Aker ASA Kjell Inge Røkke Shareholder Årsrapportletter April 20152012 2 Shareholder letter from the chairman of the board

2014: returns without the X factor

Simple figures can both reveal and obscure reality.

2014 was a disappointing year for Aker’s shareholders, with the value of our oil-related investments dropping by NOK 6.3 billion. Our investments in Ocean Yield and Havfisk increased in value by NOK 1.4 billion, and dividend payments to shareholders totalled NOK 940 million.

Changes in Net Asset Value in 2014 Beskjæres 76 mm fra venstre før trykk >> (NOK million)

 Aker Solutions  Det norske  Akastor  Kvaerner Ocean Yield  Havfisk   Dividend paid to Aker’s shareholders  Operating expenses  Net interest expenses  Others

(2700) (2400) (2100) (1800) (1500) (1200) (900) (600) (300) 0 300 600 900 1200 1500

This reduced Aker’s net asset value from concentrate properties and projects in a sin- NOK 24 billion to NOK 17.7 billion in 2014 gle company. – a decline of 23 per cent to NOK 244 per We are on the move: Aker will relocate to share after a dividend payment of NOK 13 Fornebu this autumn. Following its estab- per share. lishment by the Akerselva River in Oslo in The bright spots in 2014 are the success- 1841, Aker moved to what later became the ful steps we have taken: the demerger of Aker Brygge district in 1854. Although the Aker Solutions into two listed companies, move feels strange to me, the decision to Det norske’s acquisition of Marathon Oil relocate the group’s headquarters to Norway, Ocean Yield’s controlled, profitable Fornebuporten’s offices, within walking dis- growth and Aker BioMarine’s streamlining of tance of thousands of staff at Aker-owned its krill business. Moreover, Havfisk is bene- companies, is the right one. fiting from its three new Gadus trawlers, Numerous individuals working for Aker running an efficient harvesting operation and Aker-owned companies deserve recog- and improving profits. Fornebuporten is nition and praise for their efforts in 2014. revitalising our real estate expertise and None mentioned, none forgotten. What experience. We started with the vision and impressed me most in the past year was the aim of redeveloping the Fornebulandet area acquisition of Marathon Oil Norway, where and creating an attractive base for the Aker many staff worked day and night to secure companies. The next step may well be to Det norske’s promotion to a higher league. Construction at Fornebuporten is nearing completion with first tenants moving in after summer 2015. 3 Shareholder letter from the chairman of the board

