#PowerTheChange

Annual Report
2021

www.akersolutions.com

Aker Solutions delivers integrated solutions, products and services to the global energy industry. We enable low-carbon oil and gas production and develop renewable solutions to meet future energy needs.

By combining innovative digital solutions and predictable project execution we accelerate the transition to sustainable energy production.

Content

Content

Key figures

Where we are

Highlights

CEO Introduction

Board of Directors’ Report

Financial Statements

Independent Auditor’s Report

Alternative Performance Measures

3

MENU

Aker Solutions Annual report 2021 Key figures

40,466

ORDER INTAKE

NOK million

29,473

REVENUE

NOK million

1,842

EBITDA

NOK million

6.2

EBITDA MARGIN

Percent

693

EBIT

NOK million

2.4

EBIT MARGIN

Percent

4

MENU

Aker Solutions Annual report 2021 Key figures

Key Figures

5

MENU

Segment Key Figures

Aker Solutions Annual report 2021 Key figures

6

MENU

United States

Canada

Brazil

United Kingdom

Norway

Sweden

Finland

Italy

Cyprus

Ghana

Nigeria

Republic of Congo

Angola

Saudi Arabia

UAE

Qatar

Russia

India

China

Malaysia

Brunei

Australia

Operations in more than 20 countries

Aker Solutions Annual report 2021 Where we are

7

MENU

Aker Solutions Annual report 2021 Highlights

HSSE

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 company-wide HSSE system, setting clear standards for HSSE management and leadership.

Pandemic/ COVID-19

2021 was another year heavily influenced by the COVID-19 pandemic. Protecting health and life of the people working for and with Aker Solutions has remained a top priority throughout. During the past two years, Aker Solutions’ employees have demonstrated their ability to mobilize and execute operations across the world throughout numerous pandemic constraints, adapting to new ways of working, and setting new performance benchmarks – all of which have earned the recognition of the company’s customers.

Safeguarding Mental Health

A priority in 2021 was to care for employees’ mental health during the COVID-19 pandemic. This included efforts to avoid negative effects of long-term use of home office and other precautions. This was done by promoting mental health awareness and coping skills through internal channels for mass communication as well as through face-to-face meetings and on digital platforms.

Solid Order Intake and Backlog

In 2021, Aker Solutions won new orders worth a total of NOK 40.5 billion, equivalent to 1.4x book-to-bill, bringing the order backlog at year-end to NOK 49.2 billion, an increase from NOK 38.0 billion at the beginning of the year.

Transition Journey on Track

Aker Solutions has set an ambitious target of one third of revenues in 2025 to come from renewables and transitional solutions. In 2021, the company won around NOK 16 billion in new orders related to these solutions, primarily within electrification, low-carbon solutions, offshore wind and carbon capture. Such solutions represent 32 percent of Aker Solutions’ backlog, which demonstrates that it is on-track with this target – and to grow this business to two thirds of the company’s revenue by 2030.

High Tendering Activity

High FEED and tendering activity provide a solid foundation for Aker Solutions’ growth targets. At year-end 2021, the company was tendering for approximately NOK 81 million worth of contracts, of which 20 percent was related to energy transition. Front-end work was in strong demand for 2021, and Aker Solutions won several FEED contracts that the company expects will convert to significant order intake in 2022.

Collaboration

Aker Solutions is a strong believer in collaboration, both between suppliers and customers. In 2021, Aker Solutions formed a consortium with Siemens Energy and Doosan Babcock for the UK CCUS market, with a view to secure a strong foothold within this expanding market. Aker Solutions also teamed up with DeepOcean and Solstad Offshore to create the Windstaller Alliance, which aims to provide a cost-efficient and flexible service offering for the growing offshore wind market.

Sustainability and Climate Action Plan

In 2021, Aker Solutions set specific objectives for sustainability and how it will contribute to the global climate objectives. By 2025, one third of total revenues will come from solutions to enable production and use of oil and gas with reduced emissions, and from deliveries to renewable energy projects. By 2030, this will account for two thirds of total revenues. The company will reduce CO2 emissions from own operations (scope 1 and 2) by 50 percent within 2030 and to net zero within 2050. In the past year, an aggressive five-year Climate Action Plan was also developed and finalized. The plan spells out how the company will reduce its own emissions, engage its supply chain and provide solutions to reduce emissions for customers and projects. The plan covers four key areas: A plan to reduce emissions through elimination of scope 1 hotspots and securing new power solutions; uniting the supply chain to bring down scope 3 emissions; strengthening low-carbon solutions through building a trusted, industry leading low carbon solutions system; and unleashing the potential of innovation via climate action through integration of data systems.

8

MENU

Aker Solutions Annual report 2021 CEO Introduction

2021 was a pivotal year for Aker Solutions as the first full year in operation following the merger. I am pleased with our performance during the year – both in terms of our operational and safety performance, and our financial results. We delivered on our priorities and established a solid foundation to continue to deliver on our strategy and targets moving forward. Aker Solutions is well positioned for long-term shareholder value creation and to drive the energy transition.

9

MENU

The pandemic has continued to influence both our work, and the lives of our employees and the communities around us in the many countries we are present. Both COVID-19 as well as more traditional HSSE issues, have been handled well by our dedicated people in close cooperation with partners, customers, suppliers and authorities.

Safe and efficient operations are fundamental for our ability to predictably execute projects for our customers within the planned schedules, qualities, and budgets. Aker Solutions has through 2021 demonstrated that this is a priority, and the results we have delivered prove the effect of this focus.

At the beginning of 2021, we involved employees worldwide in a process to contribute with input to our new strategy. Already in 2025, renewable energy and transitional solutions for the oil and gas production will account for one third of our total revenues, and two thirds by 2030.

As we are transforming our operations to new markets, new delivery models and digitalization across all work processes, we also invited employees to participate in discussions on how our company culture needs to evolve to enable success. As we now roll out specific improvements and initiatives based on the Strategy & Culture process, the implementation is embraced by employees who, through involvement, have ownership to the changes.

For more than 50 years, Aker Solutions has been one of the leading suppliers of complete solutions to international oil and gas projects. We see that this experience and vast capabilities also enables us to be a supplier that can enable society to accelerate the energy transition. With our leading expertise, our purpose is to solve global energy challenges for both today’s customers and for future generations.

“ With our leading expertise, our purpose is to solve global energy challenges for both today’s customers and for future generations.

Oil and gas will continue to be part of the global energy mix, and a key component for other industrial processes and products. At the same time, the global climate objectives show the importance of a rapid increase in sustainable energy sources. In our role as a supplier to oil and gas, we are increasingly involved in projects focused on reducing emissions from the production of oil and gas. In parallel, we are developing solutions for renewable energy production, and our deliveries to renewables projects is growing fast.

One essential and strategic part of these ambitions is how we are expanding our already recognized front-end engineering consultancy. Through early engagement with customers and policy makers with plans for new developments, this will further build our role as a center of expertise for the energy transition. Simultaneously, this will support Aker Solutions growth ambitions.

We expect customers around the world to start new projects over the coming 24 months. On the Norwegian Continental Shelf, a significant number of new developments will be sanctioned and we will contribute to handle this activity growth effectively and responsibly.  In 2022, we expect the company’s total revenues to increase by 20 percent compared to 2021. We believe this positive development will continue, and we have set ourselves an ambitious target to grow our revenues by 10 percent annually, on average, from 2021 to 2025. And I am pleased to confirm that we are on-track also with this target.

