Prosafe Offshore Pte Ltd Annual Report 2019

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FY2019 Annual Report · Prosafe Offshore Pte Ltd

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A N N U A L R E P O R T

2 0 1 9

CONTENT

About Prosafe

Main events in 2019

Key figures

Corporate Governance

Directors’ report

Declaration by the members
of the Board and the CEO

Consolidated accounts

Parent company accounts

101

Independent auditor’s report

107

Environmental, Social and
Governance report

ABOUT PROSAFE

Prosafe is a leading owner and operator of semi-submersible
accommodation vessels.

After the sale of a vessel for recycling in March
2020, Prosafe owns and operates seven semi-
submersible accommodation, safety and support
vessels and one Tender Support Vessel (TSV).

Furthermore, Prosafe has an agreement with
COSCO shipyard for flexible delivery terms and
long-term financing of two new build vessels:
Safe Nova and Safe Vega. These vessels are
completed and ready for worldwide
operations.

Prosafe’s vessels have accommodation
capacity for 159-500 people and offer
high quality welfare and catering facilities,
storage, workshops, offices, medical services,
deck cranes and lifesaving and fire fighting
equipment. The vessels are positioned
alongside the host installation and are
connected by means of a telescopic gangway
so that personnel can walk to work.

Prosafe has a strong track record from
demanding operations world wide,

with first class operational

The company’s versatile
fleet of six dynamically
positioned, one anchor
moored and one passive
position moored
(POSMOOR) vessels are
capable of operating in
the most demanding
offshore environments.

The company’s track

record comprises operations

offshore Norway, UK, Mexico,

USA, Brazil, Denmark, Tunisia,

West Africa, North-West

and South Australia, the

performance and good safety
results. The company has
extensive experience from
operating gangway connected to
fixed installations, FPSOs, TLPs,
Semis and Spars.

Philippines and Russia.

The company’s track record
comprises operations offshore
Norway, UK, Mexico, USA, Brazil,
Denmark, Tunisia, West Africa, North-
West and South Australia, the Philippines and

Russia.

Prosafe is listed on the Oslo Stock Exchange
with ticker code PRS.

Prosafe’s operations are
among others related to
the support of maintenance and
modification of installations on fields already
in production, hook-up and commissioning of
new fields, tie-backs to existing infrastructure
and decommissioning.

MAIN EVENTS IN 2019

• The fleet utilisation for the year was 50.9 per

• Due to a prolonged downturn and weaker

cent (2018: 47.3 per cent).

• Prosafe secured contracts and contract
extensions for Safe Scandinavia, Safe
Concordia, Safe Caledonia and Safe Boreas in
Norway, UK and Brazil.

•

In May, Petrobras awarded Prosafe a three-
year contract for the supply of a safety and
support vessel in Brazil. Prosafe took delivery
of the Safe Eurus, mobilized it from China
to Brazil and commenced operations in
November 2019.

In response to the reduced and volatile
activity level, impairments of USD 346
million were made, and the organisation
was further downsized to reduce costs and
preserve cash.

In November 2019, Prosafe announced that
the company would initiate a dialogue with
its lenders with a view to ensure a long-term
financial solution. Constructive discussions
with the lenders are ongoing.

market outlook for accommodation services,
particularly in the North Sea, Prosafe has
increased its focus on international markets
such as Brazil and Mexico.

• On 3 June 2019, Prosafe signed an agree-
ment with Floatel International Ltd to
merge their respective businesses with
the aim to create a more robust company
with improved services and geographical
presence. On 13 February 2020, the parties
regrettably decided to discontinue the
merger process due to financial uncertainty
and process risks leading to the conclusion
that any near term completion of the merger
seemed unlikely.

• Preparations for the appeal case of the
Stavanger City court’s judgement in the
dispute between Westcon and Prosafe are
ongoing. The appeal court hearing is to be
held in September 2020.

KEY FIGURES

Note

2019

2018

2017 2016

2015

Profit

Operating revenues

USD million

EBITDA

USD million 1

225.4

97.1

330.8

166.6

283.0

122.9

(342.6)

53.0

(578.2)

474.0

253.2

52.8

474.7

262.9

30.8

(399.9)

(114.5)

(647.1)

172.6

(50.6)

USD million

Operating profit

Net profit

Earnings per share
(fully diluted)

Balance sheet

Total assets

USD

(4.54)

(1.30)

(7.35)

8.36

(21.00)

USD million

1 480.2

1 736.8

1 947.0

2 686.9

2 187.2

Interest-bearing debt

USD million

1 397.9

1 243.0

1347.7

1 390.8

1 247.0

Net interest-bearing debt USD million 3

1 199.8

1 102.7

1115.8

1 185.1

1 189.9

Book equity

USD million

Book equity ratio

Liquidity reserve

USD million 5

Net cash flow

USD million

2.4

0.2%

198.1

57.8

400.2

23.0%

277.3

(91.6)

497.6

1 129.5

26.0%

231.9

26.2

42.0%

205.7

148.6

715.2

32.6%

57.1

(65.3)

Net working capital

USD million 6

(1158.2)

58.7

221.3

142.5

(157.1)

Valuation

Market Capitalisation at
year-end

USD million

Share Price

NOK

Operations

Fleet utilisation rate

19.7

2.11

126.7

118.1

13.4

306

619

2 100

50.9%

47.3%

38.4%

43.2%

70.1%

Notes
1. Operating profit before depreciation and impairment
2. Net profit / Average number of outstanding and potential shares. EPS restated to reflect reverse

split in 2016.

3. Interest-bearing debt - Cash and deposits
4. (Book equity / Total assets) * 100
5. Cash and deposits + available liquidity reserve balance under a committed revolving credit facility
6. See note 15
7. Restated to reflect reverse split in 2016

CORPORATE
GOVERNANCE
IN PROSAFE

Prosafe’s system of corporate governance forms the basis for
a transparent business model with clear segregation of roles,
responsibilities and accountabilities between shareholders,
the Board of directors, executive management and the
organisation.

NORWEGIAN CODE OF PRACTICE
Prosafe SE is a European public company (Societas Europaea) listed on the Oslo Stock Exchange. In
respectively 2018 and 2019, Prosafe moved its tax domicile and legal domicile from Cyprus to Norway.

Corporate governance in the Company follows the principles contained in the Norwegian Code of
Practice for Corporate Governance in its latest version of 17 October 2018 (the “Corporate Governance
Code”). The Company is committed to ensuring that high standards of corporate governance are
maintained and is in compliance with the Corporate Governance Code.

The corporate governance principles and practices as required by the Accounting Act Section 3-3b and
the details of how Prosafe complies with the Norwegian Code of Practice for Corporate Governance
are accounted for in this report on Corporate Governance.

1. IMPLEMENTATION AND REPORTING

ON CORPORATE GOVERNANCE

The Norwegian Code of Practice for Corporate Governance covers 15 topics which are designed to
ensure that the division of roles between shareholders, the Board of directors and the company’s
Executive Management is regulated in a way that strengthens confidence among shareholders,
employees, the capital market and other interested parties to ensure control and compliance, equal
treatment of shareholders and maximum value creation over time.

The company has accordingly implemented sound corporate governance. The Directors' Report, which
is published annually, specifically refers to a comprehensive Corporate Governance Report included
in the annual report and published on Prosafe’s website at https://www.prosafe.com/investor-
information/corporate-governance/

2. THE BUSINESS

Prosafe’s memorandum and articles of association together with its vision, strategy, goals and
reporting provide the necessary information which enables shareholders to understand, monitor and
anticipate the scope of its activities.

The objectives for which Prosafe is established are set out in Article 3 of its Articles of association
which can be accessed on Prosafe’s website.

Prosafe’s vision is to be a leading and innovative provider of technology and services in selected niches
of the global oil and gas industry.

Prosafe’s strategy is to be the preferred provider of high end semi-submersible accommodation
vessels globally.

In order to achieve the strategic ambition, Prosafe reviews and assesses risk in the following
categories: strategic, commercial, operational, compliance and legal, financial and IT/Cyber security
risks. These risk categories and the associated internal control measures are described in more detail
at https://www.prosafe.com/investor-information/corporate-governance/risk-management/

The company’s strategy, commercial outlook, operations, risks, financial status, business plans and
forecasts as well as clearly defined focus areas are regularly reviewed by the Board on the basis of
a defined annual wheel related to regular board meetings. These are supplemented by ongoing
dialogue between the Board and management, monthly reporting and ad hoc / weekly reporting and
updates of all significant matters.

Prosafe’s Code of Conduct sets out its corporate values which are reflected in its ethical guidelines
and the corporate social responsibilities which it undertakes. Prosafe is committed to transparency,
respect for employee and human rights and has a zero tolerance policy towards bribery and
corruption.

This is reflected in the various Prosafe policies and procedures, including Prosafe’s Corporate Social
Responsibility (CSR) Policy. Prosafe’s Code of Conduct and CSR Policy can be accessed on Prosafe’s
website at https://www.prosafe.com/about/corporate-responsibility/code-of-conduct/ and
https://www.prosafe.com/about/corporate-responsibility/

3. EQUITY AND DIVIDENDS

Prosafe’s consolidated shareholder’s equity as at 31 December 2019 amounted to USD 2.4 million
(2018: USD 400.2 million), equivalent to 0.2 per cent (23 per cent) of the Group’s total assets.

It is the ambition to regain sound financial position with the flexibility to support and further develop
its strategy. As such, the Company is in dialogue with its lenders to seek a long-term financial solution.

In light of the reduction in industry activity levels and challenging market conditions, no dividend
has been paid since August 2015. In 2018, the company and the lenders agreed that the company

will not declare any dividends, until deferred bank instalments have been prepaid or cancelled and
a 12-month financial forecast has been provided which confirms compliance with the financial
covenants. Given the financial situation of the company and the ongoing process with the lenders,
this situation is extended until further.

No equity buy-backs have been declared or issued during 2019.

The following part conversion of bonds (with reference to the date of the related announcements) in
respect of the equity of the company occurred during 2019 based on conversion notices received:

Nominal
value
(NOK)

No. of
new
ordinary
shares

Con-
version
price per
share

Remaining
out-
standing
principles
(NOK)

No. of
out-
standing
shares

Nominal
value
(Euro)

2,000,000

80,000

50,706,341

81,864,212

0.1

Convertible
bonds ISIN

NO
0010771025

Date

15
May
2019

Prosafe has currently two outstanding 5 year convertible bonds (zero coupon), which were issued in
2016. ISIN NO 0010771025 has a conversion price NOK 25 and the remaining outstanding principal of
the convertible bonds under this ISIN is NOK 50,706,341. ISIN NO 0010781008 has a conversion price
of NOK 30 and the remaining outstanding principal of the convertible bonds under this ISIN is NOK
122,836,000.

Outstanding warrants is 3,435,982, each of which gives right to subscribe for one new share in the
company at a subscription price of NOK 21.37. The warrants relate to a potential delivery of Safe Nova
or Safe Vega, where the lenders have elected either margin increase or warrants in connection with
the delivery of the mentioned newbuilds.

As at 31 December 2019, the authorised share capital of Prosafe is EUR 9,412,298.4 divided into
91,422,984 shares of EUR 0.10. The issued share capital increased from 81,784,212 ordinary
shares of EUR 0.10 each to 81,864,212 ordinary shares of EUR 0.10 each, following
part conversion of bonds.

Mandates and authorities for different purposes such as increase
of share capital or share buy-backs are considered separately
at each annual general meeting (“AGM”) and are
generally limited in time and valid to the date of
the next AGM. Authority for issuance of shares
relating to conversions of convertible bonds
are valid for a longer period so as to ensure,
to the extent permissible by law, that
they are in place for the entire loan
period. No such mandates were
proposed at the 2019 AGM.

4. EQUAL TREATMENT OF SHAREHOLDERS AND
TRANSACTIONS WITH CLOSE ASSOCIATES

Prosafe has one class of shares in issue and all shares are equal in all respects. Each share carries
one vote. The nominal value of each share is EUR 0.10. The company treats all shareholders in a
non-discriminatory manner ensuring that all relevant information and the proposed resolutions are
distributed in the call for the general meeting to allow the shareholders adequate time to prepare for
the meeting.

Except as referred to in this report, no transactions took place in 2019 between the company and
its shareholders, directors, senior officers or the close associates of any of these. There are no Group
companies with minority shareholders.

TRANSACTIONS IN TREASURY SHARES
There have been no share capital increases in the Company in recent years except for shares issued
in connection with the Company's convertible bonds. Should the Board wish to propose that the
AGM depart from the pre-emptive right of existing shareholders relating to any capital increase, such
a proposal will be justified by the common interest of the Company and the shareholders, and the
reasons for the proposal will be presented in the notice of the AGM as well as publicly disclosed in a
separate stock exchange announcement.

There were no material transactions with related parties in 2019, but any transaction with close
associates is required to be conducted on market terms. Information about transactions with related
parties is also disclosed in note 22 to the Consolidated Financial Statements.

Prosafe has implemented rules and procedures to ensure that directors and senior officers report
to the Board if they themselves or their closely related parties have a significant interest, directly
or indirectly, in any agreement concluded by the company. The Board must approve any agreement
between the company and a member of the Board or the Chief Executive Officer. The Board must
also approve any agreement between the company and a third party in which a member of the
Board or the chief executive officer may have a special interest. Each member of the Board shall also
continually assess whether there are circumstances which could undermine the general confidence in
a Board member's independence.

Potential conflicts of interest have been declared by Glen Ole Rødland (current Chairman of the
Board) through his indirect ownership in North Sea Strategic Investments AS, a key shareholder in
the company. In the event of any potential conflict of interest, appropriate action has been taken to
protect against such potential conflicts which includes e.g. the individual not participating in the
relevant part of the Board meeting and/or abstaining from voting on the relevant matter.

5. SHARES AND NEGOTIABILITY

Prosafe’s articles of association place no restrictions on negotiability.

6. GENERAL MEETINGS

The general meeting secures the participation of shareholders in the company’s highest decision-
making meeting. All shareholders are entitled to attend, speak and vote at general meetings. The
company’s Articles of Association are adopted by the general meeting. Shareholders holding at least 5
per cent of the issued and voting shares are entitled to submit matters for inclusion on the agenda of
an AGM.

The AGM must be held by 30 June every year. In 2020, it is scheduled to take place on 7 May. Written
notice of an AGM and a meeting calling for adoption of a special resolution is sent out not later than
twenty-one days before the scheduled meeting unless special notice is required by law. Written notice
of a meeting other than an AGM or a meeting calling for adoption of a special resolution is sent out
not later than fourteen clear days before the meeting. The resolutions and supporting information is
sufficiently detailed, comprehensive and specific to allow shareholders to form a view on all matters
to be considered at the meeting. Both these and any recommendations of the Nomination Committee
enabling shareholders to take an informed position on all matters to be discussed are made available
within the relevant timeframe on the company’s website.

Shareholders wishing to attend the general meeting must notify the company of this intention before
the deadline stipulated in the notice. As the Board wishes to facilitate the attendance of as many
shareholders as possible, it aims at setting the deadline for notification of attendance as close as
possible to the meeting date.

Shareholders who cannot attend the meeting in person are encouraged to appoint a proxy. Prosafe
prepares proxy forms and conducts the voting arrangements at the meeting in a form and manner, to
the extent possible, which allows the shareholder to vote separately on each matter to be considered
by the meeting and for each of the candidates nominated for election to the Board. Prosafe also
allows the possibility for shareholders who cannot attend the meeting in person to cast votes
electronically by correspondence (without appointing a proxy). The relevant forms for this are included
in the notice to the general meeting.

Traditionally, at least the Chairman (or in exceptional circumstances, another member of the Board),
the auditor and at least the Board representative to the Nomination Committee are present at annual
general meetings. Prosafe wishes to facilitate a dialogue with shareholders at the general meeting,
and therefore encourages all Board members to attend.

The annual general meeting shall discuss and decide upon the following:
(i) Approval of the annual accounts and annual report, including distribution of dividends.
(ii) Any other matters that according to applicable laws or the Articles of Association are to be

decided upon by the general meeting.

7. NOMINATION COMMITTEE

Pursuant to article 8 of its articles of association, Prosafe has a Nomination Committee comprising
two to three members. The majority of the members shall be independent in relation to the board
members and the company management. The general meeting will elect the members of the
nomination committee, including the chairperson, for a term of up to two years.

In addition, the Board appoints one of its members as a representative to the Nomination Committee.
The Board representative participates in the meetings and discussions, but may not vote on any
matter. The members are elected by the general meeting for a period of two years unless otherwise
agreed by the general meeting. At the 2019 AGM, the members of the Nomination Committee were
appointed for a period of one year. The instructions for the Nomination Committee were approved at
the AGM that was held on 8 May 2019.

The Nomination Committee submits its recommendations for membership of the Nomination
Committee and the Board to shareholders, together with the notice of general meeting and
recommends the fees to be paid to directors and members of the Nomination Committee.

The shareholders at the AGM also elect the Chairman of the Nomination Committee, approve the
Committee’s remuneration and may decide to approve any applicable guidelines.

Relevant deadlines for submitting proposals for candidates to be appointed to the Board or the
election Committee are published on the company’s website in due time before the AGM takes place

The Nomination Committee held six meetings during 2019. Average meeting attendance was 100 per
cent.

Name

Thomas Raaschou

Role

Chair

Annette Malm Justad

Member

Date first
appointed

May 2011

May 2016

Date due for
re-election

Meeting
attendance (%)

May 2020

100

The Chair and other members of the Committee are independent of the company’s Board.

Glen Ole Rødland was appointed Board representative to the Nomination Committee at a Board
meeting held on 8 February 2017.

8. BOARD OF DIRECTORS:
COMPOSITION AND INDEPENDENCE

The Board currently consists of five directors. The directors have been appointed so as to ensure
that a broad base of appropriate skills, expertise and experience is reflected on the Board. Working
constructively together with its Committees and the company’s administration, the Board oversees
the strategic direction, targets, reporting, management and control of the company.

Based on the proposal of the Nomination Committee, the General Meeting elects the Directors and
the Chairman, and decides on their remuneration. Currently, the directors are appointed for one year
and all directors are due for re-election in 2020.

The Board held 16 Board meetings in 2019. Average meeting attendance was 88.8 per cent.

Date first
appointed

Date due for
re-election/ date
of resignation

Meeting
attendance
(%)

Name

Glen Ole Rødland

Roger Cornish

Role

Chair

March 2016

May 2020

Director

May 2009

Resigned May 2019

Svend Anton Maier

Director

November 2016

Kristian Johansen

Director

Birgit Aagaard-Svendsen

Director

Nina Udnes Tronstad

Director

March 2017

May 2019

May 2020

93.8

66.7

93.8

81.3

93.8

84.6

At each general meeting at which resignations and appointments occur, the Nomination Committee
will provide its recommendations for Board composition to shareholders. All newly elected directors
are provided with a thorough briefing on the company’s history, business, status and challenges.

The Board members are independent of the company’s executive personnel and shareholders.
Directors are encouraged to own shares in the company. Details of share ownership can be found on
each director’s profile on the Prosafe website.

The Board has implemented various policies and procedures to avoid conflicts of interest between
directors, senior officers, their close associates and external third parties with whom the company
collaborates.

The Board also seeks to ensure that directors possess broad based and in-depth expertise and skill-
sets relevant to the company’s business and the different market segments served internationally.

Information about each Board director is available on Prosafe’s website, including whether they hold
other directorships, their age, skills and experience, and when they are due for re-election.

The requirement to establish a corporate assembly does not apply to the company as it has less than
200 employees in Norway.

9. THE WORK OF THE BOARD

The Board has ultimate responsibility for managing the company and for monitoring day-to-day
management and the company’s business activities. This means that the Board is responsible for
organisation, strategy, planning, reporting, and establishing of control systems. Further the Board is
responsible for ensuring that Prosafe operates in compliance with laws and regulations, with Prosafe’s
Code of Conduct, as well as in accordance with the shareholders’ expectations of good corporate
governance. The Board emphasises the safeguarding of the interests of all shareholders, but also the
interests of Prosafe’s other stakeholders.

The Board has adopted a generic annual plan for its work which is revised with regular intervals.
Recurrent items on the Board’s annual plan are health, safety and quality issues, the company’s
operations, corporate strategy issues, business planning, forecasting and contingencies, approval
of annual and quarterly results, monthly performance reports, annual reporting, management
compensation issues, leadership assessment and succession planning, people and organisational
strategy, special project reviews, risk evaluation, review of the company’s governing documentation,
annual Board evaluation and reviews relating to special topics. At the end of all Board meetings, the
Board has a closed session with only Board members attending the discussions and evaluating the
meeting.

The Board is responsible for making decisions related to inter alia company values and standards,
strategy and objectives, overall budgets, corporate and capital structure, financial reporting and
internal controls, investments and material transactions.

The Board has drawn up separate instructions for management and a job description and annual
targets for the chief executive officer (CEO) and deputy executive officer & chief financial officer
(DCEO&CFO) specifying their respective duties, authority and responsibilities in relation to the
business. The CEO has a particular responsibility for ensuring that the Board receives precise, relevant
and timely information enabling it to discharge its duties.

Scheduled Board meetings are normally held six to eight times a year, but the work schedule is
flexible and otherwise adaptable so as to take into account relevant commercial, operational and
strategic circumstances. Internal segregation of responsibilities and duties between the Board and
management is established in a number of various corporate documents including corporate policies
and procedures, approval matrices and delegated authorities, Board approvals for budgets and specific
investments, and the grant of specific powers of attorney in respect of particular transactions.

The Chairman has a particular responsibility for ensuring that the Board’s work is well organised and
efficiently conducted. The Chairman of the Board encourages an open and constructive debate within
the Board and with management.

AUDIT COMMITTEE
The Board established an Audit Committee in 2010. The Audit Committee operates on the basis
of a generic annual plan and undertakes an examination and evaluation of the adequacy and
effectiveness of the organisation's governance, risk management, and internal controls, monitors the
financial reporting process and prepares the Board’s follow up on such issues. The Audit Committee is
tasked from time to time with the carrying out of special investigations designed to assess the overall
risk management system within the Group.

The Audit Committee is a sub-committee of the Board of Directors, and its objective is to act as a
preparatory body in connection with the Board's supervisory roles with respect to financial reporting
and the effectiveness of the company's internal control system. It also attends to other tasks assigned
to it in accordance with the instructions for the audit Committee adopted by the Board of directors.

The Audit Committee meets at least four times a year and holds closed sessions with the appointed
auditor on at least an annual basis without the company’s management being present. The appointed
auditor participates at all Audit Committee meetings.

Proper internal control is ensured through various forms of segregation of duties, guidelines and
approval procedures. The company’s internal financial transactions are subject to special control
systems and routines. Financial risk is managed by the Group’s finance function which during
2019 has provided regular financial and liquidity forecasts and updates to the Board as well as
comprehensive forecasts at each Board meeting.

At present, the Audit Committee comprises two members. The Audit Committee held six meetings in
2019. Average meeting attendance was 100 per cent.

Name

Birgit Aagaard-Svendsen

Role

Chair

Kristian Johansen

Member

Date first time
appointed

Date due for
re-election

Meeting
attendance (%)

May 2017

Nov 2017

May 2020

100

COMPENSATION COMMITTEE
A Compensation Committee was established in 2006 to prepare proposals related to the remuneration
of senior officers.

At present, the Compensation Committee comprises of three members. The Compensation Committee
held four meetings in 2019. Average meeting attendance was 91.7 per cent.

Name

Nina Udnes Tronstad

Roger Cornish

Glen O. Rødland

Svend Anton Maier

Role

Chair*

Chair

Member

* Appointed as Chair in May 2019

Date first time
appointed

Date due for
re-election

Meeting
attendance (%)

May 2019

May 2020

June 2010

Resigned May 2019

May 2016

Feb 2017

May 2020

100

SAFETY, SUSTAINABILITY AND ETHICS COMMITTEE
Prosafe has established a Safety, Sustainability and Ethics Committee which maintains and further
develops Prosafe’s Code of Conduct and policies, which include guidance on illegal and unethical
issues. Concerns about possible breaches of the code or any policy can be reported to the Committee
by ordinary mail (addressed to the Ethics Committee, Prosafe AS, P.O. Box 39, N-4068 Stavanger,
Norway) or e-mail (conduct@prosafe.com) on a confidential basis. The Committee ensures that
alleged breaches are investigated thoroughly and fairly and reported as appropriate to the Board.

THE BOARD OF DIRECTORS’ EVALUATION OF ITS OWN WORK
The Board has traditionally undertaken an annual self-evaluation of its own performance and
expertise, working methods, composition and the manner in which the directors’ function, both
individually and collectively, in relation to the goals set for their work. In this context, the Board
also assesses itself in relation to corporate governance. The assessment is made available to the
Nomination Committee as a tool for continuous improvement.

10. RISK MANAGEMENT AND INTERNAL CONTROL

The Board is responsible for ensuring that sound internal control and risk management systems that
are appropriate for the extent and nature of the Company’s activities are in place.

The Audit Committee assesses the integrity of Prosafe’s accounts and follows up on behalf of the
Board on issues related to financial review and external audit of Prosafe’s accounts.

Furthermore, the Board and the Audit Committee supervise and verify that effective internal control
systems are in place, including systems for risk management and financial reporting, and satisfactory
routines for following up adherence to the company’s ethical guidelines.

Prosafe focuses strongly on regular and relevant management reporting of both operational and
financial matters, both in order to ensure adequate information for decision making and to quickly

respond to changing conditions. Evaluation and approval procedures for major capital expenditure
and significant treasury transactions are established.

Prosafe’s conduct and development of its business are mainly subject to the following categories of
risk: strategic, commercial, operational, compliance and legal, financial, and IT/Cyber security risk.
These risks and associated sensitivities as well as internal control measures are described in more
detail at https://www.prosafe.com/investor-information/corporate-governance/risk-management/
and in a separate Risk Management Policy.

In addition to the ongoing reviews by Executive Management, continuous reviews are also carried out
by the Board in respect of risk management and internal control arrangements. The risk management
methodology applied by management and the Board are in accordance with industry and market
practices generally and as implemented in Prosafe over several years. The risk and opportunity
register forms the basis for the action plan. All key risks and opportunities are appropriately discussed
and followed up by management and the Board in the form of strategies and mitigating actions.
Specifically with regards to the internal controls related to the accounting process, this is mitigated by
a combination of organisation and segregation of duties, procedures and authority matrix, reporting
and analytical controls and continuous reporting and reviews with the Audit Committee.

The Board of Directors has systems in place to assess that the CEO exercises appropriate and effective
management. Further, the Board and the Audit Committee take steps to ensure that the Company’s
internal control functions are working as intended and that necessary measures are taken to reduce
extraordinary risk exposure. The Company’s Audit Committee oversees the Company’s routines for
financial risk management and internal control which includes documentation for internal control
and financial reporting procedures, hereunder verifies that effective control mechanisms are in place.
Neither Prosafe’s Executive Management nor its Audit Committee reported any material weaknesses
in the related internal control systems at 31 December 2019.

11. REMUNERATION OF THE BOARD

The AGM determines directors’ fees based on recommendation from the Nomination Committee.
Remuneration of the Board reflects its responsibilities, expertise, commitment of time, and the
complexity of Prosafe’s activities. Directors’ fees are not related to the company’s performance and
none of the current Board directors have a pension scheme or agreement concerning pay after
termination of their office nor have they received any share options.

Board

Chair

USD 110,000

Deputy Chair

USD 84,000*

Directors

USD 68,000

*There is currently no Deputy Chair on Prosafe’s Board of Directors

In addition, a fee of USD 1,500 is payable for directors, Board Committee members and Board
representatives to the Nomination Committee attending Board or Committee meetings held away
from their home country.

Information relating to the total remuneration for the Board for 2019 is set out in note 6 to the
consolidated accounts.

The fees payable to the members of the Board Committees are as follows:

Committee

Chair

Members and Board
representatives

Nomination Committee

Compensation Committee

Audit Committee

USD 7,500

USD 15,000

USD 20,000

USD 5,000

USD 10,000

Other

Additional USD
850 per meeting

N/A

No director or company with which any director is associated (except as disclosed below) takes on
specific assignments for the company in addition to their appointment as a director.