Aker’s purpose is to crystallise portfolio’s value dropped by NOK 6.3 bil- assessments of the oil sector. Aker will remain stable above USD 90–100 per added value – the X factor generated lion, reducing the net asset value adjusted invests in areas it considers promising, barrel in 2014 dollars, although there will by the investment company’s heads equity ratio to 71 per cent by year-end. and in sectors and companies where it be cycles during which prices will rise and hands. Although our finances remain extremely has knowledge and can make a differ- above or fall below this level. This view robust, our portfolio gearing rate ence. Our expertise is strongest in the oil forms the foundation of our sector out- Our mandate is to make a difference by increased by 10 percentage points during and gas, fisheries, marine biotechnology, look, and investors are free to disagree or generating added value for shareholders. the year. At the beginning of 2015, the real estate, maritime assets, finance and agree with it.” In practice, Aker uses active ownership to built-in gearing rate for our investments is M&A fields. Am I now equally confident that oil help ensure that its return exceeds what around 30 per cent. We take risks, and Personally, I have made the conscious prices will quickly return to USD 100 per investors could achieve by investing pas- over time investors can expect Aker’s decision to manage my family’s assets pri- barrel? No. A return to those price levels sively in an Oslo Stock Exchange index return to beat OSEBX. marily through Aker. I greatly enjoy invest- most likely lie some way in the future. Do I tracker. Since being listed in September In 2014, OSEBX – a weighted average ing resources, time and energy in Aker. At remain highly optimistic about investing in Beskjæres 76 mm fra venstre før trykk >> 2004, we have given shareholders an aver- of the share price performance of compa- Aker, we have done what we promised, oil and gas-related companies? Undoubt- age annual return of 25 per cent in the nies listed on the Oslo Stock Exchange – investing in areas in which we have confi- edly yes. form of share price increases and divi- produced a return of 5 per cent. In terms dence. The world needs more energy, not least dends, 15 percentage points better than of both share price development including In my letter to shareholders four years due to population growth and increasing the Oslo Stock Exchange Benchmark dividends and net asset value, the figure ago, I described a discussion I had had prosperity. I have great faith in alternative Index (OSEBX). This added value com- for Aker shareholders exceeds minus 20 with my wife, Anne Grete, about investing and renewable energy sources. They will prises an X factor, albeit one which has per cent. A fraction with a negative in a yacht. We agreed to commission the become more cost-effective, driven by underperformed the OSEBX in recent numerator and a positive denominator build, but whereas Anne Grete was think- demand from environmentally conscious years. However, Aker has still outper- makes no sense to anyone, especially the ing in feet, I was using the metric system, consumers and technological advances. formed various energy indices during the shareholders. and so we ended up with a 66-metre Wind power and solar power are bound to same period. While these energy indices yacht. become even more important once better, are relevant, they are less important meas- The drop in value is strongly It is thought-provoking that the yacht more competitive energy storage technol- ures of Aker’s performance than the correlated to the fact that the price has been our best capital investment in ogies and solutions come to market. OSEBX. After all, Aker is a Norwegian of a barrel of oil halved in the recent years. When we built the yacht, we Although we can all hope that “greener” company, and the OSEBX has been our second six months of 2014. were investing in unique experiences with energy will gradually account for an benchmark for the past 10 years. family and friends. We have had those increasing proportion of the energy mix, I want Aker to be measured by and held Aker’s portfolio is heavily weighted to experiences, but I never expected the both the International Energy Agency (IEA) accountable for the added value we gener- long-term investments in oil-sensitive yacht to be the family’s best financial and other serious analysts agree that the ate, i.e. the X factor. It is easy to calculate. companies. Some may criticise me for not investment in recent years. Although I world will continue to produce oil and gas Quite simply, it is a fraction that produces reducing Aker’s oil-sector weighting when never advertised it, I received an unex- for generations to come. Looking one an exact figure when the numerator is average oil prices hit all-time highs above pected offer I could not refuse. generation ahead, the IEA expects oil and divided by the denominator. The numera- USD 100 per barrel in the years 2012– gas to account for half of global energy tor is the change in Aker’s net asset value, 2014. Instead, we invested a further NOK I know that the market and oil production. Accordingly, it is vital that including dividends, while the denominator 3.9 billion in Aker Solutions and Det norske prices fluctuate. The current global oil and gas demand should be met

is the change in OSEBX. When the result during this period, and by the end of 2014 downturn is one of several I have in the most energy and CO2-efficient man- totals 1 or more, X is a success factor. Aker’s loss in value amounted to almost experienced since becoming Aker’s ner possible. In its capacity as an indus- Aker started 2014 with a net asset NOK 2 billion. This demonstrates that Aker majority shareholder in 1996. trial owner, Aker has to combine the inter- value adjusted equity ratio of 81 per cent. does not always succeed in timing its ests of the oil industry, the fisheries indus- During the course of the year, the compa- investments optimally. I wrote the following in last year’s letter try and the environment in a responsible ny’s net interest-bearing debt grew from Aker has always been open and to shareholders: “At Aker we maintain the manner. NOK 2.3 billion to NOK 3.4 billion and the transparent about its thoughts on and view that, over the long term, oil prices 4 Shareholder letter from the chairman of the board

Consume by source of energy The world consumes around 92 million 20 000 billion needs to be invested in the levels, and some are losing money. Coun- (In billion tons oil equivalents) barrels of oil per day. Although consumption global oil industry over the next 15 years to tries are finding it harder to fund social 18 has grown and continues to increase, there is ensure production of 105 million barrels per security schemes, and political systems 15 disagreement about the scale of consump- day in 2030. are being tested.