Access to expertise will be a decisive factor to leverage the business opportunities we see ahead. We are investing in training and competence development for employees across our operations.  In 2022, Aker Solutions will also open about 2 000 new positions connected to our hubs around the world. We are glad to see that Aker Solutions’ central role in the ongoing energy transition already attracts some of the industry’s best talents. 

As we entered into 2022, geopolitical tensions around the Russia and Ukraine situation escalated. We will monitor and mitigate the increased uncertainties this has created, with particular focus on the safety and security for our people in the region.

In 2021, we delivered a strong order intake of NOK 40 billion, which included several key wins. This provides a solid foundation for long-term activities across all our segments and supports our growth targets moving forward. I am pleased to see that our strong operational performance through the past year created significant value for our customers, employees, suppliers and partners, as well as for the societies around us. We delivered solid financial performance and created significant shareholder value during the year. We remain committed to our overall target to deliver long-term values for our shareholders and other stakeholders.

The outlook remains positive. Aker Solutions is well placed to capitalize on both near-term recovery, and for the longer-term structural change in the energy markets. We will take a leading role in our markets, and #PowerTheChange!

Best Regards,

Kjetel Digre

CEO, Aker Solutions

Aker Solutions Annual report 2021 CEO Introduction

10

MENU

Aker Solutions Annual report 2021 Board of directors’ report

Following the merger with Kvaerner in 2020, which created a leading execution partner for both existing and emerging energy industries, Aker Solutions defined new ambitions for revenue growth, cost improvements and cash generation. The company delivered on these targets in 2021. The transition journey is on track towards a growing proportion of revenues deriving from renewables and low-carbon solutions for oil and gas.

11

MENU

2021 was another year influenced by the COVID-19 pandemic. However, Aker Solutions’ employees have demonstrated their ability to mobilize and execute operations across the world throughout numerous pandemic constraints, adapting to new ways of working, and setting new performance benchmarks – all of which have earned the recognition of the company’s customers.

Aker Solutions delivered a revenue of NOK 29.5 billion in 2021, which is about the same level as in 2020. However, the EBITDA result and margin for the past period improved significantly versus the year before. 2021 was successful on many fronts for Aker Solutions, with key commercial successes and developments related to the company’s transition journey, as well as improved profitability, record free cash flow generation, strong order intake and an order backlog that grew by almost 30 percent during the year.

Overview

Building on nearly two centuries of technological and engineering excellence, Aker Solutions delivers integrated solutions, products and services to the global energy industry. The company enables low-carbon oil and gas production and develops renewable solutions to meet future energy needs. By combining innovative digital solutions and predictable project execution it accelerates the transition to sustainable energy production.

Aker Solutions provides products, systems and services ranging from concept studies and front-end 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 that own and operate 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, carbon capture and storage facilities, hydrogen production plants, electrification of oil and gas offshore production platforms, and more.

Aker Solutions employs approximately 15,000 people in more than 20 countries. The head office is at Fornebu, Norway. Aker Solutions ASA is listed on the Oslo Stock Exchange under the ticker AKSO.

Strategy and Organizational Development

2021 is the first full year of operation since the 2020 merger between Aker Solutions and Kvaerner, which created a leading execution partner for delivering low-carbon oil and gas and renewables projects around the globe.

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, but 2021 saw signs of recovery. 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

15,000

OWN EMPLOYEES

20

COUNTRIES

Aker Solutions Annual report 2021 Board of directors’ report

12

MENU

Aker Solutions is committed to be a supplier accelerating the transition to sustainable energy production. The company’s ambition is that solutions to enable production and use of oil and gas with reduced emissions, and from deliveries to renewable energy projects will represent one third of total revenues already in 2025, and two thirds of total revenues in 2030.

“Aker Solutions is committed to be a supplier accelerating the transition to sustainable energy production.

Aker Solutions has also set ambitious emissions reduction targets and is committed to reduce its own emissions by 50 percent for scope 1 and 2 by 2030. By 2050, the objective is net zero emissions.

To ensure that the company has the capabilities needed to deliver on its strategy, Aker Solutions will invest in people and competence through a strategic competency lift project, where segments, functions, and regions will co-create to develop competence within targeted areas.

Aker Solutions’ offering within several renewables markets spans a wide range, including offshore wind, hydrogen production facilities and installations for carbon capture, utilization and storage (CCUS). Within both bottom-fixed and floating offshore wind, Aker Solutions delivers products and services

for foundations, converter and substations in addition to power distribution solutions. In 2019, the company was awarded the EPCI contract for floating foundations for Hywind Tampen, the world’s largest floating wind project sanctioned to date. The company has continued to strengthen its position within offshore wind during 2021, and has been selected to provide several HVDC platforms in the UK and the US. Within CCUS, Aker Solutions is delivering several contracts for the Norwegian Longship project for a full-scale CCUS value chain. The company is also engaged across the entire CO2 value chain, with key contracts for the Norcem carbon capture plant, for the Northern Light terminal for receiving captured CO2, as well as for the subsea system for injection of CO2 into the seabed for storage.

The global oil and gas markets will continue to be very important for Aker Solutions in the years to come. The temporary activity package implemented by the Norwegian parliament in 2020 triggered several new projects and contract awards for Aker Solutions in 2021. Aker Solutions is also involved in front-end engineering for several additional prospects. During 2021, Aker Solutions expanded its share of low-carbon solutions in the oil and gas market including the award of the electrification of the existing Troll West platform in Norway. The company also launched the JustEco(TM) digital tool to enable analysis of environmental footprint for more sustainable solutions.

Internationally, Aker Solutions will continue to leverage on its broad footprint and long-term customer relations to deliver low-carbon oil and gas projects globally. A notable contract win in 2021 was the major subsea gas compression  project Jansz-lo

for Chevron in Australia, an international breakthrough for the company’s subsea compression technology. The company is also involved in several international projects within renewables, such as East Anglia THREE in the UK and Sunrise in the US. In 2021, Aker Solutions formed a consortium with Siemens Energy and Doosan Babcock for the UK CCUS market, with a view to secure a strong foothold within this expanding market. In 2021, Aker Solutions also teamed up with DeepOcean and Solstad Offshore to create the Windstaller Alliance, which aims to provide a complete product supply, fabrication and marine services offering within offshore wind and other offshore renewables segments.

Digitalization is identified as a key enabler for Aker Solutions’ transformation journey. The company is collaborating with partners, including companies in the Aker group, to develop and commercialize new and innovative digital tools and solutions. For the NOA+Fulla project, Aker BP is collaborating with the supplier alliances where Aker Solutions is a partner to spearhead the new digital journey and establish models for upcoming projects. Aker Solutions was in 2021 awarded the FEED contract for this project.

Organization 

Aker Solutions’ organization is divided into five business segments: Renewables, Engineering, Topside & Facilities, Electrification, Maintenance and Modifications (EMM), and Subsea.

The company has three external reporting segments: Renewables and Field Development, Electrification, Maintenance and Modifications (EMM), and Subsea.

will need significant investments in new production in the years to come in order to bridge the gap between demand and natural decline.

Aker Solutions Annual report 2021 Board of directors’ report

13

MENU

CEO Kjetel Digre heads up Aker Solutions, with Idar Eikrem as Executive Vice President (EVP) and CFO.

There were some changes to the executive management team in 2021. In March, Marianne Hagen joined as EVP for Sustainability and Communication, later adding HSSE to her list of responsibilities.

