Personal Reflections

Personal reflections

In 2013, we – the shareholders in Aker – became NOK 2 billion richer, measured in net asset value and paid dividends. My goal was to double Aker’s net asset value, including dividends, in five years. The result was a 50 percent increase in the period from 1 January 2009 to 31 December 2013.

Aker grew on average by 8.8 per cent per year period. The OSEBX achieved 18 the OSEBX companies. During the same main Oslo Stock Exchange index. However, year during the period, while my target was per cent. period, Aker’s net asset value increased the performance behind the figures varies 15 per cent. ■■ The development of our share price from NOK 250 to NOK 332 per share and considerably. I can only quote cross-country skier Pet this past year: In 2013 alone, the Aker dividends totalling NOK 46 per share were Aker Solutions has been the strongest Beskjæres 76 mm fra venstre før trykk >> ter Northug Jr. who, after failing to win a share generated a return of 10 per cent, paid. My aim was to exceed NOK 500 per value driver during the period: the return on medal at the Sochi Winter Olympics, com while OSEBX rose by 24 per cent. Net share, including dividends, in five years. Aker’s holdings in Aker Solutions shares mented: “I felt I was in good shape, but I asset value per share increased by 3.5 In other words, in five years, NOK 250 of has on average increased by 40 per cent didn’t win the gold.” per cent in 2013, and dividends paid to shareholder value in Aker has been turned annually (IRR). The holdings in Converto shareholders equalled 3.7 per cent of into NOK 378, whereas investing in an Capital Fund have posted an IRR of 29.5 If we take a close look, we find we net asset value at the beginning of 2013. index fund would have produced NOK 543. per cent, while Det norske oljeselskap have much to be satisfied with, and The difference is NOK 165 per share. To achieved 16.5 per cent and Ocean Yield even more to reflect upon. The The graph below illustrates the situation at keep up with the index, Aker would have 12.5 per cent. Kvaerner, Aker BioMarine picture is complex. the beginning of 2014. had to create NOK 12 billion more in net and Havfisk had disappointing results com asset value and dividends paid to share pared to Aker’s required return on equity, as ■■ The development of our net asset Development of shareholder value holders. This is something to reflect over. did Aker Drilling, which was sold in 2011. value over the past 10 years: Aker’s (NOK) At the beginning of 2009, Aker’s share The other half of the January 2009 port shareholder value has increased by ■ Aker holdings totalled NOK 8.7 billion and folio comprised cash, interest-bearing ■ OSEBX twice as much as the Oslo Stock accounted for less than half of Aker’s net receivables from Aker-owned companies Exchange benchmark OSEBX 600 asset value. The other half of Aker’s capital and assets other than investments in index since the company’s listing in 500 and assets was almost dormant at the shares. September 2004 and up until the end of 400 beginning of 2009. I will comment on the We have written down NOK 1.8 billion 2013. During this period, net asset value 300 main features of the portfolio. worth of assets. Guarantees related to the has grown by an average of 22.7 per 200 Aker’s share holdings have appreciated rocket-launching company Sea Launch cent per year. OSEBX has risen by an 100 from NOK 8.7 billion to NOK 26.4 billion in have cost Aker NOK 0.8 billion. We have average of 11 per cent annually. 0 the period 2009–2013. Aker Solutions, Det financed subsidiaries at a lower interest Net asset value Dividend Net asset value ■■ The development of our share price per share 2009–2013 per share norske oljeselskap and Kvaerner accounted rate than Aker’s required rate of return. over the past five years: Aker’s share 1 January 2009 31 December 2013 for NOK 13.7 billion of this increase, includ Aker has borrowed money to build up a price on the Oslo Stock Exchange, ing NOK 6.2 billion in new investments. cash buffer. This was a deliberate choice. including dividends, has almost If we in Aker had invested the company’s Aker Drilling was sold at a loss of NOK 0.8 The return on the cash holdings and inter doubled in five years, from NOK 137 net asset value in an index fund that billion, but released NOK 3.3 billion in cash. est-bearing receivables has averaged to NOK 222 plus dividends of NOK 46 tracked OSEBX on 1 January 2009, the An additional NOK 2.1 billion in assets was approximately 4 per cent per year. as of the end of 2013. The Aker share NOK 250 would have increased to NOK divested. In short: half of Aker’s portfolio was gen has generated an average annual 510 by the end of 2013. In addition, the In total, Aker achieved an average erating low returns. The balance sheet has return to shareholders of 16 per cent, index fund would have paid NOK 33 in divi annual return of 18 per cent on its portfolio now been normalised, and we have again including dividends, during this five- dends, based on average dividends paid by in the period 2009–2013, on par with the put more of our capital to work. 9

My good partner chief executive oil and gas sector in general, and in Aker Øyvind Eriksen and I remind each Solutions and Det norske in particular. other that Aker has achieved a lot in Despite the fact that the increase in the past five years. shareholder value was less than I had aimed for, and less than the OSEBX, I am Aker’s foundation has become stronger, pleased with Aker’s progress. How can I and our latitude and flexibility have say something so self-contradictory? increased. Some of the results achieved since 2009 can be summed in the following The share prices reflect the stock five points: market’s view. They do not necessarily give us the right picture ■■ The risk exposure of the investment of Aker’s ability to generate and Beskjæres 76 mm fra venstre før trykk >> portfolio has been reduced, and the deliver value in the future. balance sheet has gradually become healthier and stronger. Aker and the portfolio companies have ■■ Upstream cash flow has increased, improved during Øyvind Eriksen’s five-year giving us greater flexibility. tenure as chief executive. Aker ASA is com ■■ The operating companies have posed of 51 talented employees who make streamlined their activities to focus on us a professional and highly competent core areas. investment company. Our investment team ■■ Our position in the oil and gas sector manages assets worth NOK 30 billion, and in general, and on the Norwegian includes leading experts on industry, continental shelf in particular, has been investments, the capital market, funding, strengthened. finance, accounting, office administration, ■■ The organisational structures of Aker IT, HR, IR and communications. and most Aker-owned companies In Aker we work hard and focused to have been further refined, establishing generate long-term shareholder value. At positive, clear role models. the beginning of 2014 the oil and gas sec tor accounted for 56 per cent of the value We have become Det norske oljeselskap’s of Aker’s assets. Now that Ocean Yield has largest and leading owner. Our ownership been listed, maritime assets account for 14 interest in Aker Solutions was increased per cent of Aker’s value. Seafood and through the direct purchase of 6 per cent of marine biotechnology represent 9 per cent, the company’s share capital in 2013. Det cash holdings 8 per cent and property norske and Aker Solutions together development 4 per cent. Other assets account for more than 50 per cent of Aker’s account for a total of 9 per cent. total investments. I see growth potential in this portfolio. At a time when investors are taking a The trend over the past five years shows wait-and-see attitude towards the oil ser underlying progress, and that makes me vice sector and oil companies, Aker has more optimistic for the future. chosen to go against the flow. When we While I rarely make statements to the have done so in the past, our shareholders media, not a day goes by without the Nor have benefited. Aker has a firm belief in the wegian media mentioning me. In 2013 I 10

