then to be recognized and measured as
Annual Report 2020 | Financials and Notes | Akastor Group 33
any other derivative in the financial statements. Embedded derivatives
Deferred tax assets and liabilities are offset if there is a legally enforceable
must be separated when the settlement for a commercial contract is
right to offset current tax liabilities and assets, and they relate to income
denominated in a currency different from any of the major contract
taxes levied by the same tax authority on the same taxable entity, or on
parties’ own functional currency, or that the contract currency is not
different taxable entities which intend either to settle current tax liabilities
considered to be commonly used for the relevant economic environment
and assets on a net basis, or to realize the tax assets and settle the
defined as the countries involved in the cross-border transaction.
liabilities simultaneously.
Changes in the fair value of separated embedded derivatives are
recognized immediately in the income statement. All foreign currency
Deferred tax assets are recognized for unused tax losses, tax credits and
exposure is hedged, so the hedging instrument to the embedded
deductible temporary differences, to the extent that it is probable that
derivative will also have corresponding opposite fair value changes in the
future taxable profits will be available against which they can be utilized.
income statement.
Measurement of deferred tax assets are reviewed at each reporting date.
Finance income and expense
Inventories
Finance income and expense include interest income and expense,
Inventories are stated at the lower of cost or net realizable value. Net
foreign exchange gains and losses, dividend income, gains and losses on
realizable value is the estimated selling price in the ordinary course of
derivatives, as well as change in fair value of financial assets measured
business, less the estimated costs of completion and selling expenses.
at FVTPL. Interest income and expenses include calculated interest using
the effective interest method, in addition to discounting effects from
The cost of inventories is based on the weighted average cost principle and
assets and liabilities measured at fair value. Gains and losses on derivatives
includes expenditures incurred in acquiring the inventories and bringing
include effects from derivatives that do not qualify for hedge accounting
them to their present location and condition. In the case of manufactured
and embedded derivatives, in addition to the ineffective portion of
inventories and work in progress, cost includes an appropriate share of
qualifying hedges.
overheads based on normal operating capacity.
Revenue from contract with customers
Impairment
The significant accounting policies relating to revenue recognition from
Trade receivables and contract assets
contracts with customers are described in Note 7 Revenue and other
Loss allowance is recognized in profit or loss and measured at lifetime
income.
Income tax
ECLs. ECLs are a probability-weighted estimate of credit losses.
Lifetime ECLs are the ECLs that result from all possible default events
over the expected life of a financial asset. The group considers a
Income tax recognized in the income statement comprises current and
financial asset to be in default when the group is unlikely to receive
deferred tax. Income tax is recognized in the income statement except
its outstanding contractual amount in full, or the contractual payments
to the extent that it relates to items recognized directly in equity or other
are more than 90 days past due. When estimating ECLs, the group
comprehensive income.
considers reasonable and supportable information that is relevant and
available without undue cost or effort, based on the group’s historical
Current tax is the expected tax payable or receivable on the taxable income
experience including forward-looking information. The loss allowance
or loss for the year, using tax rates enacted or substantially enacted at the
is recognized in financial items to the extent that impairment is caused
reporting date, and any adjustment to tax payable in respect of previous
by the insolvency of the customer.
years. Current tax payable also includes any tax liability arising from the
declaration of dividends, recognized at the same time as the liability to pay
The gross carrying amount of trade receivable is written off when the
the related dividend.
group has no reasonable expectations of recovering a trade receivable
in its entirety or a portion thereof. The group individually makes an
Deferred tax is recognized in respect of temporary differences between
assessment with respect to the timing and amount of write-off based
the carrying amounts of assets and liabilities for financial reporting and the
on whether there is a reasonable expectation of recovery. Trade
amounts used for taxation purposes. Deferred tax is not recognized for:
receivables that are written off could still be subject to enforcement
activities in order to comply with the group’s procedures for recovery
Goodwill not deductible for tax purposes.
of amounts due.
The initial recognition of assets or liabilities that affects neither
Debt instruments measured at amortized cost or at FVOCI
accounting nor taxable profit.
Debt instruments measured at amortized cost or at FVOCI are
Temporary differences relating to investments in subsidiaries to
difficulty of the borrower or it is probable that the borrower will enter
the extent that they will not reverse in the foreseeable future.
bankruptcy or other financial reorganization. The loss allowance is
considered to be “credit-impaired” when there is significant financial
charged to profit and loss.
Deferred tax is measured at the tax rates that are expected to be applied
to temporary differences when they reverse, based on the tax rates that
have been enacted or substantively enacted at the reporting date.
Annual Report 2020 | Financials and Notes | Akastor Group 34
Non-financial assets
the contract and the expected net cost of continuing with the contract.
The carrying amounts of the group’s non-financial assets (other than
Before a provision is recognized, the group recognizes any impairment
employee benefit assets, inventories and deferred tax assets) are
loss on the assets associated with the contract.
reviewed at the end of each reporting period to determine whether
there is any indication of impairment. If an indication of impairment
Restructuring
exists, the asset’s recoverable amount is estimated. Cash-generating
A restructuring provision is recognized when the group has developed
units (CGU) containing goodwill, intangible assets with an indefinite
a detailed formal plan for the restructuring and has raised a valid
useful life and intangible assets that are not yet available for use are
expectation in those affected that the entity will carry out the
tested for impairment annually.
restructuring by starting to implement the plan or announcing its main
features to those affected by it. The measurement of a restructuring
The recoverable amount is the greater of fair value less costs to sell
provision includes only the direct expenditures arising from the
and value in use. In assessing value in use, the estimated future cash
restructuring, which are those amounts that are both necessarily
flows are discounted to their present value using a pre-tax discount
entailed by the restructuring and not associated with the ongoing
rate that reflects current market assessments of the time value of
activities of the entity.
money and the risks specific to the asset. For an asset that does not
generate largely independent cash inflows, the recoverable amount is
Leases
determined for the CGU to which the asset belongs.
As a lessee
Right-of-use assets
An impairment loss is recognized whenever the carrying amount of an
The group recognizes right-of-use asset at the lease commencement
asset or a CGU exceeds its recoverable amount. Impairment losses are
date. The right-of-use asset is initially measured at cost, which
recognized in the income statement.
comprises the initial amount of the lease liability adjusted for any
An impairment loss recognized in respect of a CGU (or a group of
plus any initial direct costs. Subsequently, the right-of-use asset is
CGUs) containing goodwill is allocated first to goodwill and then to the
depreciated on a straight-line basis over the shorter of its estimated
other assets in the CGU(s) on a pro rata basis.
useful life and the lease term. In addition, the right-of-asset is subject
prepaid lease payments made at or before the commencement date,
to impairment assessment of non-financial assets and adjusted for
An impairment loss on goodwill is not reversed. An impairment loss on
certain remeasurement of the lease liability.
other assets is reversed if there has been a change in the estimates
used to determine the recoverable amount, and the change can
Lease liabilities
be objectively related to an event occurring after the impairment is
At the lease commencement date, the group recognizes lease liability
recognized. An impairment loss is reversed only to the extent that the
measured at the present value of the lease payments over the lease
asset’s carrying amount does not exceed the carrying amount that
term, discounted using the group's incremental interest rate. Generally,
would have been determined, net of depreciation or amortization, if no
the lease payments include fixed payments and variable lease payments
impairment loss had been recognized.
that depend on an index or rate.
Provisions
The lease liability is subsequently increased by the interest cost on the
A provision is recognized when the group has a present obligation as a
lease liability and decreased by lease payment made. It is remeasured
result of a past event that can be estimated reliably and it is probable
when there is a change in future lease payments arising from a change
that the group will be required to settle the obligation. If the effect is
in an index or rate, or as appropriate, changes in the assessment of
material, provisions are determined by discounting the expected future
whether an extension option is reasonably certain to be exercised or a
cash flows at a market based pre-tax rate that reflects current market
termination option is reasonably certain not to be exercised .
assessments of the time value of money and, where appropriate, the
liability-specific risks. The unwinding of the discount is recognized as
Short term leases and leases of low-value assets
finance expense.
Warranties
The group applies the recognition exemption to its leases that have
a lease term of 12 months or less from the commencement date and
do not contain a purchase option (short-term leases). The group
Provision for warranties is recognized when the underlying products
also applies recognition exemption to leases that are considered of
or services are sold. The provision is based on historical warranty
low-value assets, mainly IT equipment and office equipment. Lease
data and a weighting of all possible outcomes against their associated
payments associated with the short -term leases and leases of low
probabilities.
Onerous contracts
-value assets are recognized as expenses on a straight -line basis over
the lease term.
Provision for onerous contracts is recognized when the expected
Lease term
benefits to be derived by the group from a contract are lower than the
The group determines the lease term as the non-cancellable term of
unavoidable costs of meeting the obligations under the contract. The
the lease, together with any periods covered by an option to extend the
provision is measured at the lower of the expected cost of terminating
lease if it is reasonably certain to be exercised, or any period covered
Annual Report 2020 | Financials and Notes | Akastor Group 35
by an option to terminate the lease if it is reasonably certain not to
any impairment loss is allocated to the carrying amount of the equity-
be exercised. The group applies judgment in evaluating whether it is
accounted investee as a whole.
reasonably certain to exercise extension option, considering all relevant
factors that create economic incentive to exercise the extension option.
When the group disposes of an operation within a CGU or group of
As a lessor
CGUs to which goodwill has been allocated, a portion of the goodwill
is included in the carrying amount of the operation when determining
When the group acts as a lessor, it determines at lease inception
the gain or loss on disposal. The portion of the goodwill allocated is
whether each lease is a finance lease or an operating lease.
measured based on the relative values of the operation disposed of and
To classify each lease, the group makes an overall assessment of
can be demonstrated that another method better reflects the goodwill
whether the lease transfers substantially all of the risks and rewards
associated with the operation disposed of. The same principle is used
incidental to ownership of the underlying asset. If this is the case, then
for allocation of goodwill when the group reorganizes its businesses.
the portion of the CGU retained at the date of partial disposal, unless it
the lease is a finance lease; if not, then it is an operating lease. As part
of this assessment, the group considers certain indicators such as
Research and development
whether the lease is for the major part of the economic life of the asset.
Expenditures on research activities undertaken with the prospect of
obtaining new scientific or technical knowledge and understanding is
When the group is an intermediate lessor, it accounts for its interests
recognized in the income statement as incurred.
in the head lease and the sub-lease separately. It assesses the lease
classification of a sub-lease with reference to the right-of-use asset
Development activities involve a plan or design for the production of
arising from the head lease, not with reference to the underlying asset.
new or substantially improved products or processes. Development
expenditure is capitalized only if development costs can be measured
The group recognizes lease payments received under operating leases
reliably, the product or process is technically and commercially feasible,
as income on a straight line basis over the lease term as part of “Lease
future economic benefits are probable and the group intends to and
revenue”.
Property, plant and equipment
has sufficient resources to complete development and to use or sell
the asset. The capitalized expenditure includes cost of materials, direct
labour overhead costs that are directly attributable to preparing the
Property, plant and equipment are measured at cost less accumulated
asset for it intended use and capitalized interest on qualifying assets.
depreciation and impairment losses. The cost of self-constructed
Other development expenditures are recognized
in the
income
assets includes the cost of materials, direct labour, borrowing costs
statement as an expense as incurred.
on qualifying assets, production overheads and the estimated costs of
dismantling and removing the assets and restoring the site on which
Capitalized development expenditure
is measured at cost
less
they are located.
accumulated amortization and accumulated impairment losses.
If the components of property, plant and equipment have different
Other intangible assets
useful lives, they are accounted for as separate components.
Acquired intangible assets are measured at cost less accumulated
amortization and impairment losses.
Subsequent costs
The group capitalizes the cost of a replacement part or a component
Subsequent expenditures
of property, plant and equipment when that cost is incurred if it is
Subsequent expenditures on intangible assets are capitalized only
probable that the future economic benefits embodied with the item
when they increase the future economic benefits embodied in the
will flow to the group and the cost of the item can be measured reliably.
specific asset to which they relate. All other expenditures are expensed
All other costs are expensed as incurred.
Depreciation
as incurred.
Amortization
Depreciation is normally recognized on a straight-line basis over the
Amortization is recognized in the income statement on a straight-line
estimated useful lives of property, plant and equipment.
basis over the estimated useful lives of intangible assets unless such
Intangible assets
Goodwill
useful lives are indefinite. Intangible assets are amortized from the date
they are available for use.
Goodwill that arises from the acquisition of subsidiaries is presented as
Employee benefits
intangible asset. For the measurement of goodwill at initial recognition,
Defined contribution plans
see Business combinations.
Obligations for contributions to defined contribution pension plans are
recognized as an expense in the income statement as incurred.
Goodwill is measured at cost less accumulated impairment losses.
In respect of equity-accounted investees, the carrying amount of
goodwill is included in the carrying amount of the investment, and
Annual Report 2020 | Financials and Notes | Akastor Group 36
Defined benefit plans
Fair value measurement
The group’s net obligation in respect of defined benefit pension plans is
When available, the group measures the fair value of a financial
calculated separately for each plan by estimating the amount of future
instrument using the quoted price in an active market for that
benefit that employees have earned in the current and prior periods;
instrument. If there is no quoted price in an active market, then the
discounting that amount and deducting the fair value of any plan assets.
group uses valuation techniques that maximize the use of relevant
The calculation of defined benefit obligations is performed annually by
chosen valuation technique incorporates all of the factors that market
a qualified actuary using the projected unit credit method. The discount
participants would take into account in pricing a transaction.
observable inputs and minimize the use of unobservable inputs. The
rate is the yield at the reporting date on government bonds or high-
quality corporate bonds with maturities consistent with the terms of
The best evidence of the fair value of a financial instrument on initial
the obligations.
recognition is normally the transaction price. If the group determines
that the fair value on initial recognition differs from the transaction
Remeasurement of the net defined benefit liability, which comprises
price and the fair value is evidenced neither by a quoted price in an
actuarial gains and losses, the return on plan assets (excluding interest)
active market for an identical asset or liability nor based on a valuation
and the effect of the asset ceiling (if any, excluding interest), are
technique that uses only data from observable markets, the financial
recognized immediately in other comprehensive income. The group
instrument is initially measured at fair value, and the difference
determines the net interest expense (income) on the net defined
between the fair value on initial recognition and the transaction price is
benefit liability (asset) for the period by applying the discount rate
recognized as a deferred gain or loss. Subsequently, the deferred gain
used to measure the defined benefit obligation at the beginning of the
or loss is recognized in profit or loss on an appropriate basis over the
annual period to the then-net defined benefit liability (asset), taking
life of the instrument.
into account any changes in the net defined benefit liability (asset)
during the period as a result of contributions and benefit payments. Net
interest expense and other expenses related to defined benefit plans
are recognized in the income statement.
When the benefits of a plan are changed or when a plan is curtailed,
the resulting change in benefit that relates to past service or the gain or
loss on curtailment is recognized immediately in the income statement.
The group recognizes gains and losses on the settlement of a defined
benefit plan when the settlement occurs.
Annual Report 2020 | Financials and Notes | Akastor Group 37
Note 4 | Significant accounting estimates and judgements
Estimates and judgements are continually reviewed and are based on
Warranties
historical experiences and expectations of future events. The resulting
A provision is made for expected warranty expenditures. The warranty
accounting estimates will, by definition, seldom accurately match actual
period is normally 12-30 months as one operating cycle. Based on
results, but are based on the best estimate at the time. Estimates and
experience, the provision is often estimated at one percent of the contract
assumptions that have a significant risk of causing material adjustments to
value, but can also be a higher or lower amount following a specific
the carrying amounts of assets and liabilities within the next financial year
evaluation of the actual circumstances for each contract. Both the general
are discussed below.
Revenue recognition
one percent provision and the evaluation of project specific circumstances
are based on experience from earlier projects. Factors that could affect the
estimated warranty cost include the group’s quality initiatives and project
Revenue from performance obligations satisfied over time, typically in
execution model. Reference is made to Note 27 Provisions for further
construction contracts and service contracts, are recognized according
information about provisions for warranty expenditures on delivered
to progress. This requires estimates of the final revenue and costs of the
projects.
performance obligations, as well as measurement of progress achieved to
date as a proportion of the total work to be performed.
Deferred and contingent considerations
The main uncertainty when assessing contract revenue is related to
combinations and disposals are measured at fair value at transaction date.
recoverable amounts from variation orders, claims and incentive payments
When a deferred and contingent consideration meets the definition of a
which are recognized when, in the group’s judgement, it is highly probable
financial asset or liability, it is subsequently remeasured at fair value at the
that they will not result in a significant reversal of revenue. This assessment
reporting date. The determination of fair value is based on discounted cash
is adjusted by management’s evaluation of liquidated damages to be
flows. Key assumptions made by the management include the probability
imposed by customers, typically relating to contractual delivery terms. In
of meeting each performance target and the discount factor.
Deferred and contingent considerations resulting
from business
many contracts, there are frequent changes in scope of work resulting
in a number of variation orders. The contracts with customers normally
Impairment of non-financial assets
include procedures for issuing and approval of variation orders. There
Property, plant and equipment and intangible assets
can be unapproved variation orders and claims included in the contract
The group has significant non-current assets recognized
in the
revenue where recovery is assessed as highly probable and other criteria
consolidated statement of financial position related to Property, plant and
are met. Even though management has extensive experience in assessing
equipment and intangible assets. The value in use of some of these assets
the outcome of such negotiations, uncertainties exist.
can be significantly impacted by changes of market conditions. The group
considers whether there are indications of impairment on the carrying
One of the key uncertainties related to revenue recognition arises in the
amounts of such non-current assets. If such indications exist, an impairment
final stages of the completion of long term contracts which can involve
test is performed to assess whether or not the assets should be impaired.
renegotiations with customers. The estimates of the likely outcome of
The valuations, often determined by value in use calculations, will often
these renegotiations are based on management’s assessments subject to
be performed based on estimates of future cash flows discounted by an
complex interpretations of contractual, engineering, design and project
appropriate discount rate. Significant estimates and judgments are made
execution issues. There can be a wide range of reasonably possible
by the management, including determining appropriated cash-generating
outcomes from such renegotiations and the estimates made require a high
units and discount rate, projections for future cash flows and assumptions
degree of judgment.
of future market conditions. References are made to Note 13 Property,
plant and equipment and Note 14 Intangible assets.
Estimate of the remaining contract costs depends on productivity
factors and the cost of inputs. Weather conditions, the performance of
Goodwill
subcontractors and others with an impact on schedules, commodity prices
The group performs impairment testing of goodwill annually or more
and currency rates can affect cost estimates. Experience, systematic use
frequently if any impairment indicators are identified. The recoverable
of the project execution model and focus on core competencies reduce,
amounts of cash-generating units to which goodwill is allocated have
but do not eliminate, the risk that estimates may change significantly. A
been determined based on value-in-use calculations. These calculations
risk contingency is included in estimated contract costs based on the risk
require management to estimate future cash flows expected to arise from
register for identified significant risks.
these cash-generating units and an appropriate discount rate to reflect
Progress measurement based on costs incurred has an inherent risk related
include also assumptions for future market conditions, which require a
to the cost estimate as described above. The estimation uncertainty
high degree of judgment. Further details about goodwill allocation and
during the early stages of a contract is mitigated by a policy of normally
impairment testing are included in Note 15 Impairment testing of goodwill.
the time value of the money. Key assumptions made by the management
not recognizing revenue in excess of costs on large lump sum projects
before the contract reaches 20 percent of completion. Earlier recognition
Income taxes
can be made on a project-by-project basis if cost estimates are certain,
The group is subject to income taxes in numerous jurisdictions. Significant
typically in situations of repeat projects, proven technology or proven
judgement is required to determine the worldwide provision for income
execution model.
taxes. There are many transactions and calculations for which the ultimate
Annual Report 2020 | Financials and Notes | Akastor Group 38
tax determination is uncertain during the ordinary course of business.
Lease terms
Provisions for anticipated tax audit issues are based on estimates of
Some of the property leases, in which the group is a lessee, contain
eventual additional taxes.
extension or termination options exercisable before the end of the non-
cancellable period. These options are used to provide operational flexibility
Income tax expense is calculated based on reported income in the different
for the group. In determining the lease term, the group considers all facts
legal entities. Deferred income tax expense is calculated based on the
and circumstances that create an economic incentive to exercise an
temporary differences between the assets’ carrying amount for financial
extension option, or not exercise a termination option. Extension options
reporting purposes and their respective tax basis. The total amount
(or periods after termination options) are only included in the lease term
of income tax expense and allocation between current and deferred
if the lease is reasonably certain to be extended (or not terminated). The
income tax requires management’s interpretation of complex tax laws and
most relevant factors to be considered as “creating economic incentive”
regulations in the many tax jurisdictions where the group operates.
include significant leasehold improvement, alternatives for the leased
Valuation of deferred tax assets is dependent on management’s assessment
leased assets. Most extension options in offices leases have not been
of future recoverability of the deferred tax benefit. Expected recoverability
included in the lease term, because the group expects to be able to
may result from expected taxable income in the near future, planned
replace the assets without significant cost or business disruption. Most of
transactions or planned tax optimizing measures. Economic conditions
the early termination options are not considered in the lease term either
may change and lead to a different conclusion regarding recoverability,
as the group assesses it as reasonably certain that the leases will not be
and such change may affect the results for each future reporting period.
terminated early.
property and the costs and business disruption required to replace the
Tax authorities in different jurisdictions may challenge calculation of
The lease term assessment requires management’s judgment and is made
income taxes from prior periods. Such processes may lead to changes to
at the commencement of the leases. The lease term is reassessed if an
prior periods’ taxable income, resulting in changes to income tax expense.
option is actually exercised or the group becomes obliged to exercise
When tax authorities challenge income tax calculations, management is
it. The assessment of reasonable certainty is only revised if a significant
required to make estimates of the probability and amount of possible
event or a significant change in circumstances occurs, which affects this
tax adjustments. Such estimates may change as additional information
assessment, and that is within the group’s control. Please see Note 33
becomes known. Further details about income taxes are included in Note
Leases for more information about the leases where the group is a lessee.