In August, Signy Elde Vefring succeeded Egil Bøyum as EVP Performance and Transformation, while Henrik Inadoni was promoted and joined the executive management team as EVP Legal, Compliance and Safeguarding. Stephen Bull also joined in August, taking on the role as EVP for the Renewables segment, succeeding Karl-Petter Løken. Kenneth Simonsen was acting EVP Renewables from February to August 2021.

Global Presence

Aker Solutions is pursuing international growth in targeted markets, while safeguarding its existing market positions. The company is represented in major energy hubs around the world, including North America, Brazil, the North Sea, Africa, Asia and Russia. Aker Solutions has about 15,000 employees at over 50 locations in more than 20 countries around the world.

Market Outlook

Aker Solutions’ activity level is still primarily related to the global oil and gas markets, while the business is in parallel diversifying into a wider range of energy segments.

Oil prices have strengthened significantly over the second half of 2021. Simultaneously, customers in

several key segments have strong drivers to maintain progress for maturing and sanctioning of important prospects. The Norwegian activity package for new petroleum projects is expected to lead to contract awards for several projects in 2022 and beyond. Also, within low-carbon solutions and renewables, Aker Solutions is positioning for projects that are expected to pass key decision gates over the coming 24 months.

The company won 103 front-end orders in 2021. This is historically a leading indicator for upcoming project activity. Six studies turned into more detailed FEED projects last year. Some of these FEEDs include options for EPC contracts, which puts the company in a good position for further work in the next phases of development. Approximately one third of these studies were for projects related to the energy transition, compared with 23 percent for 2020.

In the longer term, leading customers and the entire energy industry are working to lower the carbon footprint from operations and from the use of end products. Decarbonizing oil and gas, and growth in carbon capture and renewable energy such as offshore wind and hydrogen, represent significant growth opportunities for Aker Solutions. Low-carbon solutions include oil and gas installations with all-electric power supply systems, unmanned operations, subsea compression, and carbon capture and storage. Aker Solutions is well positioned for all such projects.

“The company won 103 front-end orders in 2021. This is historically a leading indicator for upcoming project activity.

Aker Solutions Annual report 2021 Board of directors’ report

14

MENU

ESG/Sustainability

Sustainability at Aker Solutions means being a supplier that accelerates the transition to sustainable energy production by making responsible business decisions that create value while protecting the environment and contributing to the good of society.

Aker Solutions is guided by a sustainability mindset in everything it does. The company ensures safe operations for its people and the environment, and has robust programs in the social and governance areas. Aker Solutions’ Climate Action Plan provides a pathway to ensure that it meets emissions targets, support clients in reaching their goals, and further develop the company’s low-carbon solutions.

It is also important that Aker Solutions’ own business and value chain with thousands of suppliers is sustainable. The company’s objective is to reduce CO2 emissions from its own operations by 50 percent by 2030, based on our 2019 emissions. By 2050, the ambition is to become a net-zero company.

Achievements

In 2021, Aker Solutions established new policies for Sustainability and Human Rights. These policies are relevant for all employees. The company improved its CDP score to B, completed an updated climate-related risk assessment (TCFD report) and updated its new material topics based on the impacts that the company has on the environment, society, human rights and the economy.

Climate Action Plan

Over the past 18 months, Aker Solutions has seen an increased demand from stakeholders to share a

roadmap for how the company will reduce its own emissions, engage its supply chain and provide solutions to reduce emissions for customers and projects. The company established a Climate Action Steering Team and developed an aggressive five-year Climate Action Plan. The new plan addresses these issues through four key features:

■Reduce emissions: Eliminate scope 1 hotspots and secure new power solutions (scope 2)

■Unite the supply chain: Establish a resilient supply chain to bring down scope 3 emissions

■Strengthen low-carbon solutions: Build a trusted, industry leading low-carbon solutions system

■Integrate our data systems: Unleash the potential of innovation via climate action

Disclosure of EU Taxonomy Related Information

Reporting

Aker Solutions will report on EU taxonomy for the full year 2022, as required for listed Norwegian companies. To prepare for the reporting, in 2021 the company has worked diligently on analyzing its operations, assessing eligibility, interpreting the EU taxonomy criteria and developing a consistent reporting framework. Of the two environmental objectives described in the first Delegated Act, Climate Mitigation is the objective where Aker Solutions will contribute the most. The company has assessed the most significant projects within renewables and low-carbon solutions.

A large part of the company’s activities are related to the production of oil and gas. These activities, as well as aquaculture activities, are excluded from the EU taxonomy and deemed non-eligible. Aker Solutions also has some activities related to the electrification of the Norwegian continental shelf by wind power, but due to the uncertainty of potential lock-in effects, the company has currently classified these activities as non-eligible.

EU Taxonomy Work

Going forward, Aker Solutions will continue the assessment of alignment, including evaluation of the Substantial Contribution criteria, the Do No Significant Harm criteria and the Minimum Social Safeguards criteria. The company will calculate the proportion of aligned activities, by total turnover, capital expenditure and operating expenditure, and report in line with the EU taxonomy requirements for the 2022 calendar year. In addition, the company is closely following the development of the EU taxonomy to understand whether additional

Reporting Frameworks

The company’s commitment to human and labor rights is covered by the Global Framework Agreement between Aker ASA and the Norwegian and international trade unions Fellesforbundet, IndustriALL Global Union, NITO and Tekna. Aker Solutions follows the Euronext guidance on ESG reporting of January 2020 and includes reports according to the Global Reporting Initiative (GRI), Carbon Disclosure Project (CDP) and Task Force on Climate-related Financial Disclosures (TCFD). Aker Solutions’ strategy supports the UN Sustainable Development Goals (SDGs) and the company has prioritized 7 SDGs where it can have the most impact and contribute positively.

More information is available in the company’s sustainability report for 2021 on www.akersolutions.com/sustainability-reports.

Aker Solutions Annual report 2021 Board of directors’ report

15

MENU

activities could qualify under any of the other four upcoming environmental objectives. 

Eligible EU Taxonomy Activities

In the coming years, Aker Solutions will make significant ESG-related investments to reduce the company's greenhouse gas emissions, in addition to investments in technology to develop new renewable and energy transition solutions for customers. Below are some examples of Aker Solutions’ eligible activities and the relevant EU taxonomy classifications.

Carbon Capture: In the carbon capture, utilization and storage (CCUS) industry, Aker Solutions is engaged in projects across the value chain. One example is HeidelbergCement’s Norcem cement factory in Norway where Aker Solutions is a supplier to Aker Carbon Capture for delivering a carbon capture facility. This carbon capture plant will have the capacity to capture 400,000 metric tons of CO2 per year, in this hard-to-abate sector. Another example is the Net Zero Teesside power project. Net Zero Teesside Power is a first-of-a-kind gas-fired power project – fully integrated with carbon capture technology, with emissions planned to be exported and securely stored by the Northern Endurance Partnership. These activities will be classified under 3.6 Manufacture of other low carbon technologies.

Carbon Storage: For the Northern Lights project, Aker Solutions is constructing the onshore receiving facility on the west coast of Norway, where captured CO2 is received and temporarily stored before being transported offshore for permanent storage. The company is also

delivering the related subsea system offshore for the injection at the permanent storage reservoir at 2,600 meters below the seabed of the North Sea. This storage project is a key enabler that opens the addressable market for more carbon capture projects to be developed in Europe. These activities will be classified under 5.11 Transportation of CO2.

