annual report 2007 - ku leuven · kvaerner. on29march2004,followingarestructuring...

Annual report 2007

Aker DOF Supply

Shipowner building a fleet ofanchor handling vessels

Aker American Shipping

Premiere US shipowner for productand shuttle tankers

Aker Philadelphia Shipyard

The most modern and cost-effective US shipyard

Aker Oilfield Services

Subsea well maintenance andintervention specialists

A leading supplier to theenergy sector worldwide

Aker Seafoods

Seafood company that harvests,processes, and sells white fish

Aker BioMarine

Biotechnology company that devel-ops high-value products from krill

Aker Floating Production

Owns, operates, and chartersFPSO vessels

Aker Exploration

Innovative, technology-drivenoffshore exploration company

Aker Drilling

Operator of the world’s two mostadvanced drilling rigs

Aker

Active industrial owner – createsand develops companies

Aker Clean Carbon

Pioneering CO2 capture technologywith patented solution

Aker Kværner ASA

People create Aker companies. Ever sinceAker was established in 1841, innovationand commitment drive us. Several Akercompanies have roots that date back tothe 1700’s – to the industrial revolution inGreat Britain and the Nordic countries.

Aker has a long history of industrialinnovation. In recent decades, Aker com-panies have strengthened their marketposition as preferred partners in globalgrowth markets: energy resources, energytechnologies, maritime technologies,seafood, and marine biotechnology.

Aker is an active industrial holdingcompany. Aker companies are developed

Innovation throughgenerationsAker Kvaerner is an Aker company.Shared values and an innovative spirit are long-standingtraditions that forge active industrial development.

and strengthened through organic growth,acquisitions, restructuring and focusingof businesses.

People who are willing to take onchallenges and have the ability to deliverinnovative solutions constitute Aker’sheritage. Aker’s generations of dedicationand know-how, combined with today’stechnologies and tools, yield tomorrow’sproducts, services, and industrialsolutions.

Aker companies, with a total of27 100 employees on five continents,had 2007 operating revenues totalingNOK 62 billion.

Aker Kvaerner delivers engineering, construction,manufacturing, technology products, maintenance andother specialised services, often as total solutions forcomplete projects.

Global scaleAker Kvaerner has annual revenues totalling approximately NOK 58billion and employs almost 33 000 individuals worldwide, with morethan 24 000 direct employees and approximately 9 000 hired-in. Wehave offices in around 30 countries worldwide with global head-quarters at Fornebu near Oslo, Norway.

Markets and customersAker Kvaerner delivers products, services and solutions to customersworldwide in the oil and gas, refining, chemicals, metals and otherprocess industries, mining, nuclear and power generation. The majorityof our customers are companies in the energy and process industries.

Our deliveries enable our customers to build, efficiently operate andeffectively maintain their facilities. Examples include complete off-shore platforms for oil and gas projects and onshore petrochemicalplants.

OwnershipAker Kvaerner is part of Aker (www.akerasa.com) and was listed onthe Oslo Stock Exchange in 2004 (ticker: AKVER). The largest shareholder is Aker Holding AS with a 40.27 percent stake in the company.Aker Holding is owned by Aker ASA (60 percent), the NorwegianGovernment (30 percent), SAAB AB (7.5 percent) and Investor AB(2.5 percent).

The companies brought together to createAker Kvaerner were established in the firsthalf of the 19th Century, during the IndustrialRevolution. Cutting-edge technology andengineering providers from the very begin-ning, they delivered products includingsteam engines for rail and marine use and arange of industrial ironworks.

Over the next 100 years, the businessesgrew significantly. In the mid-1900’s, bothAker and Kvaerner were international corpo-rations with activities in ship building, waterpower, wood processing and other processoperations, mechanical workshops and otherindustries.

Through the 1970’s, 80’s and 90’s, theydeveloped their capabilities and experienceas suppliers of complete solutions to offshoreand onshore oil and gas and processingprojects. They each grew – organically andthrough international acquisitions – to beleaders in their markets.

On 11 March 2002, the former Kvaernergroup and the Aker Maritime group(comprising the oil and gas activities of thewider Aker group) were merged, and startedto operate as one company under the nameKvaerner.

On 29 March 2004, following a restructuringof both Aker and Kvaerner, today’s AkerKvaerner was established.

Aker Kvaerner:

Historical facts

Contents

About us and our goals5 Key figures

6 Goals and strategies

8 Our values

10 Letter from the President & CEO

Our business12 Business Areas

14 Field Development

16Maintenance, Modificationsand Operations

18 Subsea

20 Products & Technologies

22 Process & Construction

Our performance26 Board of Directors’ report

38 Annual accounts

78 Annual accounts – parent company

86 Auditor’s report

88 Share and shareholder information

92 Analytical information

Our organisation and governance94 Corporate governance

96 Board of Directors

98 Executive Management Team

100 Address

Financial Calendar 2008

14 February 4th quarter and preliminaryannual results 2007

3 April Annual General Meeting 2008

24 April 1st quarter results 2008

31 July 2nd quarter results 2008

23 October 3rd quarter results 2008

27 November Capital Markets Day

Highlights 2007

Best year everFull year consolidated revenues of NOK 57 957 million represented an increase of 15 percent com-pared to 2006. This increase was due mainly to good markets and high activity in all business areas.EBITDA of NOK 3 913 million for the year showed an increase of 36 percent from NOK 2 872 million in2006, which gave a margin increase from 5.7 percent to 6.8 percent. Net profit for the year was NOK2 464 million, giving earnings per share of NOK 8.84.

New global operating modelTo further strengthen our offering and become more transparent to the market, we have optimised ouroperations by transforming our existing structure into five focused business areas with truly globalscope. Bringing together specialised units serving the same market segments enhances knowledgesharing and enables more effective use of our total resources. The change supports the company’sstated objective of further profitable growth.

Improvement programmesTo strengthen our competitiveness, we have initiated multiple improvement programmes includingsupply management enhancement, legal structure simplification, tax optimisation and overheadrestructuring. These programmes share the common ambition of driving down our cost base, savingmore than NOK 1 billion over the next two to three years.

Strategic ownership of Aker KvaernerIn June Aker ASA, Wallenberg-related companies and the Norwegian Government entered into agreementsproviding long term strategic ownership for Aker Kvaerner. Under the agreements, Aker transferred its 40.1percent ownership interest in Aker Kvaerner to the newly established company Aker Holding. Aker holds acontrolling 60 percent stake in Aker Holding. The Norwegian Government owns 30 percent and the Swedishcompanies SAAB AB and Investor AB own 7.5 percent and 2.5 percent respectively.

Ormen Lange and Snøhvit projects completedOn 6 October, gas production commenced from the Ormen Lange gas field, 120 km into the North Sea.Aker Kvaerner was the main contractor for the large onshore processing facility which was developed withan innovative “subsea-to-shore” concept. The terminal was Norway’s largest construction site, employingat one time over 11 000 people from more than 50 nations. On 13 September, after five years of develop-ment, StatoilHydro commenced production of liquefied natural gas (LNG) at Hammerfest, as the world’smost northerly gas liquefaction plant came on stream. The plant serves the Snøhvit field, which is the firstoffshore development in the Barents Sea. Aker Kvaerner was the main installation contractor for the plant.

High-tech manufacturing centre openedAker Kvaerner’s integrated subsea oil and gas centre in Malaysia was officially opened in June. Locatedin Port Klang Free Zone, Pulau Indah, this purpose-built manufacturing centre, with a total investmentvalue of USD 100 million, is the first of its kind in the world.

Aker Kvaerner acquires drilling technology companyIn August, Aker Kvaerner signed an agreement for the acquisition of 50 percent of the shares in theGerman company Wirth GmbH, with an option to buy the remaining shares over the next few years.Wirth is a quality supplier of drilling equipment and has been one of Aker Kvaerner’s key suppliers formore than twenty years.

Contract awardsAker Kvaerner was awarded several important contracts in 2007. Among these were the Skarv EPcmacontract for BP with a contract value of NOK 2 billion; the Longview project for Genpower Holdings witha contract value of USD 654 million; process technology to Aker Floating Production with a contractvalue of NOK 430 million; a complete subsea production system to Reliance Industries worth approxi-mately USD 250 million; and the Valhall redevelopment of steel structure for BP with a contract value ofNOK 450 million. In addition drilling equipment contracts worth in total approximately NOK 6 billion andseveral frame agreements were awarded. The total order intake in 2007 was NOK 58.3 billion.