11 Income tax.
Pension benefits
Legal disputes and contingent liabilities
Given the scope of the group’s worldwide operations, group companies
The present value of the pension obligations depends on a number
are inevitably involved in legal disputes in the course of their business
of factors determined on the basis of actuarial assumptions. These
activities. In addition, as an investment company, Akastor and its portfolio
assumptions include financial factors such as the discount rate, expected
companies from time to time engage in mergers, acquisitions and other
salary growth, inflation and return on assets as well as demographical
transactions that could expose the companies to financial and other
factors concerning mortality, employee turnover, disability and early
non-operational risks, such as indemnity claims and price adjustment
retirement. Assumptions about all these factors are based on the
mechanisms resulting in recognition of deferred settlement obligations.
situation at the time the assessment is made. However, it is reasonably
certain that such factors will change over the very long periods for which
Provisions have been made to cover the expected outcome of the legal
pension calculations are made. Any changes in these assumptions will
claims and disputes to the extent negative outcomes are likely and reliable
affect the calculated pension obligations with immediate recognition in
estimates can be made. However, the final outcomes of these cases are
other comprehensive income. Further information about the pension
subject to uncertainties, and resulting liabilities may exceed provisions
obligations and the assumptions used are included in Note 26 Employee
recognized. The group follows the development of these disputes on
benefits - pension.
case-by-case basis and makes assessment based on all available evidence
as at the reporting date.
Fair value measurement
The group has invested in significant financial assets that require the
measurement of fair value. If there is no quoted price in an active market,
then the group uses valuation techniques that maximize the use of
relevant observable inputs and minimize the use of unobservable inputs.
The chosen valuation technique incorporates all of the factors that market
participants would take into account in pricing a transaction. The fair value
measurement requires a high degree of judgment. Judgements include
considerations of inputs such as cash flow projection, discount rate and
volatility. Further information about the fair value measurement using level
3 inputs is included in Note 32 Financial Instruments.
Annual Report 2020 | Financials and Notes | Akastor Group 39
Note 5 | Business combinations
Business combinations in 2020
Acquisition of DDW Offshore AS
Trade and other receivables comprise gross contractual amounts due of
NOK 66 million in DDW Offshore, of which NOK 57 million was expected
DDW Offshore AS (previously DOF Deepwater AS) was a joint venture
to be uncollectable at the date of acquisition.
between Akastor and DOF ASA (“DOF”). On October 9, 2020, DDW
Offshore completed a restructuring of its debt with its lenders. The
If new information obtained within one year of the date of acquisition
restructuring involved DOF transferring all of its shares in DDW Offshore
about facts and circumstances that existed at the date of acquisition
to Akastor for a nominal amount, and Akastor hence assuming 100
identifies adjustments to the above amounts, the accounting for the
percent ownership in the company. Further, 50 percent of the debt in
acquisition will be revised.
DDW Offshore was converted to equity and the remaining 50 percent
remains on existing terms, including a parent company guarantee from
Business combinations in 2019
Akastor ASA, albeit with certain adjustments that include i.a. no fixed
Acquisition of AGR
instalments except an upfront repayment of NOK 20 million. The maturity
On April 2, 2019, Akastor completed the transaction to merge First Geo AS
date of the debts is in October 2023. The company is obliged to divest
(First Geo) and AGR AS (AGR). The transaction was carried out primarily
all its five vessels on or around the maturity date of the debts and the
as an asset deal, whereby assets in the old AGR legal structure and three
sales proceeds after transaction costs shall be shared 50/50 between the
legal entities were transferred to a new legal structure AGR AS. Akastor
lenders and DDW Offshore.
contributed 100 percent of its shares in First Geo AS to AGR AS to form
the combined AGR/ First Geo group (referred as a new portfolio company
DDW Offshore AS owns five modern Anchor Handling Tug Supply (AHTS)
AGR). After the transaction, Akastor holds 100 percent of the shares
vessels with capability to operate and support clients on a world-wide
and held 55 percent of the economic interest in the merged company
basis. The vessels are specially designed to perform anchor-handling,
AGR. Silver fleet Capital, DNB Bank ASA and Nordea Bank Abp, Norway
towing, and supply services at offshore oil and gas fields.
branch, held the remaining 45 percent economic interest. In February
2020, Akastor increased its economic interest in AGR to 64 percent after
The group expects that the restructuring will give the company a
acquiring the equity interest previously held by Silverfleet. In addition, AGR
predictable and viable financial structure for the coming three years. DDW
AS has rolled over NOK 180 million of the debt, of which DNB and Nordea
Offshore operates in a market which remains challenging, but with this
holds NOK 90 million each.
financial structure and the relative modern and versatile fleet, the company
should be well positioned to remain as a market player and thereby secure
The group expects that the merged company AGR will be a world leading
revenue in a more normalized market in the future.
provider of well management-, reservoir- and subsurface services, ranging
from consultancy services to fully outsourced well and rig management
The acquired DDW Offshore contributed revenues of NOK 8 million and
projects. The company’s service offering covers the entire value chain
net loss of NOK 18 million for the period from the acquisition date to
from qualifications to plugging and abandonment.
December 31, 2020. If the acquisition of DDW Offshore had occurred on
January 1, 2020, the group estimates that consolidated revenue would
The acquired AGR business contributed revenues of NOK 478 million
have been NOK 4 693 million and net loss after tax would have been
and net loss of NOK 15 million for the period from the acquisition date
NOK 881 million for the year ended December 31, 2020. In determining
to December 31, 2019. If the acquisition of AGR had occurred on January
these amounts, management has assumed that the fair value adjustments,
1, 2019, the group estimates that consolidated revenue and profit after
determined provisionally, that arose on the date of acquisition would have
tax for the year ended December 31, 2019 would have been NOK 5 493
been the same if the acquisition had occurred on January 1, 2020.
million and NOK 86 million respectively. In determining these amounts,
management has assumed that the fair value adjustments, determined
Details of the net assets acquired are as follows. No goodwill is identified
provisionally, that arose on the date of acquisition would have been the
in the transaction.
same if the acquisition had occurred on January 1, 2019.
Identifiable assets and liabilities acquired
Acquisition of Bronco
Amounts in NOK million
DDW Offshore
On June 7, 2019, Akastor, through its portfolio company MHWirth, acquired
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
External borrowings
Trade and other payables
Other liabilities
Total net identifiable assets acquired
100 percent ownership interest in Bronco Manufacturing LLC (Bronco) for
a cash consideration of USD 31.5 million at a cash-free and debt-free basis.
Bronco is consolidated as part of MHWirth. By utilizing the competencies
and supply chain of Bronco, Akastor sees potential on current MHWirth
equipment, as well as the potential to re-engineer relevant equipment
to make it more suitable for onshore applications. In addition, Akastor
expects that Bronco will strengthen MHWirth's presence in North America
and increase local manufacturing capabilities in the Houston region.
397
12
9
37
(493)
(24)
(198)
(262)
The acquired Bronco business contributed revenues of NOK 123 million
Annual Report 2020 | Financials and Notes | Akastor Group 40
and net profit of NOK 8 million for the period from the acquisition date to
provisionally, that arose on the date of acquisition would have been the
December 31, 2019. If the acquisition of Bronco had occurred on January
same if the acquisition had occurred on January 1, 2019.
1, 2019, the group estimates that consolidated revenue and profit after
tax for the year ended December 31, 2019 would have been NOK 5 472
Details of the net asset acquired, purchase consideration and goodwill are
million and NOK 105 million respectively. In determining these amounts,
as follows.
management has assumed that the fair value adjustments, determined
Amounts in NOK million
Property, plant and equipment
Intangible assets
Right-of-use assets
Deferred tax assets
Inventories
Trade and other receivables
Cash and cash equivalents
Other assets
External borrowings
Lease liabilities
Deferred tax liabilities
Trade and other payables
Other liabilities
Total net identifiable assets acquired
AGR
Bronco
2
38
43
12
2
101
33
2
(152)
(43)
(8)
(111)
(1)
(82)
4
111
9
15
59
44
2
-
(5)
(9)
-
(23)
-
207
Acquisition-related costs of NOK 5 million are included in "other operating
The group measured the acquired lease liabilities using the present value
expenses" in the consolidated income statement.
of the remaining lease payments at the date of acquisition. The right-of-
use assets were measured at an amount equal to the lease liabilities.
Trade and other receivables comprise gross contractual amounts due of
NOK 104 million and NOK 48 million in AGR and Bronco, respectively, of
which NOK 3 million in AGR and NOK 4 million in Bronco was expected to
be uncollectable at the date of acquisition.
Consideration transferred and goodwill
Amounts in NOK million
Cash consideration
Fair value of non-cash consideration
Total consideration transferred
Non-controlling interests (NCI) measured at fair value
Fair value of net identifiable assets
Goodwill
AGR
Bronco
-
6
6
10
82
98
270
-
270
-
(207)
63
Annual Report 2020 | Financials and Notes | Akastor Group 41
The goodwill resulting from the acquisitions is mainly attributable to the
Acquisition of subsidiaries with NCI
value of the assembled workforce in AGR and Bronco as well as expected
In April 2019, Akastor contributed 100 percent of its shares in First Geo AS
synergies arising from the acquisitions. NOK 43 million of the goodwill
to AGR AS to form the combined AGR/ First Geo group (AGR). After the
recognized in AGR is expected to be tax deductible for tax purposes.
transaction, Akastor holds 55 percent of the economic interest in AGR, and
non-controlling interests (NCI) in AGR were recognized. As a result of the
The fair value of the non-controlling interests in AGR, a non-listed company,
transaction, the ownership interest in First Geo has decreased from 100
has been estimated by applying a discounted cash flow analysis, an income
percent to 55 percent without a loss of control. The change in ownership
based approach. The fair value measurement is based on significant inputs
interest in First Geo was treated as equity transaction and resulted in a
that are not observable in the market:
loss directly to equity.
An assumed discount rate of 12%.
Explicit forecast period of 10 years.
Terminal growth rate of 1.0%.
Amounts in NOK million
NCI in acquired AGR business
NCI in First Geo
Total NCI in AGR
Fair value of consideration received
Carrying amount of NCI in First Geo
Loss in equity attributable to equity holders of the parent company
2019
10
17
27
6
(17)
(11)
Annual Report 2020 | Financials and Notes | Akastor Group 42
Note 6 | Operating segments
Basis for segmentation
Measurement of segment performance
As of December 31, 2020, 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.
construction and intervention services to the oil and gas industry,
covering all phases from conceptual development to project
execution and offshore operations.
AGR is a well design and drilling project management, HSEQ,
reservoir and field management service company delivering
solutions for the entire field life cycle. The company also provides
rig procurement, tailored training, software and technical
manpower for clients globally.
As a result of divestment of 50 percent ownership in AKOFS Offshore
in September 2018, AKOFS Offshore is classified as a joint venture and
consolidated using the equity method, see Note 16 Equity-accounted
investees.
Further, Akastor holds 100 percent ownership in Cool Sorption, 100 percent
in DDW Offshore AS, 15.6 percent economic interest in NES Fircroft and
93 percent of Aker Pensjonskasse, as well as equity instruments in Odfjell
Drilling and Awilco Drilling. These are included in “Other holdings”. Step
Oiltools, previously part of “Other holdings”, is included in the segment
MHWirth. Historical figures have been restated.
Annual Report 2020 | Financials and Notes | Akastor Group 43
Information about reportable segments
Amounts in NOK million
Note
MHWirth
AKOFS
Offshore
AGR
Other
holdings
Total
operating
segments
Adjust-
ment of
AKOFS
Offshore
Elim-
inations
Total
Akastor
2020
Income statement
External revenue and other
income
Inter-segment revenue
Total revenue and other
income
Operating profit before de-
preciation, amortization and
impairment (EBITDA)
Depreciation and amortization
13,14,33
Impairment
33
Operating profit (loss) (EBIT)
Assets
Current operating assets
Non-current operating assets
Finance lease receivables
33
Segment assets
Liabilities
Current operating liabilities
Non-current operating liabilities
Lease liabilities
Segment liabilities
33
Net current operating assets
Net capital employed
3 758
1 000
2
-
3 760
1 000
401
(217)
-
184
414
(333)
(215)
(134)
2 537
2 799
1
677
4 609
-
5 336
5 286
1 845
307
384
2 535
692
2 801
332
6
1 203
1 542
344
3 744
637
-
637
31
(18)
-
13
115
178
-
294
122
14
10
146
(7)
148
182
3
5 577
(1 000)
5
-
186
5 582
(1 000)
(102)
(39)
(4)
(145)
745
(436)
(4)
(81)
(414)
333
215
134
58
1 929
22
3 386
9 516
23
(677)
(3 546)
-
2 009
12 925
(4 223)
216
605
199
1 019
(158)
990
2 515
932
1 795
5 242
872
7 683
(332)
(6)
(1 203)
(1 542)
(344)
(2 681)
-
(5)
(5)
-
-
-
-
(5)
-
-
(5)
(5)
-
4 577
-
4 577
331
(274)
(4)
53
2 704
5 970
23
8 697
2 177
926
592
(5)
3 695
-
-
527
5 002
Annual Report 2020 | Financials and Notes | Akastor Group
44
Amounts in NOK million
Note
MHWirth
AKOFS
Offshore
AGR
Other
holdings
Total
operating
segments
Adjust-
ment of
AKOFS
Offshore
Elimi-
nations
Total
Akastor
2019
Income statement
External revenue and other
income
Inter-segment revenue
Total revenue and other
income
Operating profit before de-
preciation, amortization and
impairment (EBITDA)
Depreciation and amortization
13,14,33
Impairment
33
Operating profit (loss) (EBIT)
Assets
Current operating assets
Non-current operating assets
Finance lease receivables
33
Segment assets
Liabilities
Current operating liabilities
Non-current operating liabilities
Lease liabilities
Segment liabilities
33
Net current operating assets
Net capital employed
4 186
1 093
1
-
4 187
1 093
476
(161)
-
315
560
(323)
-
237
3 238
2 648
3
360
5 076
-
5 889
5 437
2 609
275
397
3 281
629
2 608
312
6
1 385
1 703
49
3 734
573
-
573
14
(15)
-
(1)
191
191
-
382
178
16
17
211
12
170
602
7
6 454
(1 093)
8
-
609
6 462
(1 093)
-
(8)
(8)
2
(85)
(9)
(92)
1 052
(584)
(9)
459
(560)
323
-
(237)
288
2 150
22
2 460
4 078
10 065
25
(362)
(4 026)
-
14 168
(4 389)
319
621
263
1 203
(31)
1 257
3 418
918
2 062
6 399
660
7 769
(314)
(6)
(1 385)
(1 705)
(49)
(2 684)
-
-
-
-
-
-
-
-
-
-
-
-
-
5 361
-
5 361
492
(261)
(9)
222
3 716
6 039
25
9 779
3 105
912
677
4 694
611
5 085
Reconciliations of information on reportable segments to IFRS measures
Amounts in NOK million
Assets
Total segment assets
Derivative financial instruments
Cash and cash equivalents
Non-current interest-bearing receivables
Consolidated assets
Liabilities
Total segment liabilities
Derivative financial instruments
Current borrowings
Non-current borrowings
Consolidated liabilities
Note
2020
2019
31
22
19
31
24
24
8 697
9 779
61
275
115
43
555
201
9 147
10 578
3 695
4 694
37
1 119
628
5 479
65
3
1 444
6 206
Annual Report 2020 | Financials and Notes | Akastor Group
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.
45
Amounts in NOK million
Norway
Germany
United States
Brazil
Asia
Other Europe
Middle East
Other countries
Total
Major customer
Revenue and other income
2020
2019
2 269
2 755
668
254
127
368
433
222
236
745
316
135
464
475
253
218
Non-current assets excluding
deferred tax assets and
financial instruments
2020
2 482
770
430
254
91
73
5
39
2019
2 179
762
441
306
122
87
5
41
4 577
5 361
4 144
3 944
Revenues from one customer of MHWirth represents approximately NOK 870 million (NOK 580 million in 2019) of the group’s total revenue.
Note 7 | Revenue and other income
Revenue types
Amounts in NOK million
Revenue from contracts with customers
Other revenue and income
Lease revenue
Other revenue
Gain (loss) on disposal of subsidiaries
Gain on disposals of assets
Total revenue and other income
Note
33
2020
4 434
102
44
(5)
2
2019
5 184
148
28
-
2
4 577
5 361
Annual Report 2020 | Financials and Notes | Akastor Group
46
Disaggregation of revenue from contracts with customers
Revenue from contracts with customer is disaggregated in the following table by major contract and revenue types and timing of revenue recognition.
The table also includes a reconciliation of the disaggregated revenue with revenue information as shown in Note 6 Operating segments.
MHWirth
AKOFS
Offshore
AGR
Other
holdings
Adjustment
of AKOFS
Offshore
Total
Akastor
Amounts in NOK million
2020
Major contract/revenue types
Construction revenue
Sale of standard products
Service revenue
Total Revenue from contracts with customers
Timing of revenue recognition
Transferred over time
Transferred at point in time
Total Revenue from contracts with customers
Other revenue and income
971
1 364
1 306
3 642
2 278
1 364
3 642
116
-
-
316
316
316
-
316
684
1 000
-
6
631
636
631
6
636
-
637
105
-
51
156
156
-
156
26
182
Total external revenue and other income in segment reporting
3 758
Amounts in NOK million
2019
Major contract/revenue types
Construction revenue
Sale of standard products
Service revenue
Total Revenue from contracts with customers
Timing of revenue recognition
Transferred over time
Transferred at point in time
Total Revenue from contracts with customers
Other revenue and income
Total external revenue and other income in segment reporting
MHWirth
AKOFS
Offshore
AGR
Other
holdings
1 338
1 301
1 513
4 153
2 851
1 301
4 153
33
4 186
-
-
335
335
335
-
335
757
1 093
-
36
537
573
537
36
573
-
573
217
128
112
458
329
128
458
144
602
-
-
(316)
(316)
(316)
-
(316)
(684)
(1 000)
Adjust-
ment of
AKOFS
Offshore
-
-
(335)
(335)
(335)
-
(335)
(757)
(1 093)
1 076
1 370
1 988
4 434
3 064
1 370
4 434
143
4 577
Total
Akastor
1 555
1 466
2 162
5 184
3 717
1 466
5 184
178
5 361
Annual Report 2020 | Financials and Notes | Akastor Group Contract balances
Amounts in NOK million
Receivables, which are included in “trade and other receivables”
Contract assets
Contract liabilities
47
Note
2020
21
28
1 070
764
344
2019
1 136
1 468
609
Contract assets relate to the group’s rights to consideration for work
was included in contract liabilities in the beginning of the year is NOK 560
completed, but not yet invoiced at the reporting date. The contract
million (NOK 354 million in 2019). There was an increase of NOK 15 million
assets are transferred to receivables when the rights to payment become
of the contract liability due to acquisition of subsidiaries in 2019.
unconditional, which usually occurs when invoices are issued to the
customers. No impairment has been recognized on contract assets in
The amount of revenue recognized in 2020 from performance obligation
2020 or 2019.
satisfied (or partially satisfied) in previous period is NOK 95 million (NOK
66 million in 2019). This is mainly due to changes in the estimates of
Contract
liabilities relate to advance consideration received from
progress measurement for performance obligations satisfied over time
customer for work not yet performed. Revenue recognized in 2020 that
and changes in estimates relating to the constraining of revenues.
Transaction price allocated to the remaining performance obligations
The following table includes revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied)
2021
Later
Total
2 231
352
2 583
as of December 31, 2020.
Amounts in NOK million
Transaction price allocated
The amounts disclosed above do not include variable consideration which
is constrained. The group applies the practical expedient under IFRS 15
and does not disclose information about remaining performance obligation
when revenue is recognized in the amount to which the group has right to
invoice.
The group applies the practical expedient and does not adjust the
transaction price allocated to performance obligations for the effects of a
significant financing component if the group expects, at contract inception,
that the period between when the group transfers a promised good or
service to a customer and when the customer pays for that good or service
will be one year or less.
The following provides
information about nature of performance
obligations, including significant payment terms, and related significant
revenue recognition policies.
Annual Report 2020 | Financials and Notes | Akastor Group 48
Type of contract/revenue
Nature of performance obligations, including
significant payment terms
Significant revenue recognition policies
Construction contracts
Under construction contracts, specialized products
are built to a customer's specifications and the assets
have no alternative use to the group. If a construction
contract is terminated by the customer, the group has
an enforceable right to payment for the work complet-
ed to date. The contracts usually establish a milestone
payment schedule. The group has assessed that these
performance obligations are satisfied over time.
Each of the construction contracts normally includes
a single, combined output for the customer, such as
an integrated drilling equipment package. One single
performance obligation is usually identified in each
contract.
Assurance-type warranty for a period of 12-30 months
is normally included in construction contracts.
Sale of standard products
Service revenue
This revenue type involves sale of products or equip-
ment that are of a standard nature, not made to the
customer's specifications. Customers obtain control of
these products usually when the goods are delivered
to the customers according to the contract terms.
Invoices are usually generated when the products are
delivered. The group has assessed that these perfor-
mance obligations are satisfied at a point of time.
Assurance-type warranty for a period of 12-18 months
is normally included in these contracts.
Service revenue is generated from rendering of
services to customers. The customers simultane-
ously receive and consume the benefits provided by
these services. The invoicing is usually based on the
service provided at regular basis. Under some service
contracts, the invoices are based on hours or days per-
formed at agreed rates. The group has assessed that
these performance obligations are satisfied over time.
Revenue from the construction performance obliga-
tions is recognized according to progress. The progress
is measured using an input method that best depicts
the group's performance. The input method used to
measure progress is determined by reference to the
costs incurred to date relative to the total estimated
contract costs. Revenue in excess of costs is not recog-
nized until the outcome of the performance obligation
can be measured reliably, usually at 15-20 percent of
completion.