12. REMUNERATION OF EXECUTIVE PERSONNEL

The terms of employment of the CEO and the Executive Management are determined by the Board,
based on a detailed annual assessment of their salary and other remuneration.

Prosafe aims at providing a competitive total package for Executive Management. The basis for
comparison is other listed service companies in the oil and gas sector in the geographic areas where
Prosafe pursues its operations. The total remuneration package for the Executive Management
comprises three principal elements – base pay, variable pay and other benefits such as pension.

The variable pay of the Executive Management is performance related and linked to the operations
and development of the company for the purpose of value creation for shareholders. It is aligned
to the company’s Strategy, as set by the Board and subject to the ethics and values of the company.
The Board reserves the right to reduce or even cancel any variable pay should unforeseen events
damage the company’s reputation and/or safe operating record. It is also subject to an absolute
limit.

For further details relating to remuneration paid to Executive Management, see note 6 to the
consolidated accounts and the Declaration of Executive Remuneration as presented
by the Compensation Committee and attached to the notice
for the AGM in May 2020.

13. INFORMATION AND COMMUNICATION

Prosafe’s calendar for interim financial reporting and the General Meeting for shareholders can be
found on Prosafe’s website at https://www.prosafe.com/investor-information/financial-calendar/

Prosafe presents preliminary annual accounts in early February every year. Complete accounts,
the directors’ report and annual report are provided to shareholders and other stakeholders. In
addition interim accounts are provided on a quarterly basis. Open investor presentations are
held in connection with the reporting of annual and interim results. These presentations are also
broadcasted as webcasts. The chief executive officer and/or the DCEO&CFO use these occasions to
review the results and comment on operations, markets, prospects and outlook. The presentation
material is available on Prosafe’s website.

An ongoing dialogue is otherwise maintained with analysts and investors, who are also invited to
attend presentations. In order to ensure equal treatment of shareholders, Prosafe aims to provide
clear, up-to-date and timely financial and other information about the company’s operations to
the securities market. The company places the greatest emphasis on treating all shareholders and
analysts equally.

All information distributed to the company's shareholders is published on Prosafe's website at the
same time as it is made available to the shareholders.

Guidelines as to who is entitled to speak on behalf of the company in respect of certain matters,
as well as a contingency plan for managing information so as to respond to certain events are
contained in the various corporate procedures.

Information available to shareholders is only available in English. As an international company with
a broad shareholder base, English is regarded as the most applicable common language.

14. TAKE-OVERS

Prosafe’s articles of association do not contain any defence
mechanisms against take-over bids, nor has the company
implemented other measures limiting the opportunity to
acquire shares in the company.

If an offer is made for the company’s shares,
the Board will issue a statement evaluating
the offer and make a recommendation
as to whether shareholders should
or should not accept such offer. In
such a situation, Prosafe will act
professionally and in accordance
with the applicable principles for
good corporate governance.

15. AUDITOR

The Company’s appointed registered public accounting firm is independent in relation to Prosafe
and is elected by the general meeting of shareholders. The appointed auditor’s fee must be
approved by the general meeting of shareholders.

KPMG has been the appointed auditor of the company since May 2015. The auditor always attends
Board meetings where the annual accounts are considered. In 2019, auditors’ fees for the Group
amounted to USD 349,000 and consultancy fees paid to KPMG amounted to USD 26,000. These fees
relate to accounting and tax-related issues.

The Audit Committee is responsible for ensuring that the company is subject to independent and
effective external and internal controls. The appointed auditor participates in the Audit Committee
meetings and presents a review of the company’s internal control environment and assessment
of the key judgements/accounting issues at least once a year. In addition, a meeting is held
between the appointed auditor and the Board at least once a year (which is not attended by the
chief executive officer or any other member of management). Use of the appointed auditor by the
company for services other than audit is limited, however, guidelines have been established to
govern such use.

14 April 2020

The Board of Directors of Prosafe SE

Glen Ole Rødland

Non-executive Chairman

Birgit Aagaard-Svendsen

Kristian K. Johansen

Non-executive Director

Svend A. Maier

Non-executive Director

Nina Udnes Tronstad

Non-executive Director

Jesper K. Andresen

Chief Executive Officer

DIRECTORS’ REPORT

The directors present their annual report of Prosafe SE
(the “Company” or the “Parent Company”) and its subsidiaries
(the Company and its subsidiaries referred to as the “Group”
or “Prosafe”) together with the Group’s and the Parent
Company’s audited financial statements for the year
ended 31 December 2019.

PRINCIPAL ACTIVITY
Prosafe is a leading owner and operator of
semi-submersible accommodation, safety and
support vessels.

Prosafe’s vessels are primarily serving energy
companies on various offshore projects in
global offshore oil and gas areas. Traditionally,
the majority of the work has been related
to existing producing fields (‘brownfield’),
whereas the remainder has been related
to hook-up and commissioning of new
developments (‘greenfield’). Accommodation
vessels may also be used for decommissioning
of offshore installations.

The main geographical markets for semi-
submersible accommodation vessels have
typically been the North Sea, Brazil and Mexico.
Occasionally semi-submersible accommodation
vessels have also been employed in the US Gulf,
West Africa, Australia and other areas.

The vessels are normally provided on a time
charter basis where Prosafe mans and operates
the vessels directly.

The Parent Company, Prosafe SE, has been
legally domiciled in Norway since Q3 2019 and
is the ultimate owner of all Group companies.

FINANCIAL RESULTS,
FINANCING AND
FINANCIAL POSITION
OF THE GROUP

(The figures in brackets correspond to the 2018
comparatives)

INCOME STATEMENT
Operating revenues totalled USD 225.4 million
in 2019 (2018: USD 330.8 million), with fleet
utilisation1) increasing to 50.9 per cent (47.3
per cent). The increase in utilisation reflects
somewhat higher activity in the Brazil market.

The decrease in operating revenues is due
to lower average day rates as a result of the
downcycle.

Operating expenses decreased to USD 128.3
million (USD 164.2 million), which was mainly
driven by a one-off reversal of the accrued
lay-up costs relating to Safe Eurus as well as
cost reduction measures, but partially offset
by one-off costs, which were mainly related to
downsizing of the organisation, refinancing
process and the attempted merger process
with Floatel.

Depreciation, amortization and impairment
amounted to USD 439.7 million (USD 113.6
million) including an impairment charge of
USD 346.2 million. As the general recovery
across the exploration and production value
chain continues to be delayed, the demand for
Prosafe vessels remains weak. Management
performed an impairment assessment of
its vessels in accordance with IFRS. As a
result, an impairment charge was made in
2019. For further information relating to
the assumptions used in the impairment
assessment, refer to note 8 of the consolidated
accounts.

The operating loss amounted to USD 342.6
million (profit of USD 53 million).

1) Utilisation = actual vessel days in operation in the period / possible vessel days in the period x 100 for 100% owned vessels

Interest expenses totalled USD 34.6 million
(USD 173.3 million). The decrease compared to
2018 is mainly due to one-off effects relating
to adjustments in the carrying amount of
interest bearing debt due to revised estimated
contractual cash flows in both years as well
as the recognition of discounted cash flow
hedge reserve balance in 2018. For further
information, refer to note 10 and note 15 of the
2019 consolidated accounts.

Financial items other than interest expenses
amounted to USD 17.1 million negative (USD
13.4 million positive). The increase in financial
costs in 2019 was due to the negative effect in
fair value of all derivatives.

Taxes for 2019 in the amount of USD 4.8
million (USD 5.9 million) were mainly relating
to operations in UK and Brazil.

Net loss amounted to USD 399.9 million (net
loss of USD 114.5 million), resulting in earnings
per share of USD 4.54 negative (USD 1.3
negative). Fully diluted earnings per share were
USD 4.54 negative (USD 1.3 negative).

FINANCIAL POSITION
Total assets amounted to 1,480.2 million
(USD 1,736.8 million) at the end of 2019.
Investments in tangible assets totalled USD
77.5 million (USD 8.7 million). The investments
in 2019 mainly relate to the delivery of the Safe
Eurus from Cosco and the five-yearly Special
Periodic Survey (SPS) for Regalia and Safe
Concordia.

As of year-end 2019, the Group had a total
liquidity reserve in the form of liquid assets
(cash and deposits) of USD 198.1 million (USD
140.3 million). Total restricted cash at year-end
2019 was USD 9.7 million (USD 8.8 million).

As a consequence of low activity and a net
loss of USD 397.8 million, partly due to
impairments of USD 346.2 million, total
shareholders’ equity amounted to USD 2.4
million (USD 400.2 million), resulting in an
equity ratio of 0.2 per cent (23 per cent).

Interest-bearing debt amounted to USD 1,397.9
million (USD 1,243.0 million) at year-end.
Repayments of debt totalled USD 37.9 million
(USD 155.2 million).

The interest-bearing debt agreements are
subject to termination, repayment or buy back
clauses in the event of a change of control of the
Company (as control is defined in the relevant
agreements). The only applicable financial
covenant at year end was minimum cash of
USD 65 million, which the company was in
compliance with. On 1 April 2020, the Company
agreed a forbearance from the non-payments
and defaults from a majority of its lenders
across its two loan facilities, respectively the
USD 1,300 million facility and the USD 288
million facility. The forbearance was initially
granted for a period until 15 April 2020, but
could be extended by the lenders through a
simplified process. Subsequently in mid-April
2020, Prosafe agreed a further extension to
the forbearance from the non-payments and
defaults with a majority of its lenders across its
two loan facilities until 31 May 2020.

As part of this, the Company will continue
to defer making payments of scheduled
instalments and interests under both facilities.
Similarly, payment of the final instalment owed
and due under the seller credit to Cosco for the
Safe Notos remains as reported on 14 April
2020 subject to ongoing discussions with
Cosco and the lenders.

The forbearance shows support for the
Company to continue to operate, while lenders
reserve their rights, and secures stability for
the Company while it continues to work with
the lenders to agree on a long term financial
solution. Pending this, the Company continues
to operate on a business as usual basis to
protect and create value through challenging
market conditions.

Please refer to further information about the
loans and financial covenants in the Financing
section below and note 15 to the consolidated
accounts.

accelerate, enforce or demand payment
following non-payment and default under the
two loan facilities. The forbearance was initially
granted for a period until 15 April 2020, but
could be extended by the lenders through a
simplified process. Subsequently in mid-April
2020, Prosafe agreed a further extension to
the forbearance from the non-payments and
defaults with a majority of its lenders across its
two loan facilities until 31 May 2020.

Although there can be no assurance with
respect to the outcome of this process, the
going concern assumption
is based on the
Board’s

Net cash flow in 2019 was USD 57.8 million
positive (USD 91.6 million negative). Net cash
flow from operating activities amounted to
USD 86.6 million positive (USD 147.1 positive).
Total cash investment in tangible assets for
2019 amounted to USD 77.5 million. Gross
investment including Cosco’s sellers credit, was
USD 151.5 million. The investment was mostly
related to taking delivery of the Safe Eurus and
normal vessel maintenance work including
Special Periodic Survey (SPS) for the Regalia and
Safe Concordia.

FINANCING
In November 2019, Prosafe announced that
an impairment charge of USD 341 million
had been made to the book value of vessels
as a consequence of a prolonged industry
downturn and weaker outlook in the North
Sea in particular. Following this, the Company
further announced that the book equity
consequently was marginalized, and it will
turn negative early 2020 based on the current
forecast which will result in a breach of the
facilities agreements. In consideration of the
current outlook and the financial implication,
the Board of Directors have initiated a dialogue
with its lenders with a view to ensure sufficient
financial flexibility for the longer term. The
dialogue was formally initiated in December
2019 and resulted initially in a waiver from
Event of Default (EoD) till end February 2020
and a payment deferral till 13 February 2020.
Subsequently, the waivers from Event of
Default and payment deferrals were further
extended by all lenders till 31 March 2020.

On 1 April 2020, the Company agreed a
forbearance with a majority of its
lenders across its two loan
facilities, respectively the
USD 1,300 million facility
and the USD 288
million facility,
whereby such
lenders
agreed
not to

view that obtaining a long term and
sustainable financial solution should be
achievable.

FINANCIAL RESULTS AND FINANCIAL
POSITION OF THE PARENT COMPANY
The net loss for the year amounted to USD
412.6 million (loss of USD 130.4 million),
which included impairment charges relating
to investments in subsidiaries of USD 393.2
million. Net financial loss amounted to USD
37.8 million (USD 161.4 million).

Total net assets for the year amounted to USD
93.3 million (USD 506.1 million).

OPERATIONS
AND PROJECTS

As at year-end, the fleet comprised nine fully
owned vessels plus two new builds. Six old
vessels have been sold for recycling since
mid-2016 and a seventh was in process of
being sold for recycling.

Specifications for each of the vessels and
details of the current vessel contracts can be
found on the Company’s website https://www.
prosafe.com/fleet/vessels/

In August 2018, Prosafe reached an agreement
with Cosco allowing for flexible delivery and
long-term financing of Safe Eurus, Safe Nova
and Safe Vega. The Safe Eurus was delivered
in 2019 against a long-term contract in Brazil
while the Safe Nova and Safe Vega remain in
strategic stacking mode with Cosco in China
until Prosafe takes delivery.

Safe Scandinavia completed a contract for
AkerBP at the Ula platform in Norway in
mid-May 2019 and has since been laid up in
Norway.

Safe Zephyrus completed a contract for Equinor
at Johan Sverdrup in Norway in early May
2019. Thereafter, the vessel mobilized to the
Clair Ridge platform West of Shetland in the

UK where she started a contract for BP on 14
May 2019. The contract was completed on 15
October 2019 and the vessel is currently laid
up in the UK. Safe Zephyrus will also mobilise
for the 80-day Shell Shearwater contract in Q2
2020 with a 30-day option.

Safe Notos was fully contracted in the year for
Petrobras in Brazil.

Safe Boreas operated on a contract for Equinor
at the Mariner installation in the UK since 2018
and the contract was completed on 31 October
2019. The vessel is in lay-up in Norway.

Safe Concordia completed a 200-day contract
with MODEC to support FPSO maintenance
in Brazil late July 2019. The vessel was
subsequently mobilized to a yard in Brazil to
conduct the vessel’s five year Special Periodic
Survey (SPS) and to prepare for the next
contract for Equinor at the Peregrino field in
Brazil which started in mid-January 2020.

Safe Caledonia completed a four-month
contract for a major oil and gas operator in
the UK sector on 18 August 2019 and has
since been laid up in the UK. On 31 July 2019,
Prosafe signed a contract with Total for the Safe
Caledonia to provide accommodation support
at the Elgin complex in the UK. The contract
is due to commence mid-April 2020 and has
a firm duration of 162 days with one 30-day
option.

Regalia completed her five-year Special Periodic
Survey and reactivation at the start of 2019.
Thereafter, she completed a 60-day contract in
the UK sector on 11 July 2019. The vessel is laid
up in Norway.

Safe Bristolia has been cold-stacked in Norway
and was sold for re-cycling in March 2020.

The Company does not undertake specific R&D
activities. However, the Company is increasing
its efforts in the area of energy management
to adapt to the global ambition to achieve
energy efficiency and reduced emissions and
is currently undertaking feasibility studies
together with third parties in this respect.

TOTAL ORDER BACKLOG

Total order backlog2) as of 31 December 2019
amounted to USD 154 million (USD 287.4
million) of which USD 146 million related to
firm contracts and USD 8 million related to
options. Secured utilisation for 2020 is 32 per
cent. For 2021, secured utilisation is currently 13
per cent.

WESTCON DISPUTE

On 8 March 2018, the Stavanger City Court
issued its judgement in favour of Prosafe in
respect of the dispute between Westcon Yards
AS (Westcon) and Prosafe Rigs Pte. Ltd. relating
to the conversion of the Safe Scandinavia into
a tender support vessel. The Court decided that
Westcon must pay Prosafe NOK 344 million
plus interest and NOK 10.6 million legal costs.
Westcon filed an appeal, and Prosafe filed a
counter appeal on 28 May 2018. Prosafe will
continue to pursue its case in order to improve
on the result in the first instance. Timing for the
appeal court hearing is September 2020.

Meanwhile, Prosafe is pursuing the best

possible security for the claim. Interest is
accruing to the benefit of Prosafe in the mean
time in case Prosafe wins the court case and is
awarded interest.

UPDATE ON MERGER
PROCESS WITH FLOATEL
INTERNATIONAL LTD.

On 2 January 2020, Prosafe announced that
Prosafe and Floatel International Ltd have
agreed to extend the long stop date in the share
purchase agreement from 31 December 2019
until 30 June 2020. On 13 February 2020, the
parties regrettably decided to discontinue the
merger process due to financial uncertainty and
process risks leading to the conclusion that any
near term completion of the merger seemed
unlikely.

CORPORATE SOCIAL
RESPONSIBILITY AND
ESG REPORTING

Prosafe views Corporate Social Responsibility
(CSR) as an integral part of being an effective
and a value-creating business. Prosafe is
committed to maintaining high ethical, social,
environmental and governance standards, and
creating sustainable values for the benefit of its
stakeholders and the society at large wherever
the Company operates.

In 2019, the Company further increased its
focus on CSR by amongst others setting clear,
quantitative targets for Environmental, Social
and Governance key performance indicators.
Prosafe will prepare action plans and report
progress on these targets in future reports. The
Company’s first separate ESG report has been
included in this annual report.

2) Order backlog = amount of contracted revenue not recognised in income statement yet

OUTLOOK

The oil and gas industry is characterized by
high cyclicality and continuous changes which
impact activity levels, price levels and planning
horizons, requiring continuous risk and
opportunity management and adaptability.

During the downcycle in recent years, many
service segments have seen a significant
reduction in activity and that includes demand
for offshore accommodation vessels. Activity in
the offshore accommodation market continued
to decline during 2019, and the near-term
outlook for 2020 is lowered significantly with
the largest impact in the North Sea.

The Mexican market, which used to be a key
market for many years, cancelled all require-
ments for non-Mexican accommodation
equipment in early 2016. The Brazilian market
has picked up and continues to offer opportuni-
ties for offshore accommodation units yet to be
concluded. In general the Company’s activity
through the downcycle has been primarily
upheld by hook-up contracts related to the
support of new field installations in the
North Sea that were entered into before the
downcycle.

The most important factor that can positively
impact utilisation in the North Sea market is
the return of activity related to maintenance
and modification which traditionally has been
the main driver. At this point in time, however,
there is practically no tendering activity and
very limited prospects both in Norway and
the UK in the next few years. This is driven by,
among other factors, a combination of new
ways of working, availability of substitute
solutions, new development solutions that
do not require accommodation support and
cost focus. Consequently, geographi cal markets
outside the North Sea will be increasingly
important to Prosafe to secure work for its
vessels. In addition, the Company will explore
areas for alternative use within drilling support,
decommissioning and offshore wind.

Geographically, Brazil is currently the most
important market and is anticipated to remain
so in the foreseeable future. During 2020,
the Company will have at least three vessels
working for all or parts of the year in Brazil and
consequently the local organisation will be
further strengthened.

RISK

Prosafe categorises its primary risks under the
following headings: strategic, commercial,
operational, compliance and legal, financial and
IT/Cyber security related. The Company’s board
and senior officers manage these risk factors
through continuous risk assessments, reporting
and periodic reviews in management and
board meetings, and as part of rolling strategy
and planning processes.

The Company aims to create shareholder
value by allocating capital and resources to
the business opportunities that yield the best
return relative to the risk involved within its
specified strategic direction.

Prosafe seeks to reduce its exposure to
operational, financial and compliance related
risk through proper operating routines, the use
of financial instruments and insurance policies.

Commercial risk comprises macro factors such
as oil price and industry specific factors such as
supply/demand balance, competitive position,
new development solutions and new ways of
working to execute offshore projects
that require a high number of
personnel of various
disciplines.

The production ambitions of the new Mexican
administration are high, and it is positive
that contracts are awarded to non-Mexican
companies in other segments such as drilling.
Prosafe continues its efforts in Mexico to be
well positioned when opportunities arise again
in the accommodation segment.

The supply side has seen a positive develop-
ment since 2016 with a reduction in the
number of available units, largely supported
by Prosafe which has sold seven vessels for
recycling. In addition, one competitor has sold
one unit for recycling. More sales like
this are anticipated over the coming years,
as well as further consolidation activities,
while no further newbuilding activity is
currently anticipated given the status and
outlook of the offshore accommodation
industry.

The Company maintains its efforts to
develop and position the Company to protect
and create value. This will involve seeking
opportunities in new geographical markets and
potentially new niches for alternative use of
vessels, as well as industry consolidation.

The Company is also increasing its efforts in the
area of energy management to adapt to the
global ambition to achieve energy efficiency
and reduced emissions. Prosafe’s view is that
these efforts over time – although they will
require investments – will provide competitive
edge and new business opportunities.

Please refer to “Going Concern”
on page 31 and “Events after
the period end” on page 33.

Demand for accommodation units is among
others sensitive to oil price fluctuations
and changes in exploration and production
spending. In addition, the demand for accom-
mo dation units is sensitive to other incidents
that may impact the general state of the world
economy, general activity and spend levels, and
demand for natural resources. Global incidents
like pandemics with a material impact on
capital markets and the oil price may negatively
impact activity in the oil and gas industry, and
thereby also our operations or demand for our
services.

The Company is exposed to financial risks such
as currency risk, interest rate risk, financing and
liquidity risk and credit and counterparty risk.

Prosafe reports in USD and generates income
primarily in USD, whereas a large part of its
operating costs are in other currencies such
as GBP, Brazilian Real and NOK. The currency
mix will, however, vary with areas of operation.
This exposure as identified based on rolling
forecasts is hedged according to the Company’s
approved Finance Policy. The interest rate risk is
largely hedged by the use of interest rate swaps
or cap structures for normally 70 – 100 per cent
of the debt.

The Company carries out credit checks on
clients as part of its tendering processes and
has a history of minimal loss from debtors.
There are no material overdue receivables as
of year-end. Further information on financial
risk management is provided in note 19 to the
consolidated financial statements.

An account of the main features of Prosafe’s
risk management process is available on
its website at https://www.prosafe.com/
investor-information/corporate-governance/
risk-management/

INTERNAL CONTROLS

Internal control is ensured in accordance with
Prosafe’s policies and procedures which aim to
ensure the effectiveness and efficiency of its

operations, reliability of its financial reporting
and compliance with applicable laws and
regulations. These policies and procedures are
designed, inter alia, to safeguard assets and
protect from accidental loss or fraud.

In addition, the policies and procedures
are reinforced by the organisation and the
competence of its personnel, segregation of
duties, regular risk assessments and internal
reporting, management meetings, board
meetings and the audit committee, together
with external audit and public reporting and
communication.

In respect of internal controls relating to the
preparation of financial statements, the board
of directors demonstrates independence from
management and exercises oversight of the
development and performance of internal
control. Management establishes, with board
oversight, structures, reporting lines, and
appropriate authorities and responsibilities
in the pursuit of objectives. In addition to the
ongoing reviews by the senior officers, annual
reviews and assessments are carried out which
are approved by the board in respect of risk
management and internal controls. The risk
and opportunity register forms the basis for
the action plan which further represents a
main and continuous agenda item for both
management and the board to ensure that all
key risks and opportunities are appropriately
discussed and followed up by management
and the board in the form of strategies and
mitigating actions.

Prosafe is committed to attract, develop, and
retain competent individuals in alignment with
its objectives. The Company holds individuals
accountable for their internal control
responsibilities in the pursuit of its objectives.

The Company identifies and analyses risks
which may potentially affect the achievement
of its objectives and how these should be
managed. It also considers the potential for
fraud, and identifies and assesses changes that
could significantly affect the system of internal
control.

The Company selects, develops and deploys
controls for the mitigation of risks related to
the achievement of its financial reporting
objectives, including controls over technology.
It deploys these controls through policies and
procedures and reporting.

Prosafe carries out regular reviews to ascertain
whether the internal controls are present and
functioning, and evaluates and communicates
any internal control deficiencies in a timely
manner to those parties responsible for
taking corrective action, including senior
management and the Board of directors, as
appropriate. Audits carried out by external
parties like the financial auditor, clients and
regulatory authorities and the reporting and
follow-up of these are important elements to
ensure continuous focus on and improvement
of internal controls.

HEALTH, SAFETY AND
THE ENVIRONMENT (HSE)

Robust HSE performance is fundamental to
all of Prosafe’s operations and is therefore
reflected in its core values. As a consequence,
Prosafe works proactively and systematically to
reduce injuries and absence.

In 2019, Prosafe recorded zero incidents
classified as a Lost Time Injury (LTI), i.e. those

injuries resulting in an employee being absent
from the next work shift due to the injury.

The LTI frequency is calculated by multiplying
the number of LTIs by 1 million and dividing
this by the total number of man-hours worked.
In 2019, the LTI frequency was 0, as compared
to 0.85 in 2018.

Prosafe operates a zero accident mind-set
philosophy which means that no accidents or
serious incidents are acceptable. A number
of initiatives have been implemented over
the years in order to further strengthen the
safety culture. These and new initiatives will
be continuously developed in order to improve
safety performance further.

Sick leave was 2.26 per cent in 2019, an
increase from 2.07 per cent in 2018.

Prosafe had no accidental discharges to the
natural environment in 2019 and continues
to actively reduce emissions by investing
in modernizing its fleet and fuel efficient
equipment and by pursuing continuous
improvement in operating procedures
and practices. The impact to the external
environment from Prosafe’s operations is
reported in detail in the ESG report, which is
included in this annual report.

HUMAN RESOURCES
AND DIVERSITY

Prosafe had 150 employees at the end of
2019 (average 313), compared with 417 in the
previous year (average 401). This reduction
in the number of employees reflects the
adjustment of the organisation in response to
a weaker market outlook and reduced demand
for Prosafe’s services.

Prosafe’s global presence was reflected in the
fact that its employees came from 24 countries
around the world. The overall voluntary
employee turnover in the Group was 19.2
per cent in 2019, compared with 8.5 per cent

in 2018. This increase is mainly due to the
fact that a number of employees accepted
voluntary redundancy packages in 2019.

Prosafe operates an equal opportunity policy
including gender equality. Men have, however,
traditionally made up a greater proportion of
the recruitment base for offshore operations,
and this is reflected in Prosafe’s gender
breakdown. As of 31 December 2019, women
accounted for 26.0 per cent of all employees,
compared with 11.3 per cent in 2018. Onshore
the proportion of women was 36.6 per cent, as
compared to 40.6 per cent in 2018.

Women constituted 26.8 per cent of the
managers as at 31 December 2019, compared
with 25.0 per cent at the end of 2018.

Prosafe aims to offer the same opportunities to
all and there is no discrimination with respect
to recruitment, remuneration or promotion, due
to age, disability, gender, marriage and civil
partner ship, pregnancy and maternity, natio-
na lity, religion or belief, sex, and sexual orienta-
tion. More detailed information can be found in
the ESG report included in this annual report.

CORPORATE
GOVERNANCE

Corporate governance in the Company is based
on the principles contained in the Norwegian
code of practice for corporate governance of 17
October 2018. There are no deviations between
the code of practice and the way it has been
implemented during 2019. The Company’s full
corporate governance report is available in a
separate section in this annual report.

Corporate governance is a key focus for the
Company in order to strengthen confidence in
Prosafe among shareholders, the capital market
and other interested parties, and to help ensure
maximum value creation over time in the best
interest of shareholders, employees and other
stakeholders.

At the Annual General Meeting held on 8 May
2019, Nina Udnes Tronstad was elected new
board member replacing Roger Cornish. All
other members of the board were re-elected.
Glen Ole Rødland was re-elected as chairman,
Nina Udnes Tronstad was elected chair of the
Compensation Committee and Birgit Aagaard-
Svendsen was re-elected as chair of the Audit
Committee. The remuneration of the members
of the board of directors is disclosed in note 6
to the financial statements.

As at 31 December 2019, the only director
(including associated parties) who held shares
in the Company was Birgit Aagaard-Svendsen,
owning 3,000 shares. Glen Ole Rødland has an
indirect ownership interest in Prosafe through
his ownership interest in HitecVision VII, L.P.

GOING CONCERN

The board of directors confirms that the
accounts have been prepared under the
assumption that the Company is a going
concern. The going concern assumption is
considered to be appropriate as it is based on
the Board’s view that obtaining a long term
and sustainable financial solution should be
achievable by taking into consideration the facts
and circumstances described below.