About us and our goals

Aker Kvaerner annual report 20074

Orders and results 2007 2006 2005

Order backlog 31.12 NOK mill. 58 261 59 695 48 522

Order intake NOK mill. 57 942 62 271 51 937

Operating revenues NOK mill. 57 957 50 592 36 940

EBITDA NOK mill. 3 913 2 872 1 816

EBITDA margin Percent 6.8 5.7 4.9

Net profit from continuing operations NOK mill. 2 464 1 294 1 052

Cash flow 2007 2006 2005

Cash flow from operational activities NOK mill. 2 675 2 636 3 674

Balance sheet 2007 2006 2005

Interest bearing debt NOK mill. 2 022 2 126 5 2791)

Equity ratio Percent 25.5 25.8 16.5

Return on equity Percent 46.6 30.1 24.5

Return on capital employed Percent 38.4 29.7 13.7

Share 2007 2006 2005

Share price 31.12 2) NOK 144.5 155.6 82.9

Dividends per share 2) NOK 3.00 8.00 1.00

Earnings per share continuing operations 2) NOK 8.84 4.53 4.47

Employees 2007 2006 2005

Employees 31.12 Full time equivalents 24 427 22 722 18 324

HSE 2007 2006 2005

Lost time incident frequency Per million worked hours 0.68 1.0 1.3

Incl. subordinated loan. 2) Adjusted for share split.1)

Order backlogAmounts in NOK million

■ Field Development■ MMO■ Subsea

15 695

10 683

10 951

11 520

10 923

■ P&T■ P&C

Order intakeAmounts in NOK million


12 124

8 422

12 377

10 733

14 242

■ P&T■ P&C

EBITDAAmounts in NOK million


891

530

960

959

746

■ P&T■ P&C

Operating revenuesAmounts in NOK million


16 381

9 744

9 851

12 353

10 393

■ P&T■ P&C

Key figures


Aker Kvaerner annual report 2007 5

The preferredpartner

Goals and strategies



Drive HSE improvement

Continue to develop our Just Care™ culture through increased awareness, training, auditing and sharing of bestpractice, engaging with all stakeholders

Strengthen technology leadership

Continue to develop leading technologies within subsea, drilling equipment, well services, LNG, concrete andfloating structures and downstream processing

Acquire companies and enter into partnerships that fill technology gaps or supplement our product portfolio

Apply Aker Kvaerner technologies and competence to develop environmentally sustainable solutions, e.g. withincarbon capture and sequestration (CCS) and offshore wind energy

Increase global presence

Strengthen leading position in the North Sea and in Arctic regions

Expand product offering in selected markets including Asia, West Africa, Brazil and Gulf of Mexico

Expand value-added products and services offering

Leverage our comprehensive offering across the entire value chain to enhance our competitive advantage

Further capitalise on our partnering activities with other Aker companies to meet new market opportunities

Generate new service concepts to expand our offering to new and existing customers

Optimise use of resources

Develop resources to secure flexible capacity and cost base

Select, bid and execute the right projects

Be the preferred employer in our chosen markets

Deliver on improvement programmes

Continue to roll out commodity-based supply management using best value sourcing

Reduce cost base by focusing on working capital, taxation and overheads

Convert risk to profit through full utilisation of Aker Kvaerner’s Project Execution Model

Goals and strategiesTo deliver on our strategy Aker Kvaerner will:

Goals and strategies



We take personal responsibility forHSE because we careAll incidents can be prevented. We strivecontinuously for zero accidents to personnel,material and non-material assets.

We focus on employee health and oncontinuously improving the work environment.

We conduct our operations through effici-ent use of materials and energy, with minimumwaste and damage to the environment.

We design products and services to haveno undue environmental impact, to be safeand to be efficient in consuming energy andnatural resources. We seek to ensure that ourproducts can be recycled or disposed ofsafely.

We deliver consistently and striveto beat our goalsWhen doing a job, we understand both therisks and opportunities involved and knowhow to manage them. We take pride in deliv-ering as we promise.

Making money creates new opportunitiesand the resources for going forward, bothfor us and for our customers and partners.Commercial edge benefits us all.

We reward performance – what youachieve – and alignment with our values –how you behave.

Building customer trust is key toour businessAfter all, without customer trust and satisfac-tion, the rest doesn’t matter.

Good customer references build ourreputation – and the only way to achieve thisis by consistent and predictable performance.Our customers will recognise us for our globalexecution excellence.

We find new ways, always linked to realcustomer needs and business priorities.

Aker Kvaerner – Our values in context

Our values

Aker Kvaerner’s business activities build on oursix corporate values, which are shared by Akercompanies worldwide.

Our employees’ dedication and know-how allow us to deliver on ourcommitments to customers, employees, and the communities in whichwe work.

The values that we share have a long history. They originated amongAker companies, and have steadily evolved over time, always reflectingthe work of the generations at Aker.

Although the companies that comprise Aker generally engage indistinctly different businesses, they share many common culturalfeatures. Aker’s six core values are the nucleus of comprehensive,long term efforts that ensure the companies’ vitality in tomorrow’sconditions. How the various Aker companies achieve their growth andprofitability is no less important than the achievements themselves.

Aker Kvaerner’s corporate values lend support and guidance in day-to-day priorities and decision-making. Acting in accordance with ourcorporate values promotes sound action and reinforces Aker Kvaerner’slong term relations with its many and varied stakeholders.

An effective corporate culture must remain dynamic and responsive.Thus, it is with a combination of humility and pragmatism that AkerKvaerner works to strengthen and cultivate its shared values.

Solid values are the foundation that enables Aker Kvaerner to achievesustainable, long term industrial development. People who “speak thesame language” cooperate more easily.

Unity and commitment

At the annual Operating Managers Conference, we gather 200 executivesfrom around the world to set the direction and align the organisation todrive execution on our strategy for continued profitable growth.



All our major achievements areteam effortsIn the end, it comes down to the talent andmotivation of you and me. Delivering strongresults is impossible without a highly capableworkforce.

We learn on the job, through challengingtasks, coaching and training.

Development of people and teams in ourcompany has one purpose – to create afoundation for long term sustainable valuecreation through efficient project executionand sound business operation.

We respect and encourage diversity andbuild strong, energised and effective teams– and we have fun together, making us evenbetter.

Our goal is to be the preferred employerin our industry.

We know our business and getthings doneOnce decisions are made we combine allour efforts and focus all our energies onexecution.

We are accountable and solutions-oriented, focusing on the right details at theright time. We follow through and ensureaccountability.

We believe in empowering people closeto the action to take responsibility. Hands-ondoes not mean hands-in.

We stimulate entrepreneurship andchallenge bureaucracy, complicated hier-archies and “silo” mentality. We are OneAker Kvaerner.

We encourage early and honestcommunicationWe listen hard and talk straight – no sugarcoating, no filters.

We value early, accurate and reliablecommunication – after all, the first problemwe encounter is usually the easiest one tocope with.

We challenge each other. The best deci-sions are taken when different opinions anddifferent cultures meet in open and directdialogue.

We expect the highest standards ofethical behaviour and integrity – from all ofus, everywhere.

Our values

Our values

HSE mindsetWe take personal responsibilityfor HSE because we care

Delivering resultsWe deliver consistently and strive

to beat our goals

Customer driveBuilding customer trust is key to

our business

People and teamsAll our major achievements are

team efforts

Hands-on managementWe know our business and get

things done

Open and direct dialogueWe encourage early and honest

communication



Letter from the President & CEO



An overall improvement in our Health, Safetyand Environment (HSE) performance – hasmade our company a safer place to work.This result is attributed to the ever increasingnumber of our people being trained in HSEregulations and practices as part of thecontinuing development of our Just Care™culture.

To date, Aker Kvaerner is a company withmore than 24 000 employees and NOK 58billion in revenues. Our positive profit per-formance has enabled the Board of Direc-tors to propose a NOK 3 per share ordinarydividend payment for 2007.

We have a workforce made up of bothpermanent employees and hired-in personnelthat totals 33 000 people worldwide. We areproud to be a company that is repeatedlyrecognised as an attractive employer in inter-national third party rankings. This is reflectedin our ability to attract talent in a challengingemployment market.

In April, we restructured the company tostreamline our operations into five businessareas with global responsibilities. We alsoappointed country managers with responsi-bility for key regions. The new structure isdesigned to better align the global resourcesand expertise we offer to the market.

As part of our continuous push for opera-tional improvement, we initiated a detailedreview of all of our core processes and for

“staff functions” earlier this year. To date theresults of this improvement process are veryencouraging, and it will be continued in2008.

In June 2007, Aker ASA announced thetransfer of its 40.1 percent ownership inter-est in Aker Kvaerner to the newly establishedcompany Aker Holding AS. Aker holds a con-trolling, 60 percent stake in Aker Holding.The Norwegian Government now owns 30percent of Aker Holding, the Swedish tech-nology company SAAB AB owns 7.5 percent,and the Swedish investment company Inves-tor AB holds 2.5 percent. Aker and the Nor-wegian Government have a common under-standing and a mutual commitment to holdtheir shares in Aker Holding for at least tenyears. This agreement secures our companya strong platform for continuing our profitablegrowth strategy.

Our markets continue to show positivegrowth in demand. We have a world of oppor-tunities. The challenge is to select the rightones and to deliver consistently, on budget,on schedule and with the right quality.

In January 2008, it was announced that Iam to accept a new role in Aker ASA, andthat the nomination committee would proposemy candidacy as the new Chairman of theBoard of Aker Kvaerner. I will go on to spendmore than 50 percent of my time togetherwith the new President & CEO Simen Lieunghand his team to further develop the companyand to explore cross-business opportunitieswithin the Aker family of companies.

