001-071SaipemBil19Ing.qxd 6-04-2020 15:01 Pagina I ANNUAL REPORT 2019 001-071SaipemBil19Ing.qxd 6-04-2020 15:01 Pagina II MISSION Our mission is to implement challenging, safe and innovative projects, leveraging on the competence of our people and on the solidity, multiculturalism and integrity of our organisational model. With the ability to face and overcome the challenges posed by the evolution of the global scenarios, we must seize the opportunities to create economic and social value for all our stakeholders. OUR VALUES Innovation; health, safety and environment; multiculturalism; passion; integrity. Disclaimer By their nature, forward-looking statements are subject to risk and uncertainty since they are dependent upon circumstances which should or are considered likely to occur in the future and are outside of the Group’s control. These include, but are not limited to: exchange and interest rate fluctuations, commodity price volatility, credit and liquidity risks, HSE risks, the levels of capital expenditure in the oil and gas industry and other sectors, political instability in areas where the Group operates, actions by competitors, success of commercial transactions, risks associated with the execution of projects (including ongoing investment projects), the recent Coronavirus outbreak (including its impact across our business, worldwide operations and supply chain); in addition to changes in stakeholders’ expectations and other changes affecting business conditions. Actual results could therefore differ materially from the forward-looking statements. The financial reports contain in-depth analyses of some of the aforementioned risks. Forward-looking statements are to be considered in the context of the date of their release. Saipem SpA is under no obligation to review, update or correct them subsequently, except where this is a mandatory requirement of the applicable legislation. COUNTRIES IN WHICH SAIPEM OPERATES EUROPE Albania, Austria, Bulgaria, Croatia, Cyprus, France, Germany, Greece, Italy, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Serbia, Spain, Sweden, Switzerland, Turkey, United Kingdom AMERICAS Argentina, Bolivia, Brazil, Canada, Chile, Colombia, Ecuador, Guyana, Mexico, Peru, United States, Venezuela CIS Azerbaijan, Georgia, Kazakhstan, Russia AFRICA Algeria, Angola, Congo, Egypt, Ghana, Libya, Mauritania, Morocco, Mozambique, Namibia, Nigeria, Senegal, South Africa, Tunisia, Uganda MIDDLE EAST Iraq, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates FAR EAST AND OCEANIA Australia, China, India, Indonesia, Japan, Malaysia, Pakistan, Singapore, South Korea, Taiwan, Thailand, Vietnam BOARD OF DIRECTORS AND statutory AUDITORS OF SAIPEM SpA BOARD OF DIRECTORS1 BOARD OF STATUTORY AUDITORS2 Chairman Chairman Francesco Caio Mario Busso Chief Executive Officer (CEO) Statutory Auditors Stefano Cao Giulia De Martino Riccardo Perotta Directors Maria Elena Cappello, Claudia Carloni, Paolo Fumagalli, Alternate Statutory Auditors Federico Ferro-Luzzi, Ines Mazzilli,Pierfrancesco Latini3, Francesca Michela Maurelli Alessandra Ferone4, Paul Schapira Maria Francesca Talamonti INDEPENDENT AUDITORS KPMG SpA5 (1) Appointed by the Shareholders’ Meeting on May 3, 2018, for 2018, 2019, and 2020 and in any case up to the date of the Shareholders’ Meeting to approve the financial statements as at December 31, 2020. (2) Appointed by the Shareholders’ Meeting on April 28, 2017 for a three-year period and in any case up to the date of the Shareholders’ Meeting to approve the financial statements as at December 31, 2019. (3) Left office on December 23, 2019, effective from the appointment of a new replacement Director by the Board of Directors of Saipem, pursuant to art. 2386 of the Italian Civil Code (February 5, 2020). (4) Appointed by co-optation as Director by a resolution of the Board of Directors on February 5, 2020. (5) The Shareholders’ Meeting of May 3, 2018 resolved to appoint KPMG SpA as the independent auditors from 2019 to 2027. 001-071SaipemBil19Ing.qxd 6-04-2020 15:01 Pagina 1 ANNUAL REPORT 2019 Letter to the Shareholders 2 Structure of the Saipem Group 5 DIRECTORS’ REPORT Saipem SpA share performance 10 Operating Review 12 Organisational structure 12 Market conditions 12 New contracts and backlog 13 Capital expenditure 14 Offshore Engineering & Construction 15 OnshoreEngineering & Construction 20 Offshore Drilling 25 OnshoreDrilling 28 Financial and economic results 30 Reorganisation: impact on reporting 30 Operating results 30 Balance sheet and financial position 35 Reclassified cash flow statement 37 Key profit and financial indicators 39 Research and development 41 Human resources 46 Digital activities, ICT Services and Cyber Security 50 Governance 53 Risk management 54 Additional