Variable considerations, such as incentive bonus or
penalties, are included in construction revenue when
it is highly probable that a significant revenue reversal
will not occur. Potential penalty for Liquidated Damag-
es is recognized as a reduction of the transaction price
unless it is highly probable that it will not be incurred.
Disputed amounts and claims are only recognized
when negotiations have reached an advanced stage,
customer acceptance is highly likely and the amounts
can be measured reliably.
Contract modifications, usually in form of variation
orders, are only accounted for when they are approved
by the customers.
Revenue from these performance obligations is
recognized when the customers obtain control of the
goods, which is essentially similar to the timing when
the goods are delivered to the customers.
Service revenue is recognized over time as the services
are provided.
The revenue is recognized according to progress,
or using the invoiced amounts when the invoiced
amounts directly correspond with the value of the
services that are transferred to the customers. The
progress is normally measured using an input method,
by the reference of costs incurred to date relative to
the total estimated costs.
Annual Report 2020 | Financials and Notes | Akastor Group Note 8 | Salaries, wages and social security costs
Amounts in NOK million
Note
2020
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 | Other operating expenses
Amounts in NOK million
External consultants and hired-ins inclusive audit fees
Rental and other costs for premises and equipment
Office supplies
Travel expenses
Insurance
Other
Total other operating expenses
Fees to the auditors
49
2019
1 411
175
66
68
1 719
26
1 387
179
66
36
1 668
2020
2019
266
162
26
22
15
150
640
235
178
25
47
16
62
564
The table below summarizes audit fees, as well as fees for audit related services, tax services and other services incurred by the group during 2020 and
2019.
Amounts in NOK million
2020
2019
2020
2019
2020
2019
Akastor ASA
Subsidiaries
Total
Audit
Other assurance services
Total
2
-
3
3
-
3
8
1
9
7
1
9
10
1
11
10
1
11
Annual Report 2020 | Financials and Notes | Akastor Group 50
Note 10 | Net finance expenses
Amounts in NOK million
Profit (loss) from equity-accounted investees
Interest income on bank deposits measured at amortized cost
Interest income on debt instruments at FVOCI
Interest income on finance lease receivables
Net foreign exchange gain
Dividend income from equity instrument
Net changes in fair value of financial assets at FVTPL
Liquidation of foreign entity 1)
Other finance income
Finance income
Interest expense on financial liabilities measured at amortized cost
Interest expense on financial liabilities measured at fair value
Interest expense on lease liabilities
Net foreign exchange loss
Net changes in fair value of financial assets at FVTPL
Impairment loss on receivables 2)
Other financial expenses
Financial expenses
Net finance expenses recognized in profit and loss
Note
16
33
33
2020
2019
(256)
(160)
20
86
1
27
77
-
7
4
34
77
3
-
69
37
99
2
222
321
(94)
(20)
(36)
-
(94)
(120)
(39)
(402)
(436)
(101)
(10)
(37)
(30)
-
-
(13)
(192)
(30)
1) Relates to currency translation differences that were reclassified from Other Comprehensive Income to the income statement as result of liquidation.
2) Impairment loss on receivables related to loss allowance on debt instruments measured at FVOCI and impairment triggered by insolvency of certain customers.
See Note 32 Financial instruments for information of the finance income and expense generating items.
Note 11 | 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
Write down of tax loss and deferred tax assets
Recognition of previously unrecognized deferred tax assets
Total deferred tax income (expense)
Total tax income (expense)
2020
2019
(32)
5
(27)
13
(136)
66
(59)
(86)
(45)
2
(44)
6
(22)
16
-
(44)
Annual Report 2020 | Financials and Notes | Akastor Group 51
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
2020
2019
Profit (loss) before tax, continuing operations
Tax income (expense) using the company's domestic tax rate
(383)
84
22.0%
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)
Recognition of previously unrecognized deferred tax assets 2)
Write down of tax loss or deferred tax assets 3)
Other
Total tax income (expenses)
7
(90)
5
(10)
66
(136)
(12)
(86)
1.8%
(23.5%)
1.4%
(2.7%)
17.3%
(35.4%)
(3.2%)
(22.4%)
191
(42)
13
(9)
2
2
16
(22)
(2)
(44)
22.0%
(6.5%)
4.5%
(0.8%)
(0.9%)
(8.3%)
11.7%
1.2%
23.0%
1) Relates mainly to net profit and loss after tax from equity-accounted investees and profit and loss recognized on various tax-exempted investments.
2) Relates mainly to previously not recognized tax loss carry-forward in Norway that were utilized in 2020.
3) The impairment relates mainly to deferred tax assets in Akastor Corporate entities, MHWirth entities in USA and Brazil as well as Step Oiltools.
Recognized deferred tax assets and liabilities
Amounts in NOK million
2020
2019
2020
2019
2020
2019
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)
40
2
-
65
37
-
226
44
414
(85)
329
46
2
-
80
50
5
241
160
584
(196)
388
(5)
(7)
(50)
-
(9)
(14)
(9)
-
(95)
85
(10)
(7)
(10)
(102)
-
(8)
(70)
(10)
-
(207)
196
(11)
35
(5)
(50)
65
28
(14)
217
43
320
-
320
39
(8)
(102)
80
42
(65)
231
160
377
-
377
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 group has made an evaluation of taxable profit 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 or deductible temporary differences can be utilized.
Annual Report 2020 | Financials and Notes | Akastor Group 52
Change in net recognized deferred tax assets (liabilities)
Amounts in NOK million
Balance as of December 31, 2018
Acquisition of subsidiaries
Recognized in profit and loss
Recognized in other comprehensive income
Currency translation differences
Balance as of December 31, 2019
Recognized in profit and loss
Recognized in other comprehensive income
Currency translation differences
Balance as of December 31, 2020
Property,
plant and
equip-
ment
Intan-
gible
assets
Projects
under
construc-
tion
Pen-
sions
Provi-
sions
Deriva-
tives
Other
items
Tax loss
carry-for-
wards
40
-
(1)
-
-
39
(5)
-
1
35
(10)
(2)
4
-
-
(8)
3
-
-
(5)
(248)
72
-
147
-
(1)
(102)
53
-
-
(50)
-
(1)
9
-
80
(23)
6
2
65
56
-
(14)
-
-
42
(17)
-
2
28
(19)
(6)
(25)
(15)
-
(65)
59
(8)
-
122
15
94
-
-
231
(12)
1
(2)
352
12
(205)
-
1
160
(117)
-
1
Total
365
20
-
(6)
(1)
377
(59)
(1)
3
(14)
217
43
320
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 benefits based on forecasts and realistic expectations.
Expiry date of unrecognized tax loss carry-forwards
Amounts in NOK million
Expiry in 2021
Expiry in 2022
Expiry in 2023 and later
Indefinite
Total
2020
1
43
531
2 135
2 710
2019
1
41
448
2 182
2 671
Unrecognized other deductible temporary differences are NOK 1 105 million in 2020 (NOK 489 million in 2019).
Annual Report 2020 | Financials and Notes | Akastor Group 53
Note 12 | Earnings per share
Akastor ASA holds 2 390 215 treasury shares at year end 2020 (2 390 215 in 2019). Treasury shares are not included in the weighted average number
of ordinary shares.
Amounts in NOK million
Profit (loss) from continuing operations
Non-controlling interests
Profit (loss) attributable to ordinary shares from continuing operations
Profit (loss) from discontinued operations
Profit (loss) attributable to ordinary shares
Basic/ diluted earnings per share
2020
(469)
3
(466)
(115)
(581)
2019
147
7
154
(54)
100
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)
Basic/ diluted earnings (loss) per share for discontinued operations (NOK)
2020
2019
274 000 000 274 000 000
271 609 785
271 548 422
(2.14)
(1.72)
(0.42)
0.37
0.57
(0.20)
Annual Report 2020 | Financials and Notes | Akastor Group 54
Note 13 | Property, plant and equipment
The table below includes discontinued operations until these met the criteria to be classified as held for sale.
Note
Buildings
and land
Vessels
Machinery,
equipment, software
Under
construction
Amounts in NOK million
Historical cost
Balance as of January 1, 2019
Additions
Additions through business combinations
Reclassifications
Transfer from assets under construction
Disposals and scrapping
Currency translation differences
Balance as of December 31, 2019
Additions
Additions through business combinations
Reclassifications
Transfer from assets under construction
Disposals and scrapping
Currency translation differences
Balance as of December 31, 2020
Accumulated depreciation
Balance as of January 1, 2019
Depreciation for the year
Reclassifications
Disposals and scrapping
Currency translation differences
Balance as of December 31, 2019
Depreciation for the year
Reclassifications
Disposals and scrapping
Currency translation differences
Balance as of December 31, 2020
Book value as of December 31, 2019
Book value as of December 31, 2020
Depreciation
5
5
743
-
-
-
12
-
(14)
741
38
-
27
-
(7)
(128)
671
(328)
(16)
-
-
6
(338)
(15)
(27)
7
63
-
-
-
-
-
-
-
-
-
397
-
-
-
(31)
366
-
-
-
-
-
-
(8)
-
-
1
(310)
(7)
404
361
-
359
Total
2 153
56
6
(19)
-
(10)
(11)
1 377
49
6
(19)
-
(10)
3
33
7
-
-
(12)
-
-
1 407
28
2 175
30
-
8
17
(105)
(14)
1 343
(990)
(96)
13
8
(2)
-
-
6
(17)
(11)
(1)
4
68
397
41
-
(123)
(175)
2 384
(11)
(1 328)
-
-
-
-
(112)
13
8
4
(1 067)
(11)
(1 415)
(78)
(15)
98
12
(1 051)
339
292
-
-
11
-
-
17
4
(101)
(43)
115
76
(1 368)
760
1 017
Estimates for useful life, depreciation method and residual values are reviewed annually. Assets are mainly depreciated on a straight-line basis over their
expected economic lives as follows:
Machinery, equipment and software
Vessels
Buildings
Land
3–15 years
20–25 years
8–30 years
No depreciation
Annual Report 2020 | Financials and Notes | Akastor Group
55
Note 14 | Intangible assets
Amounts in NOK million
Note
Development costs
Goodwill
Other
Total
Historical cost
Balance as of January 1, 2019
Reclassification
Capitalized development
Acquisition through business combinations
5
Currency translation differences
Balance as of December 31, 2019
Reclassification
Capitalized development
Currency translation differences
Balance as of December 31, 2020
Accumulated amortization and impairment
Balance as of January 1, 2019
Reclassification
Amortization for the year
Currency translation differences
Balance as of December 31, 2019
Amortization for the year
Currency translation differences
Balance as of December 31, 2020
Book value as of December 31, 2019
Book value as of December 31, 2020
437
19
70
14
(1)
539
2
35
7
583
(325)
(13)
(33)
1
(370)
(35)
(6)
(411)
169
172
1 211
-
-
162
(1)
1 372
-
-
20
1 392
(87)
-
-
(1)
(88)
-
2
(86)
1 284
1 307
127
-
1
137
(1)
263
-
2
5
1 775
19
71
312
(3)
2 174
2
38
32
270
2 246
(104)
-
(21)
2
(123)
(25)
(5)
(154)
140
116
(516)
(13)
(53)
2
(581)
(60)
(10)
(651)
1 593
1 595
Research and development costs
Amortization
NOK 38 million has been capitalized in 2020 (NOK 71 million in 2019)
Intangible assets all have finite useful lives and are amortized over the
related to development activities. In addition, research and development
expected economic life, ranging between 5-10 years.
costs of NOK 12 million were expensed during the year because the
criteria for capitalization are not met (NOK 31 million in 2019).
Annual Report 2020 | Financials and Notes | Akastor Group 56
Note 15 | 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.
Please see Note 5 Business combinations for information about the goodwill acquired in MHWirth and AGR during 2019.
Amounts in NOK million
MHWirth
AGR
Total goodwill
2020
1 190
116
1 306
2019
1 168
116
1 284
Impairment testing for cash-generating units containing significant goodwill
The recoverable amounts of cash-generating units (portfolio companies)
margins and other cost components based on historical experience as
are determined based on value-in-use calculations. Discounted cash
well as assessment of future market development and conditions. These
flow models are applied to determine the value in use for the portfolio
assumptions require a high degree of judgement, given the significant
companies with goodwill. The management has made cash flow
degree of uncertainty regarding oilfield service activities in the forecast
projections based on budget and strategic forecast for the periods 2021-
period.
2025. Beyond the explicit forecast period of five years, the cash flows are
extrapolated using a constant growth rate.
Terminal value growth rate The group uses a constant growth rate not
exceeding 2% (including inflation) for periods beyond the management’s
Key assumptions used in the calculation of value in use are discussed
forecast period of five years. The growth rates used do not exceed the
below. The values assigned to the key assumptions represent
growth rates for the industry in which the portfolio company operates.
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
risk-free interest rates used in the discount rates are based on the 10 year
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
main markets. Assumptions are made regarding revenue growth, gross
risk considering current industry conditions
Discount rate assumptions used in impairment testing
MHWirth
AGR
Discount rate after tax
Discount rate pre tax
2020
12.2%
14.4%
2019
10.4%
12.5%
2020
14.7%
17.5%
2019
12.4%
15.0%
Sensitivity to changes in assumptions
growth in the forecast period were reduced by more than 12%, or the
For the portfolio companies containing goodwill, the recoverable amounts
average EBITDA margin in the forecast period were reduced by more than
are higher than the carrying amounts based on the value in use analysis
6%, the estimated recoverable amount would be lower than the carrying
and consequently no impairment loss of goodwill was recognized in 2020
amount and it would result in impairment in MHWirth. In AGR, if the
or 2019.
average revenue growth in the forecast period were reduced by more than
9%, or if the average EBITDA margin in the forecast period were reduced
The group has performed sensitivity calculations to identify any reasonably
by more than 2%, the estimated recoverable amount would be lower than
possible change in key assumptions that could cause the carrying amount
the carrying amount and it would result in impairment in AGR.
to exceed the recoverable amount. In MHWirth, if the average revenue
Annual Report 2020 | Financials and Notes | Akastor Group 57
Note 16 | Equity-accounted investees
Equity-accounted investees include joint ventures and associates. Such investments are defined as related parties to Akastor. See Note 35 Related parties
for overview of transactions and balances with joint ventures and associates, and any guarantees provided on behalf of or from such entities.
Amounts in NOK million
DOF Deepwater AS 1)
AKOFS Offshore
Electrical Subsea &
Drilling AS
Total
Business office
Storebø, Norway
Oslo, Norway
Straume, Norway
Percentage of voting rights and ownership
50%
50 %
20%
2020
Share of profit (loss) reported in Financial items
Carrying amount of investments
2019
Share of profit (loss) reported in Financial items
Carrying amount of investments
(140)
-
(124)
-
(117)
1 064
(35)
1 050
-
1
(1)
1
(256)
1 064
(160)
1 051
1) DOF Deepwater AS was a joint venture with DOF ASA, which became a 100 percent owned subsidiary in October 2020. Please see Note 5 for more information.
AKOFS Offshore
Electrical Subsea & Drilling AS
AKOFS Offshore is a joint venture where Akastor, MITSUI & CO., Ltd.
MHWirth is a shareholder in Electrical Subsea & Drilling AS (ESD) with 20%
("Mitsui") and Mitsui O.S.K. Lines, Ltd. ("MOL") hold 50%, 25% and 25% of
ownership. ESD is a privately owned Norwegian company and working on
the shares respectively, and have joint control over the company.
the development and qualification of two drilling technologies; all electric
control of Blow Out Preventers (BOP) and a Rotating Control Device for
Managed Pressure Drilling.
Annual Report 2020 | Financials and Notes | Akastor Group 58
Summary of financial information for significant equity-accounted investee (100 percent basis)
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%)
Recognized against non-current receivables and liabilities 2)
Goodwill
Elimination of unrealized gain on downstream sales 3)
Akastor's carrying amount of the investment
Revenue
Depreciation, amortization and impairment
Interest expense
Income tax expense
Profit (loss) for the year
Other comprehensive income (loss)
Total comprehensive income (loss) (100%)
Total comprehensive income (loss) (50%)
Gain on disposal of equity accounted investees
Elimination of unrealized gain on downstream sales
Akastor's share of total comprehensive income (loss)
DOF Deepwater
AS 1)
2020
2019
AKOFS Offshore
2020
2019
-
-
-
-
-
-
-
-
-
-
-
-
-
116
(196)
(47)
-
(290)
-
(290)
(145)
5
-
142
32
592
(139)
(30)
(1 146)
(1 146)
(551)
(275)
275
-
-
-
163
(148)
(68)
-
(248)
-
(248)
(124)
-
-
(140)
(124)
928
247
4 609
(1 379)
(1 047)
(2 219)
(2 212)
1 939
969
-
125
(30)
638
272
5 076
(1 373)
(1 061)
(2 207)
(2 201)
2 134
1 067
-
126
(143)
1 064
1 050
1 000
(548)
(306)
(18)
(473)
(39)
(513)
(256)
-
120
(136)
1 093
(323)
(343)
(7)
(94)
(22)
(117)
(58)
-
12
(46)
1) Income statement information for DOF Deepwater in 2020 is related to the period between January 1 – October 9, 2020 prior to the acquisition of the company.
2) In 2019, Akastor’s share of losses from DOF Deepwater AS was recognized against the carrying amount of its interest including non-current receivables. Further losses
were recognized as a liability as the group has provided guarantees for the funding of the vessels in the company. See also Note 25 Other non-current liabilities.
3) In 2016, Akastor sold the Skandi Santos topside equipment to Avium Subsea AS, a wholly owned subsidiary to AKOFS Offshore. 50% of the accounting gain from the sale
was eliminated upon consolidation, reducing Akastor’s carrying amount of the investment.
Note 17 | Other non-current assets
Amounts in NOK million
Deferred and contingent considerations
Other assets
Total other non-current assets
Note
32
2020
2019
26
3
29
62
3
65
Deferred and contingent considerations relate to divestments of subsidiaries in previous years and are measured at fair value.
Annual Report 2020 | Financials and Notes | Akastor Group Note 18 | Other investments
Amounts in NOK million
Aker Pensjonskasse
NES Fircroft investment 1)
Awilco Drilling investment 2)
Odfjell Drilling investment 3)
Other equity securities
Total other investments
59
Note
2020
2019
158
537
14
758
2
158
644
47
792
2
32
1 469
1 643
1) Akastor holds 15.6% economic ownership interest in NES Fircroft (previously NES Global Talent), a global oil and gas manpower provider.
2) Akastor holds 5.6% of the common shares in Awilco Drilling, which is listed on the Oslo Stock Exchange.
3) In May 2018, Akastor made an investment of USD 75 million in preferred equity in Odfjell Drilling, which generates 5% p.a. cash dividend and 5% p.a. payment-in-kind (PIK)
dividend for the first six years, with step-up cash dividend after 6 years. In addition, Akastor has acquired warrants for 5 925 000 common shares in Odfjell Drilling, divided
by six exercisable tranches until May 30, 2024. Odfjell Drilling is listed on the Oslo Stock Exchange.
Other investments are measured at fair value.
Note 19 | Interest-bearing receivables
Amounts in NOK million
Receivable from AKOFS Offshore
Receivable from Aker Pensjonskasse
Total non- current interest-bearing receivables
Note 20 | 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 in the period
The reversal of write down of inventory is due to change in estimate of the net realizable value.
Note
2020
2019
35
35
94
21
115
191
10
201
2020
2019
141
53
291
485
140
91
297
528
(1 221)
(1 604)
(16)
6
(102)
14
Annual Report 2020 | Financials and Notes | Akastor Group 60
Note 21 | Trade and other receivables
Amounts in NOK million
Trade receivables 1)
Less provision for impairment
Trade receivables, net of provision
Other receivables
Trade and other receivables
Advances to suppliers
Contract assets
Prepaid expenses
Public duty and tax refund
Contingent considerations
Total
Note
2020
2019
1 226
(131)
1 094
25
1 120
94
764
167
46
-
2 191
32
7
32
1 231
(49)
1 182
42
1 224
98
1 468
297
83
7
3 177
2019
426
168
39
597
1 231
1) Trade receivables are financial instruments and an impairment loss of NOK 36 million was recognized in the income statement in 2020 (NOK 11 million in 2019).
Book value of trade and other receivables is approximately equal to fair value.
Aging of trade receivables
Amounts in NOK million
Not overdue
Past due 0-30 days
Past due 31-90 days
Past due more than 90 days
Total trade receivables
2020
464
59
37
665
1 226
A majority of the trade receivables past due is related to major customers. These outstanding receivables are monitored regularly and impairment
analysis is performed on an individual basis for major customers. As of December 31, 2020, trade receivables of a face value of NOK 131 million (NOK 49
million in 2019) were impaired. 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
Acquisition of subsidiaries
Currency translation differences
Balance as of December 31
Note
2020
2019
49
36
(1)
(4)
57
(6)
131
49
11
(7)
(11)
7
-
49
5
Annual Report 2020 | Financials and Notes | Akastor Group
Note 22 | Cash and cash equivalents
Amounts in NOK million
Restricted cash
Interest-bearing deposits
Total cash and cash equivalents
61
2020
2019
6
269
275
11
544
555
Additional undrawn committed current bank revolving credit facilities amount to NOK 1.5 billion, that together with cash and cash equivalents gives a total
liquidity reserve of NOK 1.7 billion as of December 31, 2020. See also Note 24 Borrowings.
Note 23 | Capital and reserves
Share capital
Fair value reserve
Akastor ASA has one class of shares, ordinary shares, with equal rights
The fair value reserve comprises the cumulative net changes in the fair
for all shares. The holders of ordinary shares are entitled to receive
value of financial assets classified as Fair Value to OCI (FVOCI) until these
dividends and are entitled to one vote per share at General Meetings. Total
assets are impaired or derecognized.
outstanding shares are 274 000 000 at par value NOK 0.592 per share
(NOK 0.592 in 2019). All issued shares are fully paid.