Best regards,Aker Kværner ASA

Martinus BrandalPresident & CEO

It has been another record setting year

”We have a world ofopportunities. Thechallenge is to selectthe right ones and todeliver consistently, onbudget, on scheduleand with the rightquality. ”

In 2007 we delivered on some of thelargest and most complex projects we haveever undertaken, most notably StatoilHydro’sSnøhvit and Ormen Lange. We also contin-ued to win significant contracts, securing ahealthy order backlog going forward.

We opened a new high-tech subsea manu-facturing centre in Malaysia, and conducted astate-of-the-art upgrade of our subsea engi-neering and manufacturing facilities at Tranby inNorway. We also invested in a purpose-builtaftermarket facility in Houston.

During the year we won multiple technol-ogy awards, encouraging us to continue ourinvestments in clearly identified technologyniches where we differentiate ourselves fromthe competition. At the same time we willcontinue to look for acquisitions that strengthenour technology offering.

There is an increasing concern about glo-bal warming and the need for measures tolimit emissions of greenhouse gases. Werecognise that, as a large international com-pany and a supplier to producers of fossilfuels, our commitment to addressing theseenvironmental dilemmas is more importantthan ever.

During 2007, we invested in a new pilotfacility based on our Just Catch™ technology,a world leading concept for CO

2capture. We

have also formed a joint venture with Prajunder the name BioCnergy™ to become theleader in the European biofuels market.These are just two examples of our environ-mental initiatives.

In September, we conducted our PeopleSurvey. This survey is designed to measurehow well we live up to our values in our eve-ryday operations. Over 90 percent of employ-ees responded. The input from this surveywill for the basis for improvements that will beimplemented through 2008–2009.

On behalf of all Aker companies, a NOK1 million donation was made to the Red Crossto assist in their disaster relief programmesaround the world. At the same time, we werepleased to announce the signing of a strategicthree year partnership agreement with theNorwegian Red Cross. The partnershipencompasses financial support, exchangeof expertise and volunteerism, and is in effecton a global basis from January 2008.

Strong financial performance, successful delivery of key projects, majorproject wins and a safer working environment characterise 2007.

Letter from the President & CEO



Business Areas


Our business

Business Areas

Field Development

A leading global provider of services – from studies, through front-end engineeringdesign to full turn-key engineering, procurement and construction (EPC) projectexecution – for fixed and floating offshore platforms, LNG terminals, and onshoreoil and gas facilities.

Page 14 – 15

Maintenance, Modifications and Operations

A leading global provider of maintenance, modifications and operations (MMO)services to operators of offshore platforms and onshore oil and gas facilities – fromconcept screening through engineering, procurement, construction and installation(EPCI) project execution and operational support to removal, decommissioning andrecycling of discarded offshore installations.

Page 16 – 17

Subsea

A leading global provider of subsea systems, solutions and services for the oiland gas industry. Covering all aspects of subsea field development for both newand existing fields – from individual activities and products to complete subseaproduction systems, and maintained for the complete life-of-field.

Page 18 – 19

Products & Technologies

A leading global provider of specialised products and services to the upstream oiland gas industry, based on proprietary technology and know-how. Key deliverablesinclude advanced drilling equipment and systems, upstream processing techno-logy, mooring systems, as well as loading and offloading technology. Other deliveriesinclude well intervention technology and services, marine operations and subseainstallations, and reservoir evaluation services.

Page 20 – 21

Process & Construction

A leading global provider of management, design and construction services formajor projects spanning refining, petrochemical processing and bio refinery, metalsand mining, power generation, acid plants, and nuclear clean-up services. The fulllife cycle of services from initial concept through technology development, processtechnology application, design, procurement, construction, commissioning, opera-tions, maintenance, modification and decommissioning.

Page 22 – 23


Our business

Field Development

We service oil and gas field developments incarefully selected business segments. Ourservice offering includes concept development,preliminary studies, front-end engineering,detailed engineering, project management,procurement and fabrication as well asassembly and hook-up of modules, topsidesand complete platforms. Our core competencecovers:

floating drilling rigs and productionplatformsfixed installations in concrete or steelgas liquefaction plants and regasificationterminalsonshore receiving and processing terminals

Deliveries include complete value chains forgas technology including carbon capture,and tailored solutions for Arctic conditionsand ultra deepwaters. We are pursuing majorprojects in Norway, Russia, Kazakhstan, Gulfof Mexico and in the Asia-Pacific region,together with a number of studies and pre-liminary projects in these and other regions.Our main engineering and technology unit islocated in Oslo, together with our head-quarters, and we have three offshore yardsat Verdal, Stord and Egersund in Norway. FDalso has units in the US, Russia, Kazakhstan,Australia and Malaysia. Turnover in 2007totalled NOK 16 381 million and we engageapproximately 3 600 permanent and 2 700non-permanent employees.

Our customers experience predictability,effective risk assessment and the assurancethat their projects are executed to the agreedlevel of quality, on schedule and to budget.That applies whether the work is done in Arc-tic areas, in ultra deepwaters or in othertough environments. The complexity of ourprojects, and the fact that they are often exe-cuted in challenging locations, makes it evenmore important to deliver on our health,safety and environmental commitment. Ourresults reflect our success.

Combined with our responsible approach,our project management competence, engi-neering expertise, advanced technology andworld class fabrication has made us a pre-ferred supplier of complex oil and gasprojects worldwide.

Strong in selected areasNational and international oil companies areconcentrating their exploration activities andnew developments in ever deeper watersand areas with more extreme climates. Thiscreates opportunities and highlights ourcompetitive edge in demanding regions. Ris-ing activity in climatically challenging areasand deepwater reflects expectations amongthe oil companies about long term trends inenergy prices.

We pursue projects in the North and Nor-wegian Seas, the Norwegian and Russiansectors of the Barents Sea, the Atlantic offCanada, the Caspian Sea, the Sakhalinregion, Australia and the deepwater parts ofthe Gulf of Mexico. In Norway, we are numberone in our segment.

We are the contractor of choice for robustfloating production platforms for deepwaterworldwide and are solidly placed in concretetechnology, with unique experience gainedover many years in the North Sea. Today con-crete structures have acquired a new rele-vance, not least in waters with harsh climatesand for LNG terminals. We also have special-ist expertise in offshore processing installa-tions and land-based plants, both for tradi-tional oil and gas operations and for LNGregasification.

Supplies under pressureOur markets developed positively during2007 and prospects are good, with a numberof interesting opportunities on the horizon inour key markets.

Constraints in global fabrication capacityand in the supply of qualified labour continueto impact the market. We are working effec-tively with these challenges and are selectiveabout the exciting projects we take on.

Exciting projectsDuring the first quarter, we secured the con-tract to construct the production platform forthe Valhall field south of Ekofisk. Our Verdalyard is responsible for this delivery. WorthNOK 450 million, the contract includes con-struction of the jacket, transport to the fieldand installation on the seabed. Peak staffing,planned for June 2008, will involve some 300people.

With the world’s energy needs increasing sharply, oil companies areaiming to liberate new resources in deeper waters and in moredemanding climates. Aker Kvaerner’s Field Development (FD) businessarea is well positioned to tackle complex developments that make majordemands on the interaction between technology and project execution.

Technology and projectexecution expertise

Highlights 2007

Successful delivery of giant projectsOrmen Lange and Snøhvit to StatoilHydro

Integration of topsides for the advancedAker H-6e rig for Aker Drilling

Completion of concrete structure forAdriatic LNG terminal; topsideprogressing on schedule

Record high turnover

The Skarv EPcma contract covers detail engineeringand procurement work for the 16 000 ton FPSOtopsides as well as construction managementassistance to BP. On peak, the project will engageover 400 people from Aker Kvaerner.


Our business

Field Development

Key figures Field Development 2007 2006 2005

Operating revenue NOK million 16 381 16 125 9 950

EBITDA NOK million 891 903 530


Order intake NOK million 12 124 17 140 18 546

Order backlog (as of 31 December) NOK million 15 695 20 385 19 978

Number of employees (as of 31 December) Man years 3 586 3 562 3 443

During 2008 Aker Kvaerner has per-formed engineering and procurement forStatoilHydros semisubmersible productionplatform Gjøa. At the end of the year almost800 people were involved in this project, 140of them were engineers doing detail piping,structure and outfitting steel design at AkerKvaerner Powergas in Mumbai, India. AkerKvaerner will deliver the Gjøa semisub-mersible to StatoilHydro late January 2010.

A letter of intent for the Kashagan hook-up contract, part of the Kashagan experi-mental phase development, was awarded inthe second quarter to an unincorporatedconsortium of Aker Kvaerner and Ersai. Theclient is Agip KCO, and the early work activi-ties for the hook-up work, worth approxi-mately USD 157 million, started in April.

In the third quarter, BP awarded us thecontract for detailed engineering services,procurement and construction managementassistance for a new floating production,storage and offloading (FPSO) unit. This pro-duction facility is intended for the Skarv fieldin the Norwegian Sea. Our scope of theproject is worth approximately NOK 2 billionand will involve more than 400 of our peopleat peak staffing. The field is due to come onstream in the autumn of 2011.