information 63 Reconciliation of reclassified statement of financial position, 66 income statement and statement of cash flows with the mandatory templates Glossary 68 Consolidated Non-Financial Statement 72 Consolidated financial statements Statement of financial position 132 Notes to the consolidated financial statements 139 Information regarding the reprimand by Consob pursuant to Article 154-ter, 228 subsection 7, of Italian Legislative Decree No. 58/1998 and the notice from the Consob offices dated April 6, 2018 Management’s certification 232 Independent Auditors’ Report 233 Ordinary Shareholders’ Meeting of April 29, 2020 Notice of the Shareholders’ Meeting was published on the Company website and an excerpt was published in the daily newspaper Il Sole 24 Ore on March 19, 2020. Please note that the date, place, participation, voting and/or occurrence of the Shareholders’ Meeting as indicated in the notice of meeting is subject to the provisions of current legislation or those issued by the competent Authorities vis-à-vis the COVID-19 emergency, as well as the fundamental principles safeguarding the health of shareholders, employees, representatives, and consultants of the Company. Any changes will be promptly communicated using the same methods used for the publication of the notice and/or through the information channels provided for by the legislation in force. Owing to the COVID-19 health emergency and in compliance with Article106 of Law-Decree No. 18 dated March 17, 2020 aimed at minimising travel and gatherings, attending and voting at the Shareholders’ Meeting can only occur through the granting of a specific proxy to the designated representative (Avv. Dario Trevisan) as per the instructions given in the notice. \ 1 001-071SaipemBil19Ing.qxd 6-04-2020 15:01 Pagina 2 SAIPEM ANNUAL REPORT 2019 Letter to the Shareholders Dear Shareholders, 2019 has been a turning point. We have achieved positive results, a sign that the process of profound change started in 2015 has transformed Saipem into a new company, capable of creating value and facing evolving and challenging market scenario in the energy sector. Saipem has traditionally considered itself a service provider in the Oil&Gas sector. The 2014 crisis in the oil sector, together with energy transition and a deeper strategic re-thinking started in 2015, made this definition too restrictive, having started such a profound transformation. Such change process was based on the five strategic pillars which involved, in different phases, all areas of your Company: from refocusing and de-risking of the business portfolio, to the review of processes, to a new divisional organisation model, that in 2018 provided broad operational autonomy to the divisions, to cost optimisation, to debt reduction and financial discipline, all accompanied by a continuous devotion to technology and innovation. Saipem has now changed its skin and has adopted a new business model, based on its distinctive characteristics: the ability to manage complexity in challenging contexts, engineering excellence, a global DNA and the ingenuity of passionate women and men. Your Company today is more flexible and adaptable to the continuous evolving market scenarios, that will certainly characterise the coming years. It became evident that, regardless of the energy mix of the future, it is possible to identify measures to meet the needs of the new world, to engineer new proposals, innovate and modernise the organisation and corporate culture in order to manage change. A diversified offer, the competencies and a distinctive culture have been our heritage of over 60 years and will unlock new opportunities in traditional sectors, in the transition and in other infrastructural sectors with a high technical and technological content. To seize the opportunities in this new scenario remaining competitive, Saipem has strenghtened its efforts towards sustainability of its backlog, growing significantly in non-oil sectors, such as gas and LNG (Liquefied Natural Gas), and focusing on clean technologies and decarbonisation, as well as digitalising its way of operating. The new organisation was the starting point for implementing a diversified strategy for each division. In addition to traditional markets (conventional and subsea developments), the Offshore E&C Division is becoming a point of reference for the development of offshore wind farms, particularly where engineering, construction and installation are integrated. Such diversification leverages on execution skills and gives the opportunity to use in sinergy the offshore construction fleet in this new context. In the Onshore E&C business, gas and renewables will be the main drivers of the backlog expansion towards decarbonisation, together with