Following an impairment charge of USD 341
million made to the book value of vessels
in November 2019 as a consequence of a
prolonged industry downturn and weaker
outlook in the North Sea in particular,
the Company’s year end book equity was
marginalised and it was anticipated to turn
negative early 2020, which will result in a breach
of the facilities agreements. In consideration of
the financial implication, the Board of Directors
initiated a formal dialogue with its lenders in
December 2019 with a view to ensure sufficient
financial flexibility for the longer term. However,
developments in macro factors like Covid-19
and the oil price crash since early March 2020
have in a tangible manner reminded us of our
commercial risk exposure. Parallel incidents with
a pandemic occurring together with OPEC and

Russia not being able to agree and engaging in
an oil price war have led experts to define this as
a “double black swan” situation. This has almost
overnight resulted in a dramatic impact on the
global macro economy, global ways of living
and working, oil prices and consequently capital
markets and market outlook.

As mentioned earlier, Prosafe is already in a
process with its lenders since December 2019
to seek a sustainable financial solution after
several years of low activity across the industry
and an unsustainable debt level. The “double
black swan” situation adds both urgency and
complexity to this process and the Group will
be concluding on a revised business plan by late
April 2020 as a basis upon which to plan ahead
and seek a long term financial solution with
its lenders and other financial stakeholders. It
cannot be ruled out that the revised business
plan may have significant impact on the
estimated future cash flows of the Group and
thus also the carrying value of its assets. As at
the date of this report, the Group is already in a
negative book equity situation and further and
substantial impairments would reinforce that
situation and further underscore the need for
reaching a solution with its lenders and financial
stakeholders.

agent to initiate acceleration and enforcement
steps. Consequently, forbearance consent from
1/3 or above, will restrict such acceleration
and enforcement steps. The forbearance was
initially granted for a period until 15 April 2020,
but could be extended by the lenders through
a simplified process. Subsequently in mid-April
2020, Prosafe agreed a further extension to
the forbearance from the non-payments and
defaults with a majority of its lenders across
its two loan facilities until 31 May 2020. As
part of this, the Group will continue to defer
making payments of scheduled instalments and
interests under both facilities. Similarly, payment
of the final instalment owed and due under the
seller credit to Cosco for the Safe Notos remains
as reported previously subject to ongoing discus-
sions with Cosco and the lenders.

The forbearance shows support for the Group to
continue to operate, while lenders reserve their
rights, and secures stability for the Group while
it continues to work with the lenders to agree
on a long term financial solution. Pending this,
the Group continues to operate on a business as
usual basis to protect and create value through
challenging market conditions.

While operating under a forbearance agreement
with its lenders, the Group has a strong liquidity
position and is anticipated to stay above the
minimum cash covenant level based on currently
known information and commitments and all
else equal till around end 2020. The Group is
similarly anticipated to stay cash positive based
on the same assumptions till around mid-2021.

The Group's discussions with its lenders remain
constructive and the efforts to create and
agree a long-term financial solution continues.
Although there can be no assurance with
respect to the outcome of this process, the
going concern assumption is considered to be
appropriate as it is based on the Board’s view
that obtaining a long-term financial solution
should be achievable.

The content of a final solution is, however,
difficult to predict at this stage, hereunder any
accounting effects from a long-term financial
solution.

SHAREHOLDERS
AND SHARE CAPITAL

Further information on the share capital and
changes thereon are shown in note 14 to the
consolidated financial statements.

According to the shareholder register as at 31
December 2019, the 20 largest shareholders
held a total of 67.86 per cent of the issued
shares. The number of shareholders was 4,706.
North Sea Strategic Investments AS was the
largest shareholder with a holding of 18.93 per
cent of the issued shares.

Significant shareholdings as at 31 December
2019 are presented in note 14 to the financial
statements and are bi-weekly updated on the
Company’s website at https://www.prosafe.
com/investor-information/shareholder-
information/largest-stakeholders/

As at 31 December 2019, Prosafe had an issued
share capital of 81,864,212 ordinary shares. In
addition, 6,122,790 shares to be issued under
convertible bonds agreements and 3,435,982
shares to be issued under warrants agreement.
All at a nominal value of EUR 0.10 each.

There are no share incentive schemes or
shareholder agreements in place in the
Company.

The Company’s loan agreements include
change of control clauses.

14 April 2020

The Board of Directors of Prosafe SE

DIVIDENDS

Prosafe’s longer term ambition is to secure
its shareholders a competitive return on their
shares through a combination of share price
appreciation and a direct return in the form of
dividends.

In light of the reduction in industry activity
levels and challenging market conditions,
no dividend has been paid since August
2015. In 2018, the Company and the Lenders
agreed that the Company will not declare any
dividends, until deferred bank instalments have
been prepaid or cancelled and a 12-month
financial forecast has been provided which
confirms compliance with the financial
covenants.

EVENTS AFTER THE
PERIOD END

Reference is made to note 25 to the
consolidated accounts for a description of
events after the reporting date.

Glen Ole Rødland

Non-executive Chairman

Birgit Aagaard-Svendsen

Kristian Johansen

Non-executive Director

Svend A. Maier

Non-executive Director

Nina Udnes Tronstad

Non-executive Director

Jesper K. Andresen

Chief Executive Officer

DECLARATION BY THE
BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER

The Board and Chief Executive Officer have today considered and approved the annual report and
financial statements for the Prosafe Group and its parent company Prosafe SE for the 2019 calendar
year ended on 31 December 2019.

This declaration is based on reports and statements from the Chief Executive Officer, Deputy CEO
& Chief Financial Officer and on the results of the Group’s business as well as other essential
information provided to the Board to assess the position of the parent company and the Group.

TO THE BEST OF OUR KNOWLEDGE:
The 2019 financial statements for the parent company and the Group 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 parent
company’s and the Group’s assets, liabilities, financial position and results taken as a whole as of 31
December 2019.

The Board of directors’ report for the parent company and the Group provides a true and fair overview
of the development, performance and financial position of the parent company and the Group taken
as a whole, and the most significant risks and uncertainties facing the parent company and the Group.

14 April 2020

The Board of Directors of Prosafe SE

Glen Ole Rødland

Non-executive Chairman

Birgit Aagaard-Svendsen

Kristian K. Johansen

Non-executive Director

Svend A. Maier

Non-executive Director

Nina Udnes Tronstad

Non-executive Director

Jesper K. Andresen

Chief Executive Officer

CONSOLIDATED ACCOUNTS

CONSOLIDATED INCOME STATEMENT

(USD million)

Charter revenues
Other operating revenues
Operating revenues
Employee benefits
Other operating expenses
Operating profit before depreciation and impairment
Depreciation
Impairment
Operating profit/(loss)
Interest income
Interest expenses
Other financial income
Other financial expenses
Net financial items
Share of loss of equity accounted investees
Loss before taxes
Taxes
Net loss

Attributable to equity holders of the parent

Earnings per share (USD)
Diluted earnings per share (USD)

Note

4
4, 5

6
7

8
8, 13

10
10
9
9
10
13

12
12

2019

192.0
33.4
225.4
(68.8)
(59.5)
97.1
(93.5)
(346.2)
(342.6)
2.1
(34.6)
0.0
(19.2)
(51.7)
(0.8)
(395.1)
(4.8)
(399.9)

2018

293.2
37.6
330.8
(76.7)
(87.5)
166.6
(113.0)
(0.6)
53.0
2.9
(173.3)
13.4
(2.9)
(159.9)
(1.7)
(108.6)
(5.9)
(114.5)

(399.9)

(114.5)

(4.54)
(4.54)

(1.30)
(1.30)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(USD million)

Net loss for the year

Note

2019

(399.9)

2018

(114.5)

Other comprehensive income to be reclassified to profit or
loss in subsequent periods

Foreign currency translation
Net gain on cash flow hedges
Net other comprehensive income to be reclassified to
profit or loss in subsequent periods

Other comprehensive loss that will not be reclassified to
profit or loss in subsequent periods

Pension remeasurement
Other comprehensive loss that will not be reclassified to
profit or loss in subsequent periods

2.2
0.0

2.2

(5.1)
48.3

43.2

(0.1)

(0.8)

(0.1)

(0.8)

Total comprehensive loss for the year, net of tax

(397.8)

(72.1)

Attributable to equity holders of the parent

(397.8)

(72.1)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(USD million)

Note

capital

bonds

rants

equity

hedges

vertible

War-

Other

flow

trans-

lation

Total

equity

Con-

Foreign

Cash

currency

477.9

(48.3)

35.1

497.6

(31.8)

0.0

(31.8)

446.1

(48.3)

35.1

465.8

Equity at 31 December 2017

Adoption of IFRS 15

Equity at 1 January 2018

Net loss

Other comprehensive income

Total comprehensive income

Conversion of
convertible bonds

Issue of warrants

Equity at 31 December 2018

Net loss

Other comprehensive income

Total comprehensive income

Conversion of
convertible bonds

Cancellation of warrants

Equity at 31 December 2019

8.9

0.0

8.9

0.0

0.1

0.0

9.0

0.0

9.0

24.0

0.0

24.0

0.0

(3.2)

0.0

20.8

0.0

6.4

0.0

(114.5)

(0.8)

(115.3)

3.2

0.0

334.0

(399.9)

(0.1)

(400.0)

(0.2)

0.0

(6.4)

0.2

6.4

20.6

0.0

(59.4)

0.0

48.3

0.0

(114.5)

(5.1)

42.4

(72.1)

0.0

0.1

6.4

30.0

400.2

0.0

2.2

(399.9)

2.1

(397.8)

0.0

32.2

0.0

2.4

The legal form of the share capital and the share premium accounts are reflected in the statement
of changes in equity of the accompanying parent financial statements. Other equity includes share
premium reserve, capital reduction reserve and retained earnings.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(USD million)

ASSETS

Vessels

New builds

Other tangible assets

Investments in associated companies

Derivatives

Total non-current assets

Cash and deposits

Debtors

Other current assets

Total current assets

Total assets

EQUITY AND LIABILITIES

Share capital

Convertible bonds

Warrants

Other equity

Total equity

Interest-bearing non-current liabilities

Deferred tax

Derivatives

Other non-current liabilities

Total non-current liabilities

Interest-bearing current debt

Accounts payable

Taxes payable

Other current liabilities

Total current liabilities

Total equity and liabilities

Note

31/12/2019

31/12/2018

8, 23

18, 19

18, 20

18, 19

18, 21

15, 18, 19

18, 19

15, 18, 19

16, 18

1 204.6

60.7

1.9

0.0

1 267.2

198.1

8.0

6.9

213.0

1 480.2

9.0

20.6

0.0

(27.2)

2.4

76.7

0.0

27.6

2.3

106.6

1 321.2

3.1

13.3

33.6

1 371.2

1 480.2

1 422.6

125.8

2.5

5.2

2.4

1 558.5

140.3

25.2

12.8

178.3

1 736.8

9.0

20.8

6.4

364.0

400.2

1 198.5

0.0

16.1

2.4

1 217.0

44.5

2.2

14.7

58.2

119.6

1 736.8

On 14 April 2020, the Board of Directors of Prosafe SE approved and authorised these financial state-
ments for issue.

Glen Ole Rødland

Non-executive Chairman

Birgit Aagaard-Svendsen

Kristian Johansen

Non-executive Director

Svend A. Maier

Non-executive Director

Nina Udnes Tronstad

Non-executive Director

Jesper K. Andresen

Chief Executive Officer

CONSOLIDATED CASH FLOW STATEMENT

(USD million)

Note

2019

2018

CASH FLOW FROM OPERATING ACTIVITIES

Loss before taxes

Gain on sale of non-current assets

Depreciation and impairment

Interest income

Interest expenses

Share of loss of equity accounted investee

Taxes paid

Change in working capital

Other items from operating activities

Net cash provided by operating activities

CASH FLOW FROM INVESTING ACTIVITIES

Proceeds from sale of tangible assets

Acquisition of tangible assets

Interest received

Net cash used in investing activities

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from new interest-bearing debt

Repayments of interest-bearing debt

Refinancing cost

Interest paid

Net cash used in financing activities

Net cash flow

Cash and deposits at 1 January

Cash and deposits at 31 December

(395.1)

(0.2)

439.7

(2.1)

34.6

0.8

(6.2)

(0.5)

15.6

86.6

0.2

(77.5)

2.1

(75.2)

155.0

(37.9)

0.0

(70.7)

46.4

57.8

140.3

198.1

(108.6)

(2.1)

113.6

(2.9)

173.3

1.7

(13.4)

16.6

(31.1)

147.1

2.6

(8.7)

2.9

(3.2)

0.0

(155.2)

(4.2)

(76.1)

(235.5)

(91.6)

231.9

140.3

8, 23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: CORPORATE INFORMATION AND PRINCIPAL ACTIVITY
Prosafe SE (the 'Company') is a public limited company domiciled in Norway. The registered office of
the Company is Forusparken 2, 4031 Stavanger, Norway. The Company is a leading owner and operator
of semi-submersible offshore accommodation vessels. The Company is listed on the Oslo Stock
Exchange with ticker code 'PRS'.

The consolidated financial statements comprise the financial statements of the Company and its
subsidiaries (together referred to as the 'Group').

The consolidated financial statements for the year ended 31 December 2019 were approved and
authorised for issue in accordance with a resolution of the Board of Directors on 14 April 2020.

NOTE 2: STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards ('IFRS') endorsed by the European Union. The consolidated financial statements
have been prepared on a historical cost basis, except for derivative financial instruments which are
measured at fair value through profit or loss.

The consolidated financial statements are presented in US dollars (USD), and all amounts have
been rounded to the nearest millions, unless otherwise indicated. In adding up rounded figures and
calculating percentage rate of changes, slight differences may result compared with totals arrived at
by adding up component figures which have not been rounded.

The accounting policies adopted are consistent with those in the previous financial years except
IFRS 16 Leases. IFRS 16 Leases has been applied from 1 January 2019. The changes to significant
accounting policies are described in detail below.

CRITICAL JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Group’s consolidated financial statements requires management to make
critical judgments, estimates and assumptions that affect the reported amounts of revenue,
expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of the reporting
period. However, uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of the asset or liability affected in future
periods.

The estimates and assumptions are assessed on a continuous basis. The estimates and assumptions
which have the most significant effect on the amounts recognised in the financial statements are as
follows:

GOING CONCERN. The Board of Director confirms that the accounts have been prepared under the
assumption that the Group is a going concern. The going concern assumption is considered to be
appropriate as it is based on the Board’s view that obtaining a long term and sustainable financial
solution should be achievable by taking into consideration the facts and circumstances described
below.

Due to a prolonged downturn and weaker outlook in the North Sea in particular, an impairment of
USD 341 million has been made to book value of vessels in 2019, which resulted in the Group’s book
equity being marginalised at year end and it was anticipated to turn negative early 2020 which will
result in a breach of the facilities agreements.

Since December 2019, the Board of Directors have initiated a dialogue with the lenders with a view
to ensure sufficient financial flexibility for the longer term. However, developments in macro factors
like Covid-19 and the oil price crash since early March 2020 have in a tangible manner reminded
us of our commercial risk exposure. These factors have added both urgency and complexity to this
process and the Group will be concluding on a revised business plan by late April 2020 as a basis
upon which to plan ahead and seek a long term financial solution with its lenders and other financial
stakeholders. It cannot be ruled out that the revised business plan may have significant impact on the
estimated future cash flows of the Group and thus also the carrying value of its assets. As at the date
of this report, the Group is already in a negative book equity situation and further and substantial
impairments would reinforce that situation and further underscore the need for reaching a solution
with its lenders and financial stakeholders.

On 1 April 2020, the Group agreed a forbearance with a majority of its lenders across its two loan
facilities, respectively the USD 1,300 million facility and the USD 288 million facility, whereby such
lenders agreed not to accelerate, enforce or demand payment following non-payment and default
under the two loan facilities. Both facilities require direction from lenders holding more than 2/3 of
the total commitment for the agent to initiate acceleration and enforcement steps. Consequently,
forbearance consent from 1/3 or above, will restrict such acceleration and enforcement steps. The
forbearance was initially granted for a period until 15 April 2020, but could be extended by the lenders
through a simplified process. Subsequently in mid-April 2020, Prosafe agreed a further extension to
the forbearance from the non-payments and defaults with a majority of its lenders across its two
loan facilities until 31 May 2020. As part of this, the Group will continue to defer making payments of
scheduled instalments and interests under both facilities. Similarly, payment of the final instalment
owed and due under the seller credit to Cosco for the Safe Notos remains as reported previously
subject to ongoing discussions with Cosco and the lenders.

The forbearance shows support for the Group to continue to operate, while lenders reserve their
rights, and secures stability for the Group while it continues to work with the lenders to agree on a
long term financial solution. Pending this, the Group continues to operate on a business as usual basis
to protect and create value through challenging market conditions.

While operating under a forbearance agreement with its lenders, the Group has a strong liquidity
position and is anticipated to be able to stay above the minimum cash covenant level of USD 65
million based on currently known information and commitments and all else equal till around end
2020. The Group is similarly anticipated to stay cash positive based on the same assumptions till
around mid-2021.

The Group's discussions with its lenders remain constructive and the efforts to create and agree
a long-term financial solution continue. Although there can be no assurance with respect to the
outcome of this process, the going concern assumption is considered to be appropriate as it is based
on the Board’s view that obtaining a long-term financial solution should be achievable.

The content of a final solution is, however, difficult to predict at this stage, hereunder any accounting
effects from a long-term financial solution.

Please see Note 19 and Note 25 for further information.

DEPRECIATION. Estimated useful life of the Group's accommodation/service vessels is 30 to 50
years dependent on the age at the time of acquisition and subsequent refurbishments and as the
economic life varies for the various components on a vessel. Individual components may, however, be
depreciated over shorter periods of time. Please refer to note 8.

IMPAIRMENT / REVERSAL OF IMPAIRMENT OF NON-FINANCIAL ASSETS. Management monitors
the performance indicators on an ongoing basis. At each reporting date, management reviews
and determines whether there is any indication of impairment or impairment reversal of the fixed
assets. If any such indication exists, or at least on an annual basis, the asset’s recoverable amount is
estimated. Changes in the circumstances or expectations of future performance of an individual asset
may be an indicator that the asset is impaired, requiring the carrying amount to be written down to
its recoverable amount. Impairments are reversed if conditions for impairment are no longer present.
Evaluating whether impairment indicators are present, if an asset is impaired or if an impairment
should be reversed requires a high degree of judgement and estimates of recoverable amounts may to
a large extent depend upon the selection of key assumptions about the future.

Where recoverable amounts are based on estimated future cash flows, reflecting the Group’s or
market participants’ assumptions about the future and discounted to their present value, the
estimates involve complexity. Impairment testing requires long-term assumptions to be made
concerning a number of economic factors such as future vessel day rates, operating costs, utilisation
rate and discount rates in order to establish relevant future cash flows and their discounted amounts.
Long-term assumptions for major economic factors are made at a group level. There is a high degree
of reasoned judgement involved in establishing these assumptions, in determining other relevant
factors such as vessel day rates and long-term growth rates, and in determining the residual value for
computation of the ultimate terminal value of an asset.

IMPAIRMENT OF SHARES IN SUBSIDIARIES. Impairment of shares in subsidiaries is a significant
estimate required for the preparation of the parent company accounts.

MODIFICATION OF LIABILITIES MEASURED AT AMORTISED COST. Under a non-substantial loan
modification that does not require derecognition of the financial liability, the amortised cost of the
financial liability is recalculated as the present value of the estimated future contractual cash flows. If
there is a change in the timing or amount of estimated cash flows, the amortised cost of the financial
liability is adjusted in the period of change to reflect the revised actual and estimated cash flows,
with a corresponding income or expense being recognised in profit or loss. Based on a qualitative
and quantitative assessment of the changes in contractual cash flows in both years, the change is
accounted for as a non-substantial loan modification and not an extinguishment.

In 2018, the modification of the amortised cost carried in the loan amount was mainly the effect
from the refinancing agreement with a deferral of the USD 1,300 million facility repayment and the
increased margin under the new financing terms, and will be amortised over the remaining loan
periods. The recalculated amortised cost of the liability resulted in a loss that has been recognised in
the profit and loss statement.

In 2019, some of the warrants issued previously to lenders contingent upon delivery of the Nova and
Vega vessel have been cancelled and replaced with the conditional increase of the applicable margin
of the loan. The terms of the loans have consequently been modified. The recalculated amortised cost
of the liability resulted in a gain recognised in the profit and loss statement. See note 15 for details on
the assumptions and cash flow estimate.

CHANGES IN SIGNIFICANT ACCOUNTING POLICIES
As mentioned, the accounting policies adopted are consistent with those of the previous financial
year except IFRS 16 Leases. Other standard amendments and interpretations are also effective from
1 January 2019, but they do not have a material effect on the Group's financial statements. Due to
the transition methods chosen by the Group in applying these standards, comparative information
throughout these financial statements has not been restated to reflect the requirements of the new
standards.

IFRS 16 Leases
The new accounting standard IFRS 16-Leases was effective from 1 January 2019. IFRS 16 sets out
the principles for recognition, measurement, presentation and disclosure of leases and replaces
the previous IAS 17-Leases and other guidance on lease accounting within IFRS. The new standard
represents a significant change in lessees’ accounting for leases but keeps the accounting model for
lessors mainly unchanged.

IFRS 16 defines a lease as a contract that conveys the right to control the use of an identified asset
for a period of time in exchange for consideration. For each contract that meets this definition, IFRS
16 requires lessees to recognize a right-of-use asset and a lease liability in the balance sheet with
certain exemptions for short-term and low value leases. Lease payments are to be reflected as interest
expense and a reduction of lease liabilities, while the right-of-use assets are to be depreciated over
the shorter of the lease term and the assets useful life. The portion of lease payments representing
payments of lease liabilities and interest expense shall be classified in line with the policy elected for
other interest payments in the statement of cash flows.

The Group adapted the standard from its mandatory adaption date of 1 January 2019. The following
policies and practical approach are applied for adapting the standard and the adoption has no
material effect to the Group's consolidated financial statements.

- For contracts already assessed under IAS 17, there are no reassessments of whether a contract is or

contains a lease.

- The modified retrospective method is applied. However, there is no adjustment made for the

opening balance of equity as at 1 January 2019 as it is immaterial.

- Prior year comparatives are not restated.
- Lease liabilities are measured at the present value of remaining lease payments, discounted using

the incremental borrowing rate as at 1 January 2019.

- Right-use of assets are measured at an amount equal to the lease liability.
- Leases for which the lease term ends during 2019 are expensed as short term leases.
- Major lease liabilities for the Group comprise of leases of chartered-in vessels, office buildings,

warehouses, transportation, logistics assets and other IT infrastructure and office equipment. The
Group separately expenses variable expense services and other non-lease components embedded
in lease contracts for office buildings and warehouses.

- For leases of other assets, the Group capitalised non-lease components subject to fixed payments
as part of the lease. Besides certain office buildings leases that will expire after 2019, all other
leases in the Group are expiring in 2019 with no extension options embedded in the lease.
- The Group applied the short-term exemption, which means that all leases with a lease term

that ends in 2019 are expensed as before and not capitalised upon transition. Subsequently, the
Group also applied the general short-term exemption in IFRS 16 for leases of chartered-in vessels,
office buildings, warehouses, transportation, logistics assets and other IT infrastructure and office
equipment.

- The Group applied the general low value exemption in IFRS 16 for leases of office and other

equipment. This means that no low value leases of such assets will be capitalised and that lease
payments are expensed in profit or loss.

The effect on the adoption of the IFRS 16 on the consolidated financial statements is considered not
to be material to the Group's financial statement.

Standards issued but not yet effective, which the Group has not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory
for 31 December 2019 reporting periods and have not been early adopted by the Group. The Group’s

assessment is that such new standards and interpretations are not expected to have a material
impact on the Group in the current or future reporting periods or on foreseeable future transactions
upon adoption.

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION. The consolidated financial statements comprise the financial statements
of the parent company and its subsidiaries. Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and continue to be consolidated until
the date that such control ceases. The financial statements of the subsidiaries are prepared for the
same reporting period as the parent company, using consistent accounting policies. Associates are
those entities in which the Group has significant influence, but not control or joint control over the
financial and operating policies. Interests in associates are accounted for using the equity method
and are initially recognised at cost. Subsequent to initial recognition, the consolidated financial
statements include the Group’s share of the profit or loss and other comprehensive income of equity-
accounted investees, until the date on which significant influence ceases.

All intra-group balances, income and expenses, unrealised gains and losses and dividends resulting
from intra-group transactions are eliminated in full. The Group’s interest in equity-accounted
investees comprises interests in an associate. Unrealised gains arising from transactions with equity-
accounted investees are eliminated against the investment to the extent of the Group’s interest in the
investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent
that there is no evidence of impairment.

BUSINESS COMBINATIONS AND GOODWILL. Business combinations are accounted for using the
acquisition method. The cost of an acquisition is measured as the aggregate of the consideration
transferred, measured at acquisition date fair value. Acquisition related costs incurred are expensed
and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date.

Goodwill is initially measured at cost being the excess of the aggregate of the consideration
transferred and the amount recognised for non-controlling interest over the net identifiable assets
acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of
the subsidiary acquired, the difference is recognised in profit and loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the
purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition
date, allocated to each of the Group’s cash generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those
units.

Where goodwill forms part of a cash generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the operation disposed of is included in the carrying amount
of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed
of in this circumstance is measured based on the relative values of the operation disposed of and the
portion of the cash generating unit retained.

FOREIGN CURRENCY TRANSLATION. The presentation currency is USD. This is also the functional
currency for the parent company. Transactions in other currencies than the functional currency are
translated at the exchange rate prevailing at the transaction date. Monetary items in other currencies
than the functional currency are translated to the functional currency at the exchange rate on the
reporting date, and the currency difference is recognised in the profit and loss account. Non-monetary
items in currencies other than the functional currency are translated at the exchange rate at the
transaction date. When consolidating companies with a functional currency other than USD, profit
and loss items are translated at the monthly average exchange rate, while balance sheet items
are translated at the exchange rate on the reporting date. Translation differences are recognised in
other comprehensive income. On disposal of a foreign operation, the deferred cumulative amount
recognised in other comprehensive income, relating to that particular operation, is recognised in the
income statement.

SEGMENT REPORTING. For management and monitoring purposes, the Group is organised into one
segment; chartering and operation of accommodation/service vessels. For geographical information,
reference is made to note 4.

REVENUE RECOGNITION

Type of Product/
Service

Charter Income/
Mobilisation
Income/
Demobilisation
Income/
Lump Sum Fee

Nature and timing of satisfaction
of performance, including
significant payment terms

The Group charters the
accommodation vessels to
customers for an agreed period.
The Group does not convey the
right to control the use of the
asset to the customers and none
of the contracts are accounted for
as a lease. The invoices are issued
on a monthly basis or based on
the contractual terms and are
normally payable within 30 days.

Management, crew
services, catering
and other related
income

The Group provides optional
services upon request from the
customer. The invoices are issued
on a monthly basis or based on the
contractual terms and are payable
normally within 30 days.

Revenue recognition

The activities giving rise to mobilisation,
demobilisation and re-phasing are not a
distinct performance obligation in itself
and are highly interdependent on the
charter activities. These activities are
necessary for the Group to perform its
service in providing the accommodation
vessels to the customer. These incomes,
together with charter income and
bareboat income, are considered as a
single performance obligation and the
revenue are collectively recognised over
the charter period. The deferred revenue
is included in the contract liabilities.

These incomes are recognised over
time when performance obligations are
met. The related costs are recognised in
profit or loss when they are incurred.

The Group has reviewed its contracts with customers and concluded that these contracts do not
contain a lease. If another conclusion determined that these contracts contain a lease, there will not
be any significant difference in the accounting of revenue.

Interest income
Interest income is recognised on a time-proportion basis using the effective interest method. Interest
income is included in financial items in the income statement.

Dividend income
Dividend income is recognised when the right to receive payment is established.

PROVISIONS are recognised when, and only when, the Group has a present obligation as a result of
events that have taken place, and it can be proven probable that a financial settlement will take place as
a result of this liability, and that the size of the amount can be measured reliably. Provisions are reviewed
on each balance sheet date and their level reflects the best estimate of the liability. When the Group
expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset,
but only when the reimbursement is virtually certain. The expense relating to any provision is presented
in the income statement net of any reimbursement.