made only one public statement. That Interest in the Norwegian continental At Aker Solutions, Øyvind and his manage the exploration company Norwegian Oil requires some discipline, dear shareholders. shelf is high after several exploration ment team have redesigned complex struc Consortium (NOCO) almost 50 years ago. successes. There is an exciting tures. The company is now better organ In the 1990’s I was involved in efforts to This letter to our shareholders is my future ahead for both the Norwegian ised and, through Øyvind’s eyes, Aker has open the Norwegian Continental Shelf to channel for communicating views and continental shelf and Det norske. acquired a far broader and deeper insight new market participants. With great ambi reflections that I consider important ■■ Ocean Yield is a new addition to the into Aker Solutions. We are focused on tions, I had nurtured an oil dream for many and relevant. family, with a large dividend potential. strengthening and refining the company’s years before we finally established Aker This ship-owning company has delivered core operations. Energy, and the company was prequalified I have admitted mistakes openly and hon strong returns to shareholders since its There are still measures to implement in as a licensee on the Norwegian continental estly, expressed my opinions and shared listing on Oslo Stock Exchange in the Aker Solutions before our goals are shelf in 1999. reflections. Both in the past and present, I summer of 2013. Thus far, Ocean Yield reached. The company is undergoing a In February 2002, we made a bet on the believe I have communicated matters and has concluded long-term contracts that transformation and a renewal, and is no Agat field, located 65 kilometres northwest Beskjæres 76 mm fra venstre før trykk >> topics important to Aker and its sharehold will generate NOK 10 billion in EBITDA longer a victim of Newton’s first law – the of Florø and slightly north of the Gjøa oil ers. My letters to the shareholders chronicle over the next 7-8 years. The company law of inertia – where an object will remain field. The German oil company RWE-DEA a journey. has a solid platform for further growth. stationary or maintain a constant speed if owned 51 per cent of the field, while Aker Looking back we see that the portfolio ■■ Aker BioMarine is a rapidly growing no external force is applied to it, or if the Energy owned 49 per cent. The well was companies have gradually become more company and the world’s leading sum of the applied forces is zero. dry, and Aker’s pockets were almost as streamlined and more robust. The journey supplier of krill-based ingredients. Aker Solutions’ customer base includes empty as Agat due to the financial chal tells us much about the future direction of Superba™ Krill Oil contains omega-3 the world’s leading oil companies, and their lenges that arose in the aftermath of our Aker and the operational companies. fatty acids in phospholipid form. interests determine the company’s priorities Kvaerner takeover. In the autumn of 2003 Every day, there are 4.7 million people and development. Aker Solutions’ cus Aker Energy was sold, together with a loss ■■ Aker Solutions has increasingly who take the red capsule with its tomer focus has given us access to net carry-forward, to Lundin Petroleum. specialised on selected areas such as documented health benefits. Aker works and circles that were previously inac In 2006 we made a fresh start with the engineering and subsea. The company BioMarine is a wholly-owned “wild card” cessible. Today, we have a seat at the table exploration company Aker Exploration and is among the global leaders in subsea in Aker’s portfolio. when major oil and gas industry issues are later we began to buy shares in Det norske. control systems and technology. The final ■■ Havfisk is being focused as a trawler discussed. The two companies merged on 22 Decem pieces are about to fall into place for an company, and owns 10-11 per cent of In Det norske, executive chairman Sverre ber 2009, and since then Aker has been even more streamlined Aker Solutions. Norwegian cod quotas. The company Skogen is leading the charge after both the Det norske oljeselskap’s principal active ■■ Kvaerner has been revived after a accounts for 2 per cent of Aker’s value. CEO and the board chairman stepped down shareholder. demerger from Aker Solutions. The ■■ The financial investments portfolio has last year. Sverre’s most important task has company has more than 40 years turned challenges into billion-kroner been to recruit a new CEO for Det norske. Det norske won’t pay dividends to of track record on the Norwegian gains. In 2009 Aker gathered 12 non- We now look forward to Karl Johnny Hersvik shareholders until 2020 at the earliest. continental shelf, and together Kvaerner/ core companies into the Converto fund. taking over as Det norske’s new chief exec This means that it will have taken Aker Solutions have participated in Assets worth NOK 1.6 billion have since utive by 1 May. Hersvik, 41 years old, has more than 20 years from Aker plowed more than 80 per cent of the field grown to NOK 3.7 billion, including 15 years of management experience from new grounds, until we reap the fruits developments on the NCS. In addition, divestments. The Converto team has Statoil and Hydro, and will join Det norske of what we sowed. Kvaerner is the world’s leading provider created substantial shareholder value from his current position as Senior Vice of offshore concrete structures. from high-risk investments. President of Statoil’s Research and Devel The oil business is for long-term investors, ■■ Aker Exploration has merged with Det opment division. not impatient ones. I become patient when norske, putting Aker in the driver’s seat Øyvind continues to streamline Aker Aker has played a part in the Norwegian I sit down and calculate Det norske’s value of a company holding 80 licenses on Solutions with the aim of making it a oil adventure since the very beginning. The and its potential future cash flow. The the Norwegian continental shelf at the leading provider in the area of Subsea company’s history shows that it was one of Johan Sverdrup field will be the company’s end of 2013, including 33 operatorships. Factory and Field Design. the pioneers behind the establishment of cornerstone for decades to come. 11