Converter Platforms and Substations for Offshore Wind: Sunrise Wind is a large 924-megawatt offshore wind project in the US, developed by Ørsted and Eversource. Aker Solutions will, in a consortium with Siemens Energy, supply the high-voltage, direct current (HVDC) converter platform under its EPCI contract. Sunrise Wind is one of the largest offshore wind farms in the US, located offshore New York, and is planned to generate enough clean energy to power approximately 600,000 homes. It is expected to be operational in 2025. In addition, Aker Solutions, in consortium with Siemens Energy, has been selected by Vattenfall as preferred bidder for the Norfolk offshore wind project located in the North Sea off the coast of Norfolk, UK. The Norfolk wind zone consists of the Norfolk Vanguard and Norfolk Boreas offshore wind farms. The planned 3.6-gigawatt total installed capacity will make this one the largest offshore zones in the world at the time of completion. Aker Solutions has also in a consortium with Siemens Energy signed a contract with ScottishPower Renewables with the intent to provide the HVDC converter stations for the East Anglia THREE offshore wind project in the UK.  These activities will be classified under 4.3 Electricity generation from wind power.

Hydrogen: Through Aker Solutions’ differentiating front end business, the company is also engaged

in early-phase work for several upcoming opportunities within hydrogen. The company is currently supporting Aker Clean Hydrogen in maturing its projects towards sanctioning. Aker Solutions’ offering within hydrogen includes engineering, procurement and constructions (EPC) services for green, blue and turquoise hydrogen plants and e-fuel. Aker Clean Hydrogen has set a target of 5.0-gigawatt net installed clean hydrogen capacity in 2030. To achieve this, the company has several ongoing projects and plans to which Aker Solutions can contribute with its expertise. These activities will be classified under 9.1 Close to market research, development and innovation.

Corporate Governance

Good corporate governance at Aker Solutions will ensure sustainable operations and value creation over time to the benefit of shareholders and other stakeholders. Corporate governance is a framework of processes, mechanisms, and responsibilities for managing the business and making sure the right objectives and strategies are set and implemented with results that can be measured and followed up.

The management and the Board of Directors are responsible for ensuring that the company conducts business using sound corporate governance, and sets the standards for corporate governance, ensuring these reflect the Norwegian Code of Practice for Corporate Governance.

The audit committee supports the Board of Directors in the quality assurance of guidelines, policies, and other governing instruments pertaining to the company. The committee supports the Board of Directors in safeguarding that the company

Aker Solutions Annual report 2021 Board of directors’ report

16

MENU

has sound management and internal controls over financial reporting and enterprise risks. The audit committee also monitors compliance with the company’s Code of Conduct as well as anti-corruption and third-party representative policies.

The directors and officers of Aker Solutions ASA are covered under an Aker group Director & Officer’s Liability Insurance (D&O). The insurance covers personal legal liabilities including defence and legal costs. The officers and directors of the parent company and all subsidiaries globally (owned more than 50 percent) are covered by the insurance. The cover also includes employees in managerial positions or employees who become named in a claim or investigation.

More information is available in the corporate governance report for 2021 on www.akersolutions.com/corporate-governance.

Financial Performance

Aker Solutions presents its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) as approved by the European Union. Aker Solutions merged with Kvaerner in November 2020, and the consolidated financial statements in this report include financial results of Aker Solutions and Kvaerner as a merged company from the beginning of the reporting period based on the book-value method. All financial information, except those in the Parent Company Financial Statements, relate to the consolidated financial statements for the group, since the parent company has very limited operations.

Consolidated Financial Results

Aker Solutions’ revenue increased slightly to NOK 29.5 billion in 2021 from NOK 29.4 billion in the prior year. Earnings before interest and other financial items, taxes, depreciation and amortization (EBITDA) for the full year 2021 increased to NOK 1.842 billion (6.2 percent) compared to NOK 1.539 billion (5.2 percent) a year earlier. EBITDA excluding special items was NOK 1.871 billion, compared to NOK 1.236 billion a year earlier. This corresponds to an increase of the EBITDA margin excluding special items to 6.4 percent compared to 4.3 percent for 2020. The positive development of EBITDA for 2021 was mainly driven by solid performance in the Subsea segment as well as improvement in the Electrification, Maintenance and Modifications segment from the year before. 

The company’s measures to deliver on a target of 1.5 billion of cost reductions from full-year 2019 to full-year 2021 has now been fully implemented. These cost reductions include cost saving programs, which both companies already had initiated due to the market downturn, as well as cost synergies realized through the merger.

Interest income was NOK 242 million in 2021, compared to NOK 100 million in the previous year. Interest expenses were NOK 383 million compared to NOK 504 million the year before. Income before tax increased to NOK 520 million in 2021 from negative NOK -1,314  million the year before. The positive development is mainly driven by the improvements in the Subsea and EMM segments, as well as higher impairments and net financial items in 2020. The effective P&L tax rate was 52 percent compared to negative 15.7 percent in the previous year.

Net income after tax in 2021 was NOK 249 million compared with negative NOK -1,520 million the previous year. Earnings per share were NOK 0.52  versus negative NOK -3.13 in 2020. Excluding special items, the earnings per share for 2021 were NOK 0.65 versus negative NOK -1.36 the previous year.

External Reporting Segments

The company has established three reporting segments for communication to shareholders and the financial markets: The Renewables and Field Development segment, the Electrification, Maintenance and Modifications (EMM) segment, and the Subsea segment.

Renewables and Field Development Financial Results

The Renewables and Field Development segment designs and delivers renewable energy solutions for offshore wind, hydrogen and carbon capture, utilization and storage (CCUS). The segment also includes engineering and fabrication for complete deliveries of traditional oil and gas platforms, onshore facilities, decommissioning and marine operations.

Renewables and Field Development revenue remained stable at NOK 10.6 billion in 2021 from NOK 10.8 billion the year before. The EBITDA margin improved to 5.0 percent from 4.0 percent the year earlier, positively impacted by NOK 125 million related to an arbitration settlement in the first quarter of 2021. Several projects in the portfolio were still in earlier phases of execution in 2021, with no margin recognition.

Aker Solutions Annual report 2021 Board of directors’ report

17

MENU

Subsea Financial Results

The Subsea segment supplies a broad spectrum of market leading intelligent subsea products, systems and solutions globally, as well as subsea lifecycle services.

Subsea revenue increased slightly to NOK 9.7 billion in 2021 from NOK 9.5 billion the year before. The EBITDA margin increased to 12.8 percent percent versus 6.0 percent percent a year earlier, driven by solid performance on ongoing projects supported by a robust project portfolio with a high portion of standardized equipment.

The full-year order intake increased to NOK 14.0 billion in 2021 from NOK 11.4 billion in the prior year. This represented a book-to-bill of 1.3 times. Tender activity remains very high with an estimated sales value of around NOK 46 billion at year-end. The order backlog increased by 32 percent during 2021 to NOK 14.1 billion at the end of the year versus NOK 10.6 billion a year earlier.

Electrification, Maintenance & Modifications Financial Results

The Electrification, Modifications and Maintenance segment (EMM) optimizes field life solutions. It has specialized capabilities for efficient execution of a range of maintenance and modifications services for offshore infrastructure, and offers decarbonization and environmentally sound offerings including electrification solutions.

EMM revenue increased to NOK 9.2 billion in 2021 from NOK 8.7 billion the year before. The EBITDA margin was 4.4 percent versus 0.3 percent a year earlier, when some non-recurring project adjustments were made.

The full-year order intake was NOK 9.9 billion in 2021, compared to NOK 13.8 billion the prior year. This represented a book-to-bill of 1.1 times. The segment was engaged in active tenders at an estimated sales value of NOK 7 billion at year-end. The order backlog increased to NOK 17.6 billion at the end of 2021 versus NOK 16.5 billion a year earlier.