Currency translation reserve
Treasury shares
The translation reserve comprises all foreign currency differences arising
from the translation of the financial statements of foreign operations,
At the Annual General Meeting in 2014, authorization was given to
as well as the effective portion of any foreign currency differences from
repurchase up to 27.4 million shares, representing 10 percent of the share
hedges of net investments in foreign operations.
capital of Akastor ASA. The group purchases treasury shares to meet the
obligation under employee share purchase programs. As of December 31,
The currency translation reserve includes exchange differences arising
2020, Akastor ASA holds 2 390 215 treasury shares (2 390 215 treasury
from the translation of the net investments in foreign operations, and
shares in 2019), representing 0.87 percent of total outstanding shares.
foreign exchange gain or loss on loans defined as net investment hedge
The Board of Directors has proposed no dividends for 2020 or 2019.
of investments in foreign operations or liquidation of such entities, the
or part of net investments in foreign operations. Upon the disposal
Hedging reserve
The hedging reserve relates to cash flow hedges of future revenues and
accumulated currency translation differences related to these entities are
reclassified from the currency translation reserve to the income statement.
expenses against exchange rate fluctuations. The income statement
Net investments in foreign operations have been hedged with a gain of
effects of such instruments are recognized in accordance with the
NOK 16 million in 2020 (loss NOK 9 million in 2019). Accumulated gain
progress of the underlying construction contract as part of revenues or
in equity on net investment hedges as of 2020 is a gain of NOK 11 million
expenses as appropriate. The hedging reserve represents the value of such
(gain of NOK 11 million in 2019) and relate to investments in the United
hedging instruments that is not yet recognized in the income statement.
States and Cyprus.
The underlying nature of a hedge is that a positive value on a hedging
instrument exists to cover a negative value on the hedged position, see
Note 10 Net finance expenses and Note 31 Derivative financial instruments.
Annual Report 2020 | Financials and Notes | Akastor Group
62
Note 24 | Borrowings
Below are contractual terms of the 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 30 Financial risk management and exposures.
Amounts in million
Currency
Nominal
currency
value
Carrying
amount
(NOK)
Interest
rate
Fixed
interest
margin
Interest
coupon Maturity 2)
Interest terms
2020
Revolving credit facility
(NOK 1 250 million)
Revolving credit facility
(USD 155 million)
Term loan facility AGR
Term loan facility DDW Offshore
Total borrowings
Current borrowings
Non-current borrowings
Total borrowings
2019
Revolving credit facility
(NOK 1 250 million)
Revolving credit facility
(USD 155 million)
Term loan facility AGR
Total borrowings
Current borrowings
Non-current borrowings
Total borrowings
NOK
350
347
0.39%
3.25% 1)
3.64%
Dec 2021
NIBOR + margin
0.15%
1.88%
0.23%
3.25% 1)
2.12%
4.25%
3.40%
4.00%
4.48%
Dec 2021
USD LIBOR + margin
Apr 2027
Fixed rate
Oct 2023
USD LIBOR + margin
USD
NOK
USD
90
180
53
772
173
455
1 746
1 119
628
1 746
NOK
800
794
1.65%
3.25% 1)
4.90%
Dec 2021
NIBOR + margin
1.71%
1.88%
3.25% 1)
2.12%
4.96%
4.00%
Dec 2021
USD LIBOR + margin
Apr 2027
Fixed rate
USD
NOK
56
180
494
161
1 448
3
1 444
1 448
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 35 percent of the margin (2019: 35
percent).
2) The maturity date reflects maturity date as defined in the loan agreements. For information about contractual maturities of borrowings including interest payments and
the period in which they mature, see Note 30 Financial risk management and exposures.
Bank debt (Norway)
The revolving credit facilities are provided by a bank syndicate consisting of high-quality Nordic and international banks. The terms and conditions include
restrictions which are customary for these kinds of facilities, including inter alia negative pledge provisions and restrictions on acquisitions, disposals
and mergers, dividend distribution and change of control provisions. For information about financial covenants, see Note 29 Capital management. The
revolving credit facilities are classified as current borrowings as of December 31, 2020 as the maturity date defined in the loan agreements is December
2021.
The term loan facility of NOK 180 million term loan to AGR is provided by Nordea and DNB. The lenders have no recourse to Akastor ASA. This facility
includes restrictions which are customary for these kinds of facilities.
The term loan of USD 53 million to DDW Offshore is provided by GIEK, DNB and BNPParibas and matures in October 2023. The Facility is guaranteed
by Akastor ASA and the lenders benefit from first priority mortgages in the vessels. This facility includes restrictions which are customary for these kinds
of secured financing.
Annual Report 2020 | Financials and Notes | Akastor Group
63
Reconciliation of liabilities arising from financing activities
Amounts in NOK million
Balance as
of December
31, 2019
Foreign
exchange
movements
Capitalized
borrowing
costs
Accrued
interest
Acquisition
of business
Balance as
of December
31, 2020
Cash flows
Revolving credit facilities
Term loan facility - AGR
Term loan facility - DDW Offshore
Total liabilities arising from
financing activities
1 287
161
-
(89)
-
-
(81)
-
(38)
1 448
(89)
(120)
4
-
-
4
(2)
12
-
10
-
-
493
497
1 119
173
455
1 746
Note 25 | Other non-current liabilities
Amounts in NOK million
Note
2020
2019
Deferred gain
Deferred settlement obligations
Guarantee obligation related to joint venture
Liability for profit split
Other liabilities
Total other non-current liabilities
32
32
5, 32
32
72
197
-
185
24
478
93
195
177
-
26
491
Deferred gain
Guarantee obligation related to joint venture
In May 2018, Akastor invested in preferred equity and warrants in Odfjell
Akastor’s share of losses in DOF Deepwater AS, as a joint venture, in excess
Drilling. On initial recognition, the investment in the financial assets is
of the carrying amount of Akastor’s investment interest in the joint venture
recognized at fair value and the difference between the fair value and the
was recognized as a liability as the group has provided guarantees for the
transaction price, NOK 117 million, was recognized as “Deferred gain”. The
funding of the vessels in the company. DOF Deepwater was acquired as
deferred gain is subsequently amortized and recognized to profit and loss
a 100 percent owned subsidiary in October 2020 and renamed to DDW
at straight-line basis over six years. See Note 18 Other investments for
Offshore AS. See Note 5 Business combination for more information.
more information about the investment.
Liability for profit split
Deferred settlement obligations
DDW Offshore AS has obligation to share 50 percent of the sale proceeds
Deferred settlement obligations represent contingent considerations
from disposal of its vessels with its lenders prior to the maturity of the
resulting from disposal of subsidiaries. The obligations are mainly related
debts. See Note 5 Business combination for more information.
to provision for guaranteed preferred return to Mitsui and MOL in
connection with the divestment of 50 percent shares in AKOFS Offshore.
Other liabilities
See Note 35 Related parties for more information.
Other liabilities are mainly related to welfare fund.
Annual Report 2020 | Financials and Notes | Akastor Group 64
Note 26 | 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 to
company is responsible for paying an agreed contribution to the employee’s
the contribution plan in 2008, the company introduced a compensation
pension assets. In such a plan, this annual contribution is also the cost.
plan. The basis for deciding the compensation amount is the difference
In a defined benefit plan, it is the company’s responsibility to provide a
between calculated pension capital in the defined benefit plan and the
certain pension. The measurement of the cost and the pension liability
value of the defined benefit plan at the age of 67 years. The compensation
for such arrangements is subject to actuarial valuations. Akastor has over
amount will be adjusted annually in accordance with the adjustment of the
a long time period gradually moved from defined benefit arrangements
employees’ pensionable income, and accrued interest according to market
to defined contribution plans. Consequently, the impact of the remaining
interest. If the employee leaves the company voluntarily before the age of
defined benefit plans is gradually reduced.
67 years, 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 organized
AFP
is an early retirement arrangement organized by Norwegian
by the Norwegian Government. This arrangement provides the main
employers, the main Labor Union organization in Norway (LO) and the
general pension entitlement of all Norwegians. All pension arrangements by
Norwegian Government. The AFP plan is providing additional lifelong
employers consequently represent limited additional pension entitlements.
pensions to employees that retire before the general retirement age, to
Norwegian employers are obliged to provide an employment pension
employees are given a choice of retirement age, with lower pension at
compensate for the reduction of the ordinary pension entitlements. The
plan, which can be organized as a defined benefit plan or as a defined
earlier retirement.
contribution plan. The Norwegian companies in Akastor have closed
the earlier defined benefit plans in 2008 and are now providing defined
The Norwegian Accounting Standards Board has issued a comment
contribution plans for all employees.
concluding that the AFP plan is a multi-employer defined benefit plan. The
Defined benefit plan
AFP plan exposes the participating entities to actuarial risk associated
with employees of other entities with the result that there is no consistent
Employees who were 58 years or older in 2008, when the change took
and reliable basis for allocating the obligation, plan assets and costs to
place, are still in the defined benefit plan, which is a funded plan. There are
individual participating entities. Sufficient information is not available to
no longer any active employees in this plan. The estimated contributions
use defined benefit accounting and the AFP plan is accounted for as a
expected to be paid to the Norwegian plan during 2021 amount to
defined contribution plan.
NOK 4 million.
Pension cost
Amounts in NOK million
Defined benefit plans
Defined contribution plans including AFP
Total pension cost
Net employee defined benefit obligations
Amounts in NOK million
Defined benefit plans Norway
Defined benefit plans Germany
Defined benefit plans USA
Defined benefit plans other countries
Total employee benefit obligations
Pension plans outside Norway
Pension plans outside Norway are predominately defined contribution plans.
Note
2020
2019
9
57
66
9
57
66
8
2020
2019
222
136
31
(2)
388
199
122
35
3
359
Annual Report 2020 | Financials and Notes | Akastor Group Movement in net defined benefit (asset) liability
Amounts in NOK million
Balance 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
Changes in asset ceiling
Effect of movements in exchange rates
Other
Benefits paid by the plan
Contributions paid into the plan
Balance as of December 31
Plan assets
Amounts in NOK million
Plan assets at fair value Norwegian plan
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
65
Pension obligation
2020
2019
Pension asset
Net pension obligation
2020
2019
2020
2019
619
587
(260)
(255)
359
332
9
8
17
7
35
(4)
6
44
(41)
-
(41)
639
9
11
20
5
40
9
2
55
(43)
-
(43)
619
-
(3)
(3)
-
-
-
1
(1)
5
4
-
(3)
(3)
-
(1)
-
(1)
(5)
(1)
(8)
26
(20)
7
(251)
26
(20)
6
(260)
9
5
14
7
35
(4)
1
(1)
11
49
(14)
(20)
(34)
388
9
7
16
5
39
9
(1)
(5)
1
48
(16)
(20)
(37)
359
2020
2019
7
10
26
25
68
59
126
28
72
100
23
249
1
12
24
42
79
55
134
43
59
101
24
260
The equity portfolio is invested globally. The fair value of the equities is
The investment in fund/private equity is mainly funds that invests in listed
based on their quoted prices at the reporting date without any deduction
securities and where the fund value is based on quoted prices.
for estimated future selling cost.
The investments in bonds are done in the Norwegian market and most of
The group’s most significant defined benefit plans are in Norway, Germany
the bonds are not listed on any exchange. The market value as at year end
and USA. The followings are the principal actuarial assumptions at the
is based on official prices provided by the Norwegian Securities Dealers
reporting date for the plans in these countries.
Defined benefit obligation – actuarial assumptions
Association. The Bond investments have on average a high credit rating.
Most of the investments are in Norwegian municipalities with a credit
rating of AA.
Annual Report 2020 | Financials and Notes | Akastor Group
66
Discount rate
Asset return
Salary progression
Pension indexation
Norway
Germany
USA
2020
2019
2020
2019
1.50%
1.50%
2.25%
2.20%
2.20%
2.75%
0 -1.75%
0 -2.25%
2.30%
2.30%
n/a
1.60%
2.71%
2.71%
n/a
1.75%
2020
1.91%
1.91%
n/a
n/a
2019
2.89%
2.89%
n/a
n/a
Pri-2012 Total
Dataset Mortality
with Scale MP-
2020
Pri-2012 Total
Dataset Mortality
with Scale MP-
2019
Mortality table
K2013
K2013
RT 2018 G
RT 2018 G
The information below relates only to Norwegian plans as these represent
in the pension indexations. The total effect of fluctuations in economic
the majority of the plans.
assumptions is consequently unlikely to be very significant.
The discount rates and other assumptions in 2020 and 2019 are based
Assumptions regarding future mortality have been based on published
on the Norwegian high quality corporate bond rate and recommendations
statistics and mortality tables. The current life expectancy underlying the
from the Norwegian Accounting Standards Board. It should be expected
values of the defined benefit obligation at the reporting date is shown
that fluctuations in the discount rates would also lead to fluctuations
below.
Years
Life expectancy of male pensioners
Life expectancy of female pensioners
2020
2019
22.5
25.8
22.4
25.7
As of December 31, 2020, the weighted-average duration of the defined benefit obligation was 9.6 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, 2020 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
(11)
1
13
14
(1)
(4)
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.
Annual Report 2020 | Financials and Notes | Akastor Group Note 27 | Provisions
Amounts in NOK million
Provision, current
Provision, non-current
Total provisions
67
2020
2019
109
50
160
119
51
170
Development of significant provisions
Amounts in NOK million
Warranties Restructuring
Onerous
contracts
Other
Total
Balance as of December 31, 2019
New provisions
Provisions utilized
Provisions reversed
Unwind of discount
Currency translation differences
Balance as of December 31, 2020
Expected timing of payment
Within the next twelve months
After the next twelve months
Total
Warranties
65
30
(22)
(1)
-
(1)
72
61
12
72
16
20
(4)
(1)
-
-
30
21
9
30
57
-
(17)
-
7
-
47
8
39
47
32
-
(16)
(6)
-
-
10
8
2
10
170
50
(58)
(8)
7
(1)
160
99
61
160
The provision for warranties relates mainly to the possibility that Akastor,
reorganization in MHWirth due to the challenging rig market. The
based on contractual agreements, needs to perform guarantee work
provision includes provision for vacant office premises after the workforce
related to products and services delivered to customers. Warranty
reduction and is estimated based on the detailed restructuring plans for
provision is presented as current as it is expected to be settled in the
the businesses and locations affected.
group’s normal operating cycle. See Note 4 Significant accounting
estimates and judgments for further descriptions.
Onerous contracts
Restructuring
Provision for onerous contracts relates mainly to unavoidable operational
costs for vacant properties where the group has committed to under lease
Restructuring mainly relates to significant workforce reduction and
contracts.
Note 28 | Trade and other payables
Amounts in NOK million
Trade creditors 1)
Accrued expenses
Trade and other payables
Public duty and tax payables
Contract liabilities
Deferred settlement obligations
Total trade and other payables
1) Trade creditors are due within one year.
Book value of trade creditors and other current liabilities is approximately equal to fair value.
Note
2020
32
7
32
305
1 232
1 537
101
344
77
2 060
2019
451
1 725
2 176
112
609
77
2 974
Annual Report 2020 | Financials and Notes | Akastor Group 68
Note 29 | Capital management
Akastor’s capital management is designed to ensure that the group
These ratios are similar to covenants as defined in loan agreements for the
has sufficient financial flexibility, short-term and long-term. One main
revolving credit facilities which are shown below. See Note 24 Borrowings
objective is to maintain a financial structure that, through solidity and cash
for details about these loans.
flow, secures the group’s strong long-term creditworthiness, as well as
maximize value creation for its shareholders through:
The company’s gearing ratio shall not exceed 1.0 times and
is calculated from the consolidated total borrowings to the
Investing in projects and business areas which will increase the
consolidated Equity.
company’s Return On Capital Employed (ROCE) over time.
Optimizing the company’s capital structure to ensure both
consolidated EBITDA to consolidated Net Finance Cost when
sufficient and timely funding over time to finance its activities at
gearing ratio is below 0.5
The ICR shall not be lower than 3.0, calculated from the
the lowest cost.
Investment policy
The ICR shall not be lower than 4.0, calculated from the
consolidated EBITDA to consolidated Net Finance Cost when
Akastor’s capital management is based on a rigorous investment selection
gearing ratio exceeds 0.5
process which considers not only Akastor’s weighted average cost of
capital and strategic orientation but also external factors such as market
Minimum liquidity amount shall exceed NOK 500 million on
expectations.
Funding policy
Liquidity planning
consolidated level.
The ratios are calculated based on net debt including cash and borrowings
as shown in Note 32 Financial instruments, EBITDA (earnings before
Akastor has a strong focus on its liquidity situation in order to meet its
interest, tax, depreciation, amortization) and net interest costs, however
short-term working capital needs and to ensure solvency for its financial
adjusted for certain items as defined in the loan agreement. Covenants
obligations. Akastor had a liquidity reserve per year end 2020 of NOK
ratios are based on accounting principles as of December 31, 2020.
1.7 billion, composed of an undrawn committed credit facility of NOK 1.5
billion and cash and cash equivalents of NOK 0.3 billion.
The covenants are monitored on a regular basis by the Akastor Treasury
Funding of operations
department to ensure compliance with the loan agreements and are tested
and reported on a quarterly basis. Akastor was in compliance with its
Akastor’s group funding policy is that subsidiaries should finance their
covenants as of December 31, 2020. Based on current financial forecasts,
operations with the treasury department (Akastor Treasury). This ensures
there is a risk of breaching the ICR covenant in the first quarter of 2021.
optimal availability and transfer of cash within the group and better control
This is driven by lower earnings post COVID-19 outbreak as well as the
of the company’s overall debt as well as cheaper funding for its operations.
consolidation of DDW Offshore which from October 2020 has contributed
However, AGR is financed directly through a NOK 180 million Term Loan
negative EBITDA and increased interest cost in Akastor’s consolidated
maturing in 2027, and DDW Offshore is financed directly through a USD 53
financial statements. To mitigate this risk, the group has obtained a waiver
million Term loan maturing in 2023.
of the ICR covenant in March 2021 for the remaining period of the current
Funding duration
financing. The waiver is contingent on closing of the refinancing of Akastor
following the creation of a joint venture between MHWirth AS and Baker
Akastor emphasizes financial flexibility and steers its capital structure
Hughes’ Subsea Drilling Systems business as described below.
accordingly to limit its liquidity and refinancing risks. In this perspective,
loans and other external borrowings are to be renegotiated well in advance
On March 2, 2021, Akastor announced an agreement with Baker Hughes
of their due date and generally for periods of 3 to 5 years.
to create a joint venture company that will bring together Akastor’s wholly
Funding cost
owned subsidiary, MHWirth AS and Baker Hughes’ Subsea Drilling Systems
business. The transaction will require refinancing of Akastor’s existing
Akastor aims to have diversified funding sources in order to reach the
corporate credit facility. Akastor has received commitments for a total of
lowest possible cost of capital. These funding sources might include:
NOK 1 250 million in revolving credit facilities that will be entered into
The use of banks based on syndicated credit facilities.
second half of 2021. Please see Note 37 Events after the reporting date
prior to closing of the transaction, which is expected to take place in the
for more information of the transaction.
The issue of debt instruments in the Norwegian capital market.
The issue of debt instruments in foreign capital markets.
of the group following the MHWirth transaction, management believes
that the risk of additional covenant breach is low and that the group will
Based on the received ICR covenant waiver and committed refinancing
Ratios used in monitoring of capital/Covenants
continue as a going concern for the foreseeable future.
Akastor monitors capital on the basis of a gearing ratio (net debt/equity)
and interest coverage ratio (ICR) based on EBITDA/net interest costs.
AGR’s external financing has one financial covenant the Liquidity shall be
not less than NOK 20 million, applicable from 1 January 2021..
Annual Report 2020 | Financials and Notes | Akastor Group 69
Note 30 | Financial risk management and exposures
The group is exposed to a variety of financial risks: currency risk, interest
amount of their respective cash flows. The group assesses whether the
rate risk, price risk, credit risk, liquidity risk and capital risk. The capital
derivative designated in each hedging relationship is expected to be and
market risk affects the value of financial instruments held. The objective of
has been effective in offsetting changes in cash flows of the hedged item
financial risk management is to manage and control financial risk exposures
using the hypothetical derivative method. In these hedge relationships, the
and thereby increase the predictability of earnings and minimize potential
main sources of ineffectiveness can arise from:
adverse effects on the group’s financial performance. Akastor group
uses financial derivative instruments to hedge certain risk exposures and
Changes to the forecasted amount of cash flows of hedged items
applies hedge accounting in order to reduce the profit or loss volatility.
and hedging instruments.
Risk management is present in every project. It is the responsibility of
The counterparties’ credit risk differently impacting the fair value
the project managers, with the support of Akastor Treasury, to identify,
movements of the hedging instruments and hedged items.
evaluate and hedge financial risks under policies approved by the Board
of Directors. The group has well-established principles for overall risk
Currency exposures from investments in foreign currencies are only
management, as well as policies for the use of derivatives and financial
hedged when specifically instructed by management. As of December 31,
investments. There have not been any changes in these policies during
2020, Akastor had no net investment hedges.
the year.
Currency risk
The change in hedge reserve in 2020 is related to hedges of forecast sales
and purchases.