Statoil, the operator, expects Johan The experts will argue about whether a Johan Sverdrup production and value over time* Sverdrup to produce oil for 50 years after 70 per cent recovery factor is too low or too (Figures in NOK million) production starts in late 2019. The field is high. I am a technology optimist. This, currently estimated to contain Stock Tank combined with the field’s high reservoir Time value of cash flows Production Original Oil In Place (STOOIP) totalling 4 bil quality, makes me believe that the potential Future value of NOK 1 billion Current value of future income Share of Sverdrup lion barrels of oil equivalents. recovery factor will exceed 70 per cent. As invested today of NOK 1 billion reserves produced NOK 1 billion invested today is worth Accrued Current value, discounted 70 per cent recovery rate, A recovery factor of 60 per cent will they say, “Time will tell.” NOK 200 billion in 2070, given an income using 10 per cent annual 2.8 billion barrels result in a total production of 2.4 billion bar annual return of 10 per cent undiscounted interest rate rels. Based on an oil price of USD 100 per Historically speaking, large fields Year barrel and the current NOK exchange rate, tend to become larger. The quality of the potential revenue stream will total the Johan Sverdrup field makes it a 2070 200 000 1 000 5 100 % almost NOK 1 500 billion and, of course, “world-class asset”. Beskjæres 76 mm fra venstre før trykk >> substantially more if one believes in a cor 2060 80 000 1 000 10 95 % relation between oil prices and inflation. Just look at what Ekofisk and Statfjord The expected plateau production of have become compared to the initial fore 2050 31 000 1 000 30 85 % 600 000 barrels of oil equivalents per day is casts. The two fields have built oil compa likely to generate more than NOK 130 bil nies and generated shareholder values that 2040 10% annual 12 000 1 000 100 80 % lion in annual revenues. Even after operat few believed to be possible. As an active return ing expenses and capital costs, and after owner of Det norske, Aker is focused on the State has gotten its share through the contributing to a robust long-term funding 2030 5 000 1 000 200 60 % 78 per cent tax rate, the licence partners solution for Det norske that does not will benefit from a strong long-term cash involve undue commitments of equity. 2020 2 000 1 000 600 flow. The Johan Sverdrup diagram puts me in A 60 per cent recovery rate will still leave a good mood on behalf of Det norske and 2014 1.6 billion barrels of oil in the ground. If the Aker’s shareholders, and it warrants a 1 000 1 000 1 000 recovery factor rises to 70 per cent, Johan closer study. In the interest of simplicity, I Sverdrup may increase its reserves by an have used a nominal annual return of 10 *Johan Sverdrup production estimated by Aker ASA, based on public data. additional 400 million barrels. This corre per cent. In this model an investment of sponds to more than two large field devel NOK 1 billion in Johan Sverdrup in 2014 will opments on the Norwegian continental be worth NOK 5 billion in 2030 and NOK and expect oil prices to stay relatively high during which prices will rise above or fall shelf. By comparison, the Ivar Aasen field is 200 billion in 2070, after 50 years of oil pro in future, we get a relatively inexpensive below this level. This view forms the foun estimated to contain approximately 150 duction. Correspondingly, the accrued option to potentially generate large cash dation of our sector outlook, and investors million barrels of oil equivalents. income of NOK 1 billion in 2030 is worth flows in the future. are free to disagree or agree with it. Today, an additional 400 million barrels only NOK 200 million, if the amount is dis The profitability of Johan Sverdrup will Irrespective of how Johan Sverdrup’s means an additional value of NOK 240 bil counted to current value. The Johan Sver be affected by investments, operating potential is calculated, the field is a robust lion. It will require investments in new wells, drup will continue to generate substantial costs, the recovery rate and the production project and a value generator. For Det nor technology and equipment, but these bar cash flow from 2030 onwards. This cash profile. These are factors which we to some ske, participation in the field is a “com rels are highly profitable. Nevertheless, flow is assigned only a marginal value at degree can influence, while we obviously pany-maker.” I‘m not concerned that Johan these barrels will be assigned a low value in present. Given a recovery factor of 70 per have no say on what oil prices over the next Sverdrup will fail to deliver considerable a cash flow analysis because production cent, some 40 per cent will remain in 2030. 50 years will be. At Aker we maintain the shareholder value. As a shareholder, I am will occur later in the lifetime of the field Views will differ as to what the figures in view that, over the long term, oil prices will more concerned about how Det norske and much of the value will thus will be dis the diagram tell us. If you, like me, believe remain stable above USD 90–100 per barrel spends the money generated by Johan counted away. in the potential of a greater recovery rate in 2014 dollars, although there will be cycles Sverdrup. 12

