Annual Report 2020.Pdf

Annual Report 2020 The time for change is now. #PowerTheChange #PowerTheChange The time for change is now. In our common quest to create a cleaner, safer and more sustainable future, we must take ownership and accountability. Content <ul style="display: flex;"><li style="flex:1">Key figures </li><li style="flex:1">3</li></ul><ul style="display: flex;"><li style="flex:1">6</li><li style="flex:1">Where we are </li></ul><ul style="display: flex;"><li style="flex:1">Highlights </li><li style="flex:1">7</li></ul><ul style="display: flex;"><li style="flex:1">CEO Introduction </li><li style="flex:1">8</li></ul>Board of Directors' Report Consolidated Financial Statements Parent Company Financial Statements Independent Auditor's Report Alternative Performance Measures 10 25 104 121 126 MENU 3AKER SOLUTIONS ANNUAL REPORT 2020 KEY FIGURES Key figures* <ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul>ORDERS AND RESULTS Order backlog December 31 Order intake NOK million NOK million NOK million NOK million Percent 37,979 34,163 29,396 1,539 5.2 33,083 26,155 38,163 2,711 7.1 34,163 29,396 Revenue EBITDA <ul style="display: flex;"><li style="flex:1">ORDER INTAKE </li><li style="flex:1">REVENUE </li></ul><ul style="display: flex;"><li style="flex:1">NOK million </li><li style="flex:1">NOK million </li></ul>EBITDA margin EBITDA margin ex. special items EBIT <ul style="display: flex;"><li style="flex:1">Percent </li><li style="flex:1">4.3 </li><li style="flex:1">7.3 </li></ul>NOK million Percent <ul style="display: flex;"><li style="flex:1">-776 </li><li style="flex:1">988 </li></ul><ul style="display: flex;"><li style="flex:1">EBIT margin </li><li style="flex:1">-2.6 </li><li style="flex:1">2.6 </li></ul>1,539 5.2 EBIT margin ex. special items Net income <ul style="display: flex;"><li style="flex:1">Percent </li><li style="flex:1">-0.2 </li><li style="flex:1">3.6 </li></ul>EBITDA NOK million EBITDA MARGIN Percent <ul style="display: flex;"><li style="flex:1">NOK million </li><li style="flex:1">-1,520 </li><li style="flex:1">283 </li></ul>CASHFLOW <ul style="display: flex;"><li style="flex:1">Cashflow from operational activities </li><li style="flex:1">NOK million </li><li style="flex:1">501 </li><li style="flex:1">360 </li></ul><ul style="display: flex;"><li style="flex:1">4.3 </li><li style="flex:1">-776 </li></ul>BALANCE SHEET Net interest-bearing debt Equity ratio NOK million Percent -456 29.5 -986 32.2 EBITDA MARGIN EXCL. SPECIAL ITEMS Percent EBIT NOK million <ul style="display: flex;"><li style="flex:1">Liquidity reserve </li><li style="flex:1">NOK million </li><li style="flex:1">8,171 </li><li style="flex:1">8,883 </li></ul>SHARE Share price December 31 Basic earnings per share NOK NOK 16.45 -3.13 n/a* <ul style="display: flex;"><li style="flex:1">-2.6 </li><li style="flex:1">-0.2 </li></ul>0.49 <ul style="display: flex;"><li style="flex:1">EBIT MARGIN </li><li style="flex:1">EBIT MARGIN EXCL. </li></ul>SPECIAL ITEMS Percent EMPLOYEES Percent <ul style="display: flex;"><li style="flex:1">Total employees December 31 </li><li style="flex:1">Own employees </li><li style="flex:1">14,494 </li><li style="flex:1">18,789 </li></ul>HSSE Lost time incident frequency** Total recordable incident frequency** Sick-leave rate** <ul style="display: flex;"><li style="flex:1">Per million worked hours </li><li style="flex:1">0.18 </li></ul>1.28 3.02 0.3 1.29 2.5 Per million worked hours Percentage of total working hours * Aker Solutions and Kvaerner merged in November 2020, and share price at end of 2019 not comparable Note: 2019 figures are restated to reflect the merger between Aker Solutions and Kvaerner ** 2020 numbers are Aker Solutions and Kvaerne r , b ut 2019 numbers are only Aker Solutions MENU 4AKER SOLUTIONS ANNUAL REPORT 2020 KEY FIGURES Key figures* <ul style="display: flex;"><li style="flex:1">Revenue </li><li style="flex:1">EBITDA and EBITDA margin ex. special items </li><li style="flex:1">Order intake and backlog </li></ul><ul style="display: flex;"><li style="flex:1">Amounts in NOK billion </li><li style="flex:1">Amounts in NOK billion and percent </li><li style="flex:1">Amounts in NOK billion </li></ul>50 40 30 20 10 010 50 40 30 20 10 3.0 2.5 2.0 1.5 1.0 0.5 0.0 864200<ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">EBITDA (NOK billion) </li><li style="flex:1">EBITDA margin (percent) </li><li style="flex:1">Intake </li><li style="flex:1">Backlog </li><li style="flex:1">Revenue </li></ul>*2019 figures are restated to reflect the merger between Aker Solutions and Kvaerner MENU 5AKER SOLUTIONS ANNUAL REPORT 2020 KEY FIGURES Segment key figures* Renewables and Field Development Electrification, Maintenance and Modifications Subsea Amounts in NOK billion and percent Amounts in NOK billion and percent Amounts in NOK billion and percent <ul style="display: flex;"><li style="flex:1">Revenue </li><li style="flex:1">Revenue </li><li style="flex:1">Revenue </li></ul>15 12 915 12 915 12 9666333000<ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">Revenue </li><li style="flex:1">Revenue </li><li style="flex:1">Revenue </li></ul><ul style="display: flex;"><li style="flex:1">EBITDA