The group operates internationally and is exposed to currency risk
on commercial transactions, recognized assets and liabilities and net
Exposure to currency risk
investments in foreign operations. Commercial transactions and recognized
Estimated forecasted receipts and payments in the table below are
assets and liabilities are subject to currency risk when payments are
calculated based on the group’s hedge transactions, adjusted for hedged
denominated in a currency other than the respective functional currency
balance sheet items. These are considered to be the best estimate of
of the group company. The group’s exposure to currency risk is primarily
the currency exposure, given that all currency exposure is hedged in
to USD, EUR and BRL, but also other currencies.
accordance with the group’s policy. The net exposure is managed by
Akastor’s policy requires business units to mitigate currency exposure
Akastor Treasury.
in any project. Akastor manages exposures by entering into forward
Changes in currency rates change the values of hedging derivatives,
contracts or currency options with the financial marketplace. Akastor has
embedded derivatives, borrowings, receivables and cash balances. Hedges
a large number of contracts involving foreign currency exposures and the
that qualify for hedge accounting are reported in the profit and loss
currency risk policy has been well-established for many years.
according to progress of projects, and deferred value of cash flow hedges
is reported as hedging reserve in equity. Any changes to currency rates will
The group determines the existence of an economic relationship between
therefore affect equity.
the hedging instrument and hedged item based on the currency and
Amounts in million
Bank
Intercompany loans
Loans and receivables
Deferred settlement assets and obligations
Balance sheet exposure
Estimated forecast receipts from customers
Estimated forecast payments to vendors
Cash flow exposure
Forward exchange contracts
Net exposure
2020
USD
EUR
(59)
33
55
(29)
-
108
(5)
104
(154)
(50)
5
24
(3)
-
26
-
(7)
(7)
12
31
BRL
-
-
127
-
127
-
-
-
-
127
2019
USD
EUR
BRL
(124)
(29)
40
98
(23)
(8)
185
(39)
146
(198)
(60)
31
(9)
-
(7)
-
(17)
(17)
28
4
-
-
96
-
96
-
-
-
-
96
Annual Report 2020 | Financials and Notes | Akastor Group 70
Sensitivity analysis
to be reasonably possible at the end of the reporting period. The analysis
A strengthening of EUR, USD and BRL against NOK as of December
assumes that all other variables, in particular interest rates, remain
31 would have affected the measurement of financial instruments
constant and ignores any impact of forecast sales and purchases. Figures
denominated in a foreign currency and increased (decreased) equity and
in the table below only include the effect in income statement and equity
income statement by the amounts shown below. This analysis is based
for change in currency regarding financial instruments and do not include
on foreign currency exchange rate variances that the group considered
effect from operating cost and revenue.
Effect of weakening of NOK against significant currencies:
Amounts in NOK million
USD (30%)
EUR (25%)
BRL (35%)
2020
Profit (loss)
after tax
Equity
Increase
(decrease)
(101)
64
57
(296)
USD (10%)
81
57
EUR (7%)
BRL (15%)
2019
Profit (loss)
before tax
Equity
Increase
(decrease)
(41)
2
11
(126)
15
11
A strengthening of the NOK against the above currencies as of December
Interest rate risk
31 would have had the equal but opposite effect on the above amounts, on
The group’s interest rate risk arises from cash balances, interest-bearing
the basis that all other variables remain constant. The sensitivity analysis
borrowings and interest-bearing receivables. Borrowings and receivables
does not include effects on the consolidated result and equity from
issued at variable rates as well as cash expose the group to cash flow
changed exchange rates used for consolidation of foreign subsidiaries.
interest rate risk. Borrowings and receivables issued at fixed rates expose
the group to fair value interest rate risk. However, as these borrowings are
The primary currency-related risk is the risk of reduced competitiveness
measured at amortized cost, interest rate variations do not affect profit
abroad in the case of a strengthened NOK. This risk relates to future
and loss when held to maturity.
commercial contracts and is not included in the sensitivity analysis above.
An increase of 100 basis points in interest rates during 2020 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. The analysis is performed on the
same basis as for 2019.
Effect of increase of 100 basis points in interest rates on profit (loss) before tax
Amounts in NOK million
Cash and cash equivalents
Current interest-bearing receivables
Borrowings
Net
2020
2019
3
2
(18)
(14)
3
4
(14)
(7)
A decrease of 100 basis points in interest rates during 2020 would have had the equal but opposite effect on the above amounts, on the basis that all
other variables remain constant. There are no effects on equity as there are no interest swaps.
Annual Report 2020 | Financials and Notes | Akastor Group 71
Guarantee obligations
Based on estimates of incurred losses in respect of trade receivables
The group has provided the following guarantees on behalf of subsidiaries
and contract assets, the group establishes a provision for impairment
and related parties as of December 31, 2020 (estimated remaining
losses. Provisions for loss on debtors are based on individual assessments.
exposure as of December 31, 2020):
Provisions for loss on receivables were NOK 131 million in 2020 (NOK 49
Performance guarantees on behalf of group companies are NOK
million in 2019).
0.7 billion (NOK 0.6 billion in 2019)
The group evaluates that significant credit risk concentrations are related
Performance guarantees on behalf of related parties NOK 2.6
exposure to credit risk at the reporting date equals the carrying amounts
billion (NOK 3.4 million in 2019)
of financial assets (see Note 32 Financial instruments) and contract
assets (see Note 7 Revenue and other income). The group does not hold
to trade receivables from major corporate customers. The maximum
Parent company indemnity guarantees for fulfillment of lease
collateral as security.
obligations and finance obligations are NOK 3.4 billion (NOK 4.0
billion in 2019).
Liquidity risk
Financial guarantees including counter guarantees for bank/
the obligations associated with its financial liabilities. The group manages
surety bonds and guarantees for pension obligations to
its liquidity to ensure that it will always have sufficient liquidity reserves to
employees are NOK 0.5 billion (NOK 0.7 billion in 2019).
meet its liabilities when due.
Liquidity risk is the risk that the group will encounter difficulty in meeting
Although guarantees are financial instruments, they are considered
Prudent liquidity risk management includes maintaining sufficient cash,
contingent obligations and the notional amounts are not included in the
the availability of funding from an adequate amount of committed credit
financial statements. See more information about guarantees for related
facilities and the ability to close out market positions. Due to the dynamic
parties in Note 35 Related parties.
nature of the underlying businesses, Akastor Treasury maintains flexibility
in funding by maintaining availability under committed credit lines.
Price risk
The group is exposed to fluctuations in market prices in the operational
The group policy for the purpose of optimizing availability and flexibility
areas related to contracts, including changes in market prices for raw
of cash within the group is to operate a centrally managed cash pooling
materials, equipment and development in wages. These risks are to the
arrangement. An important condition for the participants (business units)
extent possible managed in bid processes by locking in committed prices
in such cash pooling arrangements is that the group as an owner of such
from vendors as a basis for offers to customer or through escalation
pools is financially viable and is able to prove its capability to service its
clauses with customers.
Credit risk
obligations concerning repayment of any net deposits made by business
units. Management monitors rolling weekly and monthly forecasts of the
group’s liquidity reserve on the basis of expected cash flow.
Credit risk is the risk of financial losses to the group if customer
or counterparty to financial investments/instruments fails to meet
contractual obligations and arise principally from investment securities
and receivables.
Derivatives are only traded against approved banks. All approved banks
have investment grade ratings. Credit risk related 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
period. Such assessments are based on credit ratings, income statement
and balance sheet reviews and using credit assessment tools available (e.g.
Dun & Bradstreet and Credit Watch). Sales to customers are settled in
cash.
Revenues are mainly related to large and long¬ term projects closely
followed up in terms of payments up front and in accordance with agreed
milestones. Normally, lack of payments is due to disagreements related to
project deliveries and is solved together with the customer or escalated
to the local authority.
Annual Report 2020 | Financials and Notes | Akastor Group 72
Financial liabilities and the period in which they mature
The following is the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include
contractual interest payments and exclude the impact of netting agreements.
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
2020
Borrowings 2)
Lease liabilities
Other non-current liabilities
Derivative financial instruments
Deferred settlement obligations
Trade and other payables
Total financial liabilities
Financial guarantees 3)
2019
Borrowings 2)
Lease liabilities
Other non-current liabilities
Derivative financial instruments
Deferred settlement obligations
Trade and other payables
Total financial liabilities
Financial guarantees 3)
24
33
25
31
25, 28
28
24
33
25
31
25, 28
28
1 746
1 895
592
210
37
274
1 537
4 396
732
239
37
274
1 537
4 714
37
84
2
28
11
1 266
1 429
1 172
76
2
1
68
272
54
125
5
8
67
-
568
219
227
-
128
-
64
228
2
-
-
-
1 590
258
7 175
294
5
382
1 448
1 639
677
203
22
272
2 176
4 798
847
203
22
272
2 176
5 159
8 538
39
84
23
(19)
-
1 745
1 871
585
35
78
23
23
69
431
659
226
1 380
136
50
18
81
-
1 666
7
1 142
3 666
295
2 828
70
275
103
-
121
-
569
1 239
115
274
5
-
-
-
394
6480
1) Nominal currency value including interest.
2) The interest costs are calculated using the last fixing rate known by year end (plus applicable margin).
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.
Annual Report 2020 | Financials and Notes | Akastor Group
Note 31 | Derivative financial instruments
The group uses derivative financial instruments such as currency forward
contracts and currency options to hedge its exposure to foreign exchange
arising from operational, financial and investment activities. In addition,
there are embedded foreign exchange forward derivatives separated
from ordinary commercial contracts. Further information regarding risk
management policies in the group is available in Note 30 Financial risk
management and exposures. Derivative financial instruments are classified
as current assets or liabilities as they are a part of the operating cycle.
The group is holding the following foreign exchange forward contracts:
Amounts in NOK million
2020
Foreign exchanges forward contracts to hedge highly probable
forecasted sales
Notional amounts USD
Average forward rate (USD/NOK)
Foreign exchanges forward contracts to hedge highly probable
forecasted purchases
Notional amounts USD
Average forward rate (USD/NOK)
Notional amounts EUR
Average forward rate (EUR/NOK)
2019
Foreign exchanges forward contracts to hedge highly probable
forecasted sales
Notional amounts USD
Average forward rate (USD/NOK)
Average forward rate (EUR/USD)
Foreign exchanges forward contracts to hedge highly probable forecasted
purchases
Notional amounts USD
Average forward rate (USD/NOK)
Notional amounts EUR
Average forward rate (EUR/NOK)
73
Maturity
Total
6 months
and less
6-12 months
1-2 years
8
9.05
22
9.13
153
36
12
243
46
28
123
8.72
36
8.91
9
-
-
3
10.05
10.75
124
9.05
1.54
41
8.85
15
9.95
75
8.43
1.12
4
8.45
8
9.96
-
-
-
-
45
8.37
-
-
-
4
10.05
Annual Report 2020 | Financials and Notes | Akastor Group 74
Fair value of derivative instruments with maturity
The table below presents the fair value of the derivative financial instruments and a maturity analysis of the derivatives cash flows.
Amounts in NOK million
2020
Assets
Cash flow hedges
Embedded derivatives in ordinary commercial contracts
Fair value adjustments to hedged assets
Total forward foreign exchange contracts, assets
Liabilities
Cash flow hedges
Fair value adjustments to hedged liabilities
Total forward foreign exchange contracts, liabilities
2019
Assets
Cash flow hedges
Embedded derivatives in ordinary commercial contracts
Fair value adjustments to hedged assets
Total forward foreign exchange contracts, assets
Liabilities
Cash flow hedges
Embedded derivatives in ordinary commercial contracts
Fair value adjustments to hedged liabilities
Total forward foreign exchange contracts, liabilities
Instruments
at fair value
Total
cash flow 1)
6 months
or less
6–12 months
1–2 years 2)
44
6
11
61
(27)
(9)
(37)
48
4
(10)
43
(55)
(7)
(3)
(65)
44
6
11
61
(27)
(9)
(37)
48
4
(10)
43
(55)
(7)
(3)
(65)
29
6
11
46
(19)
(9)
(28)
43
4
(10)
37
(9)
(7)
(3)
(19)
4
-
4
(1)
-
(1)
4
-
-
4
(27)
-
-
(27)
11
-
11
(8)
-
(8)
1
-
-
1
(19)
-
-
(19)
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 2 years.
Foreign exchange derivatives
almost equal, opposite effect to profit and loss. In the table above, the
Akastor entities hedge the group’s future transactions in foreign currencies
derivatives hedging the embedded derivatives are included in Forward
with external banks. The exposure to foreign exchange variations in future
foreign exchange contracts - not hedge accounted.
cash flows is hedged back-to-back in order to meet the requirements for
hedge accounting. The foreign exchange derivatives are either subject to
The hedged transactions in foreign currency that are subject to cash flow
hedge accounting or separated embedded derivatives. Hedges qualifying
hedge accounting are highly probable future transactions expected to
for hedge accounting are classified as cash flow hedges (hedges of highly
occur at various dates during the next one to four years, depending on
probable future revenues and/or expenses).
progress in the projects. Gains and losses on forward foreign exchange
Embedded derivatives are foreign exchange derivatives separated from
as hedging reserve in equity until they are recognized in the income
construction contracts. The reason for separation is that the agreed
statement in the period or periods during which the hedged transactions
payment is in a currency different from any of the major contract parties’
affect the income statement. If the forward foreign exchange contract is
own functional currency, or that the contract currency is not considered
rolled due to change in timing of the forecasted cash flow, the settlement
to be commonly used for the relevant economic environment defined as
effect is included in Contract assets or Contract liabilities.
contracts are recognized in other comprehensive income and reported
the countries involved in the cross-border transaction. The embedded
derivatives represent currency exposures, which is hedged against
external banks. Since the embedded derivatives are measured and
classified in the same way as their hedging derivatives, they will have an
Annual Report 2020 | Financials and Notes | Akastor Group
Unsettled cash flow hedges’ impact on profit and loss and equity (not adjusted for tax)
Amounts in NOK million
Fair value of all hedging instruments
Recognized in profit and loss
Deferred in equity (the hedge reserve)
75
2020
8
(13)
21
2019
(6)
11
(17)
The purpose of the hedging instrument is to secure a situation where
of the value of the forward contracts have already affected the income
the hedged item and the hedging instrument together represent a
statement indirectly as revenues and expenses are recognized based on
predetermined value independent of fluctuations of exchange rates.
updated forecasts and progress. The positive NOK 21 million (negative
Revenue and expense on the underlying construction contracts are
NOK 17 million in 2019) that are currently recorded directly in the hedging
recognized in the income statement in accordance with progress.
reserve, will be reclassified to income statement over the next years.
Consequently, negative NOK 13 million (positive NOK 11 million in 2019)
Note 32 | Financial instruments
Accounting classifications and fair values
Level 2 - fair values are based on price inputs other than quoted prices
The following table shows the carrying amounts and fair values of financial
derived from observable market transactions in an active market for
assets and financial liabilities, including their levels in the fair value
identical assets or liabilities. Level 2 includes currency or interest
hierarchy. It does not include fair value information for financial assets and
derivatives and interest bonds, typically when the group uses forward
financial liabilities not measured at fair value if the carrying amount is a
prices on foreign exchange rates or interest rates as inputs to valuation
reasonable approximation of fair value. For financial instruments measured
models.
at fair value, the levels in the fair value hierarchy are as shown below.
Level 1 - fair values are based on prices quoted in an active market for
internal assumptions used in the absence of quoted prices from an active
identical assets or liabilitiess.
market or other observable price inputs.
Level 3 - Fair values are based on unobservable inputs, mainly based on
Amounts in NOK million
2020
Financial assets measured at fair value
Fair value – hedging instruments
Derivative financial instruments
Fair value through P&L (mandatorily at FVTPL)
Equity securities
Equity securities 1)
Warrants
Contingent considerations
Fair value through Other comprehensive income
Debt instruments 1)
Financial assets not measured at fair value
Financial assets at amortized cost
Cash and cash equivalents
Non-current interest-bearing receivables
Trade and other receivables
Financial assets
Note
Carrying
amount
Financial instruments
measured at fair value
Level in fair
value hierarchy
31
18
18
18
17, 21
18
22
19
21
61
14
906
16
26
61
Level 2
14
906
16
26
Level 1
Level 3
Level 3
Level 3
533
533
Level 3
275
115
1 120
3 063
Annual Report 2020 | Financials and Notes | Akastor Group 76
Amounts in NOK million
Financial liabilities not measured at fair value
Financial liabilities at amortized cost
Borrowings 2)
Other financial liabilities
Other non-current liabilities
Trade and other payables
Financial liabilities measured at fair value
Fair value – hedging instruments
Derivative financial instruments
Fair value through profit & loss
Deferred settlement obligations
Financial liabilities
Amounts in NOK million
2019
Financial assets measured at fair value
Fair value – hedging instruments
Derivative financial instruments
Fair value through P&L (mandatorily at FVTPL)
Equity securities
Equity securities 1)
Warrants
Contingent considerations
Fair value through Other comprehensive income
Debt instruments 1)
Financial assets not measured at fair value
Financial assets at amortized cost
Cash and cash equivalents
Current interest-bearing receivables
Non-current interest-bearing receivables
Trade and other receivables
Financial assets
Financial liabilities not measured at fair value
Financial liabilities at amortized cost
Borrowings 2)
Other financial liabilities
Other non-current liabilities
Trade and other payables
Financial liabilities measured at fair value
Fair value – hedging instruments
Derivative financial instruments
Fair value through profit & loss
Deferred settlement obligations
Financial liabilities
Note
Carrying
amount
Financial instruments
measured at fair value
Level in fair
value hierarchy
24
25
28
31
(1 746)
(1 753)
Level 2
(210)
(1 537)
(37)
(37)
Level 2
25, 28
(274)
(3 804)
(274)
Level 3
Note
Carrying
amount
Financial instruments
measured at fair value
Level in fair
value hierarchy
31
18
18
18
17, 21
18
22
19
19
21
24
25
28
31
43
Level 2
47
904
79
69
Level 1
Level 3
Level 3
Level 3
613
Level 3
43
47
904
79
69
613
555
9
201
1 223
3 743
(1 448)
(1 456)
Level 2
(203)
(2 176)
(65)
(65)
Level 2
25, 28
(272)
(4 164)
(272)
Level 3
1) Investments in level 3 in the hierarchy relate to equity securities and debt securities with no active market. These investments are measured at the best estimate of fair value.
2) For credit facilities and other loans with floating interest, notional amounts are used as approximation of fair values.
Annual Report 2020 | Financials and Notes | Akastor Group
Reconciliation of Level 3 financial assets and financial liabilities
Amounts in NOK million
Balance as of December 31, 2018
Additions
Settlements
Net gain (loss) in the income statement
Fair value through OCI
Currency translation difference
Balance as of December 31, 2019
Settlements
Net gain (loss) in the income statement
Fair value through OCI
Currency translation difference
Balance as of December 31, 2020
Measurement of fair values at level 3
Debt instruments at FVOCI
77
Assets
Liabilities
1 458
2
(18)
207
17
(2)
1 665
(39)
(96)
(42)
(8)
1 480
(408)
-
204
(65)
-
(3)
(271)
77
(78)
-
-
(274)
Contingent considerations and deferred settlement obligations
Financial assets measured at FVOCI are related to debt instruments in NES
These assets and liabilities relate to contingent considerations and
Fircroft. The valuation model considers the present value of the expected
obligations from business acquisitions and disposals. Final amounts
cash flows from the ultimate disposal of the investments weighted with
to be paid or received depend on future earnings in the acquired and
different probabilities. The expected disposal value is determined by
disposed companies or outcome of indemnity claims and price adjustment
forecast EBITDA at the time of disposal and market multiples, adjusted by
mechanisms.
forecast net debt of the investee. The estimated fair value would increase
(decrease) if:
Assets and
liabilities depending on future earnings: The
recognized amounts are determined based on recent forecasts
The forecast EBITDA were higher (lower);
and strategy figures for these entities, thus the final realized
values are sensitive to the above inputs as driven by market
The market multiples applied were higher (lower); or
conditions.
The net debt of the investees at the date of disposal were lower
Assets and liabilities depending of outcome of indemnity claims
(higher).
Financial assets at FVTPL
and price adjustment mechanisms: Provisions are made based on
all available evidence as at the reporting date.
Financial assets measured using Level 3 inputs relate mainly to preferred
The credit exposure on the Level 3 asset is limited to the amount
equity and warrant investment in Odfjell Drilling.
recognized and the credit risk is not considered to be significant due to
the nature of the arrangement.
Preferred equity: The valuation model considers the present
value of the expected future payments, discounted using a risk-
adjusted discount rate of 10%. The estimated fair value would
increase (decrease) if the risk-adjusted discount rate were lower
(higher).
Warrants: The valuation is obtained from external valuation
experts, using a Monte Carlo simulation model where the
simulated stock prices are based on a lognormal stock price
model assumed to follow a Geometric Brownian Motion. The key
inputs to the valuation model consist of the stock price of Odfjell
Drilling (listed on the Oslo Stock Exchange under ticker ODL) at
the valuation date, as well as assumption of future volatility based
on the share’s historical prices. The estimated fair value is mostly
sensitive to the ODL share price and would increase (decrease) if
the ODL share price were higher (lower).
Annual Report 2020 | Financials and Notes | Akastor Group 78
Note 33 | Leases
Group as lessee
The group applies the short-term lease recognition exemptions for leases
The group has property leases on a number of locations worldwide. The
of property or machinery with lease term of 12 months or less. Leases of
leases typically run for a period of 3-10 years and some of the leases
IT equipment and office equipment are considered as leases of low-value
have extension options. The group has also lease agreements related to
assets. The right-of-use assets and lease liabilities are not recognized for
cars, machinery, IT equipment and office equipment. These leases have
short-term leases or leases of low-value assets.
an average lease period of 2-3 years, generally with no renewal options
included.
Right-of-use assets
Amounts in NOK million
Balance as of January 1
Additions
Additions through business combinations
Depreciation
Impairment
Remeasurement
Currency translation differences
Balance as of December 31
The right-of-assets are mainly related to leases of properties.
Lease liabilities
Amounts in NOK million
Balance as of January 1
Cash payments
Additions
Additions through business combinations
Remeasurement
Currency translation differences
Balance as of December 31
Current lease liabilities
Non-current lease liabilities
Lease payments recognized in the income statement
Amounts in NOK million
Expenses related to short term leases
Expenses related to leases of low-value items
Total
Lease payments recognized in statement of cash flow
Amounts in NOK million
Total cash outflow for leases
The lease agreements do not impose any covenants or restrictions.