12 tion growth. The latter is closely linked to These figures are indicative of supply and Let me provide some illustrative exam-

9 global economic growth, with China having production trends. Although other estimates ples, starting with the shale oil revolution in

6 the greatest impact. Since consumption contain both higher and lower figures, the the USA. What is the break-even point for

3 growth has increased even with prices above point is that the majority of energy experts US shale oil? Views differ widely, and the USD 100 per barrel, I do not anticipate lower anticipate continued growth in the fossil-fuel financial realities vary in line with factors 0 1965 2000 2035 growth at lower price levels. sector – including oil – in terms of consump- such as reservoir quality and available pro- The IEA has forecast that consumption will tion, supply and investment. duction infrastructure. Both well-drilling ■ Renewables including biofuels ■ Hydropower increase by around one million barrels per times and costs are falling steadily. Beskjæres 76 mm fra venstre før trykk >> ■ Nuclear day every year going forward, with an even- Future oil prices will be determined Whereas it previously took around 40 days ■ Coal tual decline due to the development of by powerful market forces and to drill a shale oil well, the average period ■ Gas energy efficiency technology. The IEA’s New geopolitical factors. is now 25 days, and 11 days in the best ■ Oil Policies Scenario – regarded as the most locations. I expect innovators to make Source: Energy outlook 2035, BP 2014 likely scenario by various experts – envisages Crude oil is the most important natural shale oil production in the USA even daily consumption of 105 million barrels in 15 resource of the industrialised nations, quicker and cheaper in the years ahead, years’ time. Demand is expected to increase meeting economic, social and political with the most accessible and cost-effec- I greatly respect the environment, and in Asia in particular, while consumption in the needs. Companies are making far less tive shale oil being produced first. am aware of the impact of fossil-fuel OECD countries is forecast to decline. money with oil prices at their current low A large proportion of the shale oil in a use, but I am unapologetic about being Oil prices are of course also influenced by part of an industry with positive social the supply of oil to the market. Supply is cur- Supply and demand of oil and economic ripple effects. The oil and rently outstripping demand. The volume (Million barrels per day) gas industry is part of the solution for available in the market is 1.5–2 per cent the future. Our task is to deliver oil and higher than current volume demand and con- ■ Daily demand: IEA New Policy (Interim years provided by Rystad) ■ Daily supply: Ucube – Fields that are commercial today given an oil price path from USD 60 per gas to market in the safest and cheapest sumption. This equates to just under two mil- barrel in 2015 to USD 110 per barrel in 2020 manner possible, without getting lion barrels per day – approximately the pro- ■ Daily supply: Ucube all fields involved in politics. In 2007, Aker duction volume of the Norwegian oil industry. invested in a political environment and This supply surplus has been sufficient to 110 106 climate project focused on CO2 capture trigger a fall in oil prices of about 50 per cent and storage. since the summer of last year. 102 We worked with the Norwegian Uni- The supply of oil to the market is being 98 94 versity of Science and Technology disrupted by short-term over-production. 90

(NTNU), SINTEF and other expert institu- On the other hand, forecasts state that non- 86

tions, but experienced a financial reality OPEC and shale oil production from existing 82 check when full-scale operation at Mong- fields will decline by 2.5 million barrels per 78 stad was shelved. The project caused day annually going forward. As demand is 74 Aker to incur a loss of more than NOK growing by one million barrels per day, an 70

400 million. additional 3.5 million “new” barrels have to 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

be produced to meet future demand. This Ucube = An online, complete and integrated field-by-field database, including reserves, Oil is and will remain Aker’s most equates to 10 Johan Sverdrup fields (first production profiles, financial figures, ownership and other key parameters for all oil and gas important sector. phase). Analysts estimate that USD 17 000– fields, discoveries and exploration licenses globally (Rystad Energy). 5 Shareholder letter from the chairman of the board