and EBITDA margin ex. special items </li><li style="flex:1">EBITDA and EBITDA margin ex. special items </li><li style="flex:1">EBITDA and EBITDA margin ex. special items </li></ul>10 810 810 81.2 1.0 0.8 0.6 0.4 0.2 0.0 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1.2 1.0 0.8 0.6 0.4 0.2 0.0 666444222000<ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">EBITDA (NOK billion) </li><li style="flex:1">EBITDA margin (percent) </li><li style="flex:1">EBITDA (NOK billion) </li><li style="flex:1">EBITDA margin (percent) </li><li style="flex:1">EBITDA (NOK billion) </li><li style="flex:1">EBITDA margin (percent) </li></ul><ul style="display: flex;"><li style="flex:1">Order intake and backlog </li><li style="flex:1">Order intake and backlog </li><li style="flex:1">Order intake and backlog </li></ul>15 12 918 15 12 915 12 9666333000<ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">2020 </li><li style="flex:1">2019 </li></ul><ul style="display: flex;"><li style="flex:1">Intake </li><li style="flex:1">Backlog </li><li style="flex:1">Intake </li><li style="flex:1">Backlog </li><li style="flex:1">Intake </li><li style="flex:1">Backlog </li></ul>*2019 figures are restated to reflect the merger between Aker Solutions and Kvaerner MENU 6AKER SOLUTIONS ANNUAL REPORT 2020 WHERE WE ARE Sweden Finland Norway Russia Canada United Kingdom Italy Cyprus Saudi Arabia United States China Qatar UAE India Ghana Brunei Nigeria Malaysia Republic of Congo Angola Brazil Australia Where we are Operations in about 20 countries. MENU 7AKER SOLUTIONS ANNUAL REPORT 2020 HIGHLIGHTS Highlights <ul style="display: flex;"><li style="flex:1">HSSE </li><li style="flex:1">Front-End </li></ul>Aker Solutions is committed to a goal of zero harm to people, assets and the environment. The cornerstone of this objective is a strong, structured and companywide HSSE system, setting clear standards for HSSE management and leadership. Front-End work was in strong demand in 2020, with a total of 159 orders for studies and projects. Of these, 23 percent were for projects related to the energy transition. Several of the ongoing studies are expected to lead to FEEDS in the second half of 2021. <ul style="display: flex;"><li style="flex:1">Pandemic/ COVID-19 </li><li style="flex:1">Growth for Renewable and Low Carbon Energy Solutions </li></ul>Protecting health and life of the people working for and with Aker Solutions has been on top of the agenda through 2020. Thorough procedures have made it possible to maintain progress on ongoing contracts in spite of the pandemic. Still, the financial results were negatively impacted by the unprecedented situation. The COVID-19 will also through 2021 continue to influence both private lives as well as ongoing operations. Through close collaboration with customers and authorities, Aker Solutions aims to continue to demonstrate that progress for projects under execution can be continued. Aker Solutions will maintain the already strong position as a supplier to the oil and gas market, and simultaneously grow the activities in the markets for sustainable energy production. The target has been set for renewables and low-carbon solutions to constitute one-third of the revenues by 2025, and to become two-thirds of the revenues by 2030. The complimentary offerings and capabilities in the merged Aker Solutions and Kvaerner company are some of the main enablers for this acceleration. <ul style="display: flex;"><li style="flex:1">Merger </li><li style="flex:1">Divestments </li></ul>In 2020, the merger of the previous Aker Solutions and Kvaerner organizations was completed. The new organization now represents a focused supplier company with the foundation to build an even more solid financial platform. The planned synergy effects have been implemented during the merger process and will be followed up through 2021. Aker Solutions spun-off its Carbon Capture and Offshore Wind businesses unlocking significant value to its shareholders. As independent companies, they can reach their full potential for further growth in a more significant way than they could as an integrated part of Aker Solutions. <ul style="display: flex;"><li style="flex:1">Key Projects for Decarbonization Already in Execution </li><li style="flex:1">A Solid Neighbor in Many Local Communities </li></ul>The Hywind Tampen for Equinor is the world’s largest project for offshore wind power based on floating units. Aker Solutions has the EPC contract for delivery of the 11 hulls and the construction has already commenced in our Stord yard. In the fourth quarter, the company secured three milestone contracts related to the Norwegian Longship project for full scale carbon capture and storage (CCS). At the University Agostinho Neto, Aker Solutions delivered a new library as part of our USD 5 million investment and long term commitment to Angola. The engineering school library is now remodeled and equipped with new furniture, academic books, computers and internet access. In a year where local communities worldwide have struggled to handle the pandemics, Aker Solutions has collaborated with authorities and provided practical support as well as