The full-year order intake almost doubled to NOK 16.8 billion in 2021, compared to NOK 9.1 billion the prior year. This represented a book-to-bill of 1.7 times. Subsea won several significant contracts in the year, with the largest one being the Jansz-Io subsea gas compression contract. Tender activity remains very high at an estimated sales value of NOK 28 billion at year-end. The order backlog increased by 63 percent to NOK 17.8 billion at the end of 2021 versus NOK 10.9 billion a year earlier.

Segment Key Figures

Note: Aker Solutions and Kvaerner merged in November 2020, historical numbers are restated according to the book-value method.

Aker Solutions Annual report 2021 Board of directors’ report

18

MENU

Assets, Equity and Liability

Non-current assets totalled NOK 13.5 billion at the end of 2021, compared with NOK 14.0 billion the year before. Goodwill and other intangible assets were NOK 5.7 billion at year-end which is slightly less than the year before. The company had a net cash position of NOK 2.2 billion in 2021, compared with net cash position of NOK 0.5 billion in the prior year. The net cash consists of current and non-current borrowings and cash and cash equivalent. The debt at the end of 2021 mainly consist of bond loans in the Norwegian market. The company ended the year with a total liquidity buffer of NOK 9.6 billion consisting of cash and bank deposits of NOK 4.6 billion as well as committed long-term revolving bank credit facilities of NOK 5.0 billion. The liquidity buffer in the prior year was NOK 8.2 billion.

The book value of equity, including non-controlling interests, was NOK 7.9 billion at the end of 2021, which is the same as the year earlier. The company’s equity ratio was 27.2 percent, down from 29.5 percent a year earlier.

Cash Flow

Consolidated cash flow from operating activities depends on several factors, including progress on and delivery of projects, changes in working capital and prepayments from customers.

Net cash flow from operating activities was NOK 2,799 million in 2021 compared with NOK 901 million a year earlier. Net current operating assets was NOK -1.8 billion at the end of 2021 versus NOK-0.3 million a year earlier. Net current operating assets may fluctuate due to the timing of large milestone payments on projects as well as other timing effects and working capital movements.

Aker Solutions’ net cash outflow for investing activities was NOK 6 million in 2021, compared with net inflow of NOK 271 million a year earlier. Investments in technology development and IT were NOK 144 million, compared with NOK 197 million a year earlier. Net cash outflow related to financing activities was NOK 1,424 million, compared to NOK 1,958 million in 2020.

Investing in Research, Innovation and Technology

Building on a history of technological and engineering accomplishments, Aker Solutions is well positioned to leverage core capabilities and maintain a strong position in oil and gas, while growing low- carbon and renewable offerings. Through the dual role as both a technology agnostic and technology integrator/ developer, the company choses the best system solutions for customers and provides competitive technology that enables low-carbon and renewable offerings

Aker Solutions’ technology strategy is customer focused on standardization within oil and gas, including technologies such as all-electric subsea tree and others. Technologies such as subsea compression, subsea CO2 injection and storage, subsea and floating substations for electrification of FPSOs/platforms enable new offerings within low-carbon. Subsea and floating substations, power cables for floating wind, engineering concept studies within fish farming, and eFuel are examples of technologies that create new opportunities within the renewable segment.

The strong focus on digitalization within the company continued throughout the year, targeting

disrupting data silos. The NOA field development, operated by Aker BP, aims to transform the way the company delivers projects through a fully digitalized project execution model, which is setting new standards for cost efficiency. During 2021, NOK 45 million was expended with digitalization.

Partnership, alliances and Joint Industry Projects (JIPs) are key contributors to Aker Solutions’ technology role. Technologies such as subsea substations, HVDC concepts and data driven services are being developed in collaboration with partners such as ABB, Siemens, Cognite and others.

Through 2021, Aker Solutions was awarded several JIPs to develop engineering solutions and subsea products within low-carbon and renewable solutions over three years. These JIPs are in collaboration with customers, research institutes and suppliers.

Aker Solutions has the key role in the Linking Carbon Capture and Storage (LINCCS) R&D project. The initiative is funded by NOK 100 million from the Research Council of Norway and a similar amount from industry partners including important customers. The objective for Aker Solutions' work is to develop new solutions for transport and storage of CO2 after capture on offshore oil and gas installations. The ambition is to reduce costs for such solutions by 70 percent.

Furthermore, through technology partners such as SuperNode (part of Aker Horizon), Aker Solutions has the potential to provide disruptive superconductor power transmission solutions that also expands the subsea delivery portfolio. When the technology is commercialized, it can result in subsea deliveries of Cooling, Pumping Pod (CPP)

Aker Solutions Annual report 2021 Board of directors’ report

19

MENU

and system solution deliveries within floating wind. Total 2021 R&D expenditure was NOK 195 million, of which NOK 144 million was capitalized and NOK 51 million was expensed. The research and development portfolio included several key development programs for future and current prospects. At the end of the year, Aker Solutions recognized NOK 32 million in impairment losses on capitalized R&D related to technologies where the market outlook changed.

Parent Company Financial Statements

Aker Solutions ASA, the parent company of the Aker Solutions group, owns and manages the group’s subsidiaries. Aker Solutions ASA has outsourced all company functions to other companies in the group, mainly Aker Solutions AS. Assets and liabilities related to the corporate treasury function are held by Aker Solutions ASA. Aker Solutions ASA had a net profit of NOK 810 million in 2021 as it received non-taxable group contributions. The costs in the company mainly consist of corporate costs and interest expenses. The net loss was NOK -163 million in 2020. 

More information on the allocation of profits can be found in the income statement of the parent company in this report.

Health, Safety, Security and Environment

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 company wide HSSE system, setting clear standards for HSSE management and leadership. Regular audits aim to identify, isolate and help address potential shortcomings.

Aker Solutions is focused on continuous improvement and learning throughout the organization, and the HSSE system is a key enabler in the quest for increasingly stringent standards. The HSSE culture is founded on the principle that HSSE has personal responsibility for every employee.

Participation and consultation of our people and safety representatives is a success factor for the HSSE Management System and a key ingredient in a strong HSSE culture. 

“Aker Solutions is committed to a goal of zero harm to people, assets and the environment.

One of the focus areas in 2021 has been Management System standardization and amalgamation of Aker Solutions and Kvaerner procedures. To ensure compliance and identify best practices the company has also implemented an annual HSSE Verification and Maturity assessment

Aker Solutions Annual report 2021 Board of directors’ report

20

MENU

program. Global Control of Work Process and leadership training have also been an important focus areas in 2021. 

These programs have been carried out while the HSSE Function has continued to manage the company’s COVID-19 pandemic response, safeguarding its capability to deliver projects and services to clients.

Health and Working Environment

Aker Solutions is committed to a goal of zero harm to its employees, not just through accident prevention, but also through safeguarding employees’ physical and mental health. In 2021, the health discipline continued to focus on reducing exposure to health hazards by performing site-specific assessments with the E-score tool at five Norway locations and three international locations. The identified hazards and risks will be eliminated or controlled according to a new improvement plan for the site and ultimately contribute to limit the number of new work-related illnesses.

Another priority in 2021 was to care for the mental health of employees during the pandemic. This included efforts to avoid negative effects of long-term use of home office and other precautions. This was done by promoting mental health awareness and coping skills through internal channels for mass communication as well as through face-to-face meetings and on digital platforms.