Note
2020
2019
537
43
-
(113)
(4)
(1)
5
468
522
121
51
(96)
(9)
(53)
1
537
Note
2020
2019
29
677
(139)
43
-
707
(151)
121
51
6
(53)
5
592
159
433
1
677
160
516
2020
2019
11
104
115
81
103
184
2020
(279)
2019
(339)
Some property leases contain extension or termination options exercisable
Most extension options in offices leases have not been included in the lease
before the end of the non-cancellable period. They are used to maximize
liability, because the group expects to be able to replace the assets without
operational flexibility in terms of managing the assets used in the group’s
significant cost or business disruption. Most of the early termination
operations. The extension and termination options held are exercisable
options are not considered in the lease term either as the group assesses
only by the group and not by the respective lessor. The group assesses at
it as reasonably certain that the leases will not be terminated early. If the
lease commencement date whether it is reasonably certain to exercise the
group had exercised the extension options in significant property leases
extension or termination options.
as of December 31, 2020, the group estimates potential future lease
Annual Report 2020 | Financials and Notes | Akastor Group 79
payments (undiscounted) of approximately NOK 420 million, which are
Finance leases
not included in the lease liabilities.
Some of the subleases of right-of-use assets are classified as finance lease,
with reference to the right-of-use assets arising from the head leases.
Group as lessor
The group subleases out some of the property leases which are presented
The following table sets out a maturity analysis of finance lease receivables,
as part of the right-of-use assets as well as some machinery.
showing the undiscounted lease payments to be received after the
reporting date.
Amounts in NOK million
Due within one year
Due in one to two years
Due in two to three years
Due in three to four years
Due in four to five years
Total undiscounted lease receivable
Unearned interest income
Total finance lease receivables
Current finance lease receivables
Non-current finance lease receivables
Operating leases
2020
2019
7
7
7
5
-
25
2
23
7
15
9
5
5
5
5
28
4
25
9
16
Most of the subleases are classified as operating leases except for the finance leases identified above. The lease income from subleasing right-of-use
assets in 2020 was NOK 30 million (NOK 73 million in 2019).
The following table sets out future undiscounted sublease income under the non-cancellable lease periods.
Amounts in NOK million
Due within one year
Due in one to two years
Due in two to three years
Due in three to four years
Due in four to five years
Due in more than five years
Total
Note 34 | Group companies
2020
2019
49
10
3
3
3
8
75
38
14
3
3
3
10
70
This note gives an overview of subsidiaries of Akastor ASA. For information about other investments in the group, refer to Note 16 Equity-accounted
investees and Note 18 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 do Brasil Equipamentos Ltda
MHWirth Canada Inc
MHWirth Offshore Petroleum Engineering (Shanghai) Co Ltd
MHWirth GmbH
MHWirth (India) Pvt Ltd
MHWirth Sdn Bhd 1)
Drilltech AS 2)
Country
Norway
Australia
Brazil
Canada
China
Germany
India
Malaysia
Norway
Ownership (%)
2020
2019
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
Annual Report 2020 | Financials and Notes | Akastor Group 80
Maritime Promeco AS 2)
MHWirth AS
Frontica Engineering AS 3)
MHWirth Singapore Engineering Management Pte Ltd
MHWirth (Singapore) Pte Ltd
MHWirth UK Ltd
MHWirth FZE
MHWirth Inc
Bronco Manufacturing LLC
Step Oiltools (Australia) Pty Ltd
Step Oiltools GmbH
PT Step Oiltools
Step Oiltools LLP
Step Oiltools (M) Sdn Bhd
Step Oiltools BV
Step Oiltools AS
Step Oiltools Services LLC
Step Oiltools LLC
Step Oiltools Pte Ltd
Step Oiltools (Thailand) Ltd
Step Oiltools (UK) Ltd
Step Oiltools FZE
AGR4)
AGR (Australia) Pty Ltd
AGR AS
AGR Petroleum Services AS
AGR Software AS
AGR Consultancy Services AS
First Geo AS 5)
AGR Mexico Well Management S. de R. L. de C. V
AGR Well Management Ltd
AGR Consultancy Solutions Ltd
AGR Group Americas, Inc.
OTHER COMPANIES
Zoetermeer Process Belgium NV/SA 1)
Frontica Global Employment Ltd
Cool Sorption A/S
Well Systems Servicing Ltd
AKA SPH AS
DDW Offshore AS
Akastor AS
Akastor Real Estate AS
KOP Surface Products Singapore Pte Ltd
Aker Cool Sorption Siam Ltd
Frontica Business Solutions Ltd
AK Pharmaceuticals LLC 1)
AK Willfab Inc
AKOFS Angola Limitada
Norway
Norway
Norway
Singapore
Singapore
UK
UAE
USA
USA
Australia
Germany
Indonesia
Kazakhstan
Malaysia
Netherlands
Norway
Oman
Russia
Singapore
Thailand
UK
UAE
Australia
Norway
Norway
Norway
Norway
Norway
Mexico
UK
UK
USA
Belgium
Cyprus
Denmark
Nigeria
Norway
Norway
Norway
Norway
Singapore
Thailand
UK
USA
USA
Angola
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
67
100
100
100
100
100
64
64
64
58
64
-
64
64
64
64
-
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
67
100
100
100
100
100
55
55
55
43
55
100
54
55
55
55
100
100
100
100
100
50
100
100
100
100
100
100
100
100
1) Liquidated in 2020.
2) Merged into MHWirth AS in 2020.
3) Demerged from MHWirth AS in 2020.
4) Akastor holds 100 percent of the shares and 64 percent of the economic interests.
5) Merged into AGR Petroleum Services AS in 2020.
6) MHWirth UK Ltd. (registered number 01753931), STEP Oiltools (UK) Ltd. (registered number SC412738) and Frontica Business Solutions Ltd (registered number 4962691)
are exempted from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A of the Companies Act 2006, UK.
Annual Report 2020 | Financials and Notes | Akastor Group 81
Note 35 | Related parties
Related party relationships are those involving control (either direct or
Remunerations and transactions with directors and executive officers are
indirect), joint control or significant influence. Related parties are in a
summarized in Note 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 Holdings AS (previously Aker
parties to Akastor have been based on arm’s length terms.
Kværner Holding AS), is wholly-owned by Aker ASA, which in turn is
controlled by Kjell Inge Røkke through TRG Holding AS and The Resource
Akastor ASA is a parent company with control of around 50 companies
Group TRG AS. In December 2020, the previous common ownership in
around the world. These subsidiaries are listed in Note 34 Group
Aker Holdings AS between Aker ASA and the Norwegian government
companies. Any transactions between the parent company and the
was dissolved. As a consequence of the dissolution, Aker ASA is no longer
subsidiaries are shown line by line in the separate financial statements
deemed to control Akastor or Aker Solutions. Akastor is an associate to
of the parent company, and are eliminated in the consolidated financial
Aker ASA as per year end 2020.
statements.
Joint ventures and associates are consolidated using the equity method,
no longer related parties of Akastor as of December 31, 2020. These
see Note 16 Equity-accounted investees. Transactions between the group
companies were considered as related parties to Akastor in 2019 and
and these entities are shown in the table below.
referred as “Aker entities” in the table below. The entities controlled
Aker Solutions and Aker BP, which are associates of Aker ASA, are
directly by Kjell Inge Røkke through TRG Holding AS and The Resource
Group TRG AS, are referred as “Related parties to Aker ASA”.
Summary of transactions and balances with significant related parties
Amounts in NOK million
Income statement
Revenue
Operating expenses
Depreciation and impairment (ROU assets)
Net financial items
Assets (liabilities)
Right-of-use assets
Finance lease receivables
Interest-bearing receivables
Trade receivables
Trade payables
Lease liabilities
2020
2019
Aker
entities 1)
Joint
ventures
Total
Aker
entities
Joint
ventures
Total
146
(53)
(26)
(5)
-
-
-
-
-
-
8
-
-
16
-
94
1
-
154
(53)
(26)
11
-
-
94
1
-
-
210
(16)
(26)
(4)
49
22
-
32
(11)
(87)
14
-
-
29
-
-
191
2
-
-
224
(16)
(26)
25
49
22
191
34
(11)
(87)
1) Aker entities are not considered as related parties to the group as of December 31, 2020. The information shown is related to the periods prior to the date when Akastor
became an associate to Aker ASA.
Below are descriptions of significant related party agreements.
a guarantee commission to Akastor.
Related party transactions with Aker entities
Several of the agreements addressing various separation issues
Aker Solutions
between Akastor and Aker Solutions are still valid after the
Akastor has entered into a number of agreements and arrangements with
demerger in 2014, including secondary joint liability for obligations
Aker Solutions, including:
existing in Aker Solutions at the time of the demerger, yet limited
in amount to the net value allocated to Akastor in the demerger.
Various lease agreements from Akastor Real Estate AS and other
Akastor companies to subsidiaries of Aker Solutions.
Aker BP
Some parent company guarantees issued on behalf of Aker
in Stavanger, Norway, to Aker BP.
In 2017, Akastor Real Estate AS entered into agreement to sublease offices
Solutions entities by Akastor (as their previous parent company)
were not transferred in connection with the demerger of Aker
Solutions in 2014. Aker Solutions is liable to indemnity Akastor
for any rightful claim such parent company guarantees and to pay
Annual Report 2020 | Financials and Notes | Akastor Group 82
Agreements with related parties to Aker ASA
The Resource Group TRG AS
Other related parties
Aker Pensjonskasse
MHWirth AS, a wholly owned subsidiary of Akastor, entered into long-term
Aker Pensjonskasse was established by Aker ASA to manage the
lease agreements in 2015 with subsidiaries of The Resource Group TRG
retirement plan for employees and retirees in Akastor as well as related
AS, for properties in Kristiansand in Norway. The annual lease payment
Aker companies. Akastor holds 93.4 percent of the paid-in capital in Aker
is approximately NOK 22 million for a lease period of 19 years starting
Pensjonskasse and Akastor’s share of paid-in equity was NOK 158 million
October 1, 2015, with options for renewal.
at the end of 2020 (NOK 158 million in 2019). Akastor’s premium paid to
AK Wilfab Inc, a wholly owned subsidiary of Akastor, is together with Aker
in 2019). Akastor also has an interest-bearing receivable against Aker
Solutions Inc and The Resource Group TRG AS sponsoring the US pension
Pensjonskasse of NOK 21 million and an additional financing commitment
plan named the Kvaerner Consolidated Retirement Plan. Akastor holds
NOK 10 million (3% interest of drawn amount and 1% interest of committed
Aker Pensjonskasse amounts to NOK 7 million in 2020 (NOK 8 million
one third of the liability of the sponsors for the underfunded element of
amount).
the plan and The Resource Group TRG AS holds two thirds of the ultimate
liability. Aker ASA guarantees for The Resource Group TRG AS’ liability
Even though Akastor owns 93.4 percent in Aker Pensjonskasse, the
and covers for all its expenses related to the pension plan.
ownership does not constitute control since Akastor does not have the
power to govern the financial and operating policies so as to obtain
Fornebuporten Næring 3 AS
benefits from the activities in this entity.
Akastor leases its headquarter offices at Fornebu from Fornebuporten
Næring 3 AS, an associated company of The Resource Group TRG AS.
Grants to employee representative’s collective fund
The contract term is 10 years starting August 31, 2015, with two additional
Aker ASA has signed an agreement with employee representatives
five-year options.
that regulate use of grants from Akastor ASA for activities related to
professional development. The grant in 2020 was NOK 510 000 (NOK
Related party transactions with joint ventures
521 250 in 2019).
DOF Deepwater AS
In October 2020, DDW Offshore AS (previously DOF Deepwater AS)
became a wholly owned subsidiary of the group. See Note 5 Business
Combinations for more information.
AKOFS Offshore
As of December 31, 2020, Akastor has interest-bearing receivables of
NOK 94 million against AKOFS Offshore, including term loan of NOK 79
million (LIBOR 0.21 percent + margin 5.5 percent) and drawn working
capital facility of NOK 15 million (NIBOR 0.53 percent + margin 5.5
percent). Akastor has made available a NOK 100 million working capital
revolving facility to AKOFS Seafarer AS from contract commencement
with Equinor.
As part of the joint venture shareholders agreement, the other two
investors, Mitsui and MOL, are entitled to a guaranteed preferred equity
return, in respect of the operations of AKOFS Seafarer, amounting to a
total of USD 46 million over a 6 year’s period. The payment of preferred
return will be settled firstly by ordinary dividend from AKOFS Offshore,
yet any shortfall is guaranteed by Akastor. Akastor ASA has issued a bank
guarantee for payment of preferred return for a total amount of NOK 244
million.
Akastor has issued a financial guarantee of NOK 127 million in favour of
finance institutions for fulfilment of lease obligations related to Avium
Subsea AS. Akastor has issued a financial parent company indemnity
guarantee of NOK 1.6 billion in favour of OCY Wayfarer Limited for
fulfilment of lease obligations related to AKOFS 3 AS. In addition, Akastor
is guaranteeing the performance of AKOFS Norway Operations AS
(operating AKOFS Seafarer) under the 5 year charter agreement with
Equinor. The total contract value of this charter agreement is NOK 2.6
billion. Avium Subsea AS, AKOFS 3 AS and AKOFS Seafarer AS are wholly
owned subsidiaries of AKOFS Offshore.
Annual Report 2020 | Financials and Notes | Akastor Group
83
Note 36 | Management remunerations
Board of directors
The board of directors did not receive any other fees than those listed in the table below, except for employee representatives who has 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 expenses recognized in the income statement based on assumptions about fees to be approved at the general
assembly rather than actual payments made in the year.
Amounts in NOK
Kristian Monsen Røkke
Øyvind Eriksen (until April 15, 2020)
Svein Oskar Stoknes (from April 15, 2020)
Lone Fønss Schrøder1)
Kathryn Baker
Sarah Ryan 1)
Stian Sjølund
Henning Jensen
Asle Christian Halvorsen
Total
2020
Audit Committee
fees
-
-
205 000
115 000
-
-
115 000
-
Board fees
600 000
97 808
242 192
452 500
340 000
372 300
170 000
170 000
170 000
2019
Audit Committee
fees
-
-
-
205 000
115 000
-
-
115 000
-
Board fees
600 000
340 000
-
490 000
340 000
395 600
170 000
170 000
170 000
435 000
2 614 800
435 000
2 675 600
1) Board fees 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 are
The main purpose of the executive remuneration is to encourage a strong
paid to the Aker companies, not to the directors in person. Therefore, board
and sustainable performance-based culture, which supports growth in
fees for Kristian Monsen Røkke, Øyvind Eriksen and Svein Oskar Stoknes
shareholder value. It is also considered important to provide competitive
were paid to Aker ASA.
Audit Committee
terms that helps to retain key personnel and executive management and
in turn mitigate the risk that core qualification and experience is lost by key
people leaving the company. Compensation to the executive management
Akastor has an audit committee comprising three of the directors, which
has a fixed element which includes a base salary which pursuant to the
held 9 meetings in 2020. As of December 31, 2020, the audit committee
company’s benchmarking is competitive with other investment companies.
comprises Lone Fønss Schrøder (chairperson), Kathryn M. Baker and
In addition, the executive management has variable remuneration, as
Henning Jensen.
further described below. All variable pay shall be subject to a cap.
Policy on remuneration to the members of the executive
The remuneration to the CEO is recommended by the chairman of the
management of Akastor
board and approved by the board of directors on an annual basis. The
As of December 31, 2020, the executive management of Akastor
remuneration to the remaining executive management shall be approved
comprised the company’s CEO Karl Erik Kjelstad and CFO Øyvind Paaske.
by the CEO, in consultation with the chairman of the board, and informed
All personnel are employed under standard employment contracts with
to the board of directors of Akastor ASA on an annual basis.
terms and conditions consistent with industry standard, including on issues
such as notice period and severance pay in the event of termination. In
The figures for the remuneration for the executive management represent
accordance with statutory law, the company may request the resignation
what has been expensed in the year.
of the CEO at its own discretion, but will be obliged to pay severance
payment in the amount of 6 months’ salary from the expiry of the notice
period.
Annual Report 2020 | Financials and Notes | Akastor Group 84
Amounts in NOK
2020
Karl Erik Kjelstad
Leif Borge 4)
Øyvind Paaske 5)
Total
2019
Karl Erik Kjelstad
Leif Borge
Total
Job title
Base salary
Variable pay 1)
Other
benefits 2)
Total taxable
remuneration
Pension benefit earned/
cost to company 3)
CEO
CFO
CFO
4 692 123
2 336 040
694 902
1 651 315
-
840 000
27 715
4 504
22 415
7 055 878
699 406
2 513 731
7 038 340
3 176 040
54 634
10 269 014
CEO
CFO
4 631 731
3 719 523
2 336 040
1 667 764
8 351 254
4 003 804
30 164
31 748
61 912
6 997 935
5 419 035
12 416 970
265 171
44 844
154 936
464 951
248 892
257 965
506 857
1) See below for further description of principles for performance based remuneration.
2) Other benefits include insurance agreements, such as membership in the standard employee scheme and an additional executive group life and disability insurance.
3) Pension benefits include the standard employee pension scheme, a disability pension scheme and certain management pension rights related to the wound up schemes
and early retirement schemes.
4) For the period between January 1 and February 29, 2020.
5) For the period between March 1 and December 31, 2020.
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. These 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
and there are no current loans, prepayments or other forms of credit from
of the company’s share price, the achievement of certain key targets and/
the company to its executive management. No members of the executive
or long term employment with the company. Such agreements, including
management are part of any option- or incentive programs other than
any payments under them and/or material changes, are proposed by the
what is described in this policy.
chairman and approved by the board.
Performance based remuneration
Share purchase program
In addition to receiving fixed compensation, the executive management
The company had no share purchase program in 2020. The executive
(as well as other members of the corporate organization) participates in
management were invited to participate in Akastor’s share purchase
a variable pay program. The objective of the program is to incentivize the
programs in 2019. The ordinary employee share purchase program gave
management to contribute to sound financial results for the company,
the executive management the opportunity to purchase maximum 250
recruit and retain key personnel as well as executing leadership in
000 shares for CEO and CFO with a reduction of 25 percent in addition
accordance with the company’s values and business ethics. The potential
to NOK 3 000. Shares purchased under the programs is subject to a three
payment under the variable pay program is set individually, with 100
year lock-up period during which the acquired shares may not be sold or
percent of the annual base salary as the maximum. Payment under the
otherwise disposed of.
program is recommended by the CEO and approved by the board on an
annual basis.
The payments under the variable pay program are subject to a discretionary
assessment based on three components:
Development of Akastor ASA’s share price.
Delivery of certain key financial, operational and strategic targets
for Akastor.
Delivery of personal performance objectives during the year.
Annual Report 2020 | Financials and Notes | Akastor Group
85
Directors’ and executive management’s shareholding
The following number of shares is owned by the directors and the members of the executive management (and their related parties) as of December 31:
Karl Erik Kjelstad
Øyvind Paaske
Kristian Monsen Røkke
Lone Fønss Schrøder
Svein Oskar Stoknes
Kathryn Baker
Sarah Ryan
Asle Christian Halvorsen
Stian Sjølund
Job title
CEO
CFO
Chairman
Deputy chairman
Director
Director
Director
Director
Director
2020
2019
400 000
5 083
200 000
4 400
1 297
45 683
5 000
10 000
10 000
300 000
-
200 000
4 400
-
45 683
5 000
10 000
10 000
Note 37 | Events after the reporting date
On March 2, 2021, Akastor announced an agreement with Baker Hughes
The transaction agreement entered into by Akastor and Baker Hughes
to create a joint venture company (Company) that will bring together
provides for customary terms for agreements of this nature, including
Akastor’s wholly owned subsidiary, MHWirth AS (MHWirth) and Baker
representations and warranties relating to the businesses being
Hughes’ Subsea Drilling Systems (SDS) business. The Company will deliver
contributed as well as an agreed form shareholders agreement customary
a global full-service offshore drilling equipment offering that will provide
for a 50/50 joint venture, including governance and exit provisions.
customers with a broad portfolio of products and services.
Completion of the transaction is subject to customary conditions, including
The Company shall be owned 50/50 by Akastor and Baker Hughes. Akastor
the second half year of 2021. Following completion of the transaction, it
shall contribute its shares in MHWirth to the Company in return for 50% of
is expected that Akastor shall account for the Company as a joint venture
regulatory approval. Closing of the transaction is expected to take place in
the shares of the Company and USD 120 million in consideration, of which
using the equity method.
USD 100 million is payable in cash at closing. Baker Hughes shall contribute
the SDS business to the Company in return for the other 50% of the shares
The transaction will require the refinancing of Akastor’s existing corporate
and USD 200 million in consideration, of which USD 120 million is payable
credit facility. Akastor has received commitments for a total of NOK 1 250
in cash at closing. The Company shall issue notes to Akastor and Baker
million in revolving credit facilities that will be entered into prior to closing
Hughes representing the balance of the consideration owed to them. The
of the transaction.
notes shall be subordinated to the Company’s external debt financing. The
Company will finance the cash consideration payable to Baker Hughes and
Akastor by way of a USD 220 million bank facility. In addition, the Company
will also be financed by a USD 80 million working capital facility.
Annual Report 2020 | Financials and Notes | Akastor Group 86
04. FINANCIALS AND NOTES
b.