TANGIBLE ASSETS are recognised at cost less cumulative depreciation and accumulated impairment
losses, if any. Assets are depreciated on a straight-line basis over their estimated useful lives, with
account taken of their estimated residual value. Management makes annual assessments of residual
value, methods of depreciation and the remaining useful life of the assets. Components of an asset
which have an estimated shorter life than the main component of the asset are accordingly depreciated
over this shorter period. Acquisition cost includes costs directly attributable to the acquisition of the
assets. Subsequent expenditures are added to the book value of the asset or accounted for on a separate
basis when it is likely that future benefits would derive from the expenditures. The vessels are subject to
a periodic survey every five years, and associated costs are amortised over the five-year period to the next
survey. Other repair and maintenance costs are expensed in the period they are incurred.

Expenditures for new builds are capitalised, including instalments paid to the yard, project management
costs, and costs relating to the initial preparation, mobilisation and commissioning until the vessel is
placed into service. In accordance with IAS 23, borrowing costs are capitalised on qualifying assets.

Tangible fixed assets are depreciated on a straight line basis over their useful lifetime as follows:
• Semi-submersible vessels – 30 to 50 years dependent on the age at the time of the acquisition and

subsequent refurbishments

• Buildings – 20 to 30 years
• Equipment – 3 to 5 years

IMPAIRMENT OF NON-FINANCIAL ASSETS. The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists or when annual impairment testing for
an asset is required, the Group estimates the asset's recoverable amount. An asset’s recoverable amount
is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and
is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Every vessel is seen as an individual cash
generating unit (CGU). Where the carrying amount of an asset or CGU exceeds its recoverable amount,
the asset is considered impaired and is written down to its recoverable amount. In assessing value in
use, the estimated future cash flows are discounted to their present value using a post-tax discount rate
that reflects current market assessments of the time value of money and risks specific to the asset. In
determining fair value less costs to sell, recent market transactions are taken into account, if available.
If no such transactions can be identified, an appropriate valuation model is used. These calculations are
corroborated by valuation multiples.

The Group bases its impairment calculation on a detailed forecast calculation which is prepared for the
Group’s cash generating units. The forecast calculation is generally covering a period of five years. For
longer periods, a long-term terminal growth rate is calculated and applied to project future cash flows
after the fifth year.

For non-financial assets except goodwill, an assessment is made at each reporting date as to whether
there is any indication that previously recognised impairment losses may no longer exist or may have
decreased. If such indication exists, the Group estimates the asset’s recoverable amount. A previously
recognised impairment loss is reversed only if there has been a significant change in the assumptions
used to determine the asset’s recoverable amount since the last impairment loss was recognised.
The impairment loss is reversed only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.

FINANCIAL ASSETS

Initial recognition
Trade receivables are initially recognised when they are originated. All other financial assets are
initially recognised when the Group become a party to the contractual provision of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) is initially
measured at fair value plus, for an item not at fair value through profit or loss ("FVTPL"), transaction
costs that are directly attributable to its acquisition or issue. A trade receivable without a significant
financing component is initially measured at the transaction price.

Classification and measurement
On initial recognition, a financial asset is classified as measured on following basis: 1) financial assets
at amortised cost; and 2) financial assets at fair value through profit or loss "FVTPL".

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes
its business model for managing financial assets, in which case all affected financial assets are
reclassified on the first day of the first reporting period following the changes in the business model.

1) Financial assets at amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions and is not
designated as at FVTPL:

It is held within a business model whose objective is to hold assets to collect contractual cash
flows; and
Its contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.

2) Financial assets at FVTPL
All financial assets not classified as measured at amortised cost or FVOCI as described above are
measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may
irrevocably designate a financial asset that otherwise meets the requirements to be measured at
amortised cost of a FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.

Derivative financial instruments
The Group uses derivative financial instruments such as forward currency contracts, interest rate cap
and interest rate swaps to hedge its foreign currency risks and interest rate risks. Such instruments
are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is negative.

The derivative financial instruments are mainly used in economic hedges where the changes in fair
value are taken directly through profit or loss. The fair value of forward currency contracts is the
discounted difference between the forward exchange rate and the contract price. The fair value of
interest rate caps and swap contracts are calculated using inputs that are from observable market
prices.

Gains or losses arising from changes in fair value of derivative financial instruments that do not
qualify for hedge accounting are taken to the profit and loss account. For cash flow hedges, the
effective portion of the gains or losses on the hedging instrument is recognised directly in other
comprehensive income and accumulated in the hedging reserve, while the ineffective portion
is recognised in the profit and loss account. Amounts taken to other comprehensive income are
reclassified to the profit and loss account when the hedged transaction affects the profit and loss
account. For fair value hedges, changes in the fair value of the designated hedging instruments are
recognised in the profit and loss account. The hedged item is adjusted to reflect change in its fair
value in respect of the risk hedged, with any gain or loss recognised in the profit and loss account.

The Group documents at the inception of the transaction the relationship between the hedging
instruments and hedged items, as well as its risk management objective and strategies for
undertaking various transactions. The Group also documents its assessment, both at hedge inception
and on an ongoing basis, of whether the derivatives designated as hedging instruments are highly
effective in offsetting changes in fair value or cash flows of the hedged items. Hedge accounting is not
applied in the Group's financial statement.

Current versus non-current classification
Derivative instruments that were not a designated and effective hedging instrument were
classified as current or non-current or separated into a current and non-current portion based on an
assessment of the facts and circumstances.

When the Group held a derivative as an economic hedge for a period beyond 12 months after the
balance sheet date or a derivative instrument was designated as an effective hedging instrument, the
fair value of the derivative instrument was classified as current or non-current consistent with the
classification of the underlying item. Economic hedges were not treated as hedging for accounting
purposes.

Subsequent measurement and gains and losses

1) Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the effective interest method. The
amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses
and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in
profit or loss.

2) Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including any interest or
dividend income, are recognised in profit or loss.

Derecognition
A financial asset is derecognised when the contractual rights to the cash flows from the financial
asset expire or it transfers the rights to receive the contractual cash flows in a transaction which
substantially all of the risks and rewards of ownership of the financial asset are transferred or in

which the Group neither transfers nor retains substantially all of the risks and rewards of ownership
and it does not retain control of the financial asset.

Impairment of financial assets

The Group recognises loss allowances for expected credit losses on:
- Financial assets measured at amortised cost

The Group measures loss allowances at an amount equal to lifetime expected credit losses, except for
the following, which are measured at 12 month expected credit loss:
- Bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the

financial instrument) has not increased significantly since initial recognition.

Loss allowances for trade receivables and assets are always measured at an amount equal to lifetime
expected credit losses.

When determining whether the credit risk of a financial asset has increased significantly since
initial recognition and when estimating expected credit losses, the Group considers reasonable and
supportable information that is relevant and available without undue cost of effort. This includes both
quantitative and qualitative information and analysis, based on the Group's historical experience and
informed credit assessment and including forward-looking information.

The Group considers a financial asset to be in default when:
- The borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the

Group to actions such as realising security (if any is held); or

- The financial asset is more than 90 days past due.

Measurement of expected credit losses:
- For trade receivables, the Group applies the simplified method of credit reserves, i.e. the reserve will
correspond to the expected loss over the whole life of the trade receivable. In order to measure the
credit losses, trade receivable are grouped based on credit risk characteristics of its customer. The
Group applies forward-looking variables for expected credit losses.

- Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are

measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due
to the entity in accordance with the contract and the cash flows that the Group expects to receive).

- Expected credit losses are discounted at the effective interest rate of the financial asset.

At each reporting date, the Group assesses whether financial assets carried at amortised cost are
credit-impaired, which is when one or more events that have a detrimental impact on the estimated
future cash flow of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:
- Significant financial difficulty of the borrower or issuer;
- A breach of contract such as default or being more than 90 days past due;
- The restructuring of a loan or advance by the Group on terms that the Group would not consider

otherwise;
It is probable that the borrower will enter bankruptcy or other financial reorganisation; or

-
- The disappearance of an active market for a security because of financial difficulties.

Loss allowances of expected credit losses for financial assets measured at amortised cost are
deducted from the gross carrying amount of the assets as in the statement of financial position.

Write-off of financial assets
The gross carrying amount of a financial asset is written off when the Group has no reasonable
expectations of recovering a financial asset in its entirety or a portion thereof. For customers, the
Group individually makes an assessment with respect to the timing and amount of write-off based
on whether there is reasonable expectation of recovery. The Group expects no significant recovery
from the amount written off. However, financial assets that are written off could still be subject to
enforcement activities in order to comply with the Group's procedures for recovery of amount due.

FINANCIAL LIABILITIES

Initial recognition
Financial liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value
through profit or loss and financial liabilities measured at amortised cost. The Group determines the
classification of its financial liabilities at initial recognition. Financial liabilities are recognised initially
at fair value and, in case of loans and borrowings, net of directly attributable costs. The Group’s
financial liabilities include non-derivative financial instruments (trade and other payables, loans and
borrowings, financial guarantee contracts) and derivative financial instruments.

Subsequent measurement and gains and losses
Financial liabilities at fair value through profit and loss are measured at fair value and net gains and
losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are
subsequently measured at amortised cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is
also recognised in profit or loss.

Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expires. When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original liability
and the recognition of a new liability, and the difference in the respective carrying amounts is
recognised in the income statement.

FAIR VALUE OF FINANCIAL INSTRUMENTS. The fair value of financial instruments that are actively
traded in organised financial markets is determined by reference to quoted market bid prices at the
close of business on the balance sheet date. For financial instruments where there is no active market,
fair value is determined using valuation techniques. Such techniques may include using recent
arm’s length market transactions, reference to the current fair value of another instrument that is
substantially the same, discounted cash flow analysis or other valuation models.

EMPLOYEE BENEFITS. Companies within the Group make contributions to pension schemes that are
defined contribution plans. The companies’ payments are recognised in the income statement for the
year to which the contribution applies.

BORROWING COSTS. Borrowing costs directly attributable to the acquisition, construction or
production of an asset that necessarily takes a substantial period of time to get ready for its intended
use or sale are capitalised as part of the cost of the respective assets. Other borrowing costs are
capitalised as calculated using the effective interest method.

INCOME TAXES in the income statement include taxes payable and changes in deferred tax. Deferred
tax is calculated on the basis of temporary differences between book and tax values that exist at the
end of the period. Deferred tax asset is recognised in the statement of financial position when it is
probable that the tax benefit can be utilised. Deferred tax and deferred tax asset are measured at
nominal value.

Income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered or paid to the tax authorities. Deferred tax liabilities are measured at the
tax rates that are expected to apply in the year when the liability is settled, based on tax rates that
have been enacted or substantively enacted at the reporting date. Deferred tax is provided using the
liability method. Deferred tax assets and liabilities are offset if a legally enforceable right exists to set
off current tax assets against current income tax liabilities and the deferred taxes relate to the same
taxable entity and the same tax authority.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each
reporting date and are recognised to the extent that it has become probable that future taxable
profits will allow the deferred tax asset to be recovered.

CASH AND DEPOSITS comprise cash at banks and short-term deposits with an original maturity of
three months or less, which are subject to an insignificant risk of changes in value.

DIVIDEND distribution to the shareholders is recognised in the financial statements on the date on
which the shareholders' right to receive payment is established.

SHAREHOLDER'S EQUITY. Any difference between the issue price of share capital and the nominal
value is recognised as share premium. The costs incurred attributable to the issue of share capital
are deducted from equity. Zero coupon convertible bonds and warrants that will be settled by the
Company by delivering a fixed number of its own equity instruments in exchange for a fixed amount
of cash are equity instruments and recognised in equity. The translation reserve comprises all foreign
currency differences arising from the translation of the financial statements of foreign operations.

NOTE 4: SEGMENT REPORTING

The Group has one segment, which is chartering and operation of accommodation/service vessels.

Operating revenues by geographical location

2019

2018

Europe

South America

Others

Total operating revenues

153.2

69.4

2.8

225.4

272.4

56.3

2.1

330.8

The revenue allocation is based on place of operation of the vessel.

The Group's firm order book, consisting of performance obligations that are unsatisfied or partially
unsatisfied as of the end of the reporting period is USD 146.1 million. Approximately USD 95.5 million,
USD 26.6 million and USD 24.0 million are related to services that will be provided in 2020, 2021 and
2022 respectively.

Contract balances

Trade receivables from charters

Contract assets

Contract liabilities

2019

2018

8.0

0.0

2.6

25.2

0.0

9.4

Contract liabilities consist mainly of advance invoiced charter revenue for one of the Group's vessels.
USD 6.8 million (2018: USD 23.1 million) was recognised as revenue in the current year that was
included in the contract liabilities balance in the beginning of the year.

Operating revenues by major customers:

Europe 1

Europe 2

Europe 3

South America 1

1) Operating revenues in USD million
2) Percentage of total revenues

2019
1)

84.7

45.0

0.0

54.0

37.6%

20.0%

0.0%

24.0%

2018
1)

156.3

38.9

76.5

50.5

47.2%

11.8%

23.1%

15.3%

Total assets by geographical location

2019

2018

Europe

South America

Asia

Total assets

NOTE 5: OTHER OPERATING REVENUES

Gain on sale of non-current assets

Management, crew services, catering and other related income

Total other operating revenues

847.5

561.7

71.1

1 233.6

350.1

153.1

1 480.2

1 736.8

2019

2018

0.2

33.2

33.4

2.1

35.5

37.6

NOTE 6: EMPLOYEE BENEFITS, MANAGEMENT REMUNERATION AND AUDIT FEE

Wages and salaries

Contract personnel

Other personnel-related expenses

Social security taxes

Pension expenses

Other remuneration

Total employee benefits

Number of employees

2019

2018

36.0

19.8

6.0

4.0

2.3

0.7

68.8

47.4

15.1

5.8

4.7

2.7

1.0

76.7

The average number of employees in the Group for 2019 was 313 (2018: 401). The average number of
employees by legal entity was as follows.

2019

2018

Prosafe Offshore Employment Company Pte. Limited

188

279

Prosafe Offshore Limited

Prosafe Services Maritimos Ltda

Prosafe AS

Prosafe Offshore Holdings Pte. Ltd.

Prosafe Rigs Pte. Ltd.

Prosafe SE

Prosafe Management AS

Prosafe Offshore Accommodation Ltd

Total average number of employees

313

401

Bonus scheme
The CEO, DCEO/CFO and COO hold incentive agreements which may lead to a bonus payment. The
bonus depends on achieving defined targets relating to stretch target for earnings, cost efficiency
targets, long-term strategic targets, operational performance and HSE performance. A portion of the
net proceeds from bonus payments shall be used to buy shares in the Company.

Severance pay
For the CEO and the CFO, the Company guarantees a remuneration corresponding to the base salary
received at the time of departure for a period of 5 months beyond a 4 month notice period and with
a set off for the 5 months against any other income received. For the COO, the Company guarantees
a remuneration corresponding to the base salary received at the time of departure for a period of 12
months beyond a 6 month notice period.

In accordance with the code of practice for corporate governance recommended by the Oslo Stock
Exchange, remuneration for Executive Management and the board of directors is specified below and
in a separate report from the compensation committee.

Senior officers
(USD 1 000)

Year

Salary

Bonus Pension

benefits

Total

Other

Jesper Kragh Andresen -CEO

Stig Harry Christiansen - DCEO/ CFO

Jens Einar Opstad Berge - COO
(Resigned in April 2019)

2019

419

399

116

487

495

155

Ryan Duncan Stewart - CCO

2019

253

170

100

551

Jesper Kragh Andresen -CEO

Stig Harry Christiansen - DCEO/ CFO

Jens Einar Opstad Berge - COO

Ryan Duncan Stewart - COO

2018

404

468

255

434

304

272

188

905

775

858

562

Board of directors
(USD 1 000)

Glen Ole Rødland (chairman)

Roger Cornish (until May 2019)

Nina Udnes Tronstad (from May 2019)

Birgit Aagaard-Svendsen

Svend Anton Maier

Kristian Johansen

Total fees

Glen Ole Rødland (chairman)

Roger Cornish

Birgit Aagaard-Svendsen

Svend Anton Maier

Kristian Johansen

Nancy Ch. Erotocritou (until April 2018)

Total fees

Year

Board fees 1)

2019

2018

128

101

491

144

109

107

578

1) If applicable, figures include compensation from audit committee, nomination committee and

compensation committee.

Auditors' fees
(USD 1 000)

Audit

Fees for non-audit services

Total auditors' fees

2019

349

375

2018

321

338

Auditors' fees are included in general and administrative expenses (note 7). Other services include
USD 26,000 (2018: USD 17,000) in respect of tax compliance and pre-liquidation stage services
offered to the group companies by the statutory auditor.

NOTE 7: OTHER OPERATING EXPENSES

Repair and maintenance

Other vessel operating expenses

General and administrative expenses

Total other operating expenses

NOTE 8: TANGIBLE ASSETS

2019

14.4

35.1

10.0

59.5

2018

14.9

64.1

8.5

87.5

Vessels

New

builds

Equip-

ment

Buildings

Total

Cost as at 31 December 2017

2 991.4

125.1

Additions

Disposals

Cost as at 31 December 2018

Transfer

Additions

Disposals

Cost as at 31 December 2019

Accumulated depreciation and
impairment 31 December 2017

Depreciation for the year

Disposals

Impairment

Accumulated depreciation and
impairment 31 December 2018

Depreciation for the year

Disposals

Impairment

Accumulated depreciation and
impairment 31 December 2019

Net carrying amount
31 December 2019

Net carrying amount
31 December 2018

7.1

(70.8)

2 927.8

202.1

14.1

(1.2)

3 142.8

1 464.2

111.9

(70.7)

(0.2)

1 505.2

92.8

(1.2)

341.4

1 938.2

0.7

0.0

125.8

(202.1)

137.0

0.0

60.7

0.0

5.1

0.3

(1.6)

3.8

0.0

0.4

(0.2)

4.0

3.4

0.5

(1.4)

0.0

2.4

0.3

(0.2)

0.0

7.9

0.6

(0.7)

7.9

0.0

0.1

(0.7)

7.3

5.9

0.6

(0.6)

0.8

6.8

0.4

(0.7)

0.4

3 129.6

8.8

(73.1)

3 065.3

0.0

151.6

(2.1)

3 214.8

1 473.5

113.0

(72.7)

0.6

1 514.4

93.5

(2.1)

341.8

2.5

6.9

1 947.6

1 204.6

60.7

1.5

0.4

1 267.2

1 422.6

125.8

1.4

1.1

1 550.9

Depreciation rate (%)

Economically useful life (years)

2-20

5-50

20-33

3-5

20-30

New builds include prepayment to the yard, owner-furnished equipment and other project costs incurred. In
November 2019, Safe Eurus started its maiden gangway connection in Brazil after completing its transit from
the yard in China. The carrying vessel value of USD 202.1 million was reclassified from new builds to vessel
category. See note 23 for details on capital commitments relating to new builds.

Estimated useful life for the semi-submersible accommodation vessels is 5-50 years dependent on
the age at the time of the acquisition and subsequent refurbishments. Certain equipment on a vessel
is depreciated over a shorter period than the life of the vessel itself. The estimated scrap value per
vessel is between USD 3 million and USD 6 million. This estimate is based on steel prices and costs
associated with scrapping and is reviewed on an annual basis.

An impairment charge of USD 0.4 million (2018: USD 0.8 million) is charged to a property held in
Aberdeen office based on the latest market valuation.

As the general recovery across the exploration & production value chain continues to be delayed,
the demand for the Group's vessels remains weak. Management has performed an impairment
assessment of all its vessels in accordance with IFRS. Each individual vessel is considered to be a cash
generating unit. As a result, the following impairment charges were made during the year:

Safe Caledonia

Safe Bristolia

Safe Scandinavia

Regalia

Safe Concordia

Safe Boreas

Safe Zephyrus

Total

Impairment Recoverable amount

24.2

29.0

164.7

52.2

15.4

16.8

39.1

341.4

69.1

0.0

68.1

10.5

68.9

305.5

280.6

802.7

The recoverable amounts have been identified by calculating the valuation-in-use (“VIU”).
Impairments had been made in the accounts for vessels with VIU lower than their net book value. The
Group also considered the use of broker estimates as a basis for fair value calculation, but this was not
applied due to the lack of transactions and liquidity in the market for the Group's vessels.

The VIU calculations are based on an updated long-term forecast for 2020-2024 and up till the end of
each vessel’s useful life. The main assumptions used in the computations are charter rates, utilisation,
operating expenses and overheads and capital expenditures.

The present value of the estimated cash flows from the cash-generating units is based on the
following inputs:

Utilisation
- Average utilisation assumed to increase from 30% in 2020 to 80% in 2024 and thereafter.

Revenues
- From 2020-2023, the assumption is based on current contracts portfolio and contract renewals

reflecting current global market conditions and remaining life of assets.

- From 2024, assumptions are applied based on the market returning to a normalised average
earnings level where return on capital equals calculated cost of capital. A normalised market
situation depends on both the demand and the industry capacity with regards to available vessels.

Expenses
- Operating expenses and overheads were reduced between 10% to 20% as compared to prior year so

as to reflect the current market conditions and activity plan.

Capital expenditures
- Capex is based on "SPS Plans" (5 year special periodic survey) and activity plan. Capex spend will be

deferred whenever possible, including SPS Plans, if a vessel is laid up and with no backlog.

Discount rate of 9% (2018: 8%)
- Discount rate is derived from weighted average cost of capital after tax of the Group.

Long-term growth rate from 2024 of 1.7% (2018: 2.5%)

Sensitivity
- A 1% increase in the discount rate would have led to an increase of impairment of USD 81 million.
- A 5% decrease in the utilisation rate would have led to an increase of impairment of USD 81 million.
- A 5% decrease in the day rate would have led to an increase of impairment of USD 81 million.
- A 5% increase in the operating expenses would have led to an increase of impairment of

USD 32 million.

NOTE 9: OTHER FINANCIAL ITEMS

Fair value adjustment interest rate swaps

Fair value adjustment interest rate caps

Total other financial income

Fair value adjustment interest rate swaps

Fair value adjustment interest rate caps

Currency loss

Other financial expenses

Total other financial expenses

2019

2018

0.0

(12.6)

(1.3)

(2.6)

(2.7)

(19.2)

11.3

2.1

13.4

0.0

(0.3)

(2.7)

(2.9)

NOTE 10: FINANCIAL ITEMS

Year ended 31 December 2019

Interest income

Total financial income

Amortisation of borrowing costs
Modification of amortised cost 1)

Amortisation of the modification of
amortised costs

Interest expenses

Subtotal

Fair value adjustment interest rate swaps

Fair value adjustment interest rate caps

Other financial expenses

Total financial expenses

Net financial items

Year ended 31 December 2018

Interest income

Fair value adjustment interest rate swaps

Fair value adjustment interest rate caps

Total financial income

Amortisation of borrowing costs
Modification of amortised cost 1)

Amortisation relating to abandonment
of hedge accounting 2)

Interest expenses

Subtotal

Other financial expenses

Total financial expenses

Net financial items

Financial
assets
measured at
amortised
cost

Fair value
through
profit and
loss

Financial
liabilities
measured at
amortised
cost

0.0

(12.6)

(1.3)

0.0

(13.9)

0.0

(6.4)

28.8

13.3

(70.3)

(34.6)

0.0

(5.3)

(39.9)

0.0

11.3

2.1

13.4

0.0

(4.2)

(56.8)

(48.3)

(64.0)

(173.3)

(2.9)

(176.2)

Total

2.1

(6.4)

28.8

13.3

(70.3)

(34.6)

(12.6)

(1.3)

(5.3)

(53.8)

Total

2.9

11.3

2.1

16.3

(4.2)

(56.8)

(48.3)

(64.0)

(173.3)

(2.9)

(176.2)

2.1

0.0

2.1

2.9

0.0

2.9

0.0

2.9

1) Refer to note 15 relating to modification of amortised costs in 2019.

(13.9)

(39.9)

(51.7)

Financial
assets
measured at
amortised
cost

Fair value
through
profit and
loss

Financial
liabilities
measured at
amortised
cost

1) Refer to note 15 relating to the modification of amortised cost of interest-bearing debt.
2) Refer to note 19 for amortisation relating to abandonment of hedge accounting.

13.4

(176.2)

(159.9)

NOTE 11: TAXES

Income tax expenses

Taxes in income statement:

Taxes payable

Change in deferred tax

Total taxes in income statement

Reconciliation of effective tax rate (IAS 12.81)

Tax rate in Norway (parent company tax jurisdiction)

Loss before taxes

Tax based on applicable tax rate

Tax effect of non-deductible expenses

Tax effect due to changes in unrecognized deferred tax assets

Effect of tax in other jurisdictions

Total taxes in income statement

2019

2018

4.8

0.0

4.8

22.0%

(395.1)

(86.9)

0.8

86.1

4.8

9.7

(3.8)

5.9

23.0%

(108.6)

(25.0)

11.1

10.1

9.7

5.9

Deferred tax - Specification and movements

2019

2018

Temporary differences:

Exit from Norwegian tonnage tax system

Long-term liabilities

Vessel tax base exceeds net book value

Tax loss carried forward

Gain / (loss) account for deferral

Basis for deferred tax

Recognised deferred tax asset

Deferred tax liability 1 January

Change in deferred tax in income statement

Translation difference

Deferred tax liability 31 December

13.9

(6.5)

(558.0)

(419.5)

(31.0)

17.4

(100.8)

(211.6)

0.0

(1 001.1)

(295.0)

0.0

4.1

(3.8)

(0.3)

0.0

Tax payable as at 31 December

13.3

14.7

Following an assessment of legal structure to ensure an optimal organisation of the Group, the Group
decided to relocate the tax residency of 5 legal entities from respectively Cyprus and Singapore (3 legal
entities which were tax residents in Cyprus, including parent company Prosafe SE, and 2 vessel-owning legal
entities which were tax residents in Singapore) to Norway in Q2 2018. The corporate tax rate in Norway for
2019 is 22% (2018 is 23%).

Deferred income tax assets and liabilities are offset as all the temporary differences are within the Norway
tax resident entities that comprise a tax group. Within the tax group there is a legally enforceable right

to set off current tax assets against current tax liabilities. There is no expiry date on the temporary
differences and tax loss carried forward. The value of the deferred tax assets is not recognised in the
accounts as the probability of having sufficient future taxable profit to utilise the deferred tax assets as
tax deductions cannot be established.

The total tax payable in the income statement as at 31 December resulted from the Group's operations in
other parts of the world which were subjected to tax in jurisdictions other than Norway.

The temporary differences relating to tax loss carried forward as of 31 December 2019 include tax losses
for 2018 in the amount of USD 269 million not included in the 2018 balance due to uncertainty as of the
reporting day for the 2018 financial statements.

NOTE 12: EARNINGS PER SHARE

Earnings per share are calculated by dividing net profit by the weighted average number of ordinary
shares outstanding during the year. Diluted earnings per share are calculated by dividing net profit
by the weighted average number of ordinary shares plus the number of potential shares relating to
warrants.

Net loss
Weighted average number of outstanding shares (1 000) 1)

Basic earnings per share
Weighted average number of outstanding and potential shares (1 000) 2)

Diluted earnings per share

2019

2018

(399.9)

87 987

(4.54)

87 987

(4.54)

(114.5)

87 987

(1.30)

87 987

(1.30)

1) The weighted average number of outstanding shares include the average share capital of
81,824,000 and mandatory convertible bonds of 6,163,000 (2018: average share capital of
81,295,000 and mandatory convertible bonds of 6,692,000).

2) In 2018 and 2019, the warrants were anti-dilutive and not included in the calculation.

NOTE 13: INVESTMENTS IN ASSOCIATED COMPANIES

In December 2016, the Group acquired a 25% shareholding in Dan Swift (Singapore) Pte. Ltd., a
company incorporated in Singapore. The registered office of the Company is 1 Harbourfront Avenue,
#16-08, Keppel Bay Tower, Singapore 098632. The company owns one accommodation monohull. This
investment is measured using the equity method.