Aker Solutions’ global sick leave for 2021 was 3.17 percent, which is above the target of 2.5 percent. The sick leave in the previous year was 3.02 percent. The 2021 number reflects a negative influence by the COVID-19 pandemic.

Safety

Aker Solutions operates with a zero-harm mindset and the belief that all incidents can be prevented. The Zero Days indicator counts days without a recordable injury or serious incident across the company. In 2021, Aker Solutions delivered 306 Zero Days, compared to 305 in 2020. However, the company is committed to returning to the 2017 level, setting a goal of 315 Zero Days for 2022.

Aker Solutions uses the lagging indicator Serious Incident Frequency (SIF) to focus on the trend and occurrence of high-risk incidents. These are incidents where the actual or potential consequence is deemed to be high or extreme, as defined by the company’s classification matrix. The year-end result indicates a positive performance development on this KPI, with a SIF figure of 0.29, which is slightly below the target of 0.3. The company experienced 12 serious incident cases in 2021, and four of those were related to dropped objects.

In total, 56 employees were injured with a severity higher than first aid treatment, with five classified as serious, during 2021. There were no fatalities. A total of 14 injuries caused lost workdays, and 12 caused restricted work. The remaining 30 injuries required medical treatment. At the end of 2021, Aker Solutions had a Lost Time Injury Frequency (LTIF) of 0.34, compared to 0.18 in 2020. The Total Recordable Injuries Frequency (TRIF) increased slightly from 1.28 in 2020 to 1.31 in 2021.

Aker Solutions Annual report 2021 Board of directors’ report

21

MENU

Security 

Aker Solutions’ commitment towards safeguarding employees, assets and reputation is demonstrated by the core team of security professionals and the operation of a 24/7 Global Security Operations Center. The Center supports all aspects of Aker Solutions’ global operations as well as some of the affiliated Aker companies.

Security is currently grouped into the disciplines of physical security, personnel security, travel security, information security and executive protection. It is managed either from within the security function or as a stakeholder in concert with the appropriate function. In 2021, 124 Security Cases were reported and most of the cases were related to physical security (generally failure of technical components and personnel not adhering to security procedures). No serious security incidents were reported in 2021 and 118 cases out of 124 were reported as low risk (green).

Cybercrime

The risks posed by cyber criminals continues to be a major threat to operations. This risk is managed by IT with the security function closely engaged as a stakeholder. The threat landscape is continuously monitored, and necessary steps are taken to safeguard employees, systems, data and products. Phishing emails remain the most important vector for cyber-attacks. Further measures have been taken to secure email, improve capabilities to identify ongoing malicious activities and increase employee awareness of cyber threats. With smarter products connected to the internet, there is an

increased risk to these devices and the systems they are connected to. Precautions have been taken to protect Aker Solutions’ and clients' assets.

Emergency Preparedness and Response

While the primary focus in 2021 for the company’s Emergency Response Teams has been the management of business continuity and health issues associated with COVID-19, additional effort has been placed on coordinating the actions of organizations at the tactical, operational and strategic levels of the company. Governance around emergency management has been revised and the roles, responsibility of functions and how they will interact with each other in a situation have been interrogated and refined. Emphasis has been placed on training with exercises conducted at all three levels ensuring that teams, as standard, comprise leaders from the P&O, IT, HSSE, Security, Legal and Communications functions and subject matter experts as appropriate. The teams train regularly, and all findings and learnings are registered in the Synergi tool.

Environment

Aker Solutions works to protect the environment by offering products, systems and services that promote the reduction of the environmental footprint of customers’ operations where possible. There is an opportunity to support the climate change agenda in line with our low-carbon and renewables solutions strategy. The company has also committed to reduce its own internal emissions by control of its internal activities.

“Aker Solutions works to protect the environment by offering products, systems and services that promote the reduction of the environmental footprint of customers’ operations where possible.

The company’s internal total energy consumption, based on the recorded use of oil, gas, fuels and electricity, increased from 145,520 megawatt hours (MWh) in 2020 to 159,476 MWh in 2021. This increase is mainly due to higher energy consumption in the winter months of January and February. However, the total carbon dioxide emissions were lower in 2021 at 22,852 tons versus 24,914 tons in 2020. The COVID-19 pandemic has contributed to this development, as it has caused an overall reduction of travel locally and internationally. This has accelerated use of digital channels for communication and meetings as alternatives to conventional business travel.

In 2021, Aker Solutions reported on its climate change information to CDP and will continue this practice in 2022. The company received a “B” score for its 2021 CDP rating, which is an excellent achievement. The company strives to improve activities and plans further. The CDP report can be viewed at https://www.akersolutions.com/sustainability/reporting-frameworks-and-assessments/

Aker Solutions Annual report 2021 Board of directors’ report

22

MENU

Aker Solutions also measures and monitors waste segregation and recycling activities. In 2021, the company recorded total waste of 34,623 tons, compared with 16,183 tons in the previous year. In total, 78,3 percent of the waste was sent for recycling in 2021. This is a positive development from the 61 percent that was reported in 2020. To align with industry standards, the company only includes material recycling in its recycled waste fraction, excluding hazardous waste and waste-to-energy recovery.

In 2021, Aker Solutions initiated a project to develop a comprehensive Climate Action Plan. The plan was launched in January 2022 and more information is available in the company’s annual sustainability report.

Safeguarding Diversity and Equal Opportunity

Aker Solutions had 15,012 employees and 4,965 contract staff at the end of 2021. The company is strongly committed to the principles of non-discrimination and equal opportunity, regardless of gender, nationality, or other factors. The company has a diverse workforce, which it seeks to develop and motivate through strategy involvement, competency management, employee engagement, career development and leadership training.

Aker Solutions seeks to promote diversity in its workforce through clear requirements for diversity in recruitment and development of individuals and programs supporting equal opportunity, in accordance with its Code of Conduct, People Policy and recruitment procedures. Men have traditionally dominated the oil and gas industry

and, particularly, offshore work. This continues to be reflected in the company’s organization, where around 18 percent of its employees are women. Aker Solutions strengthened its focus on promoting greater diversity in 2021 through recruiting more female candidates and promoting women to leadership roles. The percentage of females being recruited in 2021 was 17.5 percent compared with 11.2 percent in 2020.  The percentage of women in leadership roles has decreased from 23.77 in 2020 to 23.18 in 2021. As the company is not content with this development, increasing the share of female employees will remain a priority in 2022.

Aker Solutions is empowered by its diverse workforce with 91 nationalities and by the number of female employees excelling and filling crucial roles across the company’s global operations.

More information regarding the company’s commitment to equality and diversity is available in the company’s 2021 sustainability report: www.akersolutions.com/sustainability-reports.

Risk Factors

Aker Solutions’ global footprint, operations and exposure to energy markets and a volatile commodity price provides both opportunities and risks that may affect the company’s operations, performance, finances, reputation and share price. It is evident that external risk factors such as pandemics, market risk, supply chain risks, cybercrime, compliance and integrity risks, political risks, risks related to civil or political unrest including war, and climate related risks may have a significant adverse impact on the company, in addition to internal risk factors such as operational risks and financial risks. These risk factors are further described below.

Pandemics

The COVID-19 pandemic may have negative influence on the operations also in 2022. Although vaccination levels are rapidly increasing in most of the countries where Aker Solutions operate, and societies are gradually re-opening, future developments are difficult to predict. The company continues to cooperate closely with authorities, customers and partners to mitigate the situation. However, as the restrictions are dynamic and continuously changing at the start of 2022, it is difficult to estimate the effects on the operations for the full year.