Johan Sverdrup is also crucial for have long remained stable above USD 100 The investments in Converto, Ocean Yield, Aker Solutions and Det norske’s ability Kvaerner’s offshore yards at Verdal per barrel. It is alarming to hear oil compa Aker BioMarine and Havfisk grew by NOK to generate shareholder value has and Stord. nies say that it is unprofitable to develop 3.1 billion, while a decline in the share increased. Given that Aker has increased fields at this price level. Not long ago, oil prices of Det norske, Aker Solutions and its shareholding in Aker Solutions, our view In last year’s letter, I gave considerable companies assumed USD 20 per barrel in Kvaerner totalled NOK 2 billion. Value has on this is clear. The company has never attention to Kvaerner and the competition their long-term development forecasts and been created in the Converto portfolio, been in better shape than it is today. I am from Asian yards. My analysis remains made money at that level. where we feared that value had been lost. no less optimistic with respect to Det nor unchanged. I have become even more con The supplier industry also has a respon On paper, the value of Aker’s oil-related ske’s future. As regards Kvaerner, there are vinced that ordering from Norwegian yards sibility to help reduce costs. One of the investments declined in 2013, however we many positive developments within the reduces the risk of cost overruns and most important things suppliers can do to see considerable potential for value growth company, but I understand why the market delays compared to placing orders in Asia. reduce costs is to successfully implement in the sector. is questioning what the future will bring. This applies particularly to smaller opera more efficient and robust execution mod When I look back on the development in When Jan Arve Haugan reads this, in his Beskjæres 76 mm fra venstre før trykk >> tors and larger oil companies lacking exten els. The interaction between developers the share prices of Det norske, Aker Solu capacity as Kvaerner’s chief executive, I do sive experience with developments on the and builders can be improved, and the tions and Kvaerner, I must ask myself: “Have hope that he will be inspired to prove that Norwegian continental shelf. coordination of the engineering and con the companies’ ability to generate share the company can deliver better results than Delivering engineering, procurement and struction phases can be optimised. holder value been reduced?” If so, value has the market fears. construction work bundled together in a I am convinced that the Norwegian sup of course been eroded, and those who have The companies that contributed to the single contract – referred to as an EPC con plier industry will remain an important part sold their shares did the right thing. increase in Aker’s shareholder value in 2013 tract for complex offshore assignments – is ner for oil companies in the future. My con Aker’s share investments in Det norske, have in common that most of their CEOs a demanding task, particularly due to the viction rests on the tremendous knowledge Aker Solutions and Kvaerner had a total are from the Sunnmøre district in Norway. NORSOK standard. Norwegian yards have base that has been built up by Norwegian value of NOK 15.7 billion at the end of This is not easy for someone from neigh more than 40 years’ knowledge and experi specialised industry clusters. 2013, following share price declines total bouring Romsdal to admit, but Frank O. ence of developments on the Norwegian Right on our doorstep we have what will ling NOK 2 billion. Based on Aker’s required Reite, Lars Solbakken, Hallvard Muri and continental shelf. remain one of the world’s largest offshore rate of return of 12 per cent per year, the Olav Holst-Dyrnes deserve considerable Lundin awarded Kvaerner the EPC con markets for many decades to come: the share investments in these three compa praise on behalf of their respective teams. tract for the construction of the Edvard Grieg Norwegian and UK continental shelves. To nies should have a value of close to NOK Let me begin with Frank O. Reite, who field in 2012. It is natural that some oil com address future challenges, the entire indus 20 billion. has worked almost half his life for me and panies turn to Asia, but the scale of the trend try needs the injection of new knowledge Does this mean that Aker has had a loss Aker. Under Frank’s leadership and with his and the way it occurred surprised me. Edvard and top talent able to help boost recovery of NOK 4 billion? I don’t think so, but I inspiration, Converto has not only rescued, Grieg will be a reference project as regards rates, reduce environmental impacts and don’t expect everyone to agree with me. In but also generated values worth billions for what is optimal in terms of cost, timetable implement projects more quickly and cost- industrial terms, the three companies are Aker’s shareholders. Frank and his seven and quality. In my opinion, the Lundiners effectively. My ambition is that the Aker developing in line with our plans and objec highly competent colleagues deserve credit have a highly experienced and competent family will continue to make an important tives. The dividend payments Aker receives for their efforts, as do individuals in Con team, and the Edvard Grieg project is being contribution to raising the level of knowl from Aker Solutions and Kvaerner are gen verto Fund’s operational companies. developed in an exemplary fashion. edge in the oil industry. erally consistent with our expectations. Over the past year Kvaerner has restruc Share prices in the oil service, oil pro Two companies in Converto have tured its business model, preparing for the Oil accounts for well over half of duction and exploration sectors have gen accounted for by far the largest value next wave of tenders that will come with Aker’s investments and value, but in erally fallen in the past year. In my view, the increase in the last few years: Johan Sverdrup. In the meantime, Kvaern 2013 the greatest growth was seen in long-term trend is continued growth. I’ve American Shipping Company and er’s order backlog and impetus are suffi other areas. experienced many a downturn since I Aker Philadelphia Shipyard. cient to allow it to make adjustments. entered the oil and gas business in 1996. In The general cost inflation in the offshore The figures show that Aker’s net asset my experience, these create more opportu The total value of Aker’s investments in the sector provides food for thought. Oil prices value increased by NOK 1.1 billion in 2013. nities than challenges. two companies has increased from NOK 59 13