In 2019, the Group fully disposed its shares in Dan Swift (Singapore) Pte. Ltd. to a third party for a
nominal consideration. Prior to disposal, the Group recognised an impairment of USD 4.4 million on
its investment in associate and a loss of USD 0.8 million in the share of loss of investment in associate.
The impairment loss is included as part of impairment in the Consolidated Income Statement.

The following table summarises the financial information of Dan Swift (Singapore) Pte. Ltd., adjusted
for valuation adjustments at acquisition. The table also reconciles the summarised financial
information to the carrying amount of the Group’s interest in Dan Swift (Singapore) Pte. Ltd.

Ownership

Non-current assets

Current assets

Non-current liabilities

Current liabilities

Net assets (100%)

Group's share of net assets (25%)

Valuation adjustment non-current assets at acquisition

Carrying amount of interest in associate

Operating revenue (100%)

Net loss (100%)

Group's share of net loss in income statement (25%)

2019

2018

0 %

0.0

(3.3)

(0.8)

25 %

89.9

4.6

56.4

2.0

36.1

9.0

(3.8)

5.2

10.5

(6.6)

(1.7)

NOTE 14: SHARE CAPITAL, SHAREHOLDER INFORMATION CONVERTIBLE BONDS AND WARRANTS

2019

2018

Issued and paid up number of ordinary shares at 31 December

81 864 212

81 784 212

Shares to be issued under convertible bond agreements

Shares to be potentially issued under warrants agreement with lenders

Unissued shares authorised

Total authorised number of shares at 31 December

Nominal value at 31 December

Number of shareholders at 31 December

6 122 790

3 435 982

6 202 790

9 780 000

42 480 175

91 422 984

140 247 177

EUR 0.10

4 706

4 929

Largest shareholders as at 31 December 2019

No of shares

Percentage

North Sea Strategic Investments AS

HV VI Invest Sierra Malta Ltd

State Street Bank And Trust Comp

Nordea Bank ABP

State Street Bank And Trust Comp

Nordnet Bank AB

The Northern Trust Comp, London BR

Skandinaviska Enskilda Banken S.A.

Pareto

Helmer AS

UBS Switzerland AG

Invesco Global Balanced Fund

MP Pensjon PK

BR Industrier AS

Mørck

Verdipapirfondet DNB High Yield

Pictet & Cie (Europe) S.A.

Morgan Stanley & Co. International

Fidelity Pur.Trust:Fidelity Series

Nordnet Livsforsikring AS

15 479 410

8 657 609

6 972 694

6 567 709

3 865 811

2 019 261

1 395 611

1 165 893

1 115 763

1 000 000

916 971

874 867

859 913

800 000

737 333

669 689

666 000

626 440

600 000

559 923

18.9 %

10.6 %

8.5 %

8.0 %

4.7 %

2.5 %

1.7 %

1.4 %

1.2 %

1.1 %

1.0 %

0.9 %

0.8 %

0.7 %

Total 20 largest shareholders/groups of shareholders

55 550 897

67.9 %

All ordinary shares rank equally. Holders of these shares are entitled to dividends from time to time
and are entitled to one vote per share at general meetings of the Company.

Convertible bonds

2019

2018

No. of shares
convertible

Value

Opening balance as at 31 December

Conversion of convertible bonds

Closing balance as at 31 December

6 202 790

(80 000)

6 122 790

20.8

(0.2)

20.6

7 261 194

(1 058 404)

6 202 790

Value

24.0

(3.2)

20.8

The convertible bonds allow the bond holders to convert into shares at a conversion price of NOK 25
or NOK 30 per share. There is no contractual obligation to deliver cash or another financial asset as
the conversion feature can only be settled through the issuance of a fixed amount of shares. Hence,
the convertible bonds have been classified entirely as equity.

Warrants
As part of the USD 1,300 million credit facility refinancing concluded in 2018, the Group has issued
the warrants to those lenders having elected to receive such instead of increased margins. In total,
9,779,993 warrants have been issued, each of which gives right to subscribe for one new share in the
company at a subscription price of NOK 21.37. Of these, 5,141,021 warrants are conditional inter alia
on the Group taking delivery of Safe Nova and/or Safe Vega, and the remaining 4,638,972 warrants

on the Group taking delivery of both Safe Nova and Safe Vega. The warrants will be exercisable any
time from and subject inter alia to the Group taking delivery of Safe Nova and/or Safe Vega and the
next 3 years from such respective delivery dates, however so that any duration exceeding 5 years
from the date of the Extraordinary General Meeting will be subject to approval of such extension
by a subsequent general meeting. The warrants are expected to be subject to certain customary
adjustment mechanisms, including upon a failure to timely provide extension approval in which case
the subscription price will be set to nominal value.

In November 2019, Prosafe has issued letters to lenders to reconsider the election of warrants with
the conditional increase in the applicable margin. This modification was at the request of the lenders.
Out of the 9,779,993 warrants issued in 2018, 6,344,011 of the warrants have been cancelled and
replaced with the conditional increase of the applicable margin of the loan. The balance of warrants
remaining is 3,435,982. The difference between the opening balance in equity and the fair value of the
liability at the reclassification was recognised directly in equity on derecognition.

The remaining warrants were reclassified to financial liabilities. No profit or loss was recognised on
the reclassification. The warrants were measured at fair value, but were severely out of the money and
the amount was not material as at 31 December 2019. Refer to note 15 for further details.

NOTE 15: INTEREST-BEARING DEBT

Credit facilities

Sellers' credits

Modification of the amortised cost - credit facilities & sellers credit

Unamortised borrowing costs

Lease liabilities

Total interest-bearing debt

Non-current interest-bearing debt
Current interest-bearing debt 1)

Total interest-bearing debt

2019

2018

1 314.1

1 192.0

113.1

(16.8)

(12.7)

0.2

19.0

50.6

(18.6)

0.0

1 397.9

1 243.0

76.7

1 321.2

1 397.9

1 198.5

44.5

1 243.0

1) Please refer to the Loan Classification section at the end of this note for further details.

Reconciliation of movements of interest-bearing debt

to cash flows arising from financing activities

2019

2018

Interest-bearing debt at 1 January

1 243.0

1 347.7

Changes from financing cash flows

- Proceeds from new interest-bearing debt

- Repayments of interest-bearing debt

- Refinancing cost

- Interest paid

Total changes from financing cash flows

Other liability-changes

- Non cash movement in interest bearing debt

- Interest paid

- Non-cash increase in sellers' credits arising from fixed asset acquisition

- New finance leases

Total liability-related changes

155.0

(37.9)

0.0

(70.7)

46.4

(61.9)

70.7

99.5

0.2

0.0

(155.2)

(4.2)

(76.1)

(235.5)

54.7

76.1

0.0

108.5

130.8

Interest-bearing debt at 31 December

1 397.9

1 243.0

USD 1 300 million credit facility
The credit facility of USD 1,300 million consists of two term loan tranches of USD 800 million and USD 200
million and a revolving credit facility of USD 300 million. As of 31 December 2019, there was no availability
under the revolving credit facility. Initially the term loan tranches were reduced semi-annually by USD 55
and USD 10 million, respectively. In August 2018 the amortisation profile and covenants relating to this
facility were amended.

Since January 2020, the Group received temporary waivers from Event of Default and payment deferrals
from lenders, which expired on 31 March 2020. On 1 April 2020, the Group agreed a forbearance with a
majority of its lenders across its two loan facilities, respectively the USD 1,300 million facility and the USD
288 million facility, whereby such lenders agreed not to accelerate, enforce or demand payment following
non-payment and default under the two loan facilities. The forbearance was initially granted for a period
until 15 April 2020, but could be extended by the lenders through a simplified process. Subsequently
in mid-April 2020, Prosafe agreed a further extension to the forbearance from the non-payments and
defaults with a majority of its lenders across its two loan facilities until 31 May 2020. The forbearance
shows support for the Group to continue to operate, while lenders reserve their rights, and secures stability
for the Group while it continues to work with the lenders to agree on a long-term financial solution.

Modification of amortised cost - USD 1,300 million credit facility
When a debt instrument is restructured and the terms have been modified, it is necessary to assess
whether the new terms are considered to have been substantially modified, and thereby conclude on
the accounting treatment relating to the loan recognition (IFRS 9).

2019
As mentioned under the Warrants section above, a portion of earlier issued warrants have been
cancelled and replaced with the conditional increase of the applicable margin of the loan. The terms

of the loans have been modified Prosafe has assessed that the debt modification is a non-substantial
loan modification that does not require de-recognition based qualitative and quantitative
assessments under IFRS 9. Under a non-substantial loan modification that does not require
de-recognition of the financial liability, the amortised cost of the financial liability is recalculated as
the present value of the estimated future contractual cash flows. To reflect the new net present value
of the loan, an adjustment of USD 28.8 million is deducted from the carrying value of the loan and the
same amount of financial costs is being recognised in the profit or loss. See note 10 on modification of
the amortised cost - loan recognised as financial expenses. The adjustment made in the loan amount
is mainly the effect from the changes in estimate of the following:
1) the timing of the new build deliveries which will affect the drawdown timing of the USD 1,300

million facility and the interest rate margin applicable;

2) the timing of future repayments of debt;
3) the cancellation of warrants under the revised term

The assumption also includes that the new builds will be delivered after the finance debt matures in
February 2022 and the one year credit facility extension is not exercised.

Any future change in estimate of the assumptions of the delivery of the new builds, the timing of
future repayments of debts and credit facility extension will have an impact on the modification of
modified cost of the USD 1,300 million facility.

The adjustment in the loan amount will be amortized over the remaining loan periods.

2018
The Group has assessed that the 2018 refinancing as a non-substantial loan modification and it does
not require in de-recognition of loan. Under a non-substantial loan modification that does not require
in de-recognition of the financial liability, the carrying values of the financial liability under the new
terms needs to be recalculated by using revised cash flows and a revised effective interest rate so to
reflect the new net present value of the loan. The modification of amortised cost of USD 56.8 million
is estimated and has been added into the carrying value of the loan and the same amount of financial
costs is being recognised in the profit and loss in this year. The modification of the amortised cost
carried in the loan amount is mainly the effect from the reduction of the USD 1,300 million facility
amortization and the increased margin under the new financing term, and will be amortized over
the remaining loan periods. See note 10 on modification of the amortised cost - loan recognised as
financial expenses.

USD 144 million credit facility (previously known as the 'USD 288 million credit facility')
This credit facility, which has a maturity of seven years, consists of one tranche of USD 144 million.
The tranche was drawn upon delivery of Safe Notos in February 2016, and initially there were a second
available tranche (Safe Eurus). This tranche was cancelled in 2018, when financing for Safe Eurus was
agreed with Cosco. In September 2016 the amortisation profile relating to this facility was amended.
Prior to the amendment, the term loan tranches were reduced quarterly by USD 3 million, starting
three months after delivery of the tranche security. 90 per cent of the originally scheduled repayments
for the Safe Notos tranches in the period 1 January 2017 until 30 June 2019 have been postponed and
are to be repaid on the final maturity date. For the period 1 July 2019 until 31 December 2020, 70 per
cent of the scheduled repayments for the Safe Notos tranches have been postponed until the final
maturity date.

Since January 2020, the Group received temporary waivers from Event of Default and payment
deferrals from lenders, which expired on 31 March 2020. On 1 April 2020, the Group agreed a
forbearance with a majority of its lenders across its two loan facilities, respectively the USD 1,300
million facility and the USD 288 million facility, whereby such lenders agreed not to accelerate,
enforce or demand payment following non-payment and default under the two loan facilities. The
forbearance was initially granted for a period until 15 April 2020, but could be extended by the lenders
through a simplified process. Subsequently in mid-April 2020, Prosafe agreed a further extension to
the forbearance from the non-payments and defaults with a majority of its lenders across its two loan
facilities until 31 May 2020. The forbearance shows support for the Group to continue to operate,
while lenders reserve their rights, and secures stability for the Group while it continues to work with
the lenders to agree on a long-term financial solution.

The final maturity of this credit facility is in May 2021.

There is a cash sweep mechanism with testing 31 March and 30 September. Any excess cash over
USD 155 million threshold shall be shared between lenders (90%) and the company (10%). Once Safe
Eurus, Safe Nova and Safe Vega are delivered, the excess cash will be reduced with the initial cash
payment agreed for the three new builds (Safe Eurus USD 50 million, Safe Nova USD 25 million, Safe
Vega USD 25 million). Any new shareholder contributions shall be subtracted from excess cash, and
not swept. The cash sweep was tested on 31 March and 30 September 2019 and there was no cash
sweep at those testing dates.

Financial covenants as per amendment in August 2018:
Minimum liquidity:
Minimum value:

USD 65 million at all times
On the USD 1,300 million facility, no minimum market value requirement
shall apply until 1 January 2022; thereafter ensure that the aggregate
market value of the collateral vessels is at least 100% of the facilities
outstanding on the relevant market test dates, on at least one out of every
two consecutive annual test dates.

On the USD 144 million (Safe Notos) facility, no minimum market value
requirement shall apply until 1 January 2019. Covenant will in 2019 be
set at 110% (in respect of 2 consecutive annual test dates), and there will
be a step up in market value covenant in March 2021 to 125%. The Group is
in compliance with the minimum market value covenant at 31 December
2019.
Leverage ratio to be negotiated, with first testing date on 31 March 2021
No interest coverage ratio until 30 June 2020; 1.00x from 1 July 2020 until
31 March 2021; 1.50x from 1 April 2021 thereafter.

Leverage ratio:1)
Interest coverage:2)

There is also a maximum capital expenditure covenant which is agreed before the start of each
financial year.
There are cross default clauses between the USD 144 million and USD 1,300 million credit facilities.
The Group’s loan agreements include change of control clauses.

1) Leverage ratio = net borrowings/adjusted EBITDA
2) Interest coverage ratio = adjusted EBITDA/net interest expenses

Interest on bank facilities
Interest is USD LIBOR plus margin. Margin on outstanding amounts are as follows.

Applicable leverage ratio

USD 1,300 million facility

USD 144 million facility

Cash margin

Less than or equal to 3.0:1

Above 3.0:1 and less than 4.0:1

Above 4.0:1 and less than 5.0:1

Above 5.0:1 and less than 5.5:1

Above 5.5:1

2.60 %

2.75 %

2.90 %

3.10 %

3.35 %

2.25 %

2.30 %

2.50 %

2.75 %

As at 31 December 2019, the applicable leverage ratio is above 5.5:1.

For the USD 1,300 million facility, there was an increase in margin from the refinancing in August
2018 compared to the previous margin under the USD 1,300 million facility agreement by 0.6% p.a.
This additional 0.6% margin will be cash interest if minimum liquidity remains above USD 155 million
at anytime. However, to protect liquidity if cash falls below USD 155 million, the additional interest
will be payment-in-kind (PIK) and added to the final maturity instalment (“PIK toggle”).

In addition and as part of the amendments agreed in August 2018, subject to delivery of the Safe
Nova and Safe Vega, and the USD 1,300 million facility being outstanding at the time of delivery, the
USD 1,300 million facility lenders (only) may elect to receive either:
i. An additional margin of 0.225% p.a. for each of Safe Nova and Safe Vega from when they are
delivered. The increase in margin in connection with delivery will also be subject to the PIK toggle
mechanism, which also apply from February 2022 to February 2023 (assuming the extension option is
exercised); or ii. Warrants for up to 6.52 million shares per vessel, and up to a maximum of 9.78 million
shares in aggregate.

In November 2019, Prosafe has issued letters to lenders to reconsider the election of warrants with
the conditional increase in the applicable margin. This is due to the accounting treatment of warrants
which adversely affect the outstanding amount of the lender’s book. Out of the 9,779,993 warrants
issued in 2018, 6,344,011 of the warrants have been cancelled and replaced with the conditional
increase of the applicable margin of the loan. The balance of warrants remaining is 3,435,982.

Financial covenants as of 31 December 2019

Cash and deposits

Restricted cash

Liquidity (Liquidity covenant: minimum USD 65 million)

198.1

(9.7)

188.4

Sellers' credits
In January 2016, Cosco (Qidong) Offshore Co. Ltd. granted a sellers’ credit of around USD 29 million as
a reduction on the final delivery instalment of the Safe Notos. In August 2016, further amendment
was made to the existing payment schedule. It was agreed that the first instalment of USD 2.3
million was to be paid in October 2016 and thereafter USD 0.3 million monthly until December
2019, except August 2018 instalment of USD 0.7 million. The remaining balance of the sellers’ credit
amount together with the annual interest of 4.35% was due to be repaid in a single payment on or
before December 2019. The company’s final payment of approx. USD 18.5 million (final instalment

and accrued interest) owed and due under the sellers credit to Cosco for the Safe Notos has not been
made. This payment is subject to certain contractual subordination and coordination arrangements
with the financial lenders, and discussions with Cosco on this payment are ongoing.

Cosco (Qidong) Offshore Co. Ltd. granted a sellers’ credit of USD 99.4 million on the final delivery
instalment of the Safe Eurus in 2019.

Modification of amortised cost - Sellers Credits
In 2019 Prosafe has taken delivery of Safe Eurus and issued a promissory note with a principal amount
of USD 99.4 million to COSCO Shipping (Qidong) Offshore Co. Ltd. As the partial payment for the
vessel is deferred beyond normal credit terms, the cost of the vessel is the cash price equivalent at the
recognition date. The Safe Eurus promissory note is initially recognised at fair value and subsequently
measured at amortised cost. The fair value of the below-market loan is measured as the present value
of the expected future cash flows, discounted using an appropriate market related rate. The applicable
discounting rate is similar to the rate charged by the credit facilities lenders of 3-months USD Libor
plus 3.35% per annum. The difference between the cash price equivalent and the principal amount of
the promissory note is determined to be USD 25.4 million. This amount will be recognised as interest
over the period of credit. The repayment schedule and interest expense on the promissory note
depends on the financial performance of the vessel. The final expected maturity date is December
2027.

Loan Classification
A liability that is repayable on demand, if loan conditions have been breached and the waiver does not
provide a period of grace ending at least 12 months after the reporting date, is classified as current
(IAS 1.75).

Although the Group is compliant with the financial covenants as stated above, there are also
certain provision agreements (such as entering into negotiations of refinancing with lenders or the
Group having a forecasted negative group equity in early 2020) under the loan agreement that may
constitute an event of default. This provides the lenders with the right to repayment on demand.
However, the compliance with these provisions are judgmental and the Group does not have
sufficient legal clarity on breaching the provisions as at 31 December 2019 and therefore requested
and was granted a temporary waiver from lenders in December. The temporary waiver granted by the
lenders in 2019 which initially expired on 29 February 2020 does not have sufficient grace period of
more than 12 months after the reporting date and would therefore not impact the reclassification as
at 31 December 2019.

NOTE 16: OTHER CURRENT LIABILITIES

Various accrued costs

Accrued interest costs

Contract liabilities
Accrued layup costs 1)

Total interest-free current liabilities

1) Refer to note 23 for details on the reversal of accrued layup costs.

2019

17.3

13.7

2.6

0.0

33.6

2018

18.1

14.1

9.4

16.6

58.2

NOTE 17: MORTGAGES AND GUARANTEES

2019
As of 31 December 2019, the Group’s interest-bearing debt secured by mortgages totalled USD
1,314.1 million. The debt was secured by mortgages on the accommodation/service vessels Safe
Bristolia, Safe Caledonia, Safe Concordia, Safe Scandinavia, Regalia, Safe Boreas, Safe Zephyrus
and Safe Notos (net carrying value USD 1,002.6 million). Safe Bristolia is sold for recycling in 2020.
Negative pledge clauses apply on shares in the vessel owning subsidiaries. Earnings accounts are
pledged as security for the credit facilities, but cash will only be restricted if a continuing event of
default occurs.

A bank guarantee has been issued on behalf of Prosafe Rigs Pte. Ltd. in favour of Westcon Yards
AS, amounting to NOK 245 million at 31 December 2019. This bank guarantee is secured by a cash
deposit of USD 5 million and a counter bank guarantee of USD 30 million issued under the USD 1,300
million facility.

As at 31 December 2019, the Group had issued parent company guarantees to clients and vendors
on behalf of its subsidiaries in connection with the award and performance of contracts totalling
approximately USD 183.5 million and a parent company guarantee and indemnity relating to the
bank guarantee referred to above. The amounts specified with regard to parent company guarantees
reflect the sum of the estimated capped liability under the relevant agreements.

2018
As of 31 December 2018, the Group’s interest-bearing debt secured by mortgages totalled USD 1,192
million. The debt was secured by mortgages on the accommodation/service vessels Safe Bristolia,
Safe Caledonia, Safe Concordia, Safe Scandinavia, Regalia, Safe Boreas, Safe Zephyrus and Safe Notos
(net carrying value USD 1,422.6 million). Negative pledge clauses apply on shares in the vessel owning
subsidiaries. Earnings accounts are pledged as security for the credit facilities, but cash will only be
restricted if a continuing event of default occurs.

A bank guarantee has been issued on behalf of Prosafe Rigs Pte. Ltd. in favour of Westcon Yards
AS, amounting to NOK 245 million at 31 December 2018. This bank guarantee is secured by a cash
deposit of USD 5 million and a counter bank guarantee of USD 30 million issued under the USD 1,300
million facility.

As at 31 December 2018, the Group had issued parent company guarantees to clients and vendors
on behalf of its subsidiaries in connection with the award and performance of contracts totalling
approximately USD 201 million and a parent company guarantee and indemnity relating to the bank
guarantee referred to above. The amounts specified with regard to parent company guarantees reflect
the sum of the estimated capped liability under the relevant agreements.

NOTE 18: FINANCIAL ASSETS AND LIABILITIES

As of 31 December 2019, the group had financial assets and liabilities in the following categories:

Financial
assets
measured at
amortised
cost

Fair value
through
profit and
loss

Financial
liabilities
measured at
amortised
cost

Carrying
value

Fair value

198.1

8.0

6.9

213.0

0.0

27.6

0.0

198.1

8.0

6.9

8.0

6.9

213.0

1 308.1

89.6

0.0

3.1

0.2

33.6

2.3

89.6

27.6

3.1

0.2

33.6

2.3

89.6

27.6

3.1

0.2

33.6

2.3

27.6

1 436.9

1 464.5

Year ended 31 Dec 2019

Cash and deposits

Accounts receivable

Other current assets

Total financial assets

Credit facilities

Seller Credits

Fair value interest rate swaps

Accounts payable

Lease liabilities

Other current liabilities

Other non-current liabilities

Total financial liabilities

Management assessed the cash and deposits, accounts receivables, other current assets, accounts
payable and other current liabilities to approximate their carrying amounts largely due to the short-
term maturities of these instruments.

The Group enters into derivative financial instruments with various counterparties, principally
financial institutions with investments grade credit ratings. Derivatives valued using valuation
techniques with market observable inputs are mainly interest rate swaps and caps. The most
frequently applied valuation techniques include forward pricing and swap models, using present value
calculations. The models incorporate various inputs including the credit quality of counterparties and
interest rate and forward rate curves. All derivative contracts are secured under the USD 1,300 million
credit facility.

Year ended 31 Dec 2019

Fair value interest rate swaps

Total financial liabilities

Total

(27.6)

Level 1

Level 2

Level 3

0.0

(27.6)

0.0

As of 31 December 2018, the group had financial assets and liabilities in the following categories:

Financial
assets
measured at
amortised
cost

Fair value
through
profit and
loss

Financial
liabilities
measured at
amortised
cost

Carrying
value

Fair value

140.3

25.2

12.8

0.0

178.3

0.0

1.3

1.1

2.4

0.0

16.1

0.0

140.3

25.2

12.8

1.3

1.1

25.2

12.8

1.3

1.1

180.7

1 224.0

1 215.0

19.0

0.0

2.2

58.2

2.4

19.0

16.1

2.2

58.2

2.4

19.0

16.1

2.2

58.2

2.4

16.1

1 305.8

1 321.9

1 312.9

Year ended 31 Dec 2018

Cash and deposits

Accounts receivable

Other current assets

Fair value interest rate caps

Fair value interest rate swaps

Total financial assets

Credit facilities 1)

Seller Credits

Fair value interest rate swaps

Accounts payable

Other current liabilities

Other non-current liabilities

Total financial liabilities

1) Fair value reflects current market conditions with the assumption that the credit margin would

increase from the actual 274 basis points to 299 basis points. The net present value of the interest
advantage, discounted with USD 5-year swap rate, is around USD 9 million.

Year ended 31 Dec 2018

Fair value interest rate caps

Fair value interest rate swaps

Total financial assets

Fair value interest rate swaps

Total financial liabilities

Total

Level 1

Level 2

Level 3

1.3

1.1

2.4

(16.1)

0.0

1.3

1.1

2.4

(16.1)

0.0

Assets measured at fair value in the consolidated statement of financial position

The Group uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 -

Inputs other than quoted prices included within level 1 that are observable for assets
or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Inputs for assets or liabilities that are not based on observable market data (unobservable inputs).

Level 3 -

The currency forwards and interest swaps are valued based on current exchange rates and forward curves.

NOTE 19: FINANCIAL RISKS AND DERIVATIVE FINANCIAL INSTRUMENTS

The Group operates on a global basis with cash flows and financing in various currencies. This means
that the Group is exposed to market risks related to fluctuations in exchange rates and interest rates.
The Group's presentation currency is USD, and financial risk exposure is managed with financial
instruments in accordance with internal policies and standards approved by the board of directors.

Currency risk
The Group is exposed to currencies other than USD associated with operating expenditure, capital
expenditure, tax, cash and deposits. Operating expenditure, capital expenditure and tax are mainly
denominated in GBP, BRL and NOK. However, cash and deposits are mainly denominated in USD, GBP
and NOK.

Currency risk - sensitivity
The sensitivity analysis is based on a reasonably possible change in the relevant exchange rates and
reflects the main effects on profit or loss and equity assuming that the change had occurred at the
balance sheet date. A 10% strengthening/weakening of the USD against NOK and GBP will have the
following effects. Exposures to foreign currency changes for all other currencies are not material.
OCI in the table below refers to Other Comprehensive Income.

Pre-tax effects

USD +10%

Re-valuation cash and deposits

Total

USD - 10%

Re-valuation cash and deposits

Total

2019

2018

Income state-
ment effect

OCI
effect

Income state-
ment effect

OCI
effect

(1.2)

1.2

0.0

(7.1)

7.1

0.0

Interest rate risk
Interest on debt is in principle floating, but has been hedged to reduce the variability of cash flows
in the interest payments through the use of interest rate swaps and caps agreements. The Group
evaluates the hedge profile in relation to the repayment schedule of its loans, the Group’s portfolio
of contracts, cash flow and cash in hand. The interest rate risk is largely hedged by the use of interest
rate swaps or cap structures for normally 70-100% of the debt.

Interest rate risk - sensitivity
The sensitivity analysis is based on a reasonably possible change in the relevant forward curves and
reflects the main effects on profit or loss and equity assuming that the change had occurred at the
balance sheet date. A forward curve shift of ±50bps (2018: ±50bps) is applied in the analysis.

2019

2018

Income
statement effect

OCI
effect

Income
statement effect

OCI
effect

Pre-tax effects

Forward curve +50bps (2018: +50bps)

Re-valuation interest rate swaps

Re-valuation interest rate caps

Total

Forward curve -50bps (2018: -50bps)

Re-valuation interest rate swaps

Re-valuation interest rate caps

Total

5.3

0.1

5.4

(5.4)

0.0

(5.4)

0.0

8.3

2.2

10.5

(8.4)

(0.8)

(9.2)

Changes in other comprehensive income related to financial instruments
The following changes in other comprehensive income were related to financial instruments:

Re-valuation interest rate swaps

Total

2019

0.0

2018

48.3

Due to the ceased hedge accounting for its interest rate swaps, in 2018, the Group has assessed
the discontinued cashflow hedge reserve balance and concluded that the amount is not expected
to be recovered in the future periods due to the interest rate development and forward curve. As a
consequence of this assessment, the reserve balance of USD 48.3 million was taken into profit or
loss in 2018. See note 10 on amortisation relating to abandonment of hedge recognised as financial
expenses.

Credit risk
In line with industry practice, other contracts normally contain clauses which give the customer an
opportunity for early cancellation under specified conditions. Providing the Group has not acted
negligently, however, the effect on results in such cases will normally be wholly or partly offset by a
financial settlement in the company’s favour. Following a potential notice of convenience termination,
the customer will have to pay the Group a substantial part of the remaining contract value.