reservoir is produced in the first year, and well data shows that monthly production drops by approximately 70 per cent during the first 12 months of production. To main- tain production, new wells have to be drilled all the time. Thus far, this machinery has been lubricated by capital from the bond market. In fact, some 15 to 20 per cent of the US high-yield market has been invested in US shale oil. Last year, this part of the bond market totalled USD 250 billion. Fall- ing oil prices have raised risk levels, and Beskjæres 76 mm fra venstre før trykk >> shale oil producers now face higher interest rates and reduced demand for their bonds. Going forward, consolidation seems likely in the US shale oil industry, led by companies with strong balance sheets and independ- ence of the capital markets in general, and bond markets in particular. If this develop- ment materialises, the capital cost of pro- ducing shale oil can be expected to fall. In the global arena, OPEC appears to Production – forecast per oil producing country 2015 Source: Rystad Energy have or is choosing to exert less power and (In million barrels oil equivalents per day) influence over oil prices than previously. United States Saudi Arabia and its allies in OPEC control of market prices, and oil prices determine Saudi Arabia Russia one-third of global oil production, and have whether the drilling of new wells is profit- China historically functioned as a stabilising swing able. The USA has increased its produc- Canada Iraq producer. However, what does the future tion from five to nine million barrels of Iran UAE hold now for OPEC? Thus far, the market is crude oil per day in the space of just a Brazil setting prices. The OPEC countries con- few years, with shale oil accounting for Mexico Kuwait sider it illogical for the oil that is cheapest half this figure. This raises questions Venezuela Nigeria to produce to be removed from the market regarding how long US producers can Norway Qatar first, and are therefore maintaining produc- maintain their current growth rates, and Angola tion to protect market share. OPEC clearly about the willingness and ability of oil Kazakhstan Algeria expects the market to adapt to economic companies to invest in new onshore and Colombia United Kingdom realities, and for oil prices to stabilise at offshore production. The offshore invest- India Oman higher levels. The implication is that the ment horizon differs fundamentally from Azerbaijan countries and companies with the highest that of onshore shale oil production. The Indonesia Libya production, tax, operating and investment typical interval between an offshore dis- Malaysia Argentina costs must adapt to the new market and covery and production start-up is eight to Egypt global situation. 12 years, followed by a production period Australia Neutral Zone This sounds logical to me. US shale oil of between 10 and 40 years. Shale oil has Ecuador

production can easily be adjusted in view already been identified in the ground. Just 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 6 Shareholder letter from the chairman of the board

a few months pass between drilling start- While it is difficult to conclude that companies, Aker and the portfolio com- from the launch of the Ivar Aasen develop- up and production start-up, and most of one view is more correct than panies have to respect customer green ment until completion of Johan Sverdrup the oil is extracted in just a few years. another, we know that the major or red lights, and capacity has to be total approximately NOK 40 billion. Historically, oil prices have included a oil companies are cutting adjusted to activity levels. Over the past Det norske had various options. One was margin in respect of political instability. investments by 15 to 20 per cent 10 years, Aker has produced a good to secure funding for the Ivar Aasen and Nevertheless, political unrest appears to from 2014 to 2015, and that return for shareholders on investments in Johan Sverdrup developments by taking up have had a limited impact on oil prices in investment levels look likely to fall the oil industry, and I believe that our loans and issuing shares. Another was to the recent, excess-supply market situa- further in 2016. shareholders will receive a strong return sell equity in Johan Sverdrup. One solution tion, despite significant political instability in the years ahead. for Aker would have been to sell its shares in many oil producing countries. Nevertheless, Aker and I still believe in Det norske. Instead, we took on the chal- Some countries have the potential to that investment in the oil industry will The Marathon Oil acquisition is an lenge of developing Det norske further ramp up production considerably in future, remain profitable going forward, whether example of how active ownership can based on an industrial vision and objective. Beskjæres 76 mm fra venstre før trykk >> while others can be expected to produce through engagement in oil companies or make a difference and generate Aker and Det norske carefully consid- less. While Iran and Iraq may increase pro- the oil service sector. Given that we are shareholder value. ered the full range of possibilities before duction, many are asking how Russia will based in Norway, the recent depreciation concluding that Det norske would generate be impacted by lower oil prices and inter- of the Norwegian krone is worth consid- The purchase of Marathon Oil Norway’s maximum shareholder value as a long-term national sanctions. The consequences ering briefly. In 2014, oil prices averaged production portfolio, licences and opera- stakeholder in the Norwegian continental already include high inflation, the deprecia- USD 104 per barrel, with one US dollar tions on the Norwegian continental shelf shelf and with Aker as its leading share- tion of the Russian rouble and rising inter- costing NOK 6.30. In other words, one would not have been possible without holder. est rates. barrel of oil (159 litres) cost NOK 655. Aker’s involvement as a stakeholder in Det The design of the Norwegian tax regime Libya is suffering political chaos, and Given an average oil price of USD 60 and norske. Det norske would have found it dif- for the petroleum sector ensures that the oil production has fallen from 1.5 to 0.5 a USD:NOK exchange rate of 1:8, the ficult, and perhaps impossible, to secure majority of oil and gas revenues flow into million barrels per day as a result. Major price of a barrel is now NOK 480. financing and implement the transaction the public purse. The tax system reim- oil producers like Venezuela and Nigeria I try to stay updated on what is written without Aker’s support and leadership. burses oil companies for 89 per cent of need their oil revenues to fund social ser- and said about the oil industry. One char- In my view, the acquisition of Marathon their field and installation development vices and infrastructure projects. These acteristic of such coverage is the diver- Oil Norway was the right move both in June costs. Once a company is producing oil, three countries alone produce about five sity of opinions among so many highly 2014 and with hindsight. Det norske has the investment costs can be set off against million barrels of oil per day. How long educated people. Very few individuals reinforced its industrial and financial posi- the tax payable on existing production on can they maintain this level of produc- have been as bullish as DNB Markets’ oil tion through the addition of Marathon’s an ongoing basis. tion? What oil price is needed to gener- analyst Torbjørn Kjus, who has been expertise, resources and portfolio, even An oil company without production lacks ate funding for projects to address social impressively accurate in his short-term after paying USD 2.1 billion for the com- this opportunity, and must cover all devel- challenges and tasks? What will happen market forecasts. pany at a time when oil prices exceeded opment costs until the field begins produc- in regions and countries like Kurdistan, History shows that the oil industry has USD 100 per barrel. I am of the firm opinion ing. Only once the company has taxable where oil is available but political devel- two modes: full speed ahead or all stop. that, without the Marathon acquisition, Det production revenues can it utilise the opments are complicating market In my view, the few stakeholders who norske could have destroyed substantial deduction granted by the tax system. The access? manage to balance the gas and brake shareholder value. company has to borrow to finance develop- These are just a few examples of top- pedals without assuming excessive risk In early 2014, the reality was that Det ments until the tax refund is realised. In ics and issues that impact supply and will, over time, achieve a robust return on norske’s activities encompassed its devel- other words, paradoxically, oil companies demand in the oil market. The potential their financial and human capital. opment and exploration portfolio, operator without production revenues have to bor- list of destabilised countries, risk factors This view is easy for Aker to advocate responsibility for the development of the Ivar row money to pay for the proportion of the and situations is almost endless. It is eas- in its capacity as majority controlling Aasen field, ownership of Johan Sverdrup field development the state is committed to ier to ask many questions than to find shareholder in Det norske. However, in and limited oil production. Det norske’s total fund. This is because the tax system com- good answers. our capacity as the owners of oil service investment commitments for the period mits the state to paying 89 per cent of field 7 Shareholder letter from the chairman of the board