As in 2006, the now completed Snøhvitand Ormen Lange projects contributed to ahigh level of activity, as did other projectsincluding the construction of the two AkerH-6e drilling rigs for Aker Drilling. The hulland topsides for the first of these units, AkerSpitsbergen, were mated at our Stord yard inNovember. The schedule for delivering thesetwo rigs has been extended to July 2008 andDecember 2008 respectively. The new time-line is caused by delays in work from sub-contractors with more subsequent carry-overwork to the later project phases, and alsothat the scope of our engineering has beenmore extensive than originally planned.

We delivered Blind Faith for Chevron andwill deliver the Adriatic LNG terminal - to beinstalled off the Italian coast for ExxonMobil

and its partners - in 2008. For the Kashaganproject for Agip KCO, the first of sevenbarges with process equipment was deliv-ered during 2007. The yards in Egersund,Norway and Astrakhan, Russia had high lev-els of activity on this project. Aker Kvaerneris well positioned to win more contracts forthe development of Kashagan, one of theworld’s largest offshore oil fields.

Good resultsWe enjoyed high activity in 2007. Operatingrevenues were NOK 16 381 million, comparedwith NOK 16 125 million in 2006. This increasereflects activity levels which were high, espe-cially as a result of work on Snøhvit and OrmenLange. EBITDA was NOK 891 million, com-pared with NOK 903 million in 2006.

The EBITDA margin was 5.4 percent, com-pared with 5.6 percent the year before.

Order intake during the year totalled NOK12 124 million, with a significant number ofsmall projects together with major awardsand a growing workload.

As part of Aker Kvaerner’s focusedrestructuring in the spring of 2007, AkerKvaerner Powergas in India and the US engi-neering services unit were transferred fromFD to the new Process & Construction busi-ness area, while our engineering services

unit in Malaysia was transferred to the Sub-sea business area.

Goals for 2008Our immediate goal is to extend our positionin our selected market segments. Our lead-ership in Norway and the far north will bemaintained. Aker Kvaerner’s development asan attractive partner in Russia and the Cas-pian Sea will be continued. We will strengthenour activities on the UK continental shelf andin the deepwater areas of the Gulf of Mexico.south-east Asia is another priority, where wewill build on our presence from the compa-ny’s base in Perth, Australia.

We will continue to strengthen our posi-tion as a supplier of LNG installations. Inaddition we will maintain our commitment tocarbon capture.

Strong markets in the Arctic and inthe gas value chainOur key markets are expected to remainstrong. The order backlog at 1 January 2008of NOK 15 695 million consists of a numberof contracts with deliveries from 2008 to 2011and form a solid foundation for the future. Thecompletion of deliveries to Ormen Langeand Snøhvit will contribute to a somewhatlower level of activity in 2008 than in 2007.

The Gjøa project has entered into thefabrication phase, and four yards in

Poland, four in Norway and one in Russiawill fabricate steel structures and piping forthe platform’s topside. The topside will be

assembled at Aker Kvaerner Stord.


Our business


Highlights 2007Our operations support and maintenancebusiness encompasses a wide range ofservices that supplement and support ourcustomers’ effective operation of installa-tions and infrastructure.

Our core competencies are in:

modifications project execution and toolsoperational expertise and technologyshutdown planning and executionconcept development and front-endengineering and design (FEED) studiesmaintenance planning and executionelectrical, instrumentation and telecom-munications contracting at offshore andland-based oil and gas facilitieson-site operations and operational sup-port servicesdecommissioning, including subsequentre-use of parts, and material recycling

We derive competitive advantage from beingin close proximity to our customers, parti-cularly with our operations in Norway atStavanger, Bergen, Trondheim and Kristiansund;in the UK at Aberdeen and Stockton; inSt John’s, Canada and in Houston, USA. Ourheadquarters are in Stavanger, and we havea second major hub in Aberdeen.

We have prefabrication workshops inNorway at Hinna, Mongstad, Ågotnes, andKristiansund. We also have a facility at Stordfor recycling offshore installations.

In 2007, we delivered revenues ofNOK 9 744 million. We have approximately4 855 permanent and 1 078 non-permanentemployees.

Increased value creationCarefully planned maintenance and improvedefficiency are two of the most important meas-ures for increasing productivity and theproduction lifetime of offshore oil and gas in-frastructure and land-based processing plants.

Longer installation lifetimes, reduceddowntime and more efficient operations leadto greater value creation for customers. Ourlocal market presence and ability to deploythe resources required for large scaleprojects are a winning combination.

Our strategy is to offer expert, intensiveand value creating services in our market.

We have the knowledge, depth and breadthof experience to take on the largest of projects.We minimise downtime through well-plannedfacilities maintenance combined with unbeat-able upgrading expertise. This significantlyreduces risk from operational interruptions,either scheduled or unforeseen.

We continuously develop services with newtechnology that contribute to improved workingmethods and solutions. Examples include

investment in hydrocarbon trainingmaintenance training for complexoperationsintegrated operationssensor/wireless technologyrobotics (both subsea and topsides)and unmanned platforms

In our operation and management of theAH001 production platform in the North Sea,we are responsible for all formal approvalsas the appointed duty holder in the UK. Thisresponsibility attests to the expertise of ouroperations people. We also provide opera-tions services on other UK continental shelfplatforms and, from our base in Egypt, forplatforms in the Red Sea.

There are clear synergies between MMOand Aker Kvaerner’s Field Development(FD) business area. FD delivers offshoreplatforms which offer us significant potentialfor subsequent operations, maintenanceand decommissioning contracts. Servicingthe entire life cycle of facilities gives us aclear competitive advantage in our market.

The growing MMO marketWe perform maintenance and modificationservices for oil and gas operators in the Nor-wegian and UK sectors of the North Sea. Wealso decommission, remove and dismantleoffshore installations. The combined marketfor these services is worth approximatelyNOK 19 billion per year.

We are working to develop our marketshare, which is around 45 percent in Norway,20 percent in the UK, and growing in theinternational market.

The overall market for our services grewsignificantly in 2007 thanks to rising energyprices. This was reflected in the postpone-

Aker Kvaerner’s Maintenance, Modifications and Operations (MMO)business area is a market leader in the North Sea. We are the only majorcontractor that has a presence in both the Norwegian and UK markets.With more than 30 years’ experience, we hold a unique market positionand are rapidly expanding internationally.

Actively contributed to delivery of giantOrmen Lange onshore gas facility

Statfjord Late Life ready for gas export

First oil Buzzard, Dumbarton, Brenda

Al Zaafarana operations contract in Egypt

Delivered on Frigg field decommissioningmilestones

The thriving modificationsmarket

Ormen Lange onshore site, Norway. Installed andcompleted all electrical, instrumentation and tele-communications systems. Continuing through long-term contract for maintenance and modification work.


Our business


Key figures Maintenance, Modifications and Operations 2007 2006 2005







ment of decommissioning projects, offset byincreases in the development of marginalfields, high investment in new field develop-ments, an increasing focus on field life exten-sion projects, and further modifications toaging infrastructure. At the same time, therising average age of installations in theNorth Sea has led to greater demand formaintenance services.

One example of where life extension post-pones decommissioning is Statfjord Late Life,where the facility has changed from being anoil producer to be a gas producer.

Continued high activity levelsWe developed our business very favourablyduring 2007, with growth in revenues andsignificantly increased margins. We focusedon international expansion and establish-ment in selected areas, principally Canada,the Caspian Sea and the Gulf of Mexico.

Significant contract awards and achieve-ments included:

Statfjord Late Life: ready for gas late2007Kashagan hook-up: letter of intent plusearly work agreementEngineering studies and projects capa-bility expanded across the North Seaand in HoustonAl Zaafarana, Egypt: operation and main-tenance contract in Gulf of SuezCompletion of significant project mile-stones on Frigg decommissioningHusky White Rose: retained maintenancecontract and gained engineering, fielddevelopment and subsea supportHelped achieve first oil from Buzzard,Dumbarton and BrendaContinued LTI-free performance onHess AH001 and Nexen Scott/Buzzardassets

Our order intake of NOK 8 422 million wasexcellent. At year end 2007, we had an orderbacklog of NOK 10 683 million.

Operating revenues were NOK 9 744 mil-lion, compared with NOK 9 677 million in2006. This increase reflects high oil prices,resulting in several projects for lifetime exten-sion of installations, development of smaller-sized fields, and projects focusing on envi-ronmental improvements.

EBITDA was NOK 530 million, comparedwith NOK 452 million in 2006, an increase ofNOK 78 million. EBITDA margin was 5.4 per-cent, compared with 4.7 percent the yearbefore.

In this busy market, recruitment and reten-tion is a competitive challenge. We suc-ceeded in retaining employees and recruit-ing some 500 new permanent employees.

In April 2007, Aker Kvaerner Geo wastransferred from MMO to Aker Kvaerner’sProducts & Technologies business area.

2008 - goals and objectivesOur goals for 2008 are to maintain our marketshare in the traditional MMO market in Nor-way, and to maintain and improve our UKmarket share. We will focus on growing inhigh margin and specialist technology niches.One such market niche is for engineeringstudies, where we will continue to develop,based on our successes in 2007.

We will continue to deliver our strategy forinternational growth in selected regions – e.g.Canada, the Caspian Sea and the Gulf ofMexico – and will capitalise on synergiesacross Aker Kvaerner.