million as of 30 June 2012 to NOK 2.5 bil make it there, I’m sure you can make it any- opment company. General Manager Tor Southern Ocean are crewed by a total of lion in January 2014. Yes, the two compa where.” stein Storækre has recruited a strong team 330 hardened fishermen, researchers, tech nies have indeed benefited from the shale- Kristian has passed the test with flying of highly-skilled professionals with knowl nologists and inspectors. Hallvard is a team oil boom and optimism in the US Jones Act colours. The yard has completed a suc edge and experience in real estate devel player leading an international team. market. American Shipping Company has cessful turnaround, and is now well-posi opment and sales. We are engaged in a Superba™ Krill Oil is the ingredient in the completed a demanding, but successful tioned for further growth. Kristian is the first positive dialogue with Bærum municipality top selling nutritional supplement in the refinancing. So has Aker Philadelphia Ship member of our family to be educated at an regarding the optimisation of the area, and U.S., sold under the MegaRed brand name. yard, which has also succeeded in rebuild Ivy League university. When he receives his Fornebuporten will have its own station In the spring of 2014 the brand-name giant ing a motivated team following a period of MBA degree from the University of Penn when the new metro line is completed. Reckitt Benckiser Group will enter the major downsizing and the possible closure sylvania Wharton School on 17 May, I’ll be It is satisfying to see the buildings rising European market with MegaRed and the of the yard. Today, the yard has an order sitting in the audience. His accomplishment from the ground at Fornebu. The first two ingredient Superba™. reserve totalling NOK 6 billion and a deliv makes a dyslexic, uneducated fisherman office buildings – which are due to be com It is clear that Möller’s Tran is intimi Beskjæres 76 mm fra venstre før trykk >> ery schedule stretching to the end of 2018. who moved to the U.S. in 1980, very proud. pleted in the summer of 2015 and the sum dated, and is therefore running ad cam Both companies have excellent operational Kristian will now take on a new role as mer of 2016, respectively – will total 67 000 paigns in the Norwegian market challeng management teams. executive chairman of Aker Philadelphia square metres, and are currently being filled ing MegaRed and Superba™ Krill Oil. American Shipping Company and Aker Shipyard, and new assignments are waiting with tenants. In addition, 271 of 290 apart Möller’s Tran is comparing the price per Philadelphia Shipyard were the two winners for him in Aker and Aker-owned compa ments in the first phase of the residential gram of fish oil with the price per gram of on the Oslo Stock Exchange last year. The nies, if he so wishes. project – which is due to be completed in krill oil. To me as a former cross-country two companies have the oldest and young the second half of 2015 – have been sold. skier from Molde who was active when the est chief executive, respectively, of all the And now back to the people from The collaboration with my childhood friend first fibreglass skis came on the market, companies listed on OSE. Sunnmøre: Ocean Yield chief Lars and former Aker head Bjørn Rune Gjelsten this is like comparing fiberglass skis with Dag Fasmer Wittusen turns 70 in June. I Solbakken holds the unofficial and his company Profier, works well. traditional wooden skis. Möller’s Tran first met him in 1987. Dag was one of the Norwegian national record for Fornebuporten has also invested in argues that you should buy the largest and founders of Orkla Finans, and played a cru dividend capacity and EBITDA per Aberdeen International Business Park, heaviest skis because they give you the cial role in funding the F/T American employee in a listed company. located in an area that is benefiting from most weight for your money and thus have Empress, which I constructed at Langsten the growth in the UK oil and gas industry. the greatest effect in the trail. Many scep yard in Tomrefjord. That was a major step Lars and his efficient team, which is being Thus far, 30 000 square metres are under tics held onto their wooden skis for a long for a 29-year-old fisherman. The project expanded to five employees as the com development, but this is expected to time, but we all know the fate of the ski had a value of NOK 238 million. I had lim pany grows, have an order backlog in increase to 100 000 square metres. manufacturers who wouldn’t let go of ited access to equity and credit financing, terms of EBITDA of NOK 2 billion per wooden skis. but Dag helped me find the way. employee. Ocean Yield has a clear and Almost two billion daily doses of Möller’s Tran is like an old wooden ski, In 1995 Dag was hired by my company straightforward business model. Superba™ Krill Oil have been sold in while MegaRed is like a speedmax racing RGI. Since then, he has been a key figure The company is as easy to understand the past year. ski made of fiberglass. The last cross-coun at Aker and Aker-related companies. In as Lars himself. No-nonsense, combined try world champion on wooden skis was 2011 he was appointed chief executive of with astuteness and good instincts, and a I continue to be impressed by Aker Bio Magne Myrmo in 1974. American Shipping Company. Age is no board loaded with knowledge and experi Marine’s achievements under the leader Superba™ Krill Oil contains omega-3 barrier to success. Perhaps the opposite is ence. The framework is ship shape. The ship of Hallvard Muri. The company is fatty acids in phospholipid form, and has true. According to Warren Buffett, a 70-year most important thing now is to put the cap growing rapidly, and now has a highly com documented health benefits. All cells in the old man is just a “spring chicken.” ital that Ocean Yield has at its disposal to petent staff from 11 nations, including more body have membranes containing phos My eldest son Kristian, aged 31, was good use. than 50 employees at Aker Brygge. It has pholipids. In order for the body to utilise entrusted with the leadership of Aker Phila Fornebuporten is putting its capital to also opened offices in the U.S., China and omega-3 fatty acids, these first have to delphia Shipyard by the company board in work, and Aker has converted NOK 1 billion Australia. pass through the cell membranes. The March 2011. At that time, I said: “If you can from loans to equity in the property devel The two krill-harvesting vessels in the phospholipids in Superba™ Krill Oil act like 14 Aker ASA annual report 2013 Letter from the chairman