development costs over a period of six An evaluation of Det norske’s current plan for the development and operation of mation that Aker would be an industrial years from the time of investment. Given position in terms of production, reserves, the field. The disagreement concerns the partner. Øyvind and I confirmed to Petoro that the state enjoys the lowest funding currency effects and tax position indicates principles for the distribution of assets that Aker had no plans to sell its shares in cost of all the stakeholders, value is trans- that despite the fact that oil prices are con- when licences are unitised. Det norske or to advocate a sale of owner- ferred from the company and the state to siderably lower than anticipated and Let me be clear: Det norske is privileged ship interests in Johan Sverdrup. Since external lenders – a lose-lose situation for planned for. In my opinion, the transaction and proud to be a key co-venture partner in then, Aker has invested a further NOK 2 the oil company and the state. has generated close to NOK 5 billion in the Johan Sverdrup adventure. I am billion in Det norske. Before the acquisition of Marathon Oil value for Det norske’s shareholders. This impressed with the work done by politi- Kjell Pedersen communicated Petoro’s Norway, Det norske had NOK 40 billion in conclusion is based on an assessment of cians and the public administration to ena- objective very clearly: to safeguard the Nor- investment commitments in the period until the various alternatives open to Det norske ble Norway to become a leading, attractive wegian state’s financial interests and production commences from Johan Sver- at the beginning of 2014 and a comparison oil and gas nation. History shows that we ensure that a fair share of the value repre- drup in Q4 2019. Ivar Aasen is expected to of these with the decision to acquire Mara- have individuals to thank for Norway’s sented by the field (PL265) flows into the Beskjæres 76 mm fra venstre før trykk >> begin production in Q4 2016. Det norske thon Oil, taking into account current oil development into the oil producer it is public purse. This was also explicitly con- would not have begun generating revenues prices, production profile, oil reserves, today. I greatly respect that. firmed in the Petoro magazine Perspektiv against which to set off investment costs investment commitments, borrowing costs Aker has invested NOK 4.4 billion in 2012, which in August of that year was dis- before reaching this milestone, and these and tax consequences. Det norske – our largest monetary invest- tributed with the daily newspaper Dagens revenues would have been entirely insuffi- With the assistance of Aker, Det nor- ment in recent times. As a 50 per cent Næringsliv in connection with the Offshore cient to absorb the NOK 40 billion invest- ske’s management is currently putting shareholder in the company, we are Northern Seas Conference and Exhibition ment programme. The incorporation of in place a robust, long-term financing focused on finding the best solutions for in Stavanger, Norway. Marathon Oil’s production into Det norske arrangement, which I believe is good for all Det norske’s shareholders. Aker will not, Petoro’s magazine also stated the fol- allows the latter to utilise the tax system to all shareholders. I applaud their efforts. as some claim we should, act as an “Aker” lowing: “Current knowledge indicates that full effect. The external funding cost will be group or system. the most valuable oil is located in the part reduced, the company’s profits will improve Those who have followed the Every company in Aker’s portfolio must of the field to which Petoro holds the rights. and the state’s future tax revenues will development of Aker and my career act in its own best interests, and those of This part of the field permits a high recov- grow – a win-win situation for the state and know that we are unafraid to discuss its shareholders. This is clearly the only ery rate, high production per well and low the oil company. matters of principle when we correct “corporate governance” approach, costs per produced barrel. Profitability and Further, in important areas the Mara- consider that we are right. even given that Aker as a whole is Nor- the total value will thus be high.” thon Oil acquisition has proven signifi- way’s largest private oil industry stake- After Petoro received a grant of NOK 98 cantly more beneficial than assumed prior That is why Det norske has our full sup- holder. Directors independent of Aker con- million via the fiscal budget to pay for to the transaction. Alvheim’s production port regarding the distribution of value and stitute a majority on the boards of all the expert and financial assessments, and Det profile is better than anticipated. There is assets in the Johan Sverdrup field. The listed Aker-owned companies. norske contributed geological and reservoir more oil in the ground than forecast, and positions adopted by Det norske’s board Det norske and Aker understood early expertise, it was documented that PL265 several additional fields with potential for are not mine alone, but are based on the on that the Johan Sverdrup field would contains a greater concentration of oil and tie-in to the production and storage ship assessments and decisions of a united involve competing interests. Petoro also is more profitable than PL501. Alvheim have been identified. Marathon Oil board and management. understood this as early as in 2012. The fact is that Det norske and Aker Norway is a perfect match in terms of its Det norske has a responsibility to Petoro’s President and CEO at the time, undertook to work with Petoro, to the reservoir portfolio, production profile, tax develop society’s resources. This task and Kjell Pedersen, contacted Øyvind and me extent that such collaboration reflected position and human resources. On the the economic social responsibility to confirm that Aker planned to be a long- expert assessments and was possible other hand USD oil prices are far lower involved constitute an obligation for the term leading shareholder in Det norske and without compromising professional and than anticipated and planned for. Since company. The Johan Sverdrup partners had no intention of selling its shares as financial requirements. This was well- most of the oil remains in the ground, the – Statoil, Lundin, Petoro, Det norske olje- soon as collaboration with Petoro was described in Petoro’s magazine dated most important question over the next 10 selskap and Maersk – have agreed an established. Pedersen wanted a clear indi- August 2012, and was the foundation for years will be how oil prices develop. economically and socially responsible cation of our ownership horizon, and confir- our cooperation over almost three years 8 Shareholder letter from the chairman of the board