AKASTOR ASA
Akastor ASA | Income statement
Akastor ASA | Statement of financial position
Akastor ASA | Statement of cash flow
Note 1 | Accounting principles
Note 2 | Operating revenue and expenses
Note 3 | Net financial items
Note 4 | Tax
Note 5 | Investments in group companies
Note 6 | Shareholders’ equity
Note 7 | Receivables and borrowings from group companies
Note 8 | Borrowings
Note 9 | Guarantees
Note 10 | Financial risk management and financial instruments
Note 11 | Related parties
Note 12 | Shareholders
86
87
88
89
90
90
91
91
92
92
93
94
95
95
96
Annual Report 2020 | Financials and Notes | Akastor ASAFinancials and Notes | Akastor ASA
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
87
Note
2020
2019
2
2
3
4
1
1
(36)
(35)
780
745
(21)
724
724
724
(31)
(30)
(37)
(67)
(1)
(67)
(67)
(67)
Annual Report 2020 | Financials and Notes | Akastor ASA
88
Akastor ASA | Statement of financial position
For the year ended December 31
Amounts in NOK million
Assets
Investments in group companies
Non-current interest-bearing receivables on group companies
Non-current interest-bearing receivables on related parties
Other non-current interest-bearing receivables
Total non-current assets
Current interest-bearing receivables on group companies
Other receivables on group companies
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
Deferred tax liability
Total non-current liabilities
Current borrowings, external
Current borrowings from group companies
Current tax liabilities
Other liabilities to group companies
Other current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Note
2020
2019
5
7
7
7
7
7
6
8
4
8
7
7
5 650
5 310
891
-
819
115
4
2
6 545
6 246
2
5
1
-
-
3
316
321
6 549
6 567
162
162
(1)
(1)
2 000
2 000
2 003
2 003
894
168
5 057
4 331
-
-
-
1 284
14
1 298
1 119
324
1
36
12
1 491
1 491
6 549
3
882
1
30
21
937
2 235
6 567
Fornebu, March 18, 2021 I Board of Directors of Akastor ASA
Kristian Røkke | Chairman
Lone Fønss Schrøder | Deputy Chairman
Svein Oskar Stoknes | Director
Kathryn M. Baker | Director
Sarah Ryan | Director
Henning Jensen | Director
Asle Christian Halvorsen | Director
Stian Sjølund | Director
Karl Erik Kjelstad | CEO
Annual Report 2020 | Financials and Notes | Akastor ASA
Akastor ASA | Statement of cash flow
For the year ended December 31
Amounts in NOK million
Profit (loss) before tax
Adjustments:
Group contribution and dividend
Net interest cost and unrealized currency (income) loss
Profit (loss), net of adjustments
Changes in net operating assets
Net interest paid
Net cash from operating activities
Change in borrowings to related parties
Net cash from investing activities
Proceeds from borrowings
Repayment of borrowings
Changes in borrowings to group companies
Change in overdraft cash pool
Proceeds from employees share purchase programme
Repayment of external dividends
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 1.5 billion as of December 31, 2020 (NOK 1.6 billion in 2019).
89
Note
2020
2019
745
(67)
3
(750)
-
5
(1)
(6)
(43)
(49)
-
-
227
(316)
430
(559)
-
2
82
15
(24)
(54)
(63)
142
142
1 135
(450)
(2)
(436)
4
-
(216)
251
(51)
(14)
(316)
316
7
316
-
-
316
Annual Report 2020 | Financials and Notes | Akastor ASA
90
Note 1 | Accounting principles
Akastor ASA (the parent company) is a company domiciled in Norway.
Cash in cash pool system
The financial statements are presented in conformity with Norwegian
Akastor ASA has a cash pool that includes the parent company’s cash as
Accounting Act and Norwegian generally accepted accounting principles
well as net deposits from subsidiaries in the group cash pooling system
(NGAAP).
owned by the parent company. Correspondingly, Akastor ASA’s current
debt to group companies will include their net deposit in the group’s cash
Revenue recognition
pool system.
Operating revenue mainly comprise parent company guarantees (PCG)
recharged to entities within the group. The revenue is recognized over the
Share capital
guarantee period.
Investments in subsidiaries
Costs for purchase of own shares including transaction costs are accounted
for directly against equity. Sales of own shares are performed according
to stock-exchange quotations at the time of award and accounted for as
Investments in subsidiaries are measured at cost in the parent company
increase in equity.
accounts, less any impairment losses. The investments are impaired to fair
value if the impairment is not considered temporary. Impairment losses
Cash flow statement
are reversed if the basis for the impairment loss is no longer present.
The statement of cash flow is prepared according to the indirect method.
Investments in subsidiaries and associates are reviewed for impairment
Cash and cash equivalents include cash, bank deposits and other short-
whenever events or changes in circumstances indicate that the carrying
term liquid investments.
amount may exceed the fair value of the investment.
Dividends, group contributions and other distributions from subsidiaries
The parent company’s financial statements are presented in NOK, which
are recognized as income the same year as they are recognized in the
is Akastor ASA’s functional currency. All financial information presented in
financial statement of the provider. If the dividends or group contributions
NOK has been rounded to the nearest million (NOK million), except when
exceed withheld profits after the acquisition date, the excess amount
otherwise stated. The subtotals and totals in some of the tables in these
represents repayment of invested capital, and is recognized as a reduction
financial statements may not equal the sum of the amounts shown due
of carrying value of the investment.
to rounding.
Functional currency and presentation currency
Classification
Foreign currency
Current assets and current liabilities include items due within one year or
Transactions in foreign currencies are translated at the exchange rate
items that are part of the operating cycle. Other balance sheet items are
applicable at the date of the transaction. Monetary items in a foreign
classified as non-current assets/debts.
currency are translated to NOK using the exchange rate applicable on the
balance sheet date. Foreign exchange differences arising on translation are
Non-current borrowings are presented as current if a loan covenant
recognized in the income statement as they occur.
breach exists at balance date. If a covenant waiver is approved subsequent
to year-end and before the approval of the financial statements, the
Tax
liability is presented as non-current debt to the extent maturity date is
Tax income (expense) in the income statement comprises current tax,
beyond one year.
withholding tax and changes in deferred tax. Deferred tax is calculated as
22 percent of temporary differences between accounting and tax values
Measurement of borrowings and receivables
as well as any tax losses carry-forward at the year end. Net deferred tax
Financial assets and liabilities consist of investments in other companies,
assets are recognized only to the extent it is probable that they will be
trade and other receivables, interest-bearing receivables, cash and cash
utilized against future taxable profits.
equivalents, trade and other payables and interest-bearing borrowing.
Trade receivables and other receivables are recognized in the balance
sheet at nominal value less provision for expected losses.
Interest-bearing borrowings are initially recorded at transaction value less
transaction costs. Subsequent to initial recognition, these borrowings
are measured at amortized cost with any difference between cost and
redemption value being recognized in the income statement over the
period of the borrowings on an effective interest basis.
Annual Report 2020 | Financials and Notes | Akastor ASA 91
Note 2 | Operating revenue and expenses
Operating revenue comprises NOK 1 million in income from parent
NOK 3.0 million has been allocated to payable fees to the Board of Directors
company guarantees (NOK 1 million in 2019).
for 2020 (2019: NOK 3.2 million). Remuneration to and shareholding of
the Board of directors and CEO is described in note 36 Management
There are no employees in Akastor ASA and hence no salary or pension
remunerations in Akastor’s consolidated financial statements.
related costs and also no loan or guarantees related to the executive
management team. Group management and corporate staff are employed
Fees to the auditors
by other Akastor companies and costs for their services as well as other
Fees to KPMG for statutory audit amounted to NOK 2.5 million (2019: 2.5
parent company costs are recharged to Akastor ASA.
million).
Note 3 | Net financial items
Amounts in NOK million
Interest income from group companies
Interest income from related parties
Interest income, external
Interest expense, external
Income on investment in subsidiary (group contribution)
Dividends from group companies
Other financial expenses
Foreign exchange gain (loss)
Net financial items
Note
2020
2019
43
4
37
(85)
250
500
(2)
33
780
44
24
31
(117)
-
-
(2)
(17)
(37)
Annual Report 2020 | Financials and Notes | Akastor ASA 92
Note 4 | Tax
Amounts in NOK million
Calculation of taxable income
Profit (loss) before tax
Permanent differences 1)
Changes in timing differences
Group contribution without tax effect
Generated (utilized) tax loss
Taxable income
Taxable (deductible) temporary differences
Provisions
Interest deduction carry-forward
Tax loss carry-forward 2)
Net temporary differences
Tax rate
Tax effects of temporary differences
Not recognized deferred tax assets 3)
Deferred tax assets (liability)
Tax expense
Origination and reversal of temporary differences in income statement
Write down of deferred tax assets
Income tax benefit (expense)
2020
2019
745
(500)
2
(160)
(88)
-
(9)
(5)
-
(15)
22%
3
(3)
-
(18)
(3)
(21)
(67)
5
-
-
61
-
(7)
-
72
66
22%
(14)
-
(14)
(1)
-
(1)
1) Permanent differences in 2020 relate to dividend income from group companies.
2) Akastor ASA has unrecognized tax loss carry forwards of NOK 440 million as of 2020 which is currently being subject to inquiries from Norwegian Tax Authorities. In 2019,
the company had unrecognized tax loss carry-forwards of NOK 1.5 billion, of which NOK 1 015 million was subject to inquiries from Norwegian Tax Authorities.
3) Deferred tax assets are not recognized when the management assesses that it is not probable that future taxable profit will be available, against which the deductible
temporary difference can be utilized.
Note 5 | Investments in group companies
Amounts in NOK million
Akastor AS 1)
Total
Registered
office
Share
capital
Number of
shares held
Percentage
owner- /
voting share
Fornebu,
Norway
1 004
1
100%
2020
2019
5 650
5 650
5 310
5 310
1) Shareholding in Akastor AS was increased in 2020 by a contribution-in-kind of NOK 340 million.
Akastor AS financial information (unaudited)
Amounts in NOK million
Profit (loss) for the period
Equity as of December 31
2020
1 517
7 201
Annual Report 2020 | Financials and Notes | Akastor ASA
93
Note 6 | Shareholders’ equity
Amounts in NOK million
Share capital
Treasury
shares
Share
premium
Other paid in
capital
Retained
earnings
Equity as of January 1, 2019
Employee share purchase programme
Profit (loss) for the period
Equity as of December 31, 2019
Repayment of dividends
Profit (loss) for the period
162
-
-
162
-
-
(2)
2 000
2 003
-
-
-
-
-
-
(1)
2 000
2 003
-
-
-
-
-
-
Equity as of December 31, 2020
162
(1)
2 000
2 003
231
4
(67)
168
2
724
894
Total
4 395
4
(67)
4 331
2
724
5 057
The share capital of Akastor ASA is divided into 274 000 000 shares with
share purchase program for employees, as settlement in future corporate
a nominal value of NOK 0.592. The shares can be freely traded. See note
acquisitions or for other purpose as decided by the board of directors.
12 Shareholders for an overview of the company's largest shareholders.
386 161 treasury shares were sold during 2019 in relation to the Employee
share purchase programme.
The number of treasury shares held by the end of 2020 are 2 390 215
and are held for the purpose of being used for future awards under any
Note 7 | Receivables and borrowings from group companies and related parties
Amounts in NOK million
Group companies deposits in the cash pool system
Akastor ASA's net borrowings in the cash pool system
Cash in cash pool system
Non-current interest-bearing receivables on group companies
Current interest-bearing receivables on group companies
Current borrowings from group companies 1)
Net interest-bearing receivables on group companies
Other receivables on group companies
Other liabilities to group companies
Total other receivables on group companies
Non-current interest-bearing receivables on related parties
Total interest-bearing receivables on related parties
1)
Includes Akastor ASA’s net borrowings in the cash pool system.
2020
2019
324
(324)
882
(566)
-
316
891
2
(324)
569
1
(36)
(35)
-
-
819
5
(882)
(58)
-
(30)
(30)
115
115
Interest-bearing receivables on and borrowings from group
cash pool is vested in the group’s policy and decided by each company’s
companies
board of directors and confirmed by a statement of participation. The
Akastor ASA is the group’s central treasury function (Akastor Treasury) and
participants in the cash pool system are jointly and severally liable and it
enters into borrowings and deposit agreements with group companies.
is therefore important that Akastor as a group is financially viable and can
Deposits and borrowings are done at market terms and are dependent
repay deposits and carry out transactions. Any debit balance on a sub
of the group companies’ credit rating and the duration of the borrowings.
account can be set-off against any credit balance. Hence, a debit balance
represents a claim on Akastor ASA and a credit balance a borrowing from
Cash pool arrangement
Akastor ASA.
Akastor ASA is the owner of the cash pool system arrangements with
DNB. The cash pool systems cover a majority of the group geographically
The cash pool system has a net cash of NOK 0 million as of December 31,
and assure good control and access to the group’s cash. Participation in
2020 (net cash of NOK 316 million in 2019).
the
Annual Report 2020 | Financials and Notes | Akastor ASA
94
Note 8 | Borrowings
Amounts in million
Currency
Nominal
currency
value
Carrying
amount
(NOK)
Interest
rate
Interest
margin 1)
Interest
coupon Maturity 2)
Interest terms
2020
Revolving credit facility (NOK 1 250
million)
Revolving credit facility (USD 155
million)
Total borrowings
Current borrowings
Total
2019
Revolving credit facility (NOK 1 250
million)
Revolving credit facility (USD 155
million)
Total borrowings
Current borrowings
Non-current borrowings
Total
NOK
350
347
0.39%
3.25%
3.64%
Dec 2021
NIBOR + margin
0.15%
3.25%
3.40%
Dec 2021
USD LIBOR + margin
USD
90
772
1 119
1 119
1 119
NOK
800
794
1.65%
3.25%
4,90%
Dec 2021
NIBOR + margin
1.71%
3.25%
4.96%
Dec 2021
USD LIBOR + margin
USD
56
494
1 287
3
1 284
1 287
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 35 percent of the margin (2019: 35
percent).
2) The maturity date reflects maturity date as defined in the loan agreements.
All facilities are provided by a bank syndicate consisting of high-quality
The covenants are monitored on a regular basis by the Akastor Treasury
Nordic and international banks. The terms and conditions include
department to ensure compliance with the loan agreements and are
restrictions which are customary for these kinds of facilities, including inter
tested and reported on a quarterly basis. Akastor was not in breach
alia negative pledge provisions and restrictions on acquisitions, disposals
with any covenants as of December 31, 2020. Based on current financial
and mergers and change of control provisions. The facilities include no
forecasts, there is a risk of breaching the ICR covenant in the first quarter
dividend restrictions.
of 2021. To mitigate this risk, Akastor has obtained a waiver of the ICR
covenant in March 2021 for the remaining period of the current financing.
The financial covenants are a gearing ratio based on net debt/equity, an
The waiver is contingent on closing of the refinancing of Akastor following
interest coverage ratio (ICR) based on EBITDA/net interest costs and
the creation of a joint venture between MHWirth AS and Baker Hughes’
a minimum liquidity amount. The financial covenants are tested on a
Subsea Drilling Systems business as described below.
quarterly basis.
The company’s gearing ratio shall not exceed 1.0 times and is
to create a joint venture company that will bring together Akastor’s wholly
calculated from the consolidated net total borrowings to the
owned subsidiary, MHWirth AS and Baker Hughes’ Subsea Drilling Systems
On March 2, 2021, Akastor announced an agreement with Baker Hughes
consolidated equity.
business. The transaction will require refinancing of Akastor’s existing
credit facility. Akastor has received commitments for a total of NOK 1 250
The ICR shall not be lower than 3.0 when gearing ratio is below
million in revolving credit facilities that will be entered into prior to closing
0.5, calculated from the consolidated EBITDA to consolidated
of the transaction, which is expected to take place in the second half of
Net Finance Cost.
2021. See more information about the transaction in Note 37 Events after
the reporting date in Akastor Group consolidated financial statements.
The ICR shall not be lower than 4.0 when gearing ratio exceeds
0.5, calculated from the consolidated EBITDA to consolidated
Based on the received ICR covenant waiver and committed refinancing
Net Finance Cost.
following the MHWirth transaction, management believes that the risk of
additional covenant breach is low and that Akastor will continue as a going
Minimum liquidity amount shall exceed NOK 500 million on
concern for the foreseeable future. See more information in note 29
consolidated level.
Capital management in Akastor Group consolidated financial statements.
Annual Report 2020 | Financials and Notes | Akastor ASA
95
Financial liabilities and the period in which they mature
Amounts in NOK million
2020
Carrying
amount
Total
undiscounted
cash flow 1)
6 months
and less
6–12 months
1–2 years 2)
Revolving credit facility (NOK 1 250 million)
347
363
6
356
Revolving credit facility (USD 155 million)
772
798
13
785
Total borrowings
1 119
1 161
19
1 141
-
-
-
2019
Revolving credit facility (NOK 1 250 million)
Revolving credit facility (USD 155 million)
Total borrowings
794
494
1 288
882
541
23
12
1 423
35
20
12
32
839
517
1 356
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 9 | Guarantees
Akastor has provided the following guarantees on behalf of wholly owned subsidiaries and related parties as of December 31 (all obligations are per date
of issue):
Amounts in NOK million
Parent Company Guarantees to group companies1)
Parent Company Guarantees to related companies2)
Counter guarantees for bank/surety bonds, group companies3)
Counter guarantees for bank/surety bonds, related parties3)
Total guarantee liabilities
Maturity of guarantee liabilities:
6 months and less
6-12 months
1-2 years
2-5 years
5 years and more
2020
1 907
4 226
497
-
6 630
113
5
18
2019
1 510
5 806
730
5
8 052
99
226
7
3 666
1 239
2 828
6 480
1) Parent Company Guarantees to support subsidiaries in contractual obligations towards clients.
2) Parent Company Guarantees to support related parties in contractual obligations towards clients, mainly AKOFS 1 AS, AKOFS 3 AS, AKOFS Norway Operations AS and
DOF Deepwater AS (in 2019).
3) Bank guarantees and surety bonds are issued on behalf of Akastor subsidiaries and related parties, and counter indemnified by Akastor ASA.
Although guarantees are financial instruments, they are considered contingent obligations and the notional amounts are not included in the financial
statements.
US pension plan
AK Wilfab Inc, a wholly owned subsidiary of Akastor, is together The Resource Group TRG AS and Akastor ASA sponsoring the US pension plan named
the Kvaerner Consolidated Retirement Plan. Akastor Group holds one third of the liability of the sponsors for the underfunded element of the plan and
The Resource Group TRG AS holds two thirds of the ultimate liability. Aker ASA guarantees for The Resource Group TRG AS’ liability and covers for all
its expenses related to the pension plan.
Annual Report 2020 | Financials and Notes | Akastor ASA 96
Note 10 | Financial risk management and financial instruments
Currency risk
Credit risk
Subsidiaries may enter into financial derivative agreements with the
Credit risk is the risk of financial losses to the company if a customer
parent company to hedge their foreign exchange exposure. Accordingly,
or counterparty fails to meet contractual obligations. Credit risk relates
derivatives from external banks are used to mitigate the foreign exchange
to loans to subsidiaries and associated companies, hedging contracts,
exposure from the financial derivative agreements with the subsidiaries. In
guarantees to subsidiaries and associated companies and deposits
addition, Akastor ASA may have cash flow exposure towards its financial
with external banks. External deposits and hedging contracts are done
assets and liabilities. Akastor ASA may enter into financial derivative
according to a list of approved banks and primarily with banks where the
agreements to hedge these potential cash flow exposures.
company also have a borrowing relationship.
As of 31 December 2020 or 2019, Akastor ASA had not entered into any
Loss provisions for interest-bearing receivables are made in situations of
forward exchange contracts with subsidiaries.
negative equity if the company is not expected to be able to fulfill its loan
Interest rate risk
obligations from future earnings. No impairment was booked in 2020 or
2019. See note 7 Receivables and borrowings from group companies for
more information about receivables.
The company is exposed to changes in interest rates because of floating
interest rate on loan receivables and loan payables. The company does
Liquidity risk
not hedge transactions exposure in financial markets and does not have
Liquidity risk relates to the risk that the company will not be able to meet
any fixed interest rate loan receivables nor loan payables. The company is
its debt and guarantee obligations and is managed through maintaining
therefore not exposed to fair value risk on its outstanding loan receivables
sufficient cash and available credit facilities. Due to the dynamic nature of
or loan payables. Interest bearing loan receivables and loan payables
the underlying businesses, Akastor Treasury maintains flexibility in funding
expose the company to income statement and cash flow interest risk.
by maintaining availability under committed credit lines. Development in
Interest-bearing borrowings to group companies reflect the cost of
monitored through weekly and monthly cash flow forecasts, annual
external borrowing, reducing the interest risk exposure for Akastor ASA.
budgets and long term planning.
the group’s and thereby Akastor ASA’s available liquidity is continuously
Note 11 | Related parties
Transactions and balances with subsidiaries and related parties are described in the following notes:
Transactions
Other services
Financial items
Investments
Cash pool, receivables and borrowings
Guarantees
Note
Note 2
Note 3
Note 5
Note 7
Note 10
All transactions with related parties are carried out at market terms and in accordance with the arm’s lengths principle.
Annual Report 2020 | Financials and Notes | Akastor ASA 97
Note 12 | Shareholders
Shareholders with more than 1 percent shareholding as per December 31
Company
2020
Aker Holdings AS (previously “Aker Kværner Holding AS”)
Morgan Stanley & Co. LLC
Ministry of Trade, Industry and Fisheries, Norway
Goldman Sachs & Co
Euroclear Bank S.A./N.V.