a door opener. Other forms of omega-3 find shareholders have had a negative return of Aker would not have invested in fish. Fortunately, as a fisherman, I can still it far harder to penetrate the cell mem more than 50 per cent since the company Aker’s ownership and investments in take pleasure in the fact that we have brane. That is why you need smaller doses was listed in May 2005. Olav Holst-Dyrnes Havfisk and Norway Seafoods engage developed the Norwegian krill-harvesting of Superba Krill Oil than Møller’s Tran. and the Havfisk crew are in the process of many people. If decibels and column industry from practically nothing into a Moreover, you don’t have the discomfort of putting the trawler company right, and the inches were the measures of success, world-leading, environmentally friendly, burping Møller’s Tran, because the phos three Gadus trawlers have had a good Aker’s investment in whitefish would be an sustainable industry while cooperating pholipids in Superba™ Krill Oil mix well in start, although profitability must improve to absolute triumph. In reality, the opposite is closely with WWF Norway. We will krill on. the stomach, whereas Möller’s Tran floats justify the trawler investments. unfortunately true. on top like oil on water. In Norway Seafoods, Thomas Farstad is For 18 years we have tried to create prof In the newsroom of the Norwegian Aker BioMarine is cooperating with facing a tough task turning losses into prof itability throughout the value chain, from har daily business newspaper DN, it is WWF Norway on the sustainable harvesting its, experiencing “lots of pain and no gain”. vesting to processing and sale. Overall, the believed that Elvis is still alive and of krill resources in the world’s cleanest Last year the loss was NOK 56 million, a vessels and the filleting industry have lost that pigs can fly. Beskjæres 76 mm fra venstre før trykk >> waters. The krill-fishing operation is envi slight improvement over 2012. Thomas, money during this period, and every time we ronmentally certified by the Marine Stew who is also from Sunnmøre, has long since try to make adjustments in response to eco The fishing industry has attracted much ardship Council (MSC), the world’s most concluded that it is impossible to earn nomic realities, we are met with loud pro media attention in northern Norway, but respected environmental certification money given current regulations and pro tests and egregious accusations. nothing has astounded me more than DN’s organisation for seafood. Every bottle of the duction structures. This view has the unani articles in 2013/2014 on the Aker Wayfarer product can be traced back to the vessel mous support of the board, employee rep As we say at Aker: Be careful what transaction back in 2009. that harvested the krill and its exact posi resentatives, owners and the Norwegian you demand or wish for because you DN’s series of articles remind me of the tion in the Southern Ocean. Möller’s Tran is Confederation of Trade Unions (LO). may end up getting it. TV series “Dead Famous DNA” and the not marked for such tracing. The OTC market currently prices Norway program’s analysis of Elvis Presley and a The number of daily consumers of the Seafoods at NOK 42 million, a group that in Certain politicians have accused me of strand of hair from the King of Rock ‘n’ nutritional supplement Superba™ Krill Oil is 2013 sold processed fish for NOK 1.7 bil being, among other things, a pirate, a rob Roll’s black mane. To my mind, the pro approaching five million, while Möller’s lion to Norwegian and European grocery ber and a short-sighted egotist. I have gram makes it easier to understand how Tran, which was established in 1854, only chains. Norway’s whitefish industry flagship received death threats from anonymous the media can spin the strangest tales. has a fraction of this. Superba™ Krill Oil is is listing. Thomas is the right man to bring senders. I can to a certain extent live with According to a doctor – a so-called expert approaching two billion daily doses per the Norwegian whitefish industry back on these things, but Aker’s shareholders do – the DNA test result indicated that it was year. This is, quite simply, a mind-boggling track, but he cannot do so unless he is not deserve to have capital stuck on death not Presley’s lifestyle that led to his death, figure, and the number of consumers is allowed to implement some unpopular row in the fisheries businesses indefinitely. but rather a genetic muscular disease. The increasing every month. decisions. When it comes to our involvement in the reporter concluded that Presley had a DNA whitefish sector, I am tempted to quote the defect and, according to the Norwegian In comparison, our fish-processing Fish harvesting and processing American author Jessamyn West, who said national daily newspaper VG, stated that: businesses delivered approximately account for only a tiny share of Aker’s of sex: “Groan, and forget it.” “I am absolutely certain that it’s Elvis’ DNA, 110 million meals in 2013. investments, but have been important Unfortunately, things are not that simple. but I can’t prove it. I cannot guarantee to to me. Even in the eye of a storm, we have a duty you 100% that it’s Elvis’ DNA. That This winter, Havfisk took delivery of the last to remain calm and behave constructively, wouldn’t be possible.” of three modern trawlers currently ordered. I devoted considerable attention to our for the sake of the employees, customers, The media publish the strangest stories The Gadus series of efficient, environmen whitefish investments in last year’s letter, society and, not least, our shareholders. and allegations, irrespective of how shaky tally-friendly trawlers is setting a new but won’t do so this year. Last year I tried I have much to say about fish, but I do the factual grounds may be. Prejudiced standard for fisheries and trawler compa to provide insight into what some of our not wish to burden the shareholders here. journalists and experts with access to nies operating in harsh weather conditions. shareholders’ money is invested in. Instead I intend to expand on my views media are a dangerous combination, yet Although the Havfisk share doubled in It is I who have been the driving force later, for those who are particularly inter they garner attention and generate stories. value on Oslo Stock Exchange in 2013, here. Had I not been the main shareholder, ested in the whitefish industry. Under the heading “The Aker Wayfarer Aker ASA annual report 2013 15 Letter from the chairman