Credit assessment of financial institutions issuing guarantees in favour of the Group, yards,
sub-contractors and equipment suppliers is part of the Group’s project evaluations and risk analyses.

The counterparty risk is in general limited when it comes to the Group’s clients, since these are
typically major oil companies and national oil companies.

For trade receivables, the Group applies the simplified method of credit reserves, i.e. the reserve will
correspond to the expected loss over the whole life of the trade receivable. In order to measure the
credit losses, trade receivable are grouped based on credit risk characteristics of its customers.

The Group applies forward-looking variables for expected credit losses. As at 31 December 2019, no
credit reserve has been recorded as the Group's clients are typically major oil companies and national
oil companies and the receivables are usually received within 3 months. The expected credit loss is
not material.

Accounts receivables

31 December 2019

31 December 2018

Total

8.0

25.2

Not due

< 30 days 30 - 60 days

61-90 days

> 90 days

5.7

25.1

0.1

0.0

1.7

0.0

0.5

0.1

0.0

Liquidity risk
Prosafe manages liquidity and funding on a group level. Prosafe is exposed to liquidity risk in a
scenario when the Group’s cash flow from operations is insufficient to cover payments of financial
liabilities. The continued challenging environment in the oil and gas industry has increased the risk of
reduced charter revenues in the short and mid term. Liquidity risk has become the most significant
risk for the Group. Due to the expected prolonged downturn and weaker outlook in the North Sea in
particular, it has led to a major impact on future earnings and backlog, and therefore on expected
future cash reserves. The Group monitors the liquidity development and the risk of insufficient
capital by rolling cash flow forecasts to determine whether the Group's liquidity position is above the
minimum cash covenant as per the loan agreements.

As of 31 December 2019, Prosafe had an unrestricted liquidity reserve totalling USD 188.6 million.
Under the existing credit facility agreements, the Group is required to maintain minimum liquidity
of USD 65 million. Despite the Group management's continued efforts in streamlining of the
organisation to reduce costs and preserve cash, the Group is anticipated to only be able to stay above
the minimum cash covenant level based on currently known information and commitments and all
else equal till around end 2020. The Group is similarly anticipated to stay cash positive based on the
same assumptions till around mid-2021. Most of the Group's mortgaged debt has been renegotiated
during the last few years and the Group is now in discussions with lenders to find a long-term
financial solution for the Group.

On 1 April 2020, the Group agreed a forbearance with a majority of its lenders across its two loan
facilities, respectively the USD 1,300 million facility and the USD 288 million facility, whereby such
lenders agreed not to accelerate, enforce or demand payment following non-payment and default
under the two loan facilities. The forbearance was initially granted for a period until 15 April 2020,
but could be extended by the lenders through a simplified process. Subsequently in mid-April 2020,
Prosafe agreed a further extension to the forbearance from the non-payments and defaults with a
majority of its lenders across its two loan facilities until 31 May 2020. As part of this, the Group will
continue to defer making payments of scheduled instalments and interests under both facilities.
Similarly, payment of the final instalment owed and due under the seller credit to Cosco for the
Safe Notos remains as reported on 14 April 2020 subject to ongoing discussions with Cosco and the
lenders. The Group's discussions with its lenders remain constructive and the efforts to create and
agree a long-term financial solution continue.

As of 31 December 2019, the Group's main financial liabilities had the following remaining contractual
maturities (assuming the extension option for the USD 1,300 million facility is not exercised and excluding
any lender's right to accelerated repayment as a consequence of breaches to the loan agreement):

Per year
Interest-bearing debt (repayments) 1)
Interests including interest rate swaps 2)

Taxes

Accounts payable and other current liabilities

Total

2020

2021

2022

2023

2024 →

33.4

71.7

13.3

36.7

143.2

1 160.4

63.8

0.0

5.1

0.0

155.1

207.0

1 165.5

6.0

0.0

6.0

84.4

1.0

0.0

85.4

1) Interest-bearing debt includes credit facilities and seller credits from Cosco.
2) Interest on credit facilities and seller credits. Based on average swap rate, 3m LIBOR as of mid
February 2020 and current agreed credit margin.

If the lenders are to require accelerated repayment, the maturities of the interest-bearing debt will be
as follows:

Per year
Interest-bearing debt (repayments) 1)

2020

1 330.9

2021

2.1

2022

4.0

2023

2024 →

6.0

84.4

The Group has ongoing dialogue with lenders on a long-term financial solution. This might include
further amendments to interest and instalments in the coming years.

As of 31 December 2018, the Group's main financial liabilities had the following remaining
contractual maturities (assuming the extension option for the USD 1,300 million facility is not
exercised):

Per year

Interest-bearing debt (repayments)
Interests including interest rate swaps 1)

Taxes

Accounts payable and other current liabilities

2019

34.0

69.3

14.7

60.4

2020

16.6

67.8

0.0

140.5

1 019.4

63.0

0.0

7.3

0.0

2021

2022

2023 →

Total

178.4

84.4

203.5

1 026.7

1) Based on average debt, 3m LIBOR as of mid February 2019 and expected credit margin.

0.0

As of 31 December 2018, the commitments under the USD 1,300 million credit facility were not fully
utilised. As of year-end, available amount under the revolving credit facility was USD 137 million. 50% of
the USD 288 million facility was drawn upon delivery of Safe Notos in February 2016. Initially there was a
second available tranche (Safe Eurus), which was cancelled in 2018 when financing for Eurus was agreed
with Cosco. Reference is made to note 15 for further information.

Capital management
The primary objective of the Group's capital management is to ensure that it maintains a healthy
capital structure in line with economic conditions. The Group manages the total of shareholders'
equity and long term debt as their capital. Normally, the Group's main tool to assess its capital
structure is the leverage ratio, which is calculated by dividing net interest-bearing debt including
bank guarantees, by Group gross profit before depreciation and impairment over the last 12 months.
Note that the Group is currently in dialogue with its lenders about a long term financial solution in
response to the severe downcycle in the industry and weakened market outlook.

NOTE 20: CASH AND DEPOSITS

Restricted cash deposits

Free cash and short-term deposits

Total cash and deposits

2019

2018

9.7

188.4

198.1

8.8

131.5

140.3

Under the existing credit facility agreements, the Group is required to maintain a minimum liquidity
of USD 65 million. See note 15 for details on financial covenants.

NOTE 21: OTHER CURRENT ASSETS

Other receivables

Prepayments

Stock

Other current assets

Total other current assets

2019

2018

1.9

2.1

1.7

1.2

6.9

8.2

1.7

2.0

0.9

12.8

NOTE 22: RELATED PARTY DISCLOSURES

The financial statements comprise the parent company, Prosafe SE, and the subsidiaries listed below.

Company name

Prosafe Services Maritimos Ltda

Prosafe Holding Limited

Prosafe Rigs (Cyprus) Limited

Prosafe Offshore Accommodation Ltd

Prosafe Offshore BV

Prosafe AS

Prosafe Management AS

Prosafe Offshore AS

Axis Nova Singapore Pte. Ltd.

Axis Vega Singapore Pte. Ltd.

Prosafe Offshore Asia Pacific Pte. Ltd.

Prosafe Offshore Employment Company Pte. Limited

Prosafe Offshore Holdings Pte. Ltd.

Prosafe Offshore Pte. Limited

Prosafe Offshore Services Pte. Ltd.

Prosafe Rigs Pte. Ltd.

Safe Eurus Singapore Pte. Ltd.

Prosafe (UK) Holdings Limited

Prosafe Offshore Limited

Prosafe Rigs Limited

Country

of incorporation Ownership

Brazil

Cyprus

Jersey

Netherlands

Norway

Singapore

United Kingdom

100 %

Voting

100 %

Transactions and outstanding balances within the Group have been eliminated in full.

Shares owned by senior officers and directors at 31 December 2019:
(includes shares owned by close family/relatives and wholly-owned companies)

Senior officers:

Jesper Kragh Andresen - CEO

Stig Harry Christiansen - DCEO and CFO

Ryan Duncan Stewart - CCO

Directors:

Glen Ole Rødland - Chairman

Svend Anton Mayer - Director

Nina Udnes Trondstad - Director

Birgit Aagaard-Svendsen - Director

Kristian Johansen - Director

84 067

54 000

45 260

3 000

*Mr Rødland has an indirect ownership interest in Prosafe due to his ownership interest in HitecVision VII, L.P.

NOTE 23: CAPITAL COMMITMENTS

New builds
As at 31 December 2019, the Group had two (2018: three) undelivered completed new builds residing
at COSCO's Qidong shipyard in China; Safe Nova and Safe Vega. (2018: Safe Nova, Safe Vega and Safe
Eurus)

Safe Eurus
In August 2018, the Group has entered into a revised agreement with COSCO relating to the delivery
of 3 new-builds at agreed terms. One key term of the new agreement is that if the Group successfully
takes delivery of the Safe Eurus by 31 December 2019 then COSCO will waive the accrued lay up costs.

In May 2019, a three-year contract was officially awarded to the Safe Eurus by Petrobras. Upon the
contract signed, the Group has made the decision of taking delivery of the vessel and COSCO has
agreed to waive the accrued lay up costs as per term in the revised agreement. As a consequence, the
accrued lay up costs of USD 16.6 million relating to the Safe Eurus have been reversed. In July 2019,
Prosafe has taken delivery of Safe Eurus.

Safe Nova and Safe Vega
In 2018, an agreement has been reached with COSCO. If the Group gives notice to COSCO within 5
years from August 2018 to take delivery of the vessels, the Group is committed to pay USD 25 million
each upon delivery of the vessel and the reminder of the costs will be financed by COSCO. Similarly
to Safe Eurus, repayment of yard finance and interest rates linked to future earnings and day rate
achieved.

NOTE 24: CONTINGENT ASSETS

On 8 March 2018, Stavanger City Court made a favourable decision in the court case regarding the
dispute with Westcon Yards AS (Westcon). The dispute between Westcon and the Group was related
to a substantial cost overrun of Westcon's price estimate for the conversion of the Safe Scandinavia
to a tender support vessel. Westcon claimed an additional compensation of approx. NOK 306 million
plus interest, whereas the Group disputed Westcon's claim and claimed a substantial repayment.
The Court decided in favour of the Group that Westcon must repay the Group NOK 344 million
plus interest and NOK 10.6 million of legal costs. In April 2018, Westcon has filed an appeal against
Stavanger City Court judgement and the Group has filed a counter appeal.

While awaiting the final outcome of the dispute, the Group considers the amount payable by Westcon
to be a contingent asset under IAS 37, and has therefore not recognised the amount per 31 December
2018 and 31 December 2019.

NOTE 25: EVENTS AFTER THE REPORTING DATE

Update in light of Covid-19 and the oil price crash
Developments in macro factors like Covid-19 and the oil price crash since early March 2020 have in a
tangible manner reminded us of our commercial risk exposure. Prosafe’s main priority is to safeguard
health, jobs, safety and liquidity and to deliver on its obligations to customers, lenders, owners and
other important stakeholders.

Parallel incidents with a pandemic occurring together with OPEC and Russia not being able to agree
and engaging in an oil price war have led experts to define this as a “double black swan” situation.
This has almost overnight resulted in a dramatic impact on the global macro economy, global ways
of living and working, oil prices and consequently capital markets and market outlook. Specifically,
the oil price has collapsed from USD 64 per barrel in early January 2020 to as low as USD 19 per barrel
in March 2020, a level that is below the break-even level for most onshore and offshore oil & gas
projects.

Oil companies have reacted quickly to these developments, and we have seen significant general cuts
in ongoing and planned activity and spending for 2020 and also 2021. As a result of this, the Group
has seen both cancellation of existing contracts as well as vessels being put on stand-by at somewhat
reduced rates. As of the reporting date, the amendment to existing contracts has no material impact
to the order book disclosed in note 4. However, the Group is at risk that further contract cancellations
or deferrals may occur which will have further negative impact on order backlog, activity and
earnings. As a consequence, the Group’s order books as disclosed in Note 4 may not fully materialise
in the respective years as initially scheduled. The Group will engage with customers to seek clarity and
amicable solutions to the extent possible when such events occur in order to protect its rights and
financial position.

Status financing
Prosafe is already in a process with its lenders to seek a sustainable financial solution after several
years of low activity across the industry and an unsustainable debt level. The “double black swan”
situation adds both urgency and complexity to this process and the Group will be concluding on a
revised business plan by late April as a basis upon which to plan ahead and seek a long term financial
solution with its lenders and other financial stakeholders. It cannot be ruled out that the revised

business plan may have significant impact on the estimated future cash flows of the Group and thus
also the carrying value of its assets. As at the date of this report, the Group is already in a negative
book equity situation and further and substantial impairments would reinforce that situation and
further underscore the need for reaching a solution with its lenders and financial stakeholders.

The Group has been continuously adjusting the organisation since 2016 and has seen the cost and
spend levels decrease significantly and towards a minimum level from a going concern perspective.
In addition, the Group has outsourced several competencies and services in order to both reduce
costs and achieve flexibility in the cost structure. As such, the Group is generally well placed to adapt
quickly to the dramatic developments.

On 1 April 2020, the Group agreed a forbearance with a majority of its lenders across its two loan
facilities, respectively the USD 1,300 million facility and the USD 288 million facility, whereby such
lenders agreed not to accelerate, enforce or demand payment following non-payment and default
under the two loan facilities. Both facilities require direction from lenders holding more than 2/3 of
the total commitment for the agent to initiate acceleration and enforcement steps. Consequently,
forbearance consent from 1/3 or above, will restrict such acceleration and enforcement steps. The
forbearance was initially granted for a period until 15 April 2020, but could be extended by the lenders
through a simplified process. Subsequently in mid-April 2020, Prosafe agreed a further extension to
the forbearance from the non-payments and defaults with a majority of its lenders across its two
loan facilities until 31 May 2020. As part of this, the Group will continue to defer making payments of
scheduled instalments and interests under both facilities. Similarly, payment of the final instalment
owed and due under the seller credit to Cosco for the Safe Notos remains as reported on 14 April 2020
subject to ongoing discussions with Cosco and the lenders.

The forbearance shows support for the Group to continue to operate, while lenders reserve their
rights, and secures stability for the Group while it continues to work with the lenders to agree on a
long term financial solution. Pending this, the Group continues to operate on a business as usual basis
to protect and create value through challenging market conditions.

Further, while operating under a forbearance agreement with its lenders, the Group has a strong
liquidity position and is anticipated to be able to stay above the minimum cash covenant level based
on currently known information and commitments and all else equal till around end 2020. The Group
is similarly anticipated to stay cash positive based on the same assumptions till around mid-2021.

Safe Bristolia
In March 2020, the Group has completed the sale of Safe Bristolia for recycling in accordance with all
relevant conventions.

PARENT COMPANY ACCOUNTS

INCOME STATEMENT - PROSAFE SE

(USD 1 000)

Note

2019

2018

Income from investments in subsidiaries

Impairment of shares in subsidiaries and associate

Results of investing activities

Operating expenses

Depreciation

Operating profit/(loss)

Interest income

Interest expenses

Other financial income

Other financial expenses

Net financial items

Loss before taxes

Taxes

Net loss

28 020

(393 250)

(365 230)

(9 573)

(374 803)

15 655

(36 679)

(16 815)

(37 839)

(412 642)

(1)

40 396

(9 324)

(10)

31 062

7 633

(172 683)

13 438

(9 847)

(161 459)

(130 397)

(35)

(412 643)

(130 432)

Attributable to equity holders of the company

(412 643)

(130 432)

STATEMENT OF COMPREHENSIVE INCOME - PROSAFE SE

(USD 1 000)

Net loss

2019

2018

(412 643)

(130 432)

Other comprehensive income to be reclassified to profit or loss in
subsequent periods

Net gain on cash flow hedges

47 985

Other comprehensive income that will not be reclassified to
profit or loss in subsequent periods

Pension remeasurement

(151)

(822)

Total comprehensive loss for the year, net of tax

(412 794)

(83 269)

Attributable to equity holders of the company

(412 794)

(83 269)

STATEMENT OF FINANCIAL POSITION - PROSAFE SE

(USD 1 000)

ASSETS

Tangible assets

Shares in subsidiaries and in an associate

Intra-group receivables

Derivatives

Total non-current assets

Cash and deposits

Other current assets

Total current assets

Total assets

EQUITY AND LIABILITIES

Share capital

Share premium reserve

Share capital reduction reserve

Total paid-in equity

Retained earnings

Convertible bonds

Warrants

Total equity

Intra-group non-current liabilities

Interest-bearing long-term debt

Derivatives

Interest-free long-term liabilities

Total long-term liabilities

Interest-bearing current debt

Accounts payable

Intra-group current liabilities

Other interest-free current liabilities

Total current liabilities

Total equity and liabilities

Note

31/12/19

31/12/18

12, 14

8, 14

12, 14

10 , 14, 15

14, 15

10, 15

14, 15

12, 14, 15

11, 14, 15

1 089 036

1 553 203

274 693

248 525

2 452

1 363 745

1 804 180

90 900

5 629

96 529

16 024

261

16 285

1 460 274

1 820 465

9 030

9 021

1 037 584

1 037 353

71 846

1 118 460

1 118 220

(1 045 728)

(639 395)

20 569

93 301

27 617

2 287

29 904

1 308 127

457

17 502

10 983

1 337 069

1 460 274

20 809

6 461

506 095

60 037

1 198 269

16 136

2 311

1 276 753

25 728

491

853

10 545

37 617

1 820 465

On 14 April 2020, the Board of Directors of Prosafe SE approved and authorised these financial
statements for issue.

Glen Ole Rødland

Non-executive Chairman

Birgit Aagaard-Svendsen

Kristian Johansen

Non-executive Director

Svend A. Maier

Non-executive Director

Nina Udnes Tronstad

Non-executive Director

Jesper K. Andresen

Chief Executive Officer

CASH FLOW STATEMENT - PROSAFE SE

(USD 1 000)

Note

2019

2018

Cash flow from operating activities

Loss before taxes

Unrealised currency loss on long-term debt

Depreciation

Impairment shares in subsidiaries and associate

Interest income

Interest expenses

Change in working capital

Taxes paid

Other items from operating activities

Net cash flow from operating activities

Cash flow from investing activities

Proceeds from sale of shares in subsidiaries

Acquisition of shares in subsidiaries

Change in intra-group balances

Interest received

Net cash flow from investing activities

Cash flow from financing activities

Repayment of interest-bearing debt

Proceeds from interest-bearing debt

Interest paid

Net cash flow used in financing activities

Net cash flow

Cash and deposits at 1 January

Cash and deposits at 31 December

(412 642)

(130 397)

1 261

393 250

(15 655)

36 679

(4 869)

(1)

13 766

11 790

(18 500)

18 600

15 655

15 755

(33 400)

155 000

(74 269)

47 331

74 876

16 024

90 900

7 547

(7 633)

172 683

(53)

(35)

(25 716)

16 406

217 374

(3 200)

(23 645)

7 633

198 162

(151 200)

(65 717)

(216 917)

(2 349)

18 373

16 024

STATEMENT OF CHANGES IN EQUITY - PROSAFE SE

(USD 1 000)

Note

capital

redemption

Retained

Convert-

Cash flow

premium

reserve

earnings

ible Bonds

hedges

War-

rants

Total

equity

Capital

Equity at 31
December 2017

Net loss

Other comprehen-
sive income

Total comprehen-
sive income1)

Conversion of
convertible bonds

Issue of warrants

Equity at 31
December 2018

Net loss

Other comprehen-
sive income

Total comprehen-
sive income 1)

Conversion of
convertible bonds

Warrants
cancellation

Equity at 31
December 2019

8 906

1 034 280

71 846

(508 142)

23 997

(47 985)

(130 432)

582 902

(130 432)

(822)

47 985

47 163

(131 254)

47 985

(83 269)

115

3 073

(3 188)

9 021

1 037 353

71 846

(639 395)

20 809

(412 643)

(151)

(412 794)

231

(240)

6 461

506 095

(412 643)

(151)

(412 794)

6 461

(6 461)

9 030

1 037 584

71 846

(1 045 728)

20 569

93 301

1) Total comprehensive income is attributable to the owners of the company

Nature and purpose of reserves
Share premium: The difference between the issue price of the shares and their nominal value.
The share premium account can only be resorted to for limited purposes, which do not include the
distribution of dividends, and is otherwise subject to the provisions of the Norwegian Accounting Act
on reduction of share capital.

NOTES - PROSAFE SE
All figures in USD 1 000 unless otherwise stated.

NOTE 1: ACCOUNTING POLICIES

The financial statements have been prepared in accordance with the International Financial Reporting
Standards (IFRS) endorsed by the European Union (EU) and the requirements of the Norwegian
Accounting Act. The accounting policies applied to the consolidated accounts have also been applied
to the parent company, Prosafe SE. The accounting policies adopted are consistent with those in the
previous financial years. The parent company financial statements should be read in conjunction with
the consolidated accounts. The notes to the consolidated accounts provide additional information to
the parent company's accounts which is not presented here separately. Specifically, note 2 and note
25 of the consolidated accounts describe further details relating to going concern, refinancing status
and subsequent events. The Company's functional currency is US dollars (USD), and the financial
statements are presented in USD. Investments in subsidiaries and in an associate are measured at
historic cost, unless there is any indication of impairment. In case of impairment, an investment is
written down to recoverable amount.

NOTE 2: OPERATING EXPENSES

Services from subsidiaries

Directors’ fees

Salaries and management bonus

Other remuneration

Payroll taxes

Pension expenses

Auditors' audit fees

Auditors' other fees

Legal fees

Other operating expenses

Total operating expenses

Board of directors

Glen Ole Rødland (Chairman)

Roger Cornish (Until May 2019)

Nina Udnes Tronstad( From May 2019)

Birgit Aagaard-Svendsen

Svend Anton Maier

Kristian Johansen

Total fees

2019

2018

2 914

491

971

235

(17)

109

4 106

711

9 573

3 877

578

1 300

154

(104)

1 703

1 658

9 324

Year

Board fees 1)

2019

128

101

491

Board of directors

Year

Board fees 1)

Glen Ole Rødland (Chairman)

Roger Cornish

Birgit Aagaard-Svendsen

Svend Anton Maier

Kristian Johansen

Nancy Ch. Erotocritou (until April 2018)

Total fees

2018

144

109

107

578

1) If applicable, figures include compensation from audit committee, nomination committee and

compensation committee.

Number of employees
The average number of employees in the Company for 2019 was 1 (2018: 4).

NOTE 3: TANGIBLE ASSETS

Acquisition cost 31.12.17

Additions

Disposals at acquisition cost

Acquisition cost 31.12.18 and 31.12.19

Accumulated depreciation 31.12.17

Accumulated depreciation on disposals

Depreciation for the year

Accumulated depreciation 31.12.18 and 31.12.19

Carrying value 31.12.18 and 31.12.19

Carrying value 31.12.17

Depreciation rate (%)

Equipment

Total

211

(211)

201

(211)

20-30

211

(211)

201

(211)

NOTE 4: OTHER FINANCIAL ITEMS

Fair value adjustment currency forwards

Fair value adjustment interest rate swaps

Fair value adjustment interest rate caps

Total other financial income

Fair value adjustment interest rate swaps

Fair value adjustment interest rate caps

Currency loss

Other financial expenses

Total other financial expenses

2019

2018

(12 553)

(1 294)

(1 088)

(1 880)

(16 815)

11 266

2 130

13 438

(8 379)

(1 469)

(9 847)

Total

15 655

NOTE 5: FINANCIAL ITEMS

Year ended 31 December 2019

Financial
assets
measured at
amortised cost

Fair value
through
profit and
loss

Financial
liabilities
measured at
amortised
cost

Interest income

Fair value adjustment currency forwards

Fair value adjustment interest rate swaps

Fair value adjustment interest rate caps

15 655

Total financial income

15 655

Interest expenses

Amortisation of borrowing costs

Fair value adjustment interest rate swaps

Fair value adjustment interest rate caps
Currency loss 1)
Modification of amortised cost 2)
Modification of amortised cost 3)

Subtotal

Other financial expenses excluding
currency loss

Total financial expenses

(12 553)

(1 294)

(74 609)

(5 921)

28 763

15 089

(5 921)

(12 553)

(1 294)

(1 088)

28 763

15 089

(13 847)

(36 679)

(51 614)

(1 880)

(13 847)

(38 559)

(53 494)

Net financial items

15 655

(13 847)

(38 559)

(37 839)

Year ended 31 December 2018

Financial
assets
measured at
amortised cost

Fair value
through
profit and
loss

Financial
liabilities
measured at
amortised
cost

Interest income

Fair value adjustment currency forwards

Fair value adjustment interest rate swaps

Fair value adjustment interest rate caps

Total financial income

7 633

11 266

2 130

13 438

Total

7 633

11 266

2 130

21 071

Interest expenses
Currency loss 1)
Modification of amortised cost 2)

Amortisation relating to abandonment
of hedge accounting 3)

Subtotal

Other financial expenses excluding
currency loss

Total financial expenses

(67 865)

(56 833)

(67 865)

(8 379)

(56 833)

(47 985)

(172 683)

(181 061)

(1 469)

(174 151)

(182 530)

Net financial items

7 633

13 438

(174 151)

(161 459)

1) Excluded from the category breakdown, but added to the total for net effect.
2) See note 15 of the consolidated accounts relating to modification of amortised cost.
3) For further information, see note 15 of the consolidated accounts relating to the modification of

amortised cost and note 19 of the consolidated accounts for amortisation relating to abandonment
of hedge accounting.

NOTE 6: TAXES

Taxes

Total taxes in income statement

Temporary differences:

Loss carried forward

Basis for deferred tax liability (+)/benefit (-)

Deferred tax liability (+)/benefit (-)

Taxes payable at 31 December

2019

2018

(182 900)

The corporate tax rate in Norway for 2019 is 22% (2018 is 23%).
The value of the deferred tax assets is not recognised in the accounts as the probability of having
sufficient future taxable profit to utilise the deferred tax assets as tax deductions cannot be
established.

Reconciliation of effective tax rate (IAS 12.81)

Tax rate

Loss before taxes

Tax based on applicable tax rate

Tax effect of non-deductible expenses

Tax on income not taxable in determining taxable profit

Tax effect due to unrecognized deferred tax assets

Special contribution to defence fund

Tax charge

NOTE 7: SHARES IN SUBSIDIARIES AND IN AN ASSOCIATE

(Share capital, carrying value and total equity in 1 000)

2019

2018

22.0 %

23.0 %

(412 642)

(130 397)

(90 781)

84 060

(996)

7 716

(29 991)

11 040

(9 291)

28 242

2019

Ownership

Carrying

Equity at

Carrying

Companies

& Voting

No of

value at 31

Dec. 2019

31 Dec.
2019 5)

value at 31

Dec. 2018

Prosafe AS1)
Prosafe Offshore AS1)
Prosafe Management AS1)
Prosafe (UK) Holdings Limited2)
Prosafe Offshore Pte. Limited3)
Prosafe Offshore Services Pte. Ltd.3)
Prosafe Offshore Asia Pacific Pte. Ltd.3)
Prosafe Rigs Pte. Ltd.3)
Prosafe Offshore Holdings Pte. Ltd.3)
Dan Swift (Singapore) Pte. Ltd.4)

Total

100 %

91 %

100 %

100

2 000

646 050

150

58 904

59 843

48 036

270

9 826

72 643

150

8 996

935

2 481

270

9 826

67 992

222 099

879

393

150

2 519

925 521

884 890

1 259 599

21 700

16 009

1 089 036

3 200

10 000

1 553 203

The registered address of the subsidiaries and associated company are as follows:
1) Forusparken 2, N-4031 Stavanger, Norway
2) 1st Floor,10 Temple Back Bristol BS1 6FL , United Kingdom
3) 1 International Business Park, #09-03 The Synergy, Singapore 609917
4) 1 Harbourfront Avenue, #16-08, Keppel Bay Tower, Singapore 098632

5) The equity value represents only the parent company's interest in its subsidiaries.

In 2019, the Company invested an additional approximately USD 1.2 million into Dan Swift (Singapore)
Pte Ltd. In the same year the Company fully disposed the shares in Dan Swift (Singapore) Pte Ltd to a third
party for a nominal consideration.