Pandemic outbreaks and other natural disasters could also occur in the future and may impact Aker Solutions in the following manner:

■Personnel may not be able to work due to illness, quarantines, travel restrictions and social distancing

■Manufacturing sites, service bases or office buildings may as a result be shut down

■Supplies from vendors and deliveries to clients may be delayed

■Clients are likely to face delays and losses and may claim reimbursement from Aker Solutions and other suppliers

■Long-term impact on the global economy may result in loss and impairment of the assets

■Available future market could decrease as clients reduce capex

Aker Solutions Annual report 2021 Board of directors’ report

23

MENU

Market Risk

The challenging commodity price environment and the effects of the COVID-19 pandemic create significant uncertainty for both the activity and financial performance of Aker Solutions. However, the Norwegian tax incentive program is expected to trigger gradual increasing activities for Aker Solutions’ operations in Norway.

Some of the principal factors that contribute to market risk are outlined below:

■Instability in the world economy as a result of virus pandemics or risks related to civil or political unrest including war, including impacts such as supply chain disruptions

■Volatile oil and gas market, changes in supply, demand and storage having an adverse impact on energy prices which is likely to impact activity levels significantly

■Uncertainty regarding future contract awards and their impact on future earnings and profitability

■Climate change and speed of the energy transition to renewables and lower carbon economy, including environmental requirements, impact upon oil company activities and the overall development of the market

■Local content requirements, legislative restrictions and/or prohibitions on oil and gas activities in countries of existing or planned operations

■Liabilities under environmental laws or regulations

■These factors will influence oil price and oil companies' exploration, development, energy transition, production, investment, modification and maintenance activity

Developments within the market will lead to capacity adjustments and changes in the valuation of company assets and liabilities. The main uncertainties include delivering on the company’s international growth ambitions, entry and establishment in new growth markets, and delivering a competitive cost base. Aker Solutions is committed to an active policy of risk management and will take mitigating actions to increase flexibility in its operations, for instance by seeking to drive down costs, build a sustainable global workforce, invest in sustainable energy such as floating offshore wind and technology to capture emissions such as carbon capture and storage, and enhance standardization and simplification. The company aims to be agile in its approach to the market, effectively adapting to industry demand, Environment Social Governance (ESG) requirements, and fluctuations to deliver optimal value and rewards across the value chain. A focus on continuous improvement in productivity and sustainability is central to these efforts. Entering new market segments also presents new opportunities and risks. In 2022, Aker Solutions will expand its engineering offering by establishing an engineering consultancy service business. However, consultancy services are generally considered a low-risk business model.

Compliance, Integrity and Political Risks

Aker Solutions shall conduct its business with integrity, respecting the laws, cultures, dignity and rights of individuals in all of the countries where we operate. Aker Solutions has a code of conduct which is endorsed by the Board of Directors and it constitutes a framework for managing compliance and integrity risks. It describes Aker Solutions'

commitments and requirements regarding business practice, personal conduct and expectations towards business partners.

The code of conduct and other compliance procedures are implemented and operationalized in the line of business through a global compliance program. Aker Solutions’ compliance program is managed by the Business Integrity and Compliance team, led by Chief Compliance Officer (CCO). The global compliance program is designed to help the company promote a culture of compliance and integrity and to prevent, detect and respond to non-compliances, breaches of law, regulations or internal policies. 

Aker Solutions has established policies and procedures in order to comply with applicable ethical standards, laws and regulations domestically and internationally. Aker Solutions could, nevertheless, potentially become involved in unethical behaviour, either directly or through third parties or partners. The company has operations in countries associated with high political, corruption and human rights risks. Key tools to reduce these risks are the company’s code of conduct, global compliance program including anti-corruption and human rights frameworks, which are implemented at our locations globally. Risks are managed through country risk assessments, sanctions and trade compliance assessments, mandatory compliance and integrity awareness trainings, compliance reviews and integrity due diligence process of business partners. Aker Solutions’ compliance program including anti-corruption and human rights frameworks are subject to quarterly reporting to the Audit Committee.

Aker Solutions Annual report 2021 Board of directors’ report

24

MENU

Aker Solutions has zero tolerance for corruption and works vigilantly to prevent such behaviour. The company has control systems in place throughout the organization designed to identify and limit the effects of violations of the code of conduct. Employees violating the code face consequences ranging from a warning to dismissal for violating the code of conduct.

In 2021, the company maintained most core elements of its global compliance program including anti-corruption and human rights compliance frameworks. The company conducted screenings of potential projects in high-risk countries and integrity due diligence processes of potential business partners as it pursued opportunities in high-risk markets. All whistleblower cases received were investigated. Code of Conduct refresher eLearning was made available to all company personnel. The Human Rights Committee maintained its quarterly meetings throughout the year. Activities requiring travel and / or in-person interaction, such as classroom training and on-site audits, continued to be postponed or cancelled in 2021 due to the global COVID-19 pandemic.

Climate-Related Risks

Aker Solutions maps climate-related risks in accordance with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). The recommended disclosures and our responses can be found in the independent Climate Risk Review. The report summarizes climate-related risks (physical, regulatory/liability, technology, market and reputational) and opportunities for Aker Solutions and includes key findings, gaps

and recommendations. These risks and potential impacts are covered in other chapters in this report and in more detail within the company’s Annual Sustainability Reports.

The company is exposed to risks and opportunities stemming from climate change and the energy transition to renewables and a lower carbon economy. This includes changes in global demand, energy prices and environmental requirements that could increase costs, reduce demand for the company’s offerings, reduce revenue and external investment and limit certain growth opportunities. Some risks can be mitigated or turned into opportunities by investing in or transforming existing technology and services into sustainable energy such as floating offshore wind and technology to reduce emissions such as carbon capture and storage. The company may face increasing reputational and recruiting challenges and declining political goodwill if talent, investors and customers only associate Aker Solutions with the oil and gas industry instead of as a key player accelerating the transition to sustainable energy production.

Overall, the 2021 Climate Risk Review shows that Aker Solutions has a clear understanding of climate-related risks and has adequate systems in place to manage them. The assessment also includes recommended actions and priorities for the future, many of which are already being addressed through the company’s new Climate Action Plan ongoing assessments for the EU Taxonomy and other internal initiatives.

Operational Risk

Aker Solutions uses both reimbursable and fixed-price contracts. Contracts that include fixed prices for all or parts of the deliverables are subject to the risk of potential cost overruns. Aker Solutions is involved in projects that are both demanding and complex in nature, with significant design and engineering requirements, as well as extensive procurement and manufacturing of equipment, sourcing supplies and construction management. In certain situations, the projects may also require the development of innovative new technology and solutions. These can impact upon the company’s ability to deliver on time and in accordance with a contract, potentially harming Aker Solutions’ reputation, performance and finances. Factors that may have an adverse material effect on the business, results of operations and finances of Aker Solutions include, but are not limited to:

■The loss of business from a significant customer, the failure to deliver a significant project as agreed, or alterations to the order backlog.

■Aker Solutions’ ability to compete effectively and maintain market positions and sales volumes.

■The company’s capability to successfully commercialize new technology. 

■Partnerships, joint ventures and other types of cooperation that expose the company to risks and uncertainties outside its control.

■Non-delivery and/or disputes with a key supplier.

■Significant delays or quality issues impacting upon project delivery or performance.

■Cybercriminals and cyber security issues leading to system downtime or significant loss of intellectual property.