transaction,” DN and three professors have If DN’s allegations contained even a purchase a contract for the construction of went for a TRS, and that proved to be alleged that value was unlawfully trans shred of truth, I would have first had to a specialised ship at book value. On the problematic. ferred from Aker Solutions to Aker through convince Aker’s management that the com same day, Aker Solutions’ subsidiary AMC The extension of the TRS agreement on procedures that breached the Limited Lia pany should commit a financial fraud on International signed a 10-year agreement to 1 November 2013 was scheduled to take bility Companies Act. All of this was repudi Aker Solutions in the spring of 2009. I lease the ship (Aker Wayfarer), from the place automatically. At the time of the ated in 2009, and repudiated again this would then have duped Aker’s board and autumn of 2010. Both the purchase of the extension, Aker’s management and myself year by means of thorough, comprehensive misled highly competent directors with construction contract and the lease agree had insider information regarding the accounts from Aker Solutions, Aker and the extensive commercial, financial and politi ment were concluded at the market prices upcoming sale of one of Aker Solutions’ board of Aker Kvaerner Holding. cal experience. applicable at the time. DNB Markets con business areas. Insider lists had been Untruths in DN do not become truths no Thereafter, I would have manipulated the ducted a separate valuation for Aker Solu established by both Aker Solutions and matter how many times they are repeated administration of Aker Solutions, withheld tions in March 2009. The conclusion was Aker. Unfortunately, this was not taken into and spread across more than 30 newspaper information from financial advisers, com that the agreements were sound in relation consideration when the TRS agreement was Beskjæres 76 mm fra venstre før trykk >> pages. In Aker’s view, the case was con pletely fooled legal advisers from three of to comparable prices and transactions in extended. The extension was conducted in structed by a journalist who became intoxi Norway’s largest law firms and brain the market. accordance with the correct procedures, in cated by his own calculations and theories. washed the independent members of Aker Aker has said all that it has to say about that a stock exchange notice was immedi In other words, it was a news story as Solutions’ board. the Aker Wayfarer transaction. DN is free to ately published. The oversight resided in the far-fetched as the one involving a strand of In short, I would have pulled on hidden believe, think and write what it wishes, fact that no connection was made between hair from the King of Rock ‘n’ Roll’s head, strings and forced about 50 managers, including that Elvis is still alive. I have the insider list and the TRS extension. and was about as true as that Elvis Presley board members and advisers to act as my accepted that Elvis Presley died on 16 The Norwegian National Authority for is still alive. puppets, solely to increase my taxable net August 1977. Investigation and Prosecution of Economic The essence of DN’s articles and allega wealth by one or two per cent. and Environmental Crime (Oekokrim) tions is that Aker “robbed” Aker Solutions The story does not end there. According In the TRS case, DN asked critical recently concluded that the extension of of NOK 300 million, and that I am behind a to DN, I blocked the annulment of the Aker and relevant questions, something for the TRS agreement was in breach of insider conspiracy implemented by an alliance of Wayfarer transaction in 2010 because the which it deserves credit. trading rules. Oekokrim served Aker a pen people from Aker’s management and the price was too low. Aker Solutions took the alty of NOK 51 million, composed of the boards of both Aker and Aker Solutions, initiative to buy the vessel because the Like many other participants in the capital confiscation of NOK 17 million in theoretical ably assisted by legal and financial advis market for high-end offshore services and market, Aker and I have regarded total gains made on the TRS agreement in ers. DN’s spreadsheets produce figures bank financing had improved since the win return swap (TRS) agreements as a long- November 2013, together with a fine based based on given assumptions, and these ter of 2009. Aker Solutions and Aker agreed term instrument to facilitate funding and on twice the gains. amounts have been interpreted as suspi to annul the transaction at book value. financial exposure to shares. In April 2013 To put the extension in an economic cious indicators. The professors have used Apparently, I once again used my supernat Aker entered a TRS agreement with finan context: On 29 April 2013 Aker entered a them to claim that unlawful and immoral ural powers and made the board of Aker cial exposure to 1.5 million shares in Aker TRS agreement with an economic exposure acts have been committed. The matter is Kvaerner Holding block the annulment Solutions. of NOK 125 million. When the agreement personified using my name and picture, because I wanted a higher price. In other Aker had three options to increase its was extended on 1 November, the swap claiming that I, as the owner of two-thirds words, I overrode the agreement between exposure to Aker Solutions. Firstly, we price stood at NOK 82 per underlying Aker of the shares in Aker, have robbed Aker Aker Solutions and Aker in some mystical could have used Aker’s cash holding to Solutions share, the same as when the Solutions of NOK 200 million. and invisible manner. This is nonsense from acquire Aker Solutions shares. Another agreement was entered into six months beginning to end. Certain journalists at DN alternative would have been to borrow prior. Approximately three weeks later, sub As I have previously said, I feel like a think they can make pigs fly, if they use money and buy Aker Solutions stock with sequent to Aker Solutions’ announcement combination of a clairvoyant and Don enough pink newspaper and ink. collateral in the shares. The third option of the sale of a business area, Oekokrim Corleone when I read the media’s A quick reminder of the facts: On 1 April was to enter a TRS agreement with a bro calculated a theoretical gain for Aker of representations of my supernatural 2009, Aker/Aker Ship Lease signed an kerage firm. The first two alternatives NOK 17 million as a result of Aker Solu abilities. agreement with Aker Oilfield Services to would not have created any problems. We tions’ share price gain. The unrealised gain 16