In 2019, the Company has increased the investment in Prosafe AS by offsetting the amount due from
Prosafe AS.

In 2019, Prosafe Rigs Pte Ltd has returned USD 101.4 million to the Company as a reduction in capital.
The reduction of capital was settled by offsetting the amount due to Prosafe Rigs Pte Ltd.

Based on management's assessment of indicators of impairment, there are triggers which indicate that
investment in subsidiaries requires impairment. No impairment was done in 2018.

In the income statement for 2019, the following impairment charges were made:
Prosafe Rigs Pte Ltd USD 232.6 million, Prosafe Offshore Pte Ltd USD 149.5 million, Dan Swift (Singapore)
Pte Ltd USD 11.2 million.

There are mortgages on the shares in Prosafe Rigs Pte Ltd and Prosafe Offshore Pte Ltd. Please refer to
note 13.

NOTE 8: OTHER CURRENT ASSETS

Current receivables due from subsidiaries

Other current assets

Total other current assets

NOTE 9: SHARE CAPITAL, CONVERTIBLE BONDS AND WARRANTS

2019

2018

5 065

564

5 629

254

261

2019

2018

Issued and paid up number of ordinary shares at 31 December

81 864 212

81 784 212

Shares to be issued under convertible bond agreements

Shares to be potentially issued under warrants agreement with
lenders

Unissued shares authorised

Total Authorised number of shares at 31 December

Nominal value at 31 December

Number of shareholders at 31 December

Ordinary shares

In issue at 1 January

6 122 790

3 435 982

6 202 790

9 780 000

42 480 175

91 422 984

140 247 177

EUR 0.10

4 706

4 929

81 784 212

80 725 809

Issued in connection with conversion of convertible bonds

80 000

1 058 403

In issue at 31 December fully paid up

81 864 212

81 784 212

Convertible bonds

2019

2018

No. of shares
convertible

Value

Opening balance as at 31 December

6 202 790

20 809

7 261 194

Conversion of convertible bonds

(80 000)

(240)

(1 058 404)

Ending balance as at 31 December

6 122 790

20 569

6 202 790

For further information, see note 14 of the consolidated accounts.

Value

23 997

(3 188)

20 809

Warrants
As part of the USD 1,300 million credit facility refinancing concluded in 2018, the Company has issued
the warrants to those lenders having elected to receive such instead of increased margins. In total,
9,779,993 warrants have been issued, each of which gives right to subscribe for one new share in the
company at a subscription price of NOK 21.37. Of these, 5,141,021 warrants are conditional inter alia
on the Group taking delivery of Safe Nova and/or Safe Vega, and the remaining 4,638,972 warrants
on the Group taking delivery of both Safe Nova and Safe Vega. The warrants will be exercisable any
time from and subject inter alia to the Group taking delivery of Safe Nova and/or Safe Vega and the
next 3 years from such respective delivery dates, however so that any duration exceeding 5 years
from the date of the Extraordinary General Meeting will be subject to approval of such extension
by a subsequent general meeting. The Warrants are expected to be subject to certain customary
adjustment mechanisms, including upon a failure to timely provide extension approval in which
case the subscription price will be set to nominal value.

In November 2019, Prosafe has issued letters to lenders to reconsider the election of warrants with
the conditional increase in the applicable margin. This modification is at the request of the lenders.
Out of the 9,779,993 warrants issued in 2018, 6,344,011 of the warrants have been cancelled
and replaced with the conditional increase of the applicable margin of the loan. The balance of
warrants remaining is 3,435,982. The difference between the opening balance in equity and the fair
value of the liability at the reclassification was recognised directly in equity on derecognition.

The remaining warrants are reclassified to financial liabilities. No profit or loss is recognised on the
reclassification. The warrants are measured at fair value, but are severely out of the money and
the amount is not material as at 31 December 2019. For further information, see note 15 of the
Consolidated Accounts.

NOTE 10: INTEREST-BEARING DEBT

Credit facility

Modification of the amortised cost - credit facilities

Unamortised borrowing costs

Total interest-bearing debt

Long-term interest-bearing debt

Current interest-bearing debt

Total interest-bearing debt

2019

2018

1 314 103

1 191 999

6 731

(12 707)

50 583

(18 585)

1 308 127

1 223 997

1 198 269

1 308 127

25 728

1 223 997

For further information, see note 15 of the consolidated accounts.

Reconciliation of movements of interest-bearing debt

to cash flows arising from financing activities

2019

2018

At 1 January

1 223 997

1 324 901

Changes from financing cash flows

- Proceeds from new interest-bearing debt

- Repayments of interest-bearing debt

- Interest paid

Total changes from financing cash flows

Other liability-changes

- Non cash movement in interest bearing debt

- Interest paid

- Interest expense rolled to credit facilities

Total liability-related changes

155 000

(33 400)

(74 269)

47 331

(151 200)

(65 717)

(216 917)

(37 974)

74 269

504

36 799

44 196

65 717

6 100

116 013

At 31 December

1 308 127

1 223 997

NOTE 11: OTHER INTEREST-FREE CURRENT LIABILITIES

Accrued interest costs

Other current liabilities

Total other interest-free current liabilities

2019

2018

9 802

1 181

10 983

9 922

623

10 545

NOTE 12: INTRA-GROUP BALANCES

NOK loan to Prosafe AS

USD loan to Prosafe Offshore Holdings Pte. Ltd.

USD loan to Safe Eurus Singapore Pte. Ltd.

Intra-group long-term receivables

2019

2018

93 725

65 765

115 203

274 693

126 177

62 311

60 037

248 525

Loan agreements with subsidiaries are based on market prices using 3M NIBOR (NOK loan) and 3M
LIBOR (USD loan) interest rates plus a margin of 2.15% (2018: 2.15%) and 3.25-3.70% (2018: 3.25-
3.40%) per annum respectively. Outstanding balances at year-end are unsecured, and settlement
normally occurs in cash or via share capital injection.

USD loan from Prosafe Rigs Pte. Ltd.

Intra-group long-term payables

2019

2018

60 037

In 2018, loan agreements with a subsidiary are based on market prices using 3M LIBOR (USD loan)
interest rates plus a margin of 3.4% per annum. The loan is repaid by a capital reduction in the
investment in Prosafe Rigs Pte Ltd.

Transactions with related parties

2019

2018

Transactions

Sale of Investment in subsidiaries to Prosafe Offshore
Holdings Pte. Ltd.

Administrative income from subsidiaries

Administrative expenses due to subsidiaries

Interest income

Interest expenses

Group contribution from subsidiaries

Dividends from subsidiaries

(2 914)

12 427

(3 291)

23 491

4 529

60 915

(3 880)

6 348

(271)

40 396

Prosafe AS and Prosafe Management AS are performing services on behalf of Prosafe SE relating
to management, corporate activities, investor relations, financing and insurance. The services are
invoiced on a monthly basis and paid on market terms. Please refer to note 6 to the consolidated
accounts for disclosure of remuneration to directors.

Year-end balances

Current receivables due from subsidiaries

Intra-group long-term receivables

Intra-group long-term payables

Current payables due to subsidiaries

2019

2018

5 065

274 693

(17 502)

248 525

(60 037)

(853)

Current receivables are not subject to any interest calculation. The short-term payables to subsidiaries
are subject to interest rates from 3M LIBOR (USD loan) interest rates plus a margin of 3.2% per annum.
(2018: 0% to 3M LIBOR (USD loan) interest rates plus a margin of 2.15% per annum). The balances will
be settled on ordinary market terms.

NOTE 13: MORTGAGES AND GUARANTEES

2019
As of 31 December 2019, the Company’s interest-bearing debt secured by mortgages totalled USD
1,314.1 million. The debt was secured by mortgages on the accommodation/service vessels Safe
Bristolia, Safe Caledonia, Safe Concordia, Safe Scandinavia, Regalia, Safe Boreas, Safe Zephyrus
and Safe Notos (net carrying value USD 1,002.6 million). Safe Bristolia is sold for recycling in 2020.
Negative pledge clauses apply on shares in the vessel owning subsidiaries. Earnings accounts are
pledged as security for the credit facilities, but cash will only be restricted if a continuing event of
default occurs.

2018
As of 31 December 2018, the Company's interest-bearing debt secured by mortgages totalled USD
1,192 million. The debt was secured by mortgages on the accommodation/service vessels Safe
Bristolia, Safe Caledonia, Safe Concordia, Safe Scandinavia, Regalia, Safe Boreas, Safe Zephyrus and
Safe Notos (net carrying value USD 1,422.6 million). Negative pledge clauses apply on shares in the
vessel owning subsidiaries. Earnings accounts are pledged as security for the credit facilities, but cash
will only be restricted if a continuing event of default occurs.

As at 31 December 2018, Prosafe had issued parent company guarantees to clients and vendors
on behalf of its subsidiaries in connection with the award and performance of contracts totalling
approximately USD 201 million and a parent company guarantee and indemnity relating to the bank
guarantee referred to above. The amounts specified with regard to parent company guarantees reflect
the sum of the capped liability under the relevant agreements.

NOTE 14: FINANCIAL ASSETS AND LIABILITIES

Year ended 31 Dec 2019

Intra-group long-term receivables

Cash and deposits

Other current assets

Fair value interest rate caps

Total assets

Credit facility

Fair value interest rate swaps

Accounts payable

Interest-free long-term liabilities

Intra-group current liabilities

Other interest free current liabilities

Total liabilities

Year ended 31 Dec 2018

Intra-group long-term receivables

Cash and deposits

Other current assets

Fair value interest rate caps

Fair value interest rate swaps

Total assets

Credit facility

Fair value interest rate swaps

Accounts payable

Interest-free long-term liabilities

Intra-group non-current liabilities

Intra-group current liabilities

Other interest free current liabilities

Total liabilities

Financial
assets
measured at
amortised
cost

Fair value
through
profit
and loss

Financial
liabilities
measured at
amortised
cost

274 693

90 900

5 629

371 222

Carrying
value

274 693

90 900

5 629

371 238

1 308 127

27 617

457

2 287

17 502

10 983

27 617

457

2 287

17 502

10 983

27 617

1 339 356

1 366 973

Financial
assets
measured at
amortised
cost

Fair value
through
profit
and loss

Financial
liabilities
measured at
amortised
cost

248 525

16 024

261

264 810

1 310

1 142

2 452

Carrying
value

248 525

16 024

261

1 310

1 142

267 262

1 223 997

16 136

491

2 311

60 037

853

16 136

491

2 311

60 037

853

10 545

16 136

1 298 233

1 314 369

For further information, see note 18 of the consolidated accounts.

NOTE 15: MATURITY PROFILE LIABILITIES

As of 31 December 2019, the Company's main financial liabilities had the following remaining
contractual maturities (assuming the extension option for the USD 1,300 million facility is not
exercised and excluding any lender's right to accelerated repayment as a consequence of breaches to
the loan agreement):

Year ended 31 December 2019

2020

2021

2022

2023

Interest-bearing debt (repayments) 1)

Interests incl interest swaps

Intra-group current liabilities

Accounts payable

16 600

71 700

17 502

457

Other interest-free current liabilities

10 983

140 500

1 157 003

63 800

5 100

Total

117 242

204 300

1 162 103

2024
onwards

1) If the lenders are to require accelerated repayment, the maturities of the interest-bearing debt will

be brought forward entirely to year 2020.

Year ended 31 December 2018

2019

2020

2021

2022

2023
onwards

79 500

16 600

140 500

1 019 900

67 800

63 000

7 300

84 400

203 500

1 027 200

79 500

Interest-bearing debt (repayments)

Interests incl interest swaps

Intra-group non-current liabilities

Intra-group current liabilities

Accounts payable

Other interest-free current liabilities

Total

15 000

69 300

853

491

10 545

96 188

NOTE 16: FINANCIAL RISKS

Interest rate risk
Interest on debt is in principle floating, but has been hedged to reduce the variability of cash flows
in the interest payments through the use of interest rate swap and interest rate cap agreements.
The Company evaluates the hedge profile in relation to the repayment schedule of its loans, the
subsidiaries' portfolio of contracts, cash flow and cash in hand. The interest rate risk is largely hedged
by the use of interest rate swaps or cap structures for normally 70-100% of the debt.

As of 31 December 2019, the Company's hedging agreements totalled USD 1,000 million:

Notional amount

USD 225 million

USD 135 million

USD 120 million

Sub total

Notional amount

USD 160 million

USD 240 million

Sub total

Total

Fixed rate

Maturity

Swap type

(USD 1 000)

Fair value

2.4440 %

2.3630 %

1.5330 %

2.1280 %

2022

Bullet

Capped rate

Maturity

3.0000 %

2021

2022

(14 090)

(6 584)

(2 014)

(4 929)

(27 617)

Fair value

(USD 1 000)

(27 601)

Fair value of interest rate swap and interest cap agreements are estimated using quoted market
prices. The fair value estimates the gain or loss that would have been realised if the contracts had
been closed out at the balance sheet date.

Pre-tax effects

Forward curve +50bps (2018: +50bps)

Re-valuation interest rate swaps

Re-valuation interest rate caps

Total

Forward curve -50bps (2018: -50bps)

Re-valuation interest rate swaps

Re-valuation interest rate caps

Total

2019

2018

Income
statement effect

OCI
effect

Income
statement effect

OCI
effect

5 294

110

5 404

(5 361)

(15)

(5 376)

8 276

2 227

10 503

(8 422)

(778)

(9 199)

Changes in other comprehensive income related to financial instruments
The following changes in other comprehensive income were related to financial instruments:

Re-valuation interest rate swaps

Total

2019

2018

47 985

The Company ceased hedge accounting for its interest rate swaps on 30 June 2016. Under IFRS 9,
when an entity discontinues hedge accounting for a cash flow hedge and the amount accumulated in
the cash flow hedge reserve is a loss, this amount should be immediately reclassified from the reserve
into profit or loss if the entity does not expect the loss will be recovered in one or more future periods.
The Company has assessed the discontinued cash flow hedge reserve balance and concluded that the
amount is not expected to be recovered in the future periods due to the interest rate development
and forward curve. As a consequence of this assessment, the reserve balance of USD 47,985,000 is
taken into profit or loss in 2018.

Currency risk
The Company's operating expenses are primarily denominated in EUR and NOK, and the operating
result is therefore exposed to currency risk relating to fluctuations in the EUR and NOK exchange rates
versus the USD.

The Company is exposed to currencies other than USD associated with interest-bearing debt, cash
and deposits. Cash and deposits are mainly denominated in USD, GBP, EUR and NOK and the interest
bearing debt to Prosafe AS in NOK.

Currency risk - sensitivity
The sensitivity analysis is based on a reasonably possible change in the relevant exchange rates and
reflects the main effects on profit or loss and equity assuming that the change had occurred at the
balance sheet date. A 10% strengthening/weakening of the USD against NOK, EUR and GBP will have
the following effects. Exposures to foreign currency changes for all other currencies are not material.
OCI in the table below refers to Other Comprehensive Income.

Pre-tax effects

USD +10%

Re-valuation cash and deposits

Re-valuation NOK Loan to Prosafe AS

Total

USD -10%

Re-valuation cash and deposits

Re-valuation NOK Loan to Prosafe AS

Total

2019

2018

Income
statement effect

OCI
effect

Income
statement effect

OCI
effect

(300)

9 084

8 784

300

(9 084)

(8 784)

(638)

11 720

11 082

638

(11 720)

(11 082)

Credit risk
The Company is exposed to credit risk in relation to the inter-company loan to three subsidiaries,
Prosafe AS, Prosafe Offshore Holdings Pte Ltd & Safe Eurus Singapore Pte Ltd. See note 12 for details
about the intra-group loan.

Liquidity risk
The Company is exposed to liquidity risk in a scenario when the Company’s cash flow from operations
is insufficient to cover payments of financial liabilities. The Company manages liquidity and funding
on a group level. In order to mitigate the liquidity risk, the Group makes active use of a system
for planning and forecasting the development of its liquidity, and utilises scenario analyses to
secure stable and sound development in order to maintain sufficient cash to cover its financial and
operational obligations.

The Group had an unrestricted liquidity reserve totalling USD 188.6 million. Under the existing credit
facility agreements, the Group is required to maintain minimum liquidity of USD 65 million. Despite
the Group management's continued efforts in streamlining of the organisation to reduce costs and
preserve cash, the Group is anticipated to only be able to stay above the minimum cash covenant
level based on currently known information and commitments and all else equal till around end 2020.
The Group is similarly anticipated to stay cash positive based on the same assumptions till around
mid-2021. Most of the Group's mortgaged debt has been renegotiated during the last few years and
the Group is now in discussions with lenders to find a long-term financial solution for the Group.

On 1 April 2020, the Group agreed a forbearance with a majority of its lenders across its two loan
facilities, respectively the USD 1,300 million facility and the USD 288 million facility, whereby such
lenders agreed not to accelerate, enforce or demand payment following non-payment and default
under the two loan facilities. Both facilities require direction from lenders holding more than 2/3 of
the total commitment for the agent to initiate acceleration and enforcement steps. Consequently,
forbearance consent from 1/3 or above, will restrict such acceleration and enforcement steps. The
forbearance was initially granted for a period until 15 April 2020, but could be extended by the lenders
through a simplified process. Subsequently in mid-April 2020, Prosafe agreed a further extension to
the forbearance from the non-payments and defaults with a majority of its lenders across its two
loan facilities until 31 May 2020. As part of this, the Group will continue to defer making payments
of scheduled instalments and interests under both facilities. The Group's discussions with its lenders
remain constructive and the efforts to create and agree a long-term financial solution continue.

Capital management
The primary objective of the Company's capital management is to ensure that it maintains a healthy
capital structure in line with economic conditions. The Company manages the total of shareholders'
equity and long term debt as their capital. Normally, the Company's main tool to assess its capital
structure is the leverage ratio, which is calculated by dividing net interest-bearing debt including
bank guarantees, by the Company's profit/loss before depreciation and impairment over the last 12
months. Note that the Company is currently in dialogue with its lenders about a long term financial
solution in response to the severe downcycle in the industry and weakened market outlook.

100

INDEPENDENT
AUDITOR'S REPORT

101

To the General Meeting of Prosafe SE

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion
We have audited the financial statements of Prosafe SE, which comprise:

• The financial statements of the parent company Prosafe SE (the Company), which comprise the
statement of financial position as at 31 December 2019, the income statement, statement of
comprehensive income, statement of changes in equity and cash flow statement for the year
then ended, and notes to the financial statements, including a summary of significant accounting
policies, and

• The consolidated financial statements of Prosafe SE and its subsidiaries (the Group), which
comprise the consolidated statement of financial position as at 31 December 2019, the
consolidated income statement, consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated cash flow statement for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies.

In our opinion:

• The financial statements are prepared in accordance with the law and regulations.

• The accompanying financial statements give a true and fair view of the financial position of the
Company as at 31 December 2019, and its financial performance and its cash flows for the year
then ended in accordance with International Financial Reporting Standards as adopted by the EU.

• The accompanying consolidated financial statements give a true and fair view of the financial

position of the Group as at 31 December 2019, and its financial performance and its cash flows for
the year then ended in accordance with International Financial Reporting Standards as adopted by
the EU.

Basis for 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 further 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 fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern
We draw attention to Note 2 in the financial statements and the Board of Directors’ report, which
state that the Group incurred a net loss of USD 399,9 million during the year ended December 31,
2019 resulting in a total equity of USD 2,4 million at December 31 2019. Furthermore, the Group is
operating under a forbearance from non-payments and defaults agreed with a majority of it's lenders.
These events or conditions, along with other matters as set forth in liquidity section of Note 19,
Note 25 and the Board of Directors’ report, indicate that a material uncertainty exists that may cast
significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified
in respect of this matter.

102

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance
in our audit of the financial statements of the current period. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. In addition to the matter described in the
Material Uncertainty Related to Going Concern section, we have determined the matters described
below to be the key audit matters to be communicated in our report.

Valuations of offshore units (accommodation vessels and tender support vessel) in the consolidated
financial statement and valuation of shares in subsidiaries in the Parent company financial
statements.

We refer to note 2, 3 and 8 of the Consolidated Financial Statements and note 7 of the Parent
company Financial Statements.

The key audit matter

How the matter was addressed in our audit

There is a risk that the Group is not able to
recover the carrying amount of Property Plant
and Equipment, specifically vessels (“PPE”),
due to the continued weak demand in key
markets.

An impairment assessment was carried out
by the Group by assessing the value in use of
the Group’s cash generating units (“CGUs”).

Calculating the value in use requires
significant assumptions about future
developments to forecast and discount the
future cash flows that are the basis of the
assessment of the value in use.

Due to the inherent uncertainty, especially
under present market conditions, and the
subjectivity involved in forecasting and
discounting future cash flows, this area
involves auditor judgment to be applied when
assessing this key judgmental area

The above mentioned impairment risk
has a direct impact on the valuation of
the Company’s significant investment in
subsidiaries.

Our audit procedures in this area included;

• Assessing and challenging the Group’s

valuation model, including key
assumptions,key inputs and calculations
such as utilization rates, operating revenues/
expenses, expected lifetime of the vessels,
annual capital expenditure and terminal
value, in light of previous estimates and our
knowledge of the industry.

• Evaluating the historical accuracy of

management’s budgets and forecasts in
order to challenge management on the
current year cash flow forecasts;

• Assessed the mathematical and

methodological integrity of management's
impairment models and s the discount rate
applied with reference to market data;

• Compared the value of shares in subsidiaries

with the calculated value of the vessels
to assess if impairments of shares are
consistent with the calculated value of the
vessels

• Evaluating the adequacy of the financial

statement disclosures, including disclosures
of key assumptions, judgements and
sensitivities.

103

Other information
Management is responsible for the other information. The other information comprises information
in the annual report, except the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing Director for the Financial Statements
The Board of Directors and the Managing Director (Management) are responsible for the preparation
in accordance with law and regulations, including fair presentation of the financial statements in
accordance with International Financial Reporting Standards as adopted by the EU, and for such
internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s and
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using 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 for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud 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 from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.

As part of an audit in accordance with laws, regulations, and auditing standards and practices
generally accepted in Norway, including ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:

• identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error. We design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.

104

• obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness 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 related to events
or conditions that may cast significant 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 financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future 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 financial statements, including

the disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.

• obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.

We communicate with the Board of Directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify 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
safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were
of most significance in the audit of the financial statements of the current period and are therefore
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 benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

Opinion on the Board of Directors’ report
Based on our audit of the financial statements as described above, it is our opinion that the
information presented in the Board of Directors’ report and in the statement on Corporate
Governance and the Environmental, Social and Governance report concerning the financial
statements and the going concern assumption is consistent with the financial statements and
complies with the law and regulations.

105

Opinion on Registration and Documentation
Based on our audit of the financial 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 fulfilled its duty to produce a proper and clearly set out
registration and documentation of the Company’s accounting information in accordance with the law
and bookkeeping standards and practices generally accepted in Norway.

Bergen, 14 April 2020
KPMG AS

Anfinn Fardal

State Authorised Public Accountant

106

ENVIRONMENTAL,
SOCIAL AND
GOVERNANCE REPORT

107

CONTENT

109

About this report

111

Governance

115

Social

124

Environment

108

ABOUT THIS REPORT

In this Environmental, Social and Governance (ESG) Report,
Prosafe will communicate to its stakeholders how the Company
integrates environmental, social and governance factors into its
business strategy, decisions and operations in order to ensure
long-term sustainable development and profitability.

CONTENT

The Company will describe Prosafe’s ESG focus areas and results, focusing on how we respond to
climate change, treat our people, and ensure responsible business conduct.
Prosafe complies with governmental laws and rules and regulations applicable to its business.
The Company adheres to international recognised principles and guidelines such as the Universal
Declaration of Human Rights, the key conventions of the International Labour Organisation, the OECD
Guidelines for Multinational Enterprises and the principles of the United Nations Global Compact.

This report has been prepared based on the Corporate Social Responsibility (CSR) requirements of the
Norwegian Accounting Act section 3-3c, the Norwegian Shipowners’ Association’s guidelines for ESG
reporting in Maritime Industries, UN Global Compact’s requirements for communication on progress,
and the Norwegian Code of Practice for Corporate Governance.

ESG GOVERNANCE
ESG is embedded in Prosafe’s Core Values, Code of Conduct, principles for Corporate Governance and
CSR Policy.

In 2019, the Board of Directors and Executive Management decided to further increase the Company’s
efforts on ESG. In light of this, “Improve ESG offering and profile” was included as one of the
Company’s key goals for 2020, and ESG now is an integral part of the Company’s strategy.

Furthermore, a number of quantitative environmental, social and governmental KPI targets have been
set to drive development. The 2020 targets have been included in the results tables in the different
sections of this report. Prosafe will prepare action plans and report progress on these targets in future
reports.

As from 2020, the Ethics Committee will be named Safety, Sustainability and Ethics Committee, and
will assist the Board of Directors in its supervision of the Company’s ESG performance. This includes
regular reviews of ESG issues, including climate-related business risks and opportunities, anti-
corruption, personnel safety, human rights, cyber security and ESG performance. When necessary, the
Committee will consult with internal and external expert resources.

UN GLOBAL COMPACT’S GLOBAL GOALS FOR SUSTAINABLE DEVELOPMENT
Prosafe has been a participant of the UN Global Compact since 2008. We are committed to
integrating the UN Global Compact’s ten principles in the areas of human rights, labour, environment
and anti-corruption into our strategy, policies, culture and operations.

109

Prosafe supports UN’s Sustainable Development Goals (SDGs) and shares the view that its business
has a key role to play in the implementation of the goals. We aim to align our own responsibility goals
with the following SDGs that can be influenced by Prosafe: SDG 3: Good health and wellbeing; SDG 8:
Decent work and economic growth; SDG 13: Climate action; SDG 14: Life below water

Selected SDGs

2019 milestones

Potential impacts and risks (examples)

SDG 3:
Health and
wellbeing

SDG 8:
Decent work and
economic growth

Lost time incident frequency of
zero

+ Providing good work places, with
safety as our first priority

No fatalities

- Potential safety incidents

Mandatory human rights training
and anti-corruption training

+ Increased awareness

SDG 13:
Climate action

Kicked of an “Emissions reduction
project”

“Improve ESG offering and profile”
was included as one of the
Company’s key goals for 2020

- Exposure to human rights risks
related to our activities and supply
chain

+ Exploring emissions reductions

- Emissions from operations and ,
supply chain

SDG 14:
Life below water

No accidental emissions to sea

+ Managing environmental impacts

No non-regulatory release of
ballast water

- Risk of potential spills

The Company recognizes that its business activities may have both positive and negative impacts on
the SDGs. However, Prosafe seeks to minimize negative impacts and contribute positively to the goals,
and to be transparent about its impacts.

COMMITMENT TO STAKEHOLDERS
Prosafe’s ESG focus is based on transparency, stakeholder dialogue and integrity in the conduct of our
business.

The Company’s main stakeholders in this perspective are its employees, customers, suppliers,
investors and the communities where the Company operates. Prosafe will ensure that its stakeholders
at all times are in possession of correct, clear and timely information about the Company’s operations
and status.

Dialogue with stakeholders is essential for identifying risks, opportunities and trends, creating realistic
expectations and securing confidence in the Company. Prosafe interacts with its key stakeholders
amongst others through the annual general meeting, customer surveys, employee surveys, town halls
and investor presentations.

110

GOVERNANCE

Prosafe is committed to complying with all applicable laws,
including fair competition and antitrust, anti-corruption and
anti-bribery, and insider trading.

CODE OF CONDUCT
Prosafe's Code of Conduct provides the framework for what Prosafe considers to be responsible
conduct, but is not exhaustive. In the event that laws and regulations in a particular country are more
stringent than Prosafe's Code of Conduct, local rules shall apply.

Prosafe’s Code of Conduct imposes an obligation to report possible violations of the Code or other
unethical conduct. Managers are required to take their control responsibilities seriously to prevent,
detect and respond to ethical issues. Employees are encouraged to discuss concerns with their
immediate supervisor or other Manager. Concerns may also be raised with the Safety, Sustainability
and Ethics Committee.

Promoting integrity and transparency
Prosafe’s Whistleblowing Policy encourages a culture of openness within Prosafe and describes the
internal process for whistleblowing aiming at detecting, preventing and combating corrupt and/or
unethical behaviour in Prosafe and to set out the relevant guidelines as to how to report concerns and
how such matters are handled.