and more than 300 negotiation meetings Petroleum and Energy Tord Lien on 13 Feb- this year. In reality, this paper is simply Correct portfolio allocations and capital concerning the unitisation of assets in the ruary of this year. intended to inform the Norwegian parlia- discipline are crucial components of the Johan Sverdrup field. The Ministry of Petroleum and Energy ment of developments, and will be consid- success formula for a positive X factor. As For almost three years, the collaboration has referred the matter of the distribution ered before 23 June 2015. The matter will described earlier, a further vital element is with Petoro has been based on this agree- of ownership to the Norwegian Petroleum then be referred back to the same individ- Aker’s ability to take steps to secure a bet- ment and principle for the distribution of Directorate for assessment. The reply uals at the Ministry of Petroleum and ter return for shareholders throughout the value. Det norske and Petoro were in full deadline is 9 June 2015. Independently of Energy, who have the final word and will economic cycle than achieved by bench- agreement until the final days before the this clarification, the government will pub- approve the plan for development and mark indices like OSEBX and the energy submission of the Johan Sverdrup plan for lish a parliamentary white paper on the operation. A crucial point remains how and index. If you lack faith in the oil industry development and operation to Minister of development of the field in the spring of when the Ministry decides the distribution and future transactional opportunities, there of ownership. are better investments than the Aker share. Having observed the pressure and type Aker will continue to be heavily exposed to Beskjæres 76 mm fra venstre før trykk >> Gross assets by sector since listing of pressure exerted on the parties in the oil prices, the oil service sector and oil pro- (Per cent of total assets) matter of the distribution of ownership in duction. Johan Sverdrup, it is clear to me – with the At the beginning of 2015, Aker was man- ■ Other ■ Cash and liquid fund investments ■ Real estate benefit of hindsight – that Det norske aging assets valued at NOK 25 billion, with ■ Seafoods and Marine biotech ■ Maritime assets ■ Oil and gas related should have followed a different path right oil-related investments accounting for 45 100% from outset. There is a substantial differ- per cent of this total. In 2014, operating ence between what we consider a fair dis- costs and net interest costs amounted to 80% tribution and the proposal to be evaluated NOK 500 million, or 2 per cent of the capi- by the Norwegian Petroleum Directorate. tal Aker has under active management. 60% The difference equates to about 35 per Aker’s pure operating costs totalled