donations of equipment and funds to the health care organizations. <ul style="display: flex;"><li style="flex:1">Collaboration </li><li style="flex:1">Digitalization </li></ul>At Aker Solutions, we are strong believers in collaboration, and the best results are achieved when a supplier and a customer work together as one team. It allows the most efficient development concept, that brings the greatest value, to be selected. Aker Solutions will continue to drive this collaboration and actively pursue new partnerships in existing markets, as well broadening current oil and gas partnerships into the emerging energy markets. Data and digitalization are valuable tools that Aker Solutions can use to drive value for the customers through the life of an energy asset. Aker Solutions is collaborating with strong players like Cognite, SAP, Google and Siemens to accelerate the development of digital solutions to drive efficiencies through the value chains of the industry. MENU 8AKER SOLUTIONS ANNUAL REPORT 2020 CEO INTRODUCTION In August, I started my new role as Chief Executive Officer at Aker Solutions. At the same time, we announced that we already, during last autumn, would make significant structural and strategic changes to transform the company. This included spinning off Aker Carbon Capture and Aker Offshore Wind, thereby unlocking significant value to shareholders. We also completed merging Aker Solutions and Kvaerner to create a leading execution partner for both existing and emerging energy industries. CEO Introduction MENU 9AKER SOLUTIONS ANNUAL REPORT 2020 CEO INTRODUCTION The merger has strengthened the size and resilience of the company. We have a simplified and leaner organizational structure, and the offering is well tailored to our markets. The targeted cost savings were fully implemented during 2020, which has further enhanced competitiveness. In 2021, we are making further improvements. employees have done a fantastic job in adhering to the regulations we implemented across our locations. This has been key to keep operations going and to minimize the negative potential of the situation. In close collaboration with our customers, partners and national authorities, we have in spite of the pandemic managed to maintain a strong progress on ongoing, important projects around the world. production such as offshore wind power or hydrogen production plants. Some prospects look to combine oil and gas production with development of renewable power generation. Aker Solutions already has a strong offering for oil and gas projects. For execution of renewable projects and decarbonization solutions, our offering is built upon our proven expertise and execution models. In the emerging markets, we also see that energy companies, end customers and key contractors can take new roles and establish new business models. From Aker Solutions, we are actively driving for a development for increased used of partnerships, alliances and other collaboration models, and we have already established several key strategic agreements. In essence, we are creating a stronger and more optimized supplier company with a focused strategy. The merger has strengthened the size and resilience of the company. In June 2020, the Norwegian government and parliament decided on a temporary tax incentive package. This tax relief was aimed at increasing the sanctioning of new oil and gas projects at the Norwegian Continental Shelf. This has resulted in some immediate new contracts last year, as well as creating more studies for our front-end business. This will create a pull-through effect and materialize in more work in the months and years to come. During last year, the effects of the COVID-19 pandemic and the market volatility were noticeable within the company. The revenue and EBITDA fell as a result of the challenging backdrop, but the order backlog grew 15 percent compared to 2019, ending at NOK 38 billion. The outlook for project sanctioning improved for the coming years. The world will continue to demand oil and gas as well as the by-products for a long time. We will maintain our position as one of the leading international suppliers to the oil and gas companies. Increased use of digital solutions and technologies across all work processes will, both in 2021 and in the subsequent years, be an essential enabler for our <ul style="display: flex;"><li style="flex:1">development and growth. </li><li style="flex:1">The COVID-19 pandemic also introduced new HSSE </li></ul>challenges. I am pleased with how we as a company have managed this situation. We are committed to a goal of zero harm to our employees, not just through accident prevention, but also through safeguarding employee’s physical and mental health. Even before this was declared as a pandemic, we mobilized our emergency response and crisis management teams to safeguard our employees’ well-being and ensure that business continuity was maintained. In parallel, the shift towards low-carbon and renewables is prominent. The energy transition continues to evolve from high level international and national ambitions to materializing into industrial company strategies, ours included. We