We will be a preferred partner to our cus-tomers and a preferred employer to bothexisting and potential employees.

Outlook for 2008High energy prices and high industry activitylevels are expected to continue, leading tofurther field life extensions and marginal fielddevelopments.

Tendering levels will remain high, particu-larly for “late life” modifications and similarlife extension projects, and for the engineer-ing studies that are often the precursors tothis type of work. We are ideally positionedfor both.

The international market for our MMOservices is expected to demonstrate sus-tained and significant growth. Our marketshare will remain strong.

Statfjord Late Life, Norway. ModifiedStatfjord A&B from oil producer to gas

producer. Milestone ready for gasexport to UK achieved this autumn.


Our business

Subsea

As a full lifecycle provider of subsea prod-ucts and systems, from front-end studies toaftermarket support, we manufacture anddeliver the following products and servicesboth as complete engineering, procurementand construction (EPC) deliveries and stand-alone products:

subsea production systems, includingsubsea treessubsea control systemstemplate and manifold systemsumbilicals: flexible flowlines for tie-in ofsubsea production systemssubsea processing and boosting tech-nology, including subsea gas compres-sion, processing systems, multi-phasepumps, water and gas injectiondeepwater drilling riser systemstie-in systemssurface wellheadsaftermarket services

We are a global business area with 3 673permanent and 1 375 non-permanent employ-ees based in 23 locations around the world.Awarded global ISO 9001:2000 quality certifi-cation, we work on projects worldwide, throughone global organisation and a single businessmodel, using common systems.

Our headquarters are in Oslo, Norway.Manufacturing facilities are located in Mossand Tranby, Norway; Curitiba and Rio dasOstras, Brazil; Port Klang, Malaysia; Aber-deen, UK; Mobile, Alabama, US; and Batam,Indonesia. A global network of service basessecures quality aftermarket support.

In 2007, we had operating revenues ofNOK 9 851 million, an increase of 42 percentcompared to 2006.

Complete subsea solutionsOver several decades we have developedunbeatable know-how in subsea oil and gasdevelopments. Our ability to manufactureand deliver complete subsea production sys-tems, including umbilicals, is unrivalled in themarketplace.

Our reputation as a complete system pro-vider was further strengthened in 2007 withthe opening of a new high-tech manufactur-ing centre in Port Klang, Malaysia. This cen-

tre, built in record time, is the world’s only“one stop shop” for the production of com-plete subsea systems.

Over the past 20 years, we have devel-oped a strong market position in processingand boosting technologies which increaseoil and gas recovery and life-of-field fromwells with declining production rates. Thisposition was highlighted this year with thesuccessful start-up of two MultiBooster™pumps at BP’s King field in the Gulf of Mex-ico and the installation of a SeaBooster™seawater injection system at StatoilHydro’sTyrihans field.

A significant proportion of the world’sremaining oil and gas reserves is in demand-ing reservoir conditions. Aker Kvaerner isaddressing this by developing suitable tech-nologies for these fields. For example, ourunique technology for high-pressures/high-temperatures (HPHT) received another acco-lade in 2007 when StatoilHydro chose us assupplier of a subsea production system forthe Morvin field.

Growth in all subsea segmentsThe global subsea market grew significantlyin 2007. The key driver behind this growth isthe high price of oil, itself driven by the dra-matic increase in energy consumption, par-ticularly in fast-developing countries such asIndia and China.

Total investment in subsea hardware – ourcore business – increased by 60 percent com-pared to 2006, to NOK 30 billion. Market ana-lysts predict that growth will continue over thecoming years, at an annual rate of approxi-mately 20 percent. Strong growth in new-buildsof deepwater drilling units has also resulted ina high order intake for deepwater drilling risers,a product we began offering out of our newfacility in Malaysia and shortly Brazil.

The global umbilical market had a solidyear. According to Quest Offshore, we werethe world’s leading manufacturer of steeltube umbilicals in 2007, with a market shareof 40 percent in km.

High activity levels2007 was an excellent year for us, with ourbest ever revenues of NOK 9 851 million, anda record high EBITDA of NOK 960 million.

Aker Kvaerner’s subsea business area (Subsea) has grown to become akey player in the fast expanding global subsea market. The only supplierin the world that can manufacture and deliver a complete subsea produc-tion system including umbilicals, we are well positioned for further growth.

Deep impact

Highlights 2007

Record high revenue, EBITDA andEBITDA margin

Opened new high-tech manufacturingcentre in Malaysia, the world’s only “onestop shop” for production of completesubsea systems

Established long term frame agreementwith StatoilHydro for delivery of subseaproduction systems and relatedaftermarket services

Technology breakthroughs withMultiBooster™ at BP’s King field andentry into the subsea power cable market

USD 300 million subsea system contracton the Indian continental shelf signedwith Reliance Industries

Aker Kvaerner: The world’s no. 1 supplier of steeltube umbilicals.


Our business

Subsea

Key figures Subsea 2007 2006 2005







Among key contracts awarded in 2007were the USD 300 million subsea systemcontract signed with Reliance Industries’MA-D6 project, and the 5+2+2 year frameagreement with StatoilHydro for delivery ofsubsea production systems and relatedaftermarket services.

The USD 90 million deal to deliver threesubsea manifolds to Petrobras of Brazil, theumbilical frame agreement with Australia’sWoodside Petroleum, a first step into theChinese drilling riser market through a con-tract with CNOOC, and entry into the subseapower cable market through a USD 65 millioncontract also with Petrobras, are other mile-stone awards. At year end 2007, our orderbacklog stood at a record high NOK 10 951million, an 25 percent increase over 2006.

2007 also saw significant investment inupgrading our manufacturing and servicefacilities around the world. Our new Hou-ston-based centre for assembly, testing andaftermarket activity in the Gulf of Mexicowas opened in April. A NOK 65 millionupgrade of our facility in Tranby, Norway,made it one of the most efficient subsea treeand pump manufacturing sites in the world.Additionally, our USD 100 million high-techmanufacturing centre in Malaysia was offi-cially opened in June. These investments willprovide a sound basis for our future growth.

Another important development was ourestablishment, together with Aker and DOFSubsea, of Aker Oilfield Services, a providerof subsea light well intervention services.The acquisition of Phoenix Polymers Interna-tional Ltd, a manufacturer of buoyancy prod-ucts for the oil and gas industry and supplierof floatation elements to our drilling risers,was also strategically important.

This was a year for key deliveries, such asfirst oil through the subsea system at theKikeh field, the first deepwater project inMalaysia, and the technology breakthroughof the MultiBooster™ at BP’s King field. Deliv-eries to Reliance Industries’ giant projects on

the Indian continental shelf have been – andstill are – a key focus area.

2008 GoalsOne of our key objectives for 2008 and be-yond is to continue the expansion of ourstrong global position, partly by leveragingthe manufacturing centre in Malaysia to be-come the number one subsea supplier in theAsia-Pacific region. We will continue to de-velop technology in selected areas, particu-larly within increased oil recovery (IOR),where we already hold a pioneering posi-tion.

Increasing service revenue is another keygoal. This will be met by growth in theinstalled base and through planned invest-ments into our existing aftermarket facilitiesin Ågotnes, Norway and Perth, Australia, aswell as the opening of a new facility in Kaki-nada, India.

Continuing to contribute to Aker Kvaerner’sdeliveries across the entire oil and gas valuechain, as well as working with other compa-nies in the wider Aker family, will remain astrategy for success, as will improving mar-

gins through increasingly cost-efficientsupply chain management with best valuesourcing.

Continuous growthHigh oil prices and market activity levels areexpected to continue. Market analysts sug-gest that all subsea markets will continue togrow in the coming years, with a strong in-crease in the Asia-Pacific and West Africa re-gions.

Construction activity for deepwater drill-ing units is predicted to remain high. As aresult, we will open a new production facilityfor deepwater drilling risers in Rio das Ostras,Brazil in 2008.

An increasing number of subsea devel-opments will move into deeper waters, withsubsequently longer step-outs. This trend willcontinue to drive demand for subsea supportinfrastructure such as umbilicals.

We are enjoying high tendering and bid-ding activity at the start of 2008, and the mar-ket outlook remains positive. We will not, how-ever, lose focus on the safe, on-time deliveryof our existing solid order backlog.

The high-tech manufacturing centrein Malaysia is the world’s only

”one stop shop” for production ofcomplete subsea systems.


Our business


P&T growth is driven by three key markets:

Deepwater drilling• Drilling equipment and systems• Mooring systems

Floating production• Mooring and offloading equipment• Upstream process technologies• Floater installation and subsea

construction

Increased oil recovery• Well intervention• Geological consulting and services• Process technology upgrades• Drilling equipment upgrade• Subsea tieback installation

We are a leading supplier of:

Advanced drilling equipment andsystemsUpstream processing technologyMooring systems and loading andoffloading technologyWell intervention technology andservicesMarine and subsea installationReservoir evaluation services

Developed for the demanding North Sea envi-ronment, most of our products, technologiesand services are now also exported to other oilproducing regions. Today more than two thirdsof our deliveries are outside the North Sea.