Aker Solutions Annual report 2021 Board of directors’ report

25

MENU

■Supply chain issues such as increased prices, longer lead times, capacity of fabrication years, logistics.

■Resources (both competence and quantities) required to execute projects.

The Situation in Russia and Ukraine
During the winter of 2021 to 2022, geopolitical tensions increased around Russia, Ukraine and other countries. In February 2022, Russian armed forces invaded Ukraine, and the international response has been to drastically expand sanctions against Russia. One of the effects of this situation is increased uncertainty for the global business environment in general, and for business in Russia in particular. Management is handling this event and its development proactively, including sanctions and indirect impacts, and are taking actions to mitigate its effect on supply chain and other associated risks. The safety and security of employees is always a primary focus for Aker Solutions.

Financial Risks

The objective of financial risk management is to manage exposure from financial risks to increase predictability of earnings and minimize potential adverse effects on financial performance. Financial risk management and exposures are described in detail in note 22 and capital management is described in note 23. The main financial risks are:

■Currency risk: Aker Solutions has international operations and is exposed to currency risk on commercial transactions, assets and liabilities when payments and revenues are denominated in a currency other than the functional currency

of the respective entity. The currency risks in all major contracts are hedged with external banks in the foreign exchange market. More than 80 percent of the hedging volume either qualifies for hedge accounting or is presented separately as hedges of embedded derivatives. Aker Solutions operates in some jurisdictions where regulations and requirements limit the convertibility of local currency and restrict free flow of cash. Despite mitigating actions, Aker Solutions has historically experienced currency losses in Angola as currency hedging instruments are generally not available. The COVID-19 pandemic has also increased the volatility in the currency market and there is a risk that the contingency buffer included in tender prices may be insufficient to cover currency losses when market fluctuations are significant. Currency variation clauses, escalation mechanisms and currency options are also used to mitigate contingent currency exposures in tenders.

■Liquidity risk: Liquidity risk is the risk that the company is unable to meet the obligations associated with its financial liabilities. The corporate treasury department ensures financial flexibility by forecasting cash flow needs and maintaining sufficient liquidity reserves and available committed credit lines. The current market uncertainty as a result of the COVID-19 pandemic has increased the liquidity risk. However, the merger with Kvaerner, strong order intake in 2020 and 2021 and strong cash generation from operations has contributed to an improved balance sheet and visibility. The development in financial covenants is closely monitored, and management does not foresee any breach of covenants. The undrawn revolving

credit facility of NOK 5,000 million and the group’s cash reserve is currently assessed as sufficient.

■Interest rate risk: The company’s interest exposure mainly arises from external funding in bank and debt capital markets. Currently all external debt in Aker Solutions is at floating interest rates. The company’s risk management strategy is that 30-50 percent of the interest exposure shall be fixed interest rate for the duration of the debt. The company uses interest rate swaps to achieve the desired fixed/floating ratio of the external debt. As the group has no significant interest-bearing operating assets, operating income and operating cash flow are substantially independent of changes in market interest rates.

■Credit risk: Credit risk is the risk of financial losses if a customer or counterparty to financial receivables and financial instruments fails to meet contractual obligations. Financial instruments and financing are done with reputable and highly rated banks and financial institutions, of which the credit risk is considered to be low. The credit risk related to customers’ ability to pay is assessed in the bid phase and during execution of a project. The majority of the customers in traditional oil and gas projects are highly rated energy companies, where the credit risk is considered to be limited. New customers in the renewable energy sector may represent an increased credit risk. However, the majority of customers in the renewables sector are leading renewable energy companies and highly rated energy companies where Aker Solutions’ products support their decarbonization efforts and transition to renewables. The credit risk is monitored closely, especially for lower rated

Aker Solutions Annual report 2021 Board of directors’ report

26

MENU

companies and new customers. As a result of the ongoing COVID-19 pandemic and general market uncertainties, credit risk has increased in most industries. Due to a predominance of large international companies with a relatively low credit risk in its customer base, the overall exposure of Aker Solutions to credit risk related to customers’ ability to pay is low.

■Price risk: Aker Solutions is exposed to fluctuations in market prices which are mitigated in the bid process to a great extent by locking in committed prices with vendors or through escalation clauses with customers. Aker Solutions’ approach to enterprise risk management, risk management and internal controls are based on the principles in ISO 31000, Project Management Institute and the Committee of Sponsoring Organizations of Treadway Commission (COSO) frameworks, however, without applying all elements of these standards. Climate related risk is also evaluated in accordance with Task Force on Climate-related Financial Disclosure (TCFD). Aker Solutions has company-wide governing documents and tools for each defined risk category on how to assess, respond to and report on risks actively and systematically. The assessment, definition, follow-up and implementation of adequate mitigating actions towards the main risk factors are all integral parts of the overall governance of the company. Aker Solutions applies a combination of risk management practices in order to effectively manage the risk to the company such as: mandatory internal key controls and safeguarding processes for tender and projects in execution, scenario planning, sensitivity analysis, and regular audits.

Dividends and Dividend Policy

Aker Solutions’ overall objective is to create long term value for its owners in the form of an increase in the value of the company’s shares over time and/ or dividend payments or share buybacks, or a combination of these.

The company has adopted a dividend policy whereby any dividend is subject to an annual evaluation by the Board of the company’s financial position and re-investment opportunities based on strict principles for allocation of capital. The dividend policy supports the company in building financial robustness and maintaining a strong balance sheet with adequate liquidity reserves to handle future obligations as well as realizing objectives for strategic development and delivering of shareholder value. Aker Solutions targets to pay annual dividends of 30-50 percent of adjusted net profit over time.

Given the company’s solid financial position and positive outlook, the Board has proposed a dividend per share of NOK 0.20 for 2021. The dividend proposed by the Board of Directors will be presented to the annual general meeting for approval. An approved dividend distribution will normally be paid out to shareholders in the month following the general meeting.

Going Concern

While uncertainties from 2021, including the COVID-19 pandemic, continue to influence the outlook for 2022, Aker Solutions is now much better positioned to mitigate these challenges. During the past two years, the company has developed and implemented several new processes for maintaining operations in parallel with strict virus precautions, and these measures may remain essential for the

Aker Solutions Annual report 2021 Board of directors’ report

27

MENU

operations also in 2022. Several key strategic steps for positioning Aker Solutions for growth in target markets were also completed last year. The order backlog is strong and balanced, and the financial platform has been improved.

Market volatility caused by the COVID-19 pandemic increases the risk regarding the going concern assumption for most companies, and this is also the case for Aker Solutions. Although the risk has decreased as vaccination levels have risen worldwide, potential future effects of the pandemic are difficult to predict. However, the assessment is

Fornebu, March 4, 2022
Board of Directors of Aker Solutions ASA

that Aker Solutions has the resources, organization, competence, assets and customer base to continue being a going concern.

Cybercrime continues to be a major threat to operations. The threat landscape is continuously monitored, and necessary steps are taken to safeguard employees, systems, data and products. With digitalization and increased data sharing between partners, suppliers and clients, Aker Solutions is committed to protecting the company’s and clients' assets.

In accordance with the Norwegian Accounting Act, the Board of Directors confirms that the consolidated financial statements and parent company financial statements have been prepared based on the going-concern assumption.

The Board of Directors confirm that the Annual Report for 2021 gives a true and fair overview of the development during the year and the impact on the financial statements, the most significant risk and uncertainties facing the company.

Aker Solutions Annual report 2021 Board of directors’ report

28

MENU

Aker Solutions Annual report 2021 Consolidated Financial statements

Aker Solutions

December 31, 2021