are using this market development to grow our business for deliveries to a more sustainable energy production. Our backlog within low-carbon, oil and gas and renewable business is steadily increasing. Even though 2020 was a challenging year for us all, we have pulled together as a company and a new organization. From my background on the customerside and now seeing the company from the inside, I am confident that Aker Solutions is the best partner for energy companies to succeed in the market we see ahead – and to deliver value for shareholders. I am looking forward to what we will achieve together in 2021. In cooperation with local health authorities, we implemented several measures to safeguard employees, suppliers and local societies to prevent the spread of the virus. Our focus was on the health and safety of the people and, I am pleased to say our Best Regards, We see that our customers, for almost all upcoming oil and gas projects, want solutions for reduction of climate footprint on their installations. We also see customers demanding solutions for sustainable energy Kjetel Digre CEO, Aker Solutions MENU 10 AKER SOLUTIONS ANNUAL REPORT 2020 BOARD OF DIRECTORS' REPORT Board of Directors' Report 2020 was an important year for the development of Aker Solutions. During the year, Aker Solutions made significant structural and strategic changes to transform the company and enhance shareholder value. This included spinning off Aker Carbon Capture and Aker Offshore Wind. In addition, the merger between Kvaerner and Aker Solutions was completed in November 2020 and created a leading execution partner for both existing and emerging energy industries. The historical figures have been restated to reflect the merger between Aker Solutions and Kvaerner. MENU 11 AKER SOLUTIONS ANNUAL REPORT 2020 BOARD OF DIRECTORS' REPORT The year was characterized by how the COVID-19 pandemic, volatility in markets and in macroconditions caused global disruption, increased risk and reduced activity levels. Despite these headwinds, Aker Solutions delivered a growing order intake and increased order backlog in 2020. carbon capture and storage facilities, hydrogen production plants, electrification of oil and gas offshore production platforms, and more. Aker Solutions had about 14,500 own employees and was present in more than 20 countries at the end of 2020. The head office is at Fornebu, Norway. Aker <ul style="display: flex;"><li style="flex:1">Solutions ASA is listed on the Oslo Stock Exchange. </li><li style="flex:1">Aker Solutions’ revenue for 2020 was NOK 29.4 billion. </li></ul>This was a decrease of approximately 23 percent from the record high level in 2019, due to the finalization of several large projects. The EBITDA was lower due to the reduced activity level, effects of COVID-19 and provision of approximately NOK 500 million related to non-recurring project adjustments. Impairments in 2020 was NOK 1 billion, mainly related to right-of-useassets. Strategy and Organizational Development In 2020, Aker Solutions and Kvaerner joined forces to create a leading execution partner for delivering low carbon oil and gas and renewables projects around the globe. The merger of equals combined complementary offerings with significant synergies to support value creation for customers, shareholders, employees and the societies surrounding the operations. Overview Building on nearly two centuries of technological and engineering excellence, Aker Solutions is committed to finding solutions to bring energy resources safely and cost effectively into production, maximizing recovery, and minimizing the environmental footprint. There are considerable changes in Aker Solutions’ global markets, including the energy transition trends. COVID-19 has negatively impacted oil and gas demand, spending and sanctioning of new projects in 2020. Going forward, significant shifts in the global energy markets are anticipated, with accelerated growth in renewables energy production. This trend is strongly supported by governmental targets, policies and stimulus packages, supportive financial markets and technology developments driving down the relative cost of renewable energy. Oil and gas demand is likely to decline over time. However, these markets will need significant investments in new production over the years to come to bridge gap to the natural decline. 14,500 The company provides products, systems and services ranging from concept studies and frontend engineering to subsea production systems and services for enhancing and extending the life of a field. The main customers are international, national and independent oil and gas and energy companies. In addition, the company serves customers owning and operating renewable energy or process facilities. Deliveries to renewable energy business and low-carbon oil and gas projects include concept development, engineering, procurement, construction, installation (EPCI), and operation support. Key segments are offshore wind power installations, OWN EMPLOYEES 20 COUNTRIES MENU 12 AKER SOLUTIONS ANNUAL REPORT 2020 BOARD OF DIRECTORS' REPORT

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