We are a global business area with morethan 2 600 permanent and 800 non-perma-nent skilled employees worldwide. Our head-quarters are in Norway while we have offices,service bases and production facilities in keyoil producing regions around the world.

Our increasing installed base providessignificant service and after-sales potentialgoing forward.

State-of-the art expertise andcompetitive advantagesA significant proportion of the world’s re-maining oil and gas reserves are located atgreat water depths, in Arctic regions, and inreservoirs with demanding conditions such

as high temperatures and pressures. Ad-vanced technologies and innovative solu-tions for increased oil recovery (IOR) are of-ten decisive in exploiting identified reserves.We have state-of-the-art expertise, productsand technologies to address these chal-lenges, holding a leading position in severalupstream technology segments includingadvanced drilling equipment systems, wellstream separation and process systems,mooring and offloading systems.

Our marine operations segment hassecured full market and operational controlof two highly specialised construction ves-sels. With their high-tech specifications andsafety margins, these vessels are ideallysuited for operations in harsh marine environ-ments. Extensive experience in the towingand installation of offshore fixed and floatingplatforms has helped us develop a safe, cost-effective and patented technique for theinstallation of subsea structures, known asthe Pencil Buoy Method.

Market conditionsFrom a market perspective, 2007 was yetanother positive year. All target segmentsdeveloped favourably. Contracts for 4 floatingdrilling units (i.e. semisubmersibles and drill-ships) were awarded and nearly 40 FPSO’swere under construction or on order at year-end 2007. As a result the market for drillingequipment and systems, mooring equipment,processing systems and offloading unitsenjoyed high activity. With an increasingnumber of drilling rigs and floating productionunits entering the market, contracting of marineoperations and subsea installation services areexpected to develop positively.

With increasing oil prices, the life of sev-eral projects in their “tail-end” productionphase has been extended. This has lead togrowing interest in our increased oil recovery(IOR) solutions, which include well interven-tion services and technology.

An excellent year2007 was an excellent year with strong finan-cial performance and growth opportunitiesfor all business segments.

Key developments in 2007 included: theaward-winning PowerTrac® Cone Crusher,

Through its Products & Technologies (P&T) business area, Aker Kvaernerholds a leading position in the drilling equipment, FPSO topsides andsub-surface market, delivering systems, equipment and services.

Growth through innovativetechnology

Aker Kvaerner’s PowerTrac® Cone Crusher providesa new solution for cost-efficient, safe and environ-mentally sound removal of scale from wells.

Highlights 2007

Strong growth in all business segments,record high EBITDA

Strategic investment in Wirth GmbH,a German quality provider of key drillingequipment

Breakthrough in the Chinese offshoremarket and successful entrance into thedrillship market

FPSO process modules delivered inrecord time to Aker Floating Production

Successful introduction of “BOA SUB C”,a specialised construction vessel for ultradeepwater

Winner of Offshore TechnologyConference (OTC) Spotlight on NewTechnology award with PowerTrac® ConeCrusher, a highly innovative and efficientmethod for scale removal in oil and gaswells

Market leading position gained forenvironmentally safe crude loadingtechnology for Arctic conditions


Our business


Key figures Products & Technologies 2007 2006 2005







which removes scale from oil wells, prevent-ing blockages; the compact electrostaticcoalescer (CEC™) process technology,which reduces water content in oil to as littleas 0.5 percent – particularly important inmore mature fields where the amount ofwater produced can be as high as 90 per-cent – and safe crude loading technology forArctic conditions, which transports oil fromthe FPSO to the shuttle tanker and allows foremergency releases with no oil spillage.

We continue to take a major share of thestrong new-build market for deepwater drill-ing rigs and drillships. Key contracts awardedin 2007 included: China National Offshore OilCorporation (CNOOC), a breakthrough in theChinese offshore market; and two drillingequipment contracts awarded by DaewooShipbuilding & Marine Engineering Co. Ltd(DSME), one for a single drillship and one fora semisubmersible. An important achieve-ment within the drilling equipment segmentwas the acquisition of 50 percent of theshares in German company Wirth GmbH,with an option to buy the remaining sharesover the next few years. Wirth’s technologycomplements our portfolio and is an excel-lent fit with our drilling equipment segment. Itwill increase the added value and servicepotential within this segment.

We have been successful in the well inter-ventionmarket.MajorcontractsontheNorwegianContinental Shelf (NCS) were entered into in2007, highlighting the strong home marketposition. As the number of horizontal wellsincreases significantly, both in Norway andworldwide, the outlook for our well interventiontechnologies and services is favourable. In2007, we successfully carried out our first wire-line tractor operation in the Gulf of Mexico.

The PowerTrac® Cone Crusher wasawarded the OTC Spotlight on New Technol-ogy award. This environmentally-friendlyinvention has enabled very cost-efficientscale removal in oil and gas well, deliveringsignificant business benefit for our clients.

In 2007, Aker Kvaerner’s geological con-sulting business was transferred into the P&Tbusiness area. With this move, Aker Kvaernerhas organised its sub-surface activities underone global business area. We see a clearpotential for growth in this segment.

Our marine operations segment hassecured many important contracts in theNorth Sea and in the Gulf of Mexico. Theseinclude the installation of the Sevan Humming-bird FPSO on the UK continental shelf andfloater installation contracts with both Statoil-Hydro and BP Norway. With the delivery ofthe ultra deepwater multipurpose vessel BOASUB C, we have further strengthened ourposition in the offshore installation marketand are well positioned to install numerousfloaters under construction with this charteredsuperior vessel. It is currently operating inthe Gulf of Mexico.

We have significant experience in theArctic and other harsh environments and area market leader in advanced offshore load-ing equipment. We have taken a leadingposition in crude offloading technology. Thesystems for transferring oil from platform toshuttle tanker can function in extreme tem-peratures (down to - 50°C) and withstand anemergency release with no environmentalimpact. We delivered two such systems in2007, one for the Prirazlomnya field and oneto Lukoil’s Varenday loading terminal. Wehave also won a contract for the delivery ofmooring winches and fairleads for Statoil-Hydro’s Gjøa semisubmersible platform.

Our process systems segment deliveredits first process module to Aker FloatingProduction in record time. This segment alsocompleted its first two offshore SulphateRemoval Units (SRUs) for Petrobras’ FPSOP50 in Brazil and won other importantcontracts for the design and supply of oiland gas treatment packages. We haveestablished a strong position in topsideupstream process modules for the FPSOmarket.

Operating revenues were NOK 12 353million, up 63 percent from NOK 7 572 millionin 2006. The strongest growth came with thedrilling equipment segment. EBITDA wasNOK 959 million, compared with NOK 531million in 2006, an increase of NOK 428 million.EBITDA margin was 7.8 percent, comparedwith 7.0 percent the year before. Order intakeamounted to NOK 10 733 million in 2007.

Goals for 2008We have three target markets for growth inthe immediate future: deepwater drilling (drill-ing equipment and systems and mooringsystems); floating production units (mooringand offloading equipment, upstream proc-ess technologies and floater installations);and IOR through well intervention, process-ing technology upgrades and subsea tie-back installation. In IOR services, technologyis an integrated part of the offering, which isprovided under long term contracts. We willcontinue to improve and strengthen our posi-tion in each of these growth markets both or-ganically and through acquisitions.

With a growing installed base of equip-ment and technologies, our aim is to increasethe service and after-sales share of our oper-ating revenues during 2008. This will requirefurther strengthening of our service organi-sation. We will also expand our technologyportfolio to better meet the new challengesfacing the upstream oil and gas industry.

The way forwardHigh energy prices and market activity levelsare expected to continue. All of our marketsegments are expected to remain strong, es-pecially within the drilling rig, floating pro-duction and IOR segments. Several awardedcontracts, with deliveries in 2008 and later,form a solid foundation for further develop-ment. At year end 2007, our order backlogamounted to NOK 11 520 million, with deliv-eries through 2011.


Our business


Our success is founded upon a portfolio ofstrong local, yet globally-enabled businessunits. We have four global focus areas deliv-ering:

Metals and miningStudies, project management, engineer-ing, procurement and construction (EPC),engineering, procurement and construc-tion management (EPCm), commission-ing and start-up services to mining andmineral processing companies operatingmainly in Australia and the Americas.

ConstructionConstruction and global construction man-agement for all of the market segments weserve.

Process and bio-refineryFront-end engineering design (FEED) /EPC/EPCm projects with selected petro-chemical process technologies; theMiddle East is a key market.FEED/EPC for biorefineries; primaryfocus is Europe and the US.LNG FEED/EPC/EPCM projects forglobal re-gasification markets.

Technology and servicesTechnology and services spanningnuclear clean-up; water treatment;bleaching, chlor-alkali and acid plants;plus engineering facility services, prima-rily in the UK and US.Specialised niche technology know-howacross some 50 licensor technologies.Own technology arm offering expertiseand know-how in the design, supply andoperation of various proprietary processsystems and plants.

This is an integrated global enterprise withcore operations focused on Europe, theAmericas, Australia, China, India and theMiddle East. We have a first class engineer-ing talent-base of around 4 700 permanentand 5 300 non-permanent employees, ensur-ing considerable workforce flexibility and po-sitioning the business to manage the cyclicalworkload of our markets.