40% cent of Det norske’s current stock NOK 238 million in 2014, a slight reduction exchange value. on the previous year’s figure. Costs will be

20% Regardless of the outcome: Aker is a cut further. Two measures have already long-term shareholder in Det norske. allowed Aker to cut costs by 15 per cent a 0% Det norske is a key value driver in year: passing the baton to a new lead 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Aker’s investment portfolio. Investors who sponsor of the Norwegian national cross- share this view can buy into Det norske country ski teams as of 1 May 2015 and Development in net asset value (NAV) directly, or indirectly via Aker. Aker is also cancelling the order for a new jet. (NOK million) the largest shareholder in seven other Aker has established a 50/50 airline with listed companies, in addition to Det nor- Bjørn Rune Gjelsten, a personal friend 40 000 ske: Ocean Yield, Aker Solutions, Akastor, since my youth and a former CEO of Aker. 35 000 Havfisk, American Shipping Company, Bjørn Rune proposed the name Gjelsten & 30 000 Aker Philadelphia Shipyard and Kvaerner Aker Air, or G&A Air for short. I found it easy

25 000 (listed here in investment portfolio value to agree, since to my mind “G&A” stands

20 000 order as at the beginning of 2015). for “General and Administrative Expenses”, Together, the listed investments account or high-flying overheads, which will now be 15 000 for almost 90 per cent of Aker’s value halved. 10 000 excluding cash and liquid investments. 5 000 Our task is to generate shareholder value Cost-cutting by Aker and the portfolio 0 exceeding what investors can achieve by companies represents adjustment to 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Aggregated dividend payment in the period copying Aker’s share investment profile. reality. 9 Shareholder letter from the chairman of the board