ODIN Norge
Company
2019
Aker Kværner Holding AS
Goldman Sachs & Co
Morgan Stanley & Co. LLC
Aker ASA
ODIN Norge
Jefferies LLC SP. RES. A/C FBO CUS
Fond Finans Norge
Note
Nominee
Number of shares held
Ownership
Nominee
Nominee
Nominee
100 565 292
34 666 034
33 100 085
26 159 547
13 198 538
10 575 925
36.70%
12.65%
12.08%
9.55%
4.82%
3.86%
Note
Nominee
Number of shares held
Ownership
Nominee
Nominee
Nominee
110 333 615
35 373 096
31 296 769
23 331 762
10 575 925
7 288 162
3 100 000
40.27%
12.91%
11.42%
8.52%
3.86%
2.66%
1.13%
Annual Report 2020 | Financials and Notes | Akastor ASA 98
05. AUDITOR'S REPORT
KPMG AS
Sørkedalsveien 6
Postboks 7000 Majorstuen
0306 Oslo
Telephone +47 45 40 40 63
Fax
Internet www.kpmg.no
Enterprise 935 174 627 MVA
To the General Meeting of Akastor ASA
Independent auditor’s report
Report on the Audit of the Financial Statements
Opinion
We have audited the f inancial statements of Akastor ASA, which comprise:
• The f inancial statements of the parent company Akastor ASA (the Company), which comprise
the statement of f inancial position as at 31 December 2020, the income statement and
statement of cash f low f or the year then ended, and notes to the f inancial statements,
including a summary of signif icant accounting policies, and
• The consolidated f inancial statements of Akastor ASA and its subsidiaries (the Group), which
comprise the statement of f inancial position as at 31 December 2020, the income statement,
statement of comprehensive income, statement of changes in equity and statement of cash
f low f or the year then ended, and notes to the f inancial statements, including a summary of
signif icant accounting policies.
In our opinion:
• The f inancial statements are prepared in accordance with the law and regulations.
• The accompanying f inancial statements give a true and f air view of the f inancial position of the
Company as at 31 December 2020, and its f inancial perf ormance and its cash f lows f or the
year then ended in accordance with the Norwegian Accounting Act and accounting standards
and practices generally accepted in Norway.
• The accompanying consolidated f inancial statements give a true and f air view of the f inancial
position of the Group as at 31 December 2020, and its f inancial perf ormance and its cash
f lows f or the year then ended in accordance with International Financial Reporting Standards
as adopted by the EU.
Basis f or Opinion
We conducted our audit in accordance with laws, regulations, and auditing standards and practices
generally accepted in Norway, including International Standards on Auditing (ISAs). Our
responsibilities under those standards are f urther described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Company and the
Group as required by laws and regulations, and we have f ulf illed our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is suf f icient
and appropriate to provide a basis f or our opinion.
Key Audit Matters
Key audit matters are those matters that, in our prof essional judgment, were of most signif icance in
our audit of the f inancial statements of the current period. These matters were addressed in the
context of our audit of the f inancial statements as a whole, and in f orming our opinion thereon, and we
do not provide a separate opinion on these matters.
Annual Report 2020 | Auditor's ReportAuditor's Report
99
Independent Auditor's Report - 2020
Akastor ASA
Construction contract accounting estimates
Ref erence is made to Note 3 Signif icant accounting policies, Note 4 Signif icant accounting estimates
and judgements, and Note 7 Revenue and other income.
The key audit matter
The majority of the Group's revenues and prof its
are derived f rom long-term construction and
service contracts.
In IFRS 15 Revenue from contracts with
customers there is a high degree of judgement
in determining the number of perf ormance
obligations which can impact the timing and
amount of revenue recognition f or certain
contracts.
Accounting f or such contracts, where revenue
f rom perf ormance obligations are satisf ied over
time, is considered to be a risk area due to the
signif icant judgement and estimation applied by
management as well as the degree of
complexity of the contracts currently in the
portf olio.
Furthermore, estimating the outcome of disputes
and renegotiations on long-term projects is
considered to be a risk area due to the
signif icant judgment and estimation applied by
management as well as the degree of
complexity of the contracts, current market
environment and challenges f aced by
customers.
These management estimates and judgments
are of ten complex and involve assumptions
regarding f uture events f or which there may be
little or no external corroborative evidence
available. There are typically a wide range of
reasonably possible outcomes, and a high
degree of uncertainty on the outcomes of
negotiations and disputes linked to complex
contract interpretations.
As such, these contract accounting estimates
also require signif icant attention during the audit
and are subject to a high degree of auditor
judgment.
How the matter was addressed in our audit
For f inancially signif icant contracts and any
contracts with a reasonable possibility of being
in a signif icant loss-making position, we applied
prof essional scepticism and critically assessed
the accounting estimates and judgments against
the requirements of IFRS 15. Our audit
procedures in this area included, among others:
• Challenging management's measure of
progress estimate and evaluated
management's process f or assessing the
measurement of progress and the method
applied;
• Updating our understanding of the project
perf ormance, comparing changes to
previous f orecasts, sensitivities and risks by
reviewing management's project reporting
and discussing with relevant management;
• Assessing contractual revenue f orecasts
including corroborating those f orecasts with
ref erence to signed contracts and variation
orders to assess the contractual basis of
estimated f uture revenues;
• Evaluating the calculation of project revenue
and cost and contract assets and contract
liabilities in relation to the stage of
completion and f orecasts;
• Analysing preliminary rulings or other
relevant pronouncements f or items in
arbitration and historical outcomes of
negotiations with customers and other
proceedings;
• Challenging management on their
assessment of probable settlement
negotiations regarding liquidated damages
and disputes;
• Challenging management on the estimate of
cost to complete, timing of the cost and the
risk assessment related to f orecast cost;
• Obtaining and reading a selection of
correspondence between the Group and the
customer and the Group's legal advisors;
and
• Considering events subsequent to reporting
date and challenged management on their
impact to the estimates made at year-end.
Annual Report 2020 | Auditor's Report
100
Independent Auditor's Report - 2020
Akastor ASA
Other inf ormation
Management is responsible f or the other inf ormation. The other inf ormation comprises inf ormation in
the annual report, except the f inancial statements and our auditor's report thereon.
Our opinion on the f inancial statements does not cover the other inf ormation and we do not express
any f orm of assurance conclusion thereon.
In connection with our audit of the f inancial statements, our responsibility is to read the other
inf ormation and, in doing so, consider whether the other inf ormation is materially inconsistent with the
f inancial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If , based on the work we have perf ormed, we conclude that there is a material misstatement of this
other inf ormation, we are required to report that f act. We have nothing to report in this regard.
Responsibilities of the Board of Directors and the Managing Director f or the Financial Statements
The Board of Directors and the Managing Director (Management) are responsible f or the preparation
in accordance with law and regulations, including a true and f air view of the f inancial statements of the
Company in accordance with the Norwegian Accounting Act and accounting standards and practices
generally accepted in Norway, and f or the preparation and true and f air view of the consolidated
f inancial statements of the Group in accordance with International Financial Reporting Standards as
adopted by the EU, and f or such internal control as management determines is necessary to enable
the preparation of f inancial statements that are f ree f rom material misstatement, whether due to f raud
or error.
In preparing the f inancial statements, management is responsible f or assessing the Company’s and
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern. The f inancial statements of the Company use the going concern basis of accounting insof ar
as it is not likely that the enterprise will cease operations. The consolidated f inancial statements of the
Group use the going concern basis of accounting unless management either intends to liquidate the
Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities f or the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the f inancial statements as a whole
are f ree f rom material misstatement, whether due to f raud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with laws, regulations, and auditing standards and practices
generally accepted in Norway, including ISAs will always detect a material misstatement when it
exists. Misstatements can arise f rom f raud or error and are considered material if , individually or in
aggregate, they could reasonably be expected to inf luence the economic decisions of users taken on
the basis of these f inancial statements.
As part of an audit in accordance with laws, regulations, and auditing standards and practices
generally accepted in Norway, including ISAs, we exercise prof essional judgment and maintain
prof essional scepticism throughout the audit. We also:
•
identif y and assess the risks of material misstatement of the f inancial statements, whether due
to f raud or error. We design and perf orm audit procedures responsive to those risks, and
obtain audit evidence that is suf f icient and appropriate to provide a basis f or our opinion. The
risk of not detecting a material misstatement resulting f rom f raud is higher than f or one
resulting f rom error, as f raud may involve collusion, f orgery, intentional omissions,
misrepresentations, or the override of internal control.
• obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not f or the purpose of expressing an
opinion on the ef f ectiveness of the Company's or the Group's internal control.
• evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
•
conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
Annual Report 2020 | Auditor's Report
101
Independent Auditor's Report - 2020
Akastor ASA
related to events or conditions that may cast signif icant doubt on the Company and the
Group's ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the
f inancial statements or, if such disclosures are inadequate, to modif y our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, f uture events or conditions may cause the Company and the Group to cease to
continue as a going concern.
• evaluate the overall presentation, structure and content of the f inancial statements, including
the disclosures, and whether the f inancial statements represent the underlying transactions
and events in a manner that achieves a true and f air view.
• obtain suf f icient appropriate audit evidence regarding the f inancial inf ormation of the entities or
business activities within the Group to express an opinion on the consolidated f inancial
statements. We are responsible f or the direction, supervision and perf ormance of the group
audit. We remain solely responsible f or our audit opinion.
We communicate with the Board of Directors regarding, among other matters, the planned scope and
timing of the audit and signif icant audit f indings, including any signif icant def iciencies in internal con trol
that we identif y during our audit.
We also provide the Board of Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
saf eguards.
From the matters communicated with the Board of Directors, we determine those matters that were of
most signif icance in the audit of the f inancial statements of the current period and are theref ore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benef its of such communication.
Report on Other Legal and Regulatory Requirements
Opinion on the Board of Directors’ report
Based on our audit of the f inancial statements as described above, it is our opinion that the
inf ormation presented in the Board of Directors’ report and in the statements on Corporate
Governance and Corporate Social Responsibility concerning the f inancial statements, the going
concern assumption and the proposed allocation of the result is consistent with the f inancial
statements and complies with the law and regulations.
Opinion on Registration and Documentation
Based on our audit of the f inancial statements as described above, and control procedures we have
considered necessary in accordance with the International Standard on Assurance Engagements
(ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial
Information, it is our opinion that management has f ulf illed its duty to produce a proper and clearly set
out registration and documentation of the Company’s accounting inf ormation in accordance with the
law and bookkeeping standards and practices generally accepted in Norway .
Oslo, 18 March 2021
KPMG AS
Vegard Tangerud
State Authorised Public Accountant
Annual Report 2020 | Auditor's Report
102
06. ALTERNATIVE PERFORMANCE
MEASURES
Akastor discloses alternative performance measures as a supplement to the consolidated financial statements prepared in accordance with IFRS. Such
performance measures are used to provide an enhanced insight into the operating performance, financing abilities and future prospects of the group.
These measures are calculated in a consistent and transparent manner and are intended to provide enhanced comparability of the performance from
period to period. It is Akastor's experience that these measures are frequently used by securities analysts, investors and other interested parties.
The definitions of these measures are as follows:
EBITDA - earnings before interest, tax, depreciation and amortization, corresponding to "Operating profit before depreciation, amortization and
impairment" in the consolidated income statement.
EBIT - earnings before interest and tax, corresponding to "Operating profit (loss)" in the consolidated income statement.
Capex and R&D capitalization - a measure of expenditure on PPE or intangible assets that qualify for capitalization.
Net current operating assets (NCOA) - a measure of working capital. It is calculated by current operating assets minus current operating liabilities,
excluding financial assets or financial liabilities related to hedging activities.
Net capital employed - a measure of all assets employed in the operation of a business. It is calculated by non-current assets and finance lease receivables
(excluding non-current interest-bearing receivables) added by net current operating assets minus non-current operating liabilities (deferred tax liabilities,
employee benefit obligations, other non-current liabilities and lease liabilities).
Gross debt - sum of current and non-current borrowings, excluding lease liabilities.
Net debt - gross debt minus cash and cash equivalents.
Net interest-bearing debt (NIBD) - net debt minus non-current and current interest-bearing receivables.
Equity ratio - a measure of investment leverage, calculated as total equity divided by total assets at the reporting date.
Liquidity reserve - comprises cash and cash equivalents and undrawn committed credit facilities.
Order intake - represents the estimated contract value from the contracts or orders that are entered into or committed in the reporting period.
Order backlog - represents the remaining unearned contract value from the contracts or orders that are entered into or committed at the reporting date.
The backlog does not include options on existing contracts, or contract value from short-cycled service orders.
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, current
Trade and other payables
Current operating liabilities
Net current operating assets (NCOA)
2020
2019
28
485
2 191
2 704
(8)
(109)
(2 060)
(2 177)
527
10
528
3 177
3 716
(11)
(119)
(2 974)
(3 105)
611
Annual Report 2020 | Alternative Performance MeasuresAlternative Performance Measures Net capital employed (NCE)
Amounts in NOK million
Total non-current assets
Net current operating assets (NCOA)
Current finance lease receivables
Non-current interest-bearing receivables
Deferred tax liabilities
Employee benefit obligations
Other non-current liabilities
Non-current provisions
Total lease liabilities
Net capital employed (NCE)
Gross debt/Net debt/NIBD
Amounts in NOK million
Non-current borrowings
Current borrowings
Gross debt
Cash and cash equivalents
Net debt
Non-current interest-bearing receivables
Net interest-bearing debt (NIBD)
Equity ratio
Amounts in NOK million
Total equity
Divided by Total assets
Equity ratio
Liquidity reserve
Amounts in NOK million
Cash and cash equivalents
Undrawn committed credit facilities
Liquidity reserve
103
2020
2019
6 100
6 256
527
611
7
9
(115)
(201)
(10)
(11)
(388)
(359)
(478)
(491)
(50)
(51)
(592)
(677)
5 002
5 085
2020
628
1 119
1 746
2019
1 444
3
1 448
(275)
(555)
1 471
893
(115)
(201)
1 357
692
2020
3 669
9 147
40%
2020
275
1 457
2019
4 371
10 578
41%
2019
555
1 320
1 732
1 875
Annual Report 2020 | Alternative Performance Measures 104
07. BOARD OF DIRECTORS
Kristian M. Røkke | Chairman
Kristian Røkke is currently CEO of Aker Horizons AS and has extensive experience from offshore
oil services, shipbuilding and M&A. Mr. Røkke was Chief Investment Officer of Aker ASA prior to
Aker Horizons and CEO of Akastor ASA from August 2015 to December 2017. He is a board
member of several companies, including such as TRG Holding AS, American Shipping Company
ASA, Philly Shipyard ASA, Aker Offshore Wind AS, Aker Carbon Capture AS and Aker Clean
Hydrogen AS. Mr. Røkke holds an MBA from The Wharton School, University of Pennsylvania. As
of December 31, 2020, Mr. Røkke holds, through a privately owned company, 200,000 shares in
Akastor ASA and has no stock options. Mr. Røkke is both a Norwegian and American citizen and
has been elected for the period 2020-2022.
Lone Fønss Schrøder | Deputy Chairman
Lone Fønss Schrøder is CEO of Concordium AG, a global provider of blockchain technologies.
She is vice-chair of Volvo Cars AB and chair of the audit committee, and director of Geely
Sweden Holdings AB and Ingka Holding B.V. (Ikea Group). She has held several senior management
and CEO positions in the A.P. Møller-Maersk group and became CEO and president of Wallenius
Lines AB in 2005. Fønss Schrøder has board experience from Kværner ASA, Eukor Inc, Vattenfall
AB, Yara ASA, Valmet OY and others. Fønss Schrøder holds an MSc in law from the University of
Copenhagen and in economics from Copenhagen Business School in Denmark. As of December
31, 2020, she holds 4,400 shares in the company and has no stock options. She is a Danish
citizen and has been elected for the period 2020-2022.
Svein Oskar Stoknes | Director
Svein Oskar Stoknes has been CFO at Aker ASA since August 2019. Prior to this, he served as
CFO at Aker Solutions, where he joined in 2007 and was named CFO in 2014. Previously, Mr.
Stoknes held a range of senior positions within finance and advisory for organizations like
Tandberg, Citigroup and ABB. He graduated from the Norwegian School of Management and
has an MBA from Columbia Business School in New York. As of December 31, 2020, Mr. Stoknes
owns 1,297 shares and no stock options in the company. He is a Norwegian citizen and has been
elected for the period 2020-2022.
Annual Report 2020 | Board of DirectorsBoard of Directors 105
Kathryn M. Baker | Director
Kathryn M. Baker has over 30 years of business experience in a broad range of industries and
roles. She currently serves as Chairwoman of Fynd Ocean Ventures, Pensionera AB, Genetic
Analysis AS and Terra Mater Renewable Investments. Other current positions include board
member of DOF ASA and MPC Energy Solutions and member of the Investment Committee of
the Norfund. Ms. Baker previously served on the Executive Board of the Central Bank of Norway
(Norges Bank), the European Advisory Board of the Tuck School of Business and the Ethics
Committee of the Norwegian Private Equity and Venture Capital Association (NVCA), where she
also previously served as Chairwoman. 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 &
Company in Oslo and a financial analyst at Morgan Stanley in New York. Ms. Baker holds a
bachelor’s degree in economics from Wellesley College and an MBA from the Amos Tuck School
of Business at Dartmouth College. As of December 31, 2020, she holds 45,683 shares in the
company. Ms. Baker is an American citizen and has been elected for the period 2020-2021.
Sarah Ryan | Director
Dr. Sarah Ryan has 30 years of experience in the global oil & gas and oilfield services industries.
She currently serves as Non-Executive Director of Woodside Petroleum, where she is also a
member of the audit and risk and sustainability committees. Other current board positions
include Central Petroleum and Kinetic Energy Services, and previous board positions include
Aker Solutions and Vautron. Dr Ryan also serves as chair of the Advisory Board of Unearthed
Solutions and is a Fellow of the Australian Academy of Technological Sciences and Engineering.
Dr. Ryan was energy advisor, Investment director and equity analyst at Earnest Partners, a US-
based investment management firm. Prior to that, she 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, 2020, she holds 5,000
shares in the company and has no stock options. Ms. Ryan is an Australian citizen. She has been
elected for the period 2020-2021.
Henning Jensen | Director, Elected by the employees
Henning Jensen currently works as a specialist engineer in project control department at
MHWirth AS. Mr. Jensen joined MHWirth in 2005. He has since then held various positions in the
company. Mr. Jensen holds a bachelor’s degree in marine technology and a Master in Industrial
Economy and Technology from Agder University College in Grimstad. As of December 31, 2020,
Mr. Jensen holds no shares or stock options in the company. Mr. Jensen is a Norwegian citizen
and has been elected for the period 2019-2021.
Annual Report 2020 | Board of Directors 106
Asle Christian Halvorsen | Director, Elected by the employees
Asle Christian Halvorsen currently works as Senior Engineer in Mud Products dept at MHWirth
AS. He began his career with the Aker group in 2011 when he joined STEP Offshore. Mr. Halvorsen
holds a BS c in mechanical engineering from Sør-Trøndelag University College. As of December
31, 2020, he holds 10,000 shares in the company. Mr. Halvorsen is a Norwegian citizen. He has
been elected for the period 2019-2021.
Stian Sjølund | Director, Elected by the employees
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, 2020, he holds 10,000 shares in the company. Mr. Sjølund is a Norwegian citizen
and has been elected for the period 2019-2021.
Annual Report 2020 | Board of Directors 107
08. MANAGEMENT
Karl Erik Kjelstad | Chief Executive Officer
Karl Erik Kjelstad joined Akastor in 2014. He has been part of the Aker group since 1998 and has
numerous key positions including various CEO positions. Karl Erik has held several board positions
in different industries, including oil service, offshore drilling, offshore and merchant shipping,
shipbuilding, IT services, real estate and construction industry. Karl Erik holds an MSc in Marine
Engineering from the Norwegian University of Science and Technology (NTNU) and an AMP from
Harvard Business School. As of December 31, 2020, Kjelstad holds 400,000 shares in Akastor ASA
through his company Byesvollen AS.
Øyvind Paaske | Chief Financial Officer
Øyvind Paaske joined the investment team in Akastor as Investment Manager in 2014 and was
appointed CFO of Akastor from 1st March 2020. Prior to this he held the position as Investment
Manager at Converto (Aker ASA). Øyvind holds an MSc in Financial Economics from the
Norwegian School of Economics and Business Administration (NHH) and UNC Kenan-Flagler
Business School. As of December 31, 2020, Paaske holds 5,083 shares in Akastor ASA.
Annual Report 2020 | ManagementManagement 108
09. COMPANY INFORMATION
Reports on the Internet
Copyright and Legal Notice
The quarterly and annual reports of Akastor are available on
the internet. Akastor encourages its shareholders to subscribe
to the company’s annual reports via the electronic delivery
system of the Norwegian Central Securities Depository (VPS).
Please note that VPS services (VPS Investortjenester) are
designed primarily for Norwegian shareholders. Subscribers
to this service receive annual reports in PDF format by email.
VPS distribution takes place at the same time as distribution
of the printed version of Akastor’s annual report to
shareholders who have requested it. Quarterly reports, which
are generally only distributed electronically, are available on
the company’s website and other sources. Shareholders who
are unable to receive the electronic version of interim reports
may subscribe to the printed version by contacting Akastor’s
investor relations staff.
Copyright in all published material including photographs,
drawings and images in this publication remains vested in
Akastor and third party contributors to this publication as
appropriate. Accordingly, neither the whole nor any part of
this publication can be reproduced in any form without
express prior permission. Articles and opinions appearing in
this publication do not necessarily represent the views of
Akastor. While all steps have been taken to ensure the
accuracy of the published contents, Akastor does not accept
any responsibility for any errors or resulting loss or damage
whatsoever caused and readers have the responsibility to
thoroughly check these aspects for themselves. Enquiries
about reproduction of content from this publication should be
directed to Akastor ASA.
Contact details
Akastor ASA
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
DDW Offshore
Oksenøyveien 10, 1366 Lysaker, Norway
PO Box 124, 1325 Lysaker, Norway
+47 21 52 58 00
ddwoffshore.com
AGR
Karenslyst allé 4, 0278 Oslo, Norway
+47 24 06 10 00
agr.com
Cool Sorption
Smedeland 6, DK2600 Glostrup, Denmark
+45 43 45 47 45
coolsorption.com
Annual Report 2020 | Company InformationCompany Information s
a
.
T
L
O
B
•
6
5
0
1
1
2
2