Technology experienceLocal market presence and expertise inselected areas, backed up by extensiveworld-wide resources, have enabled us todevelop a strong market position in severalgeographical areas and technology niches.

In petrochemicals, we have establishedsolid, long term relationships over manyyears with licensors of select niche technolo-gies for the production of purified tereph-thalic acid (PTA), polypropylene (PP), poly-ethylene (PE), butanediol (BDO), acetic acidand others. As an example, we have played amajor role in the engineering, procurementand construction of 26 of the more than 100Univation UNIPOL™ PE reactor lines and athird of the Dow UNIPOL™ PP reactor lines,that are either in operation or under construc-tion around the world.

We have established BioCnergy™, a jointventure with Indian group Praj Industries, aglobal leader in biofuels technology, toaddress biofuels opportunities in Europe.

2007 in briefWe delivered robust growth with an EBITDAincrease of 41 percent and an order backlogat year end 2007 of NOK 10.9 billion, 37 per-cent over the previous year. All four of ourglobal focus areas contributed to thisgrowth.

We delivered a total of NOK 10.4 billion inoperating revenues in 2007, down from NOK12.0 billion in 2006. The focus on improvingprofitability versus revenue growth over thelast three years yielded an EBITDA margin of7.2 percent in 2007, up from 3.1 percent and4.4 percent in 2005 and 2006 respectively,and on a healthy NOK 1.2 billion in cash flowfromoperatingactivities.Wenowdemonstratea portfolio of strategically well positioned,profitable businesses in growth markets,ready to grow the top line. Our achievementsalso indicate that the refocusing of our busi-ness – bringing together Aker Kvaerner’senergy, process and related constructionactivities to achieve greater synergies andbetter resource utilisation – is paying off. Atthe same time, this has enabled us to capital-ise on a favourable investment environmentin the metals sector and in the power genera-tion market in North America.

Aker Kvaerner’s Process & Construction business area (P&C) is a leadingprovider in the management, design and construction of major projectsacross refining, petrochemical processing and biorefinery, metals andmining, LNG, power generation, acid plants, nuclear clean-up servicesand water treatment.

Capitalising on growthmarkets

Highlights 2007

Strong growth – 37 percent increase inbacklog

Healthy revenue increase

41 percent EBITDA growth – EBITDAmargin from 4.4 percent in 2006 to7.2 percent in 2007

Strong cash flow from operating activities

USD 1.3 billion joint venture contract forUS power station

Launch of BioCnergy™ joint venture

San Cristobal silver-zinc mining project for ApexSilver – the largest EPCm project ever executed inBolivia incorporating state-of-the-art technology.


Our business


Key figures Process & Construction 2007 2006 2005







A strong, local operational presence hasproven effective in further strengthening ourposition in the global market. This compellingmodel for generating major local businessopportunities is successful in the Asia Pacificregion, from our operations in China andIndia, in our European markets and in theMiddle East.

As an example, in Saudi Arabia, we areworking in a joint venture with SINOPEC on aworld-class polyolefins project for SaudiBasic Industries Corporation (SABIC) atYanbu. Work on this huge developmentstarted in 2005 and it is expected to come onstream in 2008.

India is a key engineering hub for all ofAker Kvaerner. Our operations deliver impor-tant input to many projects locally in India, inthe Middle East and, increasingly, world-wide.

Contract highlights in 2007As part of a consortium, we securedpivotal contracts for the engineering,supply of equipment and construction forthe Longview project, a supercritical pul-verised coal-fired power generating facil-ity in USA. Our scope of work is valuedat approximately USD 654 million.A consortium comprising BP, AssociatedBritish Foods and DuPont awarded Bio-Cnergy™ a FEED study for a plannedworld-scale bioethanol plant in the UK.2007 saw the successful conclusion ofour project for Zhejiang Hualian SunshinePetro-Chemical Co. for a new PTA plantin China. We secured further PTAprojects in Brazil and Portugal, cement-ing our position as the world’s mostexperienced contractor in the executionof projects utilising INVISTA technologyfor the production of PTA. These plantsrepresent approximately one fifth of theworld’s PTA production capacity.Our success in China was further high-lighted by securing the basic engineer-

ing design and supply of equipment fora new PP plant for PetroChina GuangXiPetrochemical Company. We were alsoawarded a contract by ShenHua BaotouCoal Chemicals for a new PP and PEfacility at its coal chemical complex.Magnox Electric awarded us a nucleardecommissioning contract to design,build and install a plant for the retrievaland encapsulation of wet intermediatelevel wastes at the Hunterston A site inWest Kilbride, Scotland.British Nuclear Group awarded two con-tracts to the ACKtiv Nuclear joint venturecomprising Aker Kvaerner, Atkins andCarillion to support decommissioning atthe First Generation Magnox StoragePond, Sellafield in the UK.In the LNG market, where we are amongthe world leaders in terminal construc-tion, the USD 680 million Gulf LNG EPCproject, along the US gulf coast, is beingmanaged from our Houston operations injoint venture with IHI.

Looking aheadWe will enjoy further success in PTA, PE andPP, with a continuing focus on China and theMiddle East. China is expected to continueas the main driver for petrochemical processinvestment over the next several years, drivenby its burgeoning economy. Aker Kvaernerhas established a sourcing hub in China andplans to substantially grow its local opera-tions over the next three to four years.

Other active markets include Europe,where plant renewals are anticipated, andSouth America - notably Brazil - where inter-est in new projects is growing. In the US, therefining sector is starting to look to new plantafter a long period of flat investment.

Our contract successes in the UK Nuclearsector in 2007, coupled with the UK NuclearDecommissioning Authority’s continued invest-ment in clean-up and decommissioningsuggest a significant up-turn in investment.

With the potential for a steady workflow tolast for many decades, combined with ourexcellent track record, we are very well posi-tioned in nuclear clean-up.

Our emphasis in metals and mining willremain on Australia and the Americas, wherethe major ore deposits are located. Despiteworldwide capacity challenges, we have astrong market position - in terms of volumewe are currently number two overall, andnumber one in South America. Our objectiveis to achieve the same status in Australia,with Africa and Asia seen as the next keymarkets to target.

The metals market is booming, thanks toChina’s high demand for commodityresources, especially base metals like cop-per and nickel. Investment in metals isexpected to increase by 30-40 percent peryear.

We are the number one contractor to thecopper industry, with experience accumu-lated over more than 50 projects, and are inthe process of developing new and improvedtechnology for gold and diamond extraction.We are engaged in the construction of thelargest gold mine currently being developedin Australia, and have developed new andimproved nickel technology for BHP Billitonas part of the Ravensthorpe project.

Our major construction operations inNorth America ensure we are well placed tobuild on our success in this important market.Our LNG regasification position is particu-larly strong, where we are ranked numberone in terms of number of contracts andvalue.

The markets for power operation and envi-ronmental solutions, as well as the non-fer-rous metals generation market, are particu-larly active, with over ten power stationprojects in the Americas being sanctioned in2008, and indications that many more willfollow.


Our business


Our performance

Contents

26 Board of Directors’ report

Annual accounts Aker Kvaerner group

38 Consolidated income statement

39 Consolidated balance sheet

40 Consolidated statement of cash flow

41 Consolidated statement of changes to equity

42 Notes to the accounts

Annual accounts Aker Kværner ASA

78 Income statement

79 Balance sheet

80 Statement of cash flow

81 Accounting principles

82 Notes to the accounts

86 Auditor’s report

88 Share and shareholder information

92 Analytical information


Our performance

All of Aker Kvaerner’s five business areasmade progress in 2007 and the order backlogreflects a persistently strong market. Comple-tion of the Ormen Lange and Snøhvit projectshad a positive impact on both operations andthe accounts. Following their delivery, AkerKvaerner expects revenues in 2008 to continueat the high 2007 level, and to increase themthereafter. Order intake in 2007 came to NOK57 942 million, and the order backlog at 1 Janu-ary 2008 was NOK 58 261 million. It is expectedthat the activity in Aker Kvaerner’s principalmarkets will remain high over the next few years.

Aker Kvaerner’s strong focus on health,safety and the environment (HSE) continuesto receive the highest priority, and a numberof programmes and measures supporting itsHSE focus are being implemented through-out the organisation. These measures willhelp to increase employee knowledge in theHSE area and to prevent unwanted incidents.The goal is zero harm to people, materialassets and the environment. Sick leave in2007 remained more or less unchanged fromthe year before, while the personnel injuryfrequencies declined. The Board deeplyregrets that, despite the strong commitment toHSE, a tragic accident occurred on 6 January2007 when one of our employees died duringa lifting operation on the UK continental shelf.

A change occurred in Aker Kvaerner’sownership during 2007. Aker ASA first reducedits holding from 50.01 to 40.1 percent, andthen sold this interest to the newly establishedcompany Aker Holding AS, owned by Aker, theNorwegian state, SAAB AB and Investor AB.

Aker Kvaerner’s market capitalisation at31 December 2007 was NOK 39 593 million,compared with NOK 42 813 million a yearearlier.