In this climate, it is good to have Øyvind sees investment opportunities and projects yard’s delivery of the platform decks for the The market has currently priced in pro- back as full-time President and CEO of with the potential to produce strong Eldfisk field (where ConocoPhillips is the longed low oil prices and prospects of Aker. Øyvind has done fantastic work as returns. Øyvind and I will spend time during operator) and Edvard Grieg field (where lower activity levels in the oil service indus- executive chairman of Aker Solutions dur- the next few months conducting a detailed Lundin is the operator) where both are on try. If these expectations are correct, com- ing the past four years, not least in terms of review of Aker’s future dividend policy. The schedule and on budget. panies and shareholders in this sector face streamlining the company and implement- aim is to formulate a policy based on struc- In recent years, Kvaerner Stord has slim returns in the years ahead. In such sit- ing major transactions. tures or models that ensure greater predict- invested more than NOK 400 million in new uations, it is important for Aker to have the As always, Øyvind and I have summa- ability and are sustainable for minority cranes and production equipment. liquidity and financial muscle needed to rised the past Aker year in words, figures shareholders. Kvaerner has sought to become more effi- support portfolio companies and take nec- and actions. As always, there is full agree- Aker has satisfactory cash holdings, rel- cient and competitive, but has nevertheless essary steps. From my own experience, I ment between Øyvind’s words and actions. atively low operating and borrowing costs, lost the last five contracts for the construc- know that downturns often offer the best Although his actions suggest that he and limited debts falling due in the near tion of large platform decks. The recent opportunities for investments with the Beskjæres 76 mm fra venstre før trykk >> deserves a bonus for 2014, Øyvind has future. Nevertheless, in my view current contract for the construction of the drilling potential to generate substantial profits declined, citing last year’s drop in value and conditions in the oil industry and market in platform for Johan Sverdrup went to the when the next upturn comes. the cost-cutting and workforce reductions general indicate that Aker should maintain Norwegian company Aibel, demonstrating At the moment, I feel a bit like the tramp the Aker group is currently implementing. substantial liquidity, financial strength and that partial construction in Norway is possi- in a cartoon drawn by the Danish author, Øyvind is leading by example, and demon- great flexibility. ble. Kvaerner, and Aker as its largest share- inventor and humourist Robert Storm strating wise, constructive leadership. holder, must acknowledge insufficient deliv- Petersen, who when asked what he thought As regards dividends, a shift occurred I am pleased when I consider the ery on meeting customer expectations in about the state of the world replied, “I don’t this year. For the first time since 2009, Aker successful industrial adjustment connection with these last five tenders. know, I have dust in my eye”. is paying a smaller dividend than in the pre- made by Øyvind and his team at Aker Kvaerner, Aker and I have considerable Sometimes, it is good not to have an vious year. Despite the drop in the group’s and in the portfolio companies. experience of engineering, procurement and opinion. More than ever before, we have to value, we are paying a dividend of 4.1 per construction (EPC) contracts. Although I work even harder and with even greater cent of net asset value as per the end of The main message is that Aker and the could quote numerous examples of suc- focus to deliver results and shareholder 2014. Half of the NOK 10 dividend may be Aker-owned companies are improving cesses and financial disasters, one particu- value. taken as dividend shares at a 10 per cent transparency, becoming stronger industry larly memorable project was the construc- discount. Overall, this equates to a divi- players and developing greater financial tion of the Njord platform for Norsk Hydro in Kjell Inge Røkke dend just exceeding our dividend policy robustness. However, some companies in 1996, which Aker “under-priced” in order to On behalf of the family range of two to four per cent of net asset our portfolio may also face challenges in a win the contract. This happened just before value. tougher market with lower activity levels I became Aker’s largest shareholder, and it Many Norwegian companies invested in and a smaller order intake. was argued at the time that this was the oil and gas sector have cut dividends Kvaerner is a company rich in tradition approximately a break-even project for Aker. for 2014. Some have cut dividends com- but facing tough decisions. The yard at Ver- The project ended up costing Aker NOK 1 pletely, while others have signalled lower dal has made great progress in improving billion, despite additional payments from the dividends going forward. Aker’s dividend its competitiveness, and Statoil has customer. It is depressing to consider what policy stands, however this year’s dividend/ awarded Kvaerner important contracts for those NOK 1 billion would be worth today. dividend share arrangement, to be imple- the construction of steel substructures for The contract for the construction of the PS: As in previous years, I would like to mented in June, breaks the trend of stable Johan Sverdrup. The yard at Stord has suc- residential and equipment platform for thank my wife and fellow shareholder Anne dividend growth. cessfully delivered projects connecting Johan Sverdrup is to be awarded before Grete for her help with the writing, form, I fully understand that some sharehold- platform decks with onshore facilities in the summer. Regardless of the outcome, content and spelling of this year’s letter to ers may be disappointed, but we have also recent years, but the company’s new-plat- we have to expect workforce reductions at the shareholders.

received positive feedback. Many have form deck construction business is seri- Kvaerner, at least while the current market interpreted our decision as a sign that Aker ously challenged. The bright spot is the situation continues. Aker Brygge, 16 April 2014