is at the same level today. Later in Novem Today Aker manages assets with a total Wiser by experience, I will not be of the company’s total assets. Aker’s buffer ber, Aker acquired 16.44 million shares in value of NOK 30 billion, and NOK 26.4 bil making new predictions as to Aker’s capital enables it to act quickly when oppor Aker Solutions in the market for NOK 1.9 lion of this amount is invested in shares. In value in five years’ time. tunities arise, and allows Aker’s manage billion. Aker has today an unrealised loss of five years, the share proportion has ment, and me, to sleep better at night. NOK 325 million on this acquisition. increased from under 50 per cent to almost Before you decide whether to sell, hold or The amount puts what the stock market The penalty of NOK 51 million should be 90 per cent of Aker’s gross asset value. buy stock in Aker, I would like to share calls the “Røkke discount” into perspective. evaluated against the realities and conse The majority of Aker’s capital has been some reflections. TRG does not intend to Investors in Aker currently get Aker BioMa quences we were confronted with. Whether put to work in solid companies, but we sell any of its Aker shares. In my view, Aker rine, Fornebuporten, our investments in the the amount is correct or not I leave for oth should not be blinded by current balance will over time meet TRG’s return and risk Norron fund and Oslo Asset Management ers to decide. Based on an evaluation of sheets. Aker must allocate capital with a profile requirements. as well as cash holdings of NOK 2.5 billion the alternatives, Aker concluded that it was firmer hand. Today, too much remains tied up Over 70 per cent of Aker’s gross asset for free when they buy Aker shares. sensible to reach an agreement with in sub-optimal investments and structures. value comprises listed shares that investors In recent years, the Aker share has Beskjæres 76 mm fra venstre før trykk >> Oekokrim and accept the penalty. This has At Aker we must become more con can acquire directly in the market. Cash traded at a price that is 30 to 40 per cent not been an easy decision. We at Aker have scious of the fact that capital has no other holdings total 8 per cent of Aker’s assets. lower than the value of the underlying always acknowledged the facts of the case purpose than to serve the shareholder Two wholly-owned subsidiaries – the bio assets. At the beginning of 2014, the dis and we have chosen to take the conse community. In other words, special local, technology company Aker BioMarine and count was 33 per cent. quences of Oekokrim’s finding. Giving regional or national interests should not be the property development company To understand the future, you have to excuses will not correct the error. We take among our investment criteria. Fornebuporten – account for over half of know the past. The graph on the next page responsibility for our actions and we learn Havfisk and Norway Seafoods are the remaining 19 per cent of Aker’s assets. is interesting. Øyvind and I have spent time from them, even when it is painful. examples of investments where Aker has Aker BioMarine and Fornebuporten are analysing Aker’s assets, notably to evaluate On behalf of Aker, I can only apologise invested in my nostalgia. Aker Kvaerner reported in the NAV at book price. whether the composition of the balance to shareholders and all other stakeholders, Holding is not an optimal ownership model Aker’s operating costs totalled NOK 236 sheet is optimal. The picture shows the and say that this is a case of “Good inten for Aker’s interests in Aker Solutions and million in 2013, corresponding to 0.8 per development of Aker’s total assets from the tions, bad execution.” From my perspec Kvaerner. Previously we have learned that cent of Aker’s total net asset value. Looking company’s listing in 2004 until the end of tive, the TRS case is one of the most dis carbon capture and Aker Clean Carbon – a forward, we hope to gradually reduce our 2013. mal incidents I have experienced at Aker, venture developed at the interface of poli operating costs as a percentage of asset A positive aspect is that Aker has man aside from accidents that have resulted in tics, public administration, business and value. aged to recoup some of the value I had injury or the loss of human life. technology development – incurred losses To ensure that we have the latitude and thought to be lost. American Shipping This is a case where DN’s journalist of NOK 400 million for Aker. flexibility we want, Aker maintains a cash Company and Aker Philadelphia Shipyard asked the right questions, and we at Aker Public debate centering on my persona buffer. Aker has NOK 5.4 billion in interest- have largely regained lost ground, while must take the uncomfortable conse should not affect Aker’s investments. If I wish bearing liabilities, cash holdings totalling Aker BioMarine is at book value. quences. One is not remembered for the to enter into sub-optimal transactions and NOK 2.5 billion, interest-bearing receivables The British author Evelyn Waugh aptly headlines – that is not what defines one. It is investments, I would do so through our fam of NOK 0.6 billion and an equal amount of wrote, “Sometimes, I feel the past and the how one deals with the headlines that does. ily company, TRG, not through Aker. My aim shares in funds. A portion of this, approxi future pressing so hard on either side that We now put this case behind us and is to distinguish more clearly between Aker mately NOK 2-3 billion, was considered there’s no room for the present at all.” look ahead. and Aker-owned companies on the one hand “buffer capital” at the start of 2014. At cur This is a fitting observation with which to and myself as a private individual on the rent interest levels, Aker is paying approxi end a long letter to the shareholders. Aker’s If you don’t acknowledge and accept other. Øyvind Eriksen and Aker’s board of mately 3 percentage points on its “buffer core is healthy, but we will benefit from where you come from, and you don’t directors are also focused on this, and Head capital.” That is the delta between the inter avoiding investing capital in sub-optimal have any objectives for what you wish of Corporate Communication Atle Kigen has ests on our outstanding bonds and our bank investments and structures. I believe that to achieve or avoid in the future, you an important role to play in ensuring that deposits. This expense, which amounts to Aker has put together a good portfolio of cannot make the right decisions in investors, politicians and the general public NOK 60-90 million per year, can be viewed investments. The portfolio and the portfolio the present. perceive and understand the difference. as an insurance premium of 0.2-0.3 per cent companies will provide opportunities and 17

flexibility going forward, and we have the face exciting times ahead. As a technology Aker share could well become a transac right team of talented people on board to and knowledge company, Aker Solutions is tional currency used for growth. We’re exploit these opportunities. All of our main well-positioned for profitable growth. nowhere near this today due to the gap sectors – energy, seafood, marine biotech The present is now. One krone in net between Aker’s underlying values and the nology and maritime assets – are being asset value trades today at 0.6-0.7 krone share price on Oslo Stock Exchange. I’ll driven by growing demand. on the stock exchange. This is the reality leave the topic as food for thought for the Aker has gone against the flow, invest more than 14 000 Aker shareholders face time being, but can ensure you that Aker ing even more heavily in oil and gas. Energy today, and the discount is a topic our larg continues to work on crystallising and needs will continue to rise, and hydrocar est investors bring up regularly. Aker’s 20 developing the values in the company port bons will remain the dominant energy biggest shareholders own over 82 per cent folio in a way that benefits our shareholder source for decades to come. Aker Solu of the company. community. tions has reported that, in the long term, I often ask myself questions such as: Along with my colleagues at Aker, the Beskjæres 76 mm fra venstre før trykk >> demand for its core products will grow by How can investors obtain more for every employee representatives and the boards an average of 8 to 10 per cent per year, krone in Aker’s net asset value? How can of Aker and Aker-owned companies, I look while annual growth in the subsea segment shareholders get greater access to the val forward to seeing what the future will bring. is estimated at 15 to 20 per cent. ues they own, but that are not priced by the At the same time, I would remind you of Our view assumes that oil prices will, in stock market? what I said three years ago: the longer term, remain stable above USD These are some of the questions that I provide no guarantees. If you want a 90–100 per barrel in 2014 dollars. The Nor we’ve addressed, but have not found good guarantee, buy a toaster. wegian continental shelf and Det norske answers to. I’ve previously written that the Kjell Inge Røkke On behalf of the family

Equity balance development in Aker ■ Debt ■ Interest bearing receivables ■ Investments ■ Other ■ Cash

50 000

PS: As in previous years, I would like to 40 000 thank my wife and fellow shareholder Anne Grete for her help with the writing, form, 30 000 content and spelling of this year’s letter to the shareholders.

20 000 Aker Brygge, 7 April 2014

10 000

-10 000 September December December December December December December December December December December 2004 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013