All such reporting will be handled with discretion and in a professional manner, with no retaliation
imposed on those who report suspected or unethical behaviour, and the individual may remain
anonymous.

The Company’s Grievance Management Procedure shall ensure that an employee’s grievance is
treated in a fair, consistent and responsive manner, together with providing a channel for the hearing
of the grievance and a fair resolution. All grievances raised under this procedure shall be treated
confidentially and in line with the Company’s Equal Opportunities Policy.

Prosafe’s Safety, Sustainability and Ethics Committee is responsible for:
• Maintaining and further developing Prosafe’s Code of Conduct;
• Ensuring that disclosures are dealt with as quickly as possible and as near to the point of origin as

possible;

• Where appropriate, give recommendations and advice on dealing with ethical dilemmas;
• Ensuring that alleged breaches are investigated thoroughly and fairly;
• Reporting at least annually and otherwise when needed, to Prosafe’s Audit Committee / Board of

directors.

ANTI-CORRUPTION AND FACILITATION PAYMENTS
Prosafe’s principles regarding bribery and corruption are crystal clear – we have zero tolerance.
This is also described in the Company’s Code of Conduct and in the Anti-bribery and Anti-corruption
procedure.

111

Prosafe is against all forms of corruption, including facilitation payments, and make best efforts to
ensure that it does not occur in the company's business activities. Prosafe will not offer customers,
potential customers, governments, agencies, or any representatives of such entities, or any other
third party any rewards or benefits in violation of either applicable law or reasonable and generally
accepted business practices.

It is Prosafe’s policy that no contributions to political parties, political committees and to individual
politicians can be given.

Any breaches or suspicion or breaches of the Code of Conduct must be flagged. If in doubt, employees
must consult their manager or the Sustainability, Safety and Ethics Committee.

SUPPLIER FOLLOW-UP
Prosafe encourages suppliers, consultants and other business partners within its sphere of influence
to observe the company’s Core Values, Code of Conduct and its standards for corporate social
responsibility, health and safety, the environment, quality assurance and training and competence.

ESG is focused upon throughout the procurement process, from the pre-qualification of vendors, to
entering into contracts, and in supplier audits. The main tool for ensuring ESG implementation in the
supply chain is the Prosafe Approved Supplier Verification Questionnaire, which requests suppliers to
sign and commit themselves to following Prosafe’s ESG principles

Suppliers are subject to the same standards as used by Prosafe within its Integrated Management
System. Through planned, scheduled and follow-up efficacy monitoring and audit activities, Prosafe
will review and verify that defined standards and requirements are met.

Suppliers are expected to:
• respect all individuals and basic human rights standards
• comply with applicable laws and regulations
• conduct their business without bribery or corruption
• engage in fair competition
• uphold labour standards and prevailing trade union

agreements (if applicable)

• uphold and support Prosafe’s Core Values

and Code of Conduct

Prosafe conducted three supplier audits in 2019. These audits included focus on Environment, Social
and Governance, including self assessment status, measures in place, objectives, ambitions and
targets.

The Company’s supplier audits during 2020 will increase focus on ESG including self assessment
status, measures in place, objectives, ambitions and targets

PERSONAL DATA (GDPR)
Prosafe takes its responsibilities seriously with regards to management of personal data. The EU
General Data Protection Regulation (GDPR) came into effect in May 2018. A GDPR workgroup
consisting of representatives from HR, Legal, PSCM and IT was established well in advance to review
all administration and management of personal data, processes and systems to ensure that the
personal data and privacy of our people and stakeholders was safeguarded in accordance with the
requirements in the regulation.

Prosafe developed the following critical procedures, Data Protection – EU/EEA and Data Protection –
Global to ensure the highest standards of protection of personal data and compliance any applicable
legislation relating to personal data, including GDPR. GDPR awareness sessions were undertaken and
GDPR compliance training was provided to individuals who hold positions that are involved in the
management and processing of personal and sensitive personal information.

OUR ACTIONS
Ensuring integrity is a continuous project. New employees are given a thorough introduction of
Prosafe’s history, operations, vision, core values and Code of Conduct. They are also offered the
necessary training in the company’s policies and procedures.

In 2019, Prosafe introduced a number of e-learning programs that are mandatory for employees,
consultants and agency personnel.

At year-end, the rate of completion for these e-learning programs was as follows:
• UN – the fight against corruption: 78 per cent
• Cyber security awareness: 59 per cent

Management has set clear targets to have 100% of the employees complete the programs as
these courses are considered important for the company. Management will remind and encourage
employees to complete the courses in order to ensure compliance.

113

RESULTS IN 2019

Parameters

2019

2018

Comment

As part of our Security Framework
we have implemented a set of
procedural and organisational
controls in addition to several
protective measures. In close
co-operation with our global
IT service partner we utilize a
centralized service desk based on ITIL
where all incidents are registered.

As above

Anti-corruption training:
Completed Training Ratio

78%

N/A

Cyber attacks or similar
incidents resulting in loss
of data, loss of integrity or
other loss

Cyber attacks or similar
incidents resulting in down-
time of critical IT systems

Investigations or lawsuits in
relation to ESG issues

Number of whistleblowing
cases

No. of supplier audits
that include auditing of
governance issues

No. of supplier audits that
include governance auditing

No. of Integrity Due
Diligence processes related
to other business partners

2020
KPI target

100%

Zero

> 3

100%
of new
suppliers

100%
of new
business
connections

114

SOSIAL

OUR PEOPLE

Prosafe’s success depends upon the combined capabilities and
contributions of its employees. Their motivation, knowledge
and competence are fundamental to the company’s further
sustainable development.

The Company is committed to offering its employees a safe and stimulating working environment
where everyone is treated fairly and with respect.

KEY STAFF NUMBERS
Prosafe had 150 employees at the end of 2019 (average 313), compared with 417 in the previous year
(average 401). This reduction in the number of employees reflects the adjustment of the organisation
in response to a weaker market outlook and reduced demand for Prosafe’s services that was initiated
in 2019. A number of employees accepted voluntary redundancy packages in the end of 2019. As a
result, the overall voluntary employee turnover in the group was 19.2 per cent in 2019, compared with
8.5 per cent in 2018. A number of employees will not leave the company before early 2020, so this
number is expected to be relatively high in 2020 as well.

The Company’s global presence was reflected in the fact that our employees came from 24 countries
around the world.

Due to the nature of the company’s business, characterized by short contracts and vessels moving
from one country to another when starting a new contract, Prosafe employs an increased number
of agency personnel offshore, often only engaged for a short time. Adherence to Prosafe’s Code of
Conduct, policies and procedures is amongst others ensured through an
introduction program for new employees,
continuous management focus
and e-learning programs.

115
115

DIVERSITY AND EQUALITY
The Company believes that strength lies in
differences and complementary traits, not
in similarities. Attracting, developing and
retaining the best employees, regardless of
gender, age, nationality, cultural background
or religion, gives the Company access to new
ideas, promotes better decision making, and
creates a workforce that mirrors our clients and
the world at large.

Women constituted 26.8 per cent of the
managers as at 31 December 2019, compared
with 25.0 per cent at the end of 2018.

Prosafe aims to offer the same opportunities
to all and does not accept discrimination
with respect to recruitment, remuneration
or promotion due to age, disability, gender,
marriage and civil partnership, pregnancy and
maternity, nationality, religion or belief, sex and
sexual orientation

RECRUITMENT AND COMPENSATION
Prosafe wants to be a preferred employer,
and aims to attract and retain employees by
offering them challenging and motivating
tasks, and by providing attractive working
conditions and possibilities for personal
development and career growth.

All employees shall have a salary that is seen
as fair, competitive and in accordance with
industry standards. Only relevant qualifications
such as education, experience, performance
and other professional criteria shall be taken
into account when appointing, settling
remuneration and awarding promotion.

2019

26%

74%

TOTAL
EMPLOYEES

2019

36.6%

63.4%

ONSHORE
EMPLOYEES

2019

26.8%

73.2%

MANAGEMENT

116

WHISTLEBLOWING
Prosafe encourages its employees to report any breaches of its Code of Conduct through the
established whistleblowing channels. This will ensure that the company when necessary can rectify,
learn and prevent re-occurrence.

RESPECTING HUMAN RIGHTS
Prosafe supports the principles set out in the Universal Declaration of Human Rights. The Company
endeavours to ensure that its operations and those of its suppliers are conducted in accordance with
basic human rights standards. This statement of support can also be found in Prosafe’s CSR Policy.
Furthermore, the obligation to respect human rights is addressed in Prosafe’s Code of Conduct.

Human Rights related risks
Prosafe operates in the international oil and gas industry, which is a strictly regulated industry within
which there is a strong presence of trade unions.

Prosafe requires that human rights are respected within its own operations and those of its suppliers.

Prosafe’s approach to respecting human rights starts with the company’s commitment to its
workforce. This includes ensuring that staff are treated fairly and without discrimination and has a
healthy, safe and secure working environment, and respecting their right to freedom of association
and rights to negotiate and cooperate through relevant representative bodies.

Prosafe does not accept any breaches of human rights or labour standards when recycling older
vessels. In all cases, Prosafe will adhere to relevant conventions (2009 Hong Kong Convention, 1989
Basel Convention), always adopt best practise, provide financial guarantees and appoint independent
recycling yard representation where necessary, until the asset is completely recycled, and conduct
extensive diligence when recycling of any asset.

Response to Human Rights violations
No legal claims have been received from any employee in respect of any violation of human rights,
and no breaches of the Code of Conduct in relation to human rights in 2019.

RESPECTING LABOUR STANDARDS
Prosafe respects and promotes the four fundamental principles and rights at work as described in the
International Labour Organisation Core Conventions:

• freedom of association and the effective recognition of the right to collective bargaining
• elimination of all forms of forced or compulsory labour
• effective abolition of child labour
• elimination of discrimination in respect of employment and occupation

These principles are also described in the Company’s Code of Conduct and in the Corporate Social
Responsibility Policy.

117

Labour rights related risks
Prosafe operates in the international oil and gas industry, which is a strongly regulated industry with
a strong presence of trade unions. The knowledge and training required in order to be allowed to work
offshore and the application of national tariff agreements largely eliminate the possibility for using
child labour.

Prosafe aims to ensure compliance with labour laws, rules and regulations in all the geographical
areas and jurisdictions it operates in. It is Prosafe’s understanding that the International Labour
Organisation Core Conventions are respected within its own operations, and within the operations of
its suppliers, consultants and other business partners.

Employee Representation and Engagement
Employees in all geographical locations have the right to be heard and represented, and to form and
join trade unions of their own choice. This is part of Prosafe’s commitment to human and labour
rights.

Prosafe encourages employee involvement and keeps its employees updated through emails, regular
intranet updates and town hall meetings with Q&A sessions.

For organisational changes that affect the company’s employees, Prosafe observes national legislation
on the minimum requirements of notification period in the countries where the company operates.

Prosafe conducted two global surveys in 2019 to gauge employee engagement. Based on the feedback
received, management evaluates which improvement areas to focus on in the following year.

Collective bargaining
The following Collective Bargaining Agreements were in force during 2019:
• Norwegian Maritime Unions
• Norwegian Ship Owners Association (NSA)
• Industri Energi (IE)

These agreements have been renewed and will continue to operate during 2020.

Response to Labour Standards violations
There have not been any reported possible breaches of labour standards since Prosafe became a
member of the UN Global Compact in October 2008.

There were not made any legal claims against the company by any employee regarding a breach of
labour standards in 2019.

OUR ACTIONS
In September 2019, Prosafe introduced a mandatory e-learning program for human rights and labour
standards, to be completed by all employees, consultants and agency personnel. At year-end, the rate
of completion was 44 per cent.

Management has set clear targets to have 100% of the employees complete this program as it is
considered important for the company. Management will remind and encourage employees to
complete the courses in order to ensure compliance.

118

RESULTS IN 2019

Parameter

2019

2018

Comment

Number of employees at
year-end

150

417

In order to adjust the size of
the organisation to the weaker
market outlook and reduced
demand for Prosafe’s services;
a number of employees were
offered voluntary redundancy
packages in the end of 2019.

Employee turnover ratio

19.2%

8.5%

As above

Share of women in the
workforce - overall

26.0%

11.3%

This is a result of the voluntary
redundancy, where a larger
number of male employees left
the organisation

Share of women in the
workforce - onshore

36.6%

40.6 %

As above

Share of women in
management

26.8%

25%

Human rights and labour
standards training

44%

Not
started
yet

No. of supplier audits
that include social issues
auditing (human rights,
labour rights, etc.)

There were zero non-
compliances or findings in
these audits

2020
KPI target

< 10%

Strive to
increase the
share over and
above current
levels

KPI to be set in
2020

100%

119

HEALTH AND SAFETY

Prosafe endeavours to offer its employees a good and safe
working environment in physical and psychosocial terms. It is
our objective that nobody should suffer work-related illnesses
or strain injuries as a consequence of working for Prosafe.

All employees should have a good balance between work requirements, individual opportunity for
control and participation, and support from colleagues and managers.

Sick leave was 2.26 per cent in 2019, an increase from 2.07 per cent in 2018. We believe that a good
working environment and a close follow-up of employees on sick leave are prerequisites for achieving
the lowest possible sickness absence rate.

We monitor and manage all areas of absence (actual and potential) closely, and take the appropriate
actions. We also take steps to enable employees to return to work on light duties, either in the office
or on shorter vessel trips to re-assimilate the employee’s return to work.

Special attention is paid to employees exposed to certain hazards such as high noise environments,
exposure to chemicals and other conditions that may be harmful to health. We carry out regular
occupational health assessments for these risks.

Reducing sick leave is significant to the well-being of the individual employee, and also has a positive
financial effect on the company and society as a whole.

Sick leave in %

3.0

2.5

2.0

1.5

1.0

2019

2018

2017

Sick leave in %

2019

2.26%

2018

2.07%

2017

2.53%

120

SAFETY CULTURE – ZERO MINDSET
Safety is a core value in Prosafe. We look upon the objective of zero incidents as a goal to work towards
and a way of thinking. We are committed to working actively to avoid injuries and accidents.

Systematic preventive health, safety and environment work is a line management responsibility
in Prosafe. Involvement by management and SBM, strong leadership and commitment, and close
cooperation with the organisation onshore and offshore, including employee representatives and
safety delegates, are key factors in achieving our goal of operating without accidents. It is about
visibility, walking the talk and caring about each other and the values we manage on behalf of our
owners and clients.

We continually look ahead and focus on the implementation of preventive measures and initiatives
to further strengthen our safety culture. We encourage our employees to identify and assist in the
development of new systems and procedures which deliver improved safety results.

In 2019, Prosafe recorded zero incidents classified as a Lost Time Injury (LTI), which means the
employee was absent from the next work shift because of the injury. This is a good performance in
direct comparison to 2018 and a reflection of the effectiveness of the robust induction and vessel
familiarisation of agency crew undertaken by Shipboard Management.

The LTI frequency is calculated by multiplying the number of LTIs by 1 million and dividing this by the
total number of man-hours worked. In 2019, the LTI frequency was 0 as compared to 0.85 in 2018.
All injuries and serious incidents are unacceptable to Prosafe. Where such events occur, we ensure

HSE Comparison

LTI

LTIF

TRIFR

2019

2018

2017

LTI (Lost Time Injuries)

LTIF (Lost Time Injury Frequency)

TRIFR (Total Recordable Injury Frequency)

2019

0.99

2018

0.85

2.54

2017

1.50

1.5

121

that suitably resourced investigations are undertaken to identify root causes and introduce risk-
reducing measures aimed at preventing recurrence. The findings of these investigations are conveyed
to the rest of the organisation to ensure a transfer of experience. These are important measures for
reaching the company’s goal of zero injuries and incidents.

Continuously supporting safety awareness
Prosafe continues to promote and support a zero mindset with our employees and sub-contractors. In
order to achieve this, a number of activities and management tools are facilitated. These are described
in more detail on Prosafe’s website at https://www.prosafe.com/fleet/hsseq/safety/ where you can
also find a description of the continuous preventive work and improvement efforts.

Contingency plans
Prosafe has established contingency plans to limit harm to people, the environment and material
assets. These plans will ensure that correct, relevant and timely information is provided to the outside
world if and when required.

We carry out regular emergency response training and exercises in cooperation with our customers
and third parties to ensure that we are as well prepared as possible to deal with a potential crisis.

122

RESULTS IN 2019

Parameters

Sick leave

Lost time injuries (LTI)

Fatalities

Comment

2019

2.26%

2018

2.07%

TRIF (Total Recordable
Injury Frequency)

0.99
Target <4

2.85
Target <4

LTIF (Lost Time Injury
Frequency)

MTC (Number of Medial
Treatment Case)

RWC (Number of Restricted
Work Case) -

FAC (Number of First Aid
Cases)

HOC (Number of Hazard
Observation Card)

0.85

14,690

11,947

Emergency drills performed

307

434

2020
KPI target

< 3%

Zero

New 2020 - within
10% range of industry
body benchmarks
(IMCA & RNNP)

Zero

New 2020 - within
10% range of industry
body benchmarks
(IMCA & RNNP)

As above

6 per day per vessel
on contract.
4 per day per vessel
in yard

123

ENVIRONMENT

Care for the environment is one of Prosafe’s core values and
forms an integral part of the Company’s business planning.
Prosafe’s goal is zero accidental discharges to the sea and
zero accidental emissions to the air, which is in line with its
principles for sustainable development.

Prosafe owns and operates a fleet of accommodation vessels that supports installations in the
offshore oil and gas industry. The oil and gas industry is an industry with a strong focus on protecting
the natural environment.

National authorities require companies operating in their waters to demonstrate compliance with
strict rules and regulations. In addition to complying with national laws, Prosafe has internal policies
and guidelines for risk management based on international standards.

ENVIRONMENTAL MANAGEMENT
Prosafe’s goal is zero accidental discharges to the sea and zero accidental emissions to the air, which
is in line with our principles for sustainable development. Prosafe actively pursues and commit to
reducing direct emissions from our vessel operations in collaboration with our clients and respective
industry body organisations.

Prosafe produces Environmental Impact Assessments for each of the vessels the Company manages
or operates. The assessments take into account the mode of operation of the vessel together with
generic geographical considerations. Local assessments are typically performed with the clients who
will usually be operating under the terms of an operator’s permit.

Moreover, the Company cooperates actively with customers and suppliers to set in-house goals, make
continuous improvements to its own routines and shape attitudes towards protecting the natural
environment from pollution by its operations. All accidental discharges and emissions are reported
and followed up in the same way as injuries and material damage.

GREENHOUSE GAS (GHG) EMISSIONS
Prosafe calculates the emissions of CO2, CO, NOx, SO2, CH4 and VOC for the fleet based on the fleet’s
diesel consumption. Prosafe’s fleet carries low sulphur marine diesel with
a maximum sulphur content of 0.1%, thereby exceeding the
requirement within MARPOL Annex VI Regulation 14.1
prohibiting the carriage of fuel oil with sulphur
content exceeding 0.5%.

124

It is important to note that the amount of diesel consumed, and thereby also the amount of
emissions, will vary largely depending on:
• the number of vessels being operated throughout the year
• the fleet utilisation (i.e. the amount of time that the vessels have been operating)
• the vessels’ operation mode - dynamic positioned (DP) vessels maintain their position by means of
thrusters and will therefore use far more diesel and thereby also have substantial higher emissions,
than vessels that maintain station by moorings

The number of vessels that uses DP and the number of days that these vessels keep their position
by using DP will vary from year to year. This implies that the amounts of emissions per year are not
directly comparable. As from 2020, Prosafe will provide more comparable data based on individual
vessel contract days.

Prosafe calculates its GHG emissions according to the GHG protocol. The calculated emission data for
vessels operated by Prosafe were as follows for the years 2015 - 2019:

Calculated
2019 total
(tonnes)

Calculated
2018 total
(tonnes)

Calculated
2017 total
(tonnes)

Calculated
2016 total
(tonnes)

Calculated
2015 total
(tonnes)

Consumed diesel

40,858

35,486

32,078

43,460

CO2

NOx

SO2

CH4

VOC

130,744

113,558

102,650

139,073

641

2,427

163

674

692

213

609

722

192

4.5

826

1,133

261

6.1

28,788

92,121

547

1,814

172

The Company actively monitors and manages staff travel, reporting on CO2 emissions globally.
Prosafe’s employees are encouraged to limit travelling to the extent possible, and rather utilise
telephone or video conference when possible.

REDUCING OUR ECOLOGICAL FOOTPRINT
The Company is seeking solutions to reduce emissions
in order to reduce its impact upon the environment.
Environmental considerations are an important
aspect when planning vessel refurbishments and
upgrades, e.g. when shifting to more fuel efficient
equipment and by continuous improvement in
operating procedures.

Prosafe cooperates with clients and authorities to
reduce the impact of its operations on the natural
environment. An example of this is a contract where
Prosafe receives incentives when the daily diesel
consumption is reduced.

2019
Calculated total
(tonnes)

130,744

125

The Company’s vessels have
International Air Pollution Prevention (IAPP)
certificates, International Oil Pollution Prevention (IOPP)
certificates and International Sewage Pollution Prevention (ISPP) certificates.
These certificates are all issued under the International Convention for the Prevention of Pollution
from Ships (MARPOL) and are subject to periodic survey.

FACILITATING IMPROVEMENT OVER TIME
In 2009, Prosafe joined the Confederation of Norwegian Enterprise's (NHO's) Environmental
Agreement on NOx. By signing the Agreement, Prosafe committed itself to prevent and reduce
environmental problems caused by emissions of nitrogen oxides in its offshore operations.

Refurbishment projects of vessels have included the replacement of older engines with low NOx
engines resulting in a reduction of diesel and lub oil consumption, thereby contributing to a reduced
environmental impact. The replacement of old tonnage has resulted in six older vessels being
replaced with four new built vessels throughout 2016-2019 with more efficient diesel engines,
producing less NOx emissions.

It is noted, however, that 2019 resulted in higher NOX emissions despite lower operational activity.
The increase from 2018 to 2019 is a direct consequence of a larger number of operations in DP mode.
As a direct consequence of the increased utilisation of the vessels in DP mode rather than moored, the
total fuel consumption for the fleet has increased.

During 2020, Prosafe will provide more comparable data based on individual vessel contract days
which will provide a more accurate reflection of vessel performance and their respective mode of
operation i.e. DP or moored and their own Scope 3 emissions associated with anchor handlers and tug
vessels

Going forward, the Company will continue to gradually implement new technology and refurbish
equipment in order to further reduce emissions.

SPILLS
Prosafe had no reportable discharges to the natural environment in 2019. The Company’s vessels take
proactive measures to mitigate the potential for any spills and regularly conduct exercises to test its
Oil Prevention Emergency Response & Spill contingency plans.

RESPONSIBLE RECYCLING
Prosafe continues to high-grade its fleet by selling the oldest and most inefficient vessels for recycling
at certified ship recycling yards. Seven old vessels have been sold for recycling since mid-2016.

In all cases, Prosafe will adhere to relevant conventions (2009 Hong Kong Convention, 1989 Basel
Convention), always adopt best practise, provide financial guarantees and appoint independent
recycling yard representation where necessary, until the asset is completely recycled, and conduct
extensive diligence when recycling of any asset.

126

USE OF CHEMICALS AND HAZARDOUS SUBSTANCES
Prosafe has an approved Chemicals list that is based on a risk assessment matrix and hierarchy of
controls. All chemical and hazardous substances are subject to an evaluation which identifies a
‘Hazard Categorisation’ to the substance.

The categorisation of the product takes consideration of the impact and effect the substance may
have on health and the natural environment. Substances are assigned either a High, Medium or Low
category for the representative hazard to health and the environment. The Hazard categorisations are
maintained and updated within the Company’s online chemical management system (CMS – SYPOL).

Where High Hazard chemicals are identified, it is general practice for Prosafe to seek to substitute
these chemicals with lower Hazard chemicals.

The Company continues to conduct further evaluations to identify safer/greener substitutes in for
current high/ medium risk substances.

WASTE MANAGEMENT
When a Prosafe vessel operates alongside an offshore installation, it will come under the umbrella
of the host installation's operating permits. Prosafe and its client's management systems are cross-
referenced within interface documents, and responsibilities are clearly defined.

All Prosafe vessels are subject to MARPOL requirements and have implemented a waste management
system that is documented in the Garbage Management Manual. The plan includes assessments
of all potential waste products originating on board together with the requirements for waste
segregation for transportation ashore.

Prosafe manages waste produced locally whilst monitoring third party’s waste disposal performance.

BALLAST WATER
Ballast water management for the Company’s vessels is controlled within the confines of the
International Maritime Organisation (IMO) regulation.

Prosafe’s vessels have International Ballast Water Management (IBWM) certificates. These certificates
are all issued under the International Convention for the Control and Management of Ship’ Ballast
Water and Sediments and are subject to periodic survey. There has not been any accidental or
non-regulatory release of ballast water.

DISCHARGE OF SEWAGE
The discharge of sewage is controlled within the confines of IMO regulation. All vessels within the
fleet have been subject to International Sewage Pollution Prevention (ISPP)
surveys and have been issued certification in
accordance with MARPOL
Annex IV by the
relevant Flag.

127

RESULTS IN 2019

Parameters

2019

2018

Comment

71.43

58.92

Direct GHG emissions
(GHG Protocol
Corporate Standard
Scope 1)
(per contract day in
CO2 tonnes)

Energy indirect GHG
emissions (GHG PCS
Scope 2)

156.5

162.8

Other indirect GHG
emissions (GHG PCS
Scope 3)

3,193

2,657

NOX

1.07

1.02

Based on fuel consumption of
the fleet in total. As a direct
consequence of the increased
utilisation of the vessels in DP
mode rather than moored, the
total fuel consumption for the
fleet has increased, resulting in
an increase in the GHG emissions

Data collated from total energy
consumption for onshore site
offices located in UK, Norway
Brazil and Singapore

Data collated from all air travel
booked through the company’s
travel agent for on and offshore
personnel including agency
personnel in UK, Norway, Brazil
and Singapore

2020
KPI target

CO2e for each
vessel per contract
day (5%reduction
from 2014-to-2018
average)

No target set,
but should see a
visible reduction
from energy con-
sumption targets
(onshore only)

No target set,
need to under-
stand better our
supplier/ sub
contractor supply
chain emissions
data

NOXe for each
vessel per contract
day (5% reduction
from 2014-to-
2018 average)

Energy Consumption
(kWh) Onshore

541,063 641,881

Energy consumed by global
offices in UK, Norway, Brazil and
Singapore

5% Reduction
based on previous
year

Energy Consumption
Reduction Rate
Onshore (percentage)

15.7

12.91

Fuel Used (1,000 litres)

40,858

42,246

Fuel Consumption
Reduction Rate
(percentage)

-15.13

- 9.7

As a direct consequence of
the increased utilisation of
the vessels in DP mode rather
than moored, the total fuel
consumption for the fleet has
increased

5% Reduction
based on previous
year

New metric m3 per
vessel per contract
day (5% reduction
from 2014-to-18
average

128

Parameters

2019

2018

Comment

Unplanned spills /
emissions to ground /
sea / air

Total waste Onshore/
Offshore (tonnes)

7.81 /
1,228

13.5/
1,086

Improved reporting
requirements were implemented
in 2019. The level of activity and
generation of waste on board
the vessels has increased due to
the preparation of a number of
vessels for lay-up and the SPS of
Safe Concordia

Recycling Ratio
(percentage)

51 / 61

49 / 56

Hazardous waste

387

N/A

Tracking introduced in Q4 2019

Waste Reduction Rate
(percentage)

57 / -11.5

N/A

Tracking introduced in Q4 2019.

Total Water Use
offshore (1,000 litres)

123,245 119,691

No. of supplier
audits that include
environmental auditing

2020
KPI target

Zero

N/A

50% onshore /
30% Offshore.
To be reviewed
during 2020

Target to be
evaluated during
2020. Possible
xx kg waste per
person during
contract

All water
consumed
offshore plus
onshore where
data available.

2 onshore / 2
offshore per year

129

Accommodating
the Offshore
Industry

www.prosafe.com

Photo: Tom Haga & iStock

130