The businessPrincipal operationsAker Kvaerner is a leading global supplier of

engineering services, fabrication, technologyproducts, maintenance, specialised servicesand total solutions for the energy and processindustries. Its main activities embrace deliv-eries to oil, gas, and petrochemical facilities,and the company is also a major supplier toprojects for gas and coal-fired power stations,metal processing plants and other selectedindustries.

To optimise the organisation of the com-pany’s business, a new global operationsmodel was adopted in the first quarter of2007. Aker Kvaerner thereafter comprisesfive business areas which also form the fivereporting segments:

Field Development (FD)Maintenance, Modifications andOperations (MMO)SubseaProducts & Technologies (P&T)Process & Construction (P&C)

At 31 December 2007, The company had24 427 direct employees, including 10 931 inNorway, plus 8 290 contract or “hired-in” per-sonnel. Aker Kvaerner’s head office is in Nor-way, at Fornebu outside Oslo.

Strategic target areasThe company’s vision is to be the preferredpartner for projects, products and servicesin the energy sector. This vision applies to allits business areas.

Aker Kvaerner is recognised as an attrac-tive business partner and employer, and itsemployees hold state-of-the-art expertise ina number of areas.

Aker Kvaerner occupies a strong position,which will be consolidated and further devel-oped. That calls for significant commitmentand substantial resources. Expectations frominvestors, customers and employees, andfrom the community and the market in gen-

eral, will be met by delivering responsibly,profitably and consistently every single day.

11 target areas have been defined for2008 to help the company realise its vision ofbeing the preferred partner:

Give HSE the highest priorityAker Kvaerner has a Just Care™ culture de-signed to strengthen the organisation’s focuson HSE in every project and for every prod-uct it delivers.

Commitment to HSE education will con-tinue. Involvement among employees is at arecord level, and HSE results have shownprogress since 2006. However, further effortis needed to reach the goal of zero harm topeople, material assets and the environment.

Establish clear leadership in the ArcticAker Kvaerner has solid experience working inthe demanding Arctic environment. It will con-tinue to develop new solutions for this region.

Establish clear leadership in deepwatertechnologyTechnological breakthroughs gives a strongcompetitive edge in the deepwater segment.Developing new solutions will continue to beimportant in the future as well as an increasedcommitment to improving products, servicesand expertise across the business.

Strengthen position as a turn-key supplier tothe LNG and gas industryAker Kvaerner will continue its efforts to ex-pand its already extensive value chainthrough a stronger commitment to gas tech-nology. By improving the utilisation of its spe-cialist units, it can offer support throughoutthe life cycle.

Strengthen commitment to south-east AsiaAker Kvaerner will expand its activities insouth-east Asia, including China, India and

Board of Directors’ report

Aker Kvaerner continued to make progress in 2007. Very positivedevelopments in its principal markets, combined with good projectexecution, meant that performance was even better than in 2006, theprevious record-setting year. Operating revenues came to NOK 57 957million, up by 14.6 percent from the year before. Profitability alsoimproved, with operating profit before depreciation rising by 36 percent toNOK 3 913 million. The EBITDA margin improved from 5.7 percent in 2006to 6.8 percent. Profitability is expected to make continued steadyprogress, with operating revenues of NOK 58-60 billion and an EBITDAmargin of 8 percent in 2008. The target for 2010 is an EBITDA margin of9 to 11 percent. An ordinary dividend of NOK 3 per share is proposed bythe Board for the fiscal year 2007, in total NOK 822 million.

Continued progress


Our performance

Malaysia, where it can exploit its competitiveadvantages.

Commit to acquiring strategic technologyAker Kvaerner is among the technology de-velopment leaders in its core areas, develop-ing world-class solutions and winning anumber of awards for its technological prod-ucts and services.

This work will continue, with an increasedcommitment to identifying and acquiringtechnology which enhances its portfolio andprovides added value for customers.

Maintain an increased focus on selectingand executing projectsPrioritising the right projects is more impor-tant than simply winning new projects.

Reliable and predictable project execu-tion yields clear competitive advantages. Thecompany will continue strengthening its exe-cution of demanding projects by selectingthe right projects and consistently imple-menting its project execution model (PEM).

Develop pricing concepts for projects,services and maintenance contractsAker Kvaerner has previously priced its ten-ders on the basis of labour and materialcosts plus a percentage for profit. This ‘cost-plus’ calculation method fails to take into ac-count the expertise actually contributed to aproject - or the added value which this repre-sents.

Cost-plus thinking is being replaced by apricing model which sells quality and exper-tise, and which focuses on the value addedto the customer in a project. Combined withother value creation methods, this approachhas been shown to provide far better projectprofitability than the cost-plus model. Withthis new pricing model Aker Kvaerner is paidfor the added value delivered to the cus-tomer.

Take care of talented employeesHuman resources are the key to successfulproject execution, growth, and new projectand business opportunities. Aker Kvaernerhas more than 24 000 employees, and willcontinue its efforts to develop both individu-als and teams with the aim of creating one ofthe world’s most attractive workplaces. Oneof the company’s goals is to reduce turnoverin its workforce to an average of less thannine percent worldwide.

Improvement programmesAker Kvaerner has a strong foundation and a

more flexible cost structure after the refinanc-ing in 2006, but improvement opportunitiesremain. In order to strengthen competitive-ness even further, a number of improvementprogrammes were launched during the sec-ond quarter of 2007. The goal is to reducethe cost base by NOK 1 billion over the nexttwo to three years. Various measures have sofar yielded savings in the order of NOK 280million. These programmes embrace areasincluding procurement, simplification of thelegal structure, optimisation of tax and work-ing capital and improved earnings throughgood risk management.

Stronger commitment to the Process &Construcion business areaA detailed review of development opportuni-ties for Process & Construction was carriedout in 2007. It has been resolved to continueand strengthen the company’s commitmentto this business area.

The Metals segment will be strengthenedthrough organic growth and acquisitions.Geographically, priority will be given to theSouth American market. The centre of gravityfor the Process business will be shifted grad-ually towards south-east Asia. This means inpart that all significant new capacity in thisarea will be added in that region. Transfer oftechnology and know-how from Europe tothe business area’s activities in other parts ofthe world, and particularly to growth marketssuch as India and China, will also be facili-tated to a greater extent. Moderate growth isexpected for Construction in its existingNorth American market.

MarketsAker Kvaerner’s markets are continuing todevelop well, and the outlook is good. Inter-national demand for energy is expected tocontinue growing for at least three to fiveyears. Developments in China and India willmake a particular contribution to stimulatingdemand. Strong raw material prices will helpto keep demand high for Aker Kvaerner’sproducts and services, and contribute to in-vestment both in existing installations andfields and in new and more demanding areas.

Combined with new technology forimproved recovery, high oil prices will boostdemand for the maintenance and upgradingof existing installations. This will extend theinstallations’ economic life and their recoveryfactor. In technology, expertise and execu-tion, Aker Kvaerner is well positioned toundertake these types of assignments.

Development of new oil and gas fields

also represents a strong market. A numberof these projects are located in particularlydemanding areas, in ultra deepwater and inharsh weather regions. Aker Kvaerner hasstrong competitive advantages in this marketas a result of its experience in the North Seaand state-of-the-art expertise.

The positive trend for international com-merce in general, and particularly in China,provides a foundation for maintaining a highlevel of investment in other industries whereAker Kvaerner can offer its services, such asmining, metals and chemicals.

Risk managementAker Kvaerner’s decision-making system isorganised in a matrix format which defineswhich decisions can be taken at which levelsin the organisation. At corporate level, advi-sory committees have been established toprovide quality assurance of major issuesbefore a final decision is taken. These com-mittees evaluate issues before a decision ismade by corporate management or the mainboard:

the corporate risk committee considersoperational project riskthe finance committee considers finan-cial market riskthe investment committee considers riskassociated with acquisition and sale ofbusinesses as well as other investmentdecisions.

The various risks evaluated by the respectivecommittees are outlined below.

Operational project risk: Aker Kvaerner’scommercial operations will normally involverisk. Responsibility for ongoing risk assess-ment rests with the various operational busi-ness areas. Typical examples of such riskare the ability to deliver existing contracts atthe agreed time, quality, functionality andprice. Delivering projects and equipment inaccordance with the contract terms and theanticipated cost framework represents asubstantial risk element, which will be themost significant factor affecting Aker Kvaer-ner’s financial performance. Results also de-pend on costs, both Aker Kvaerner’s ownand those charged by suppliers, interest ex-penses, exchange rates and the customer’sability to pay.

Aker Kvaerner works systematically withrisk management in all its business areas,through extensive systems and procedures.The aim is to ensure a thorough assessment


”All of Aker Kvaerner’s five business areasmade progress in 2007 and the order backlogcombined with the tendering activity reflect apersistently strong market.”


Our performance

total currency exposure. The remaining 20percent is secured through net positions whichdo not qualify for hedge accounting under therelevant accounting standards. The corporatetreasury department is also mandated to takea limited open position. Total currency turnoverfor the company against external banks in2007 was almost NOK 87 billion.

Interest rate risk: operational units do notcover their interest exposure unless deliver-ies entail significant advances or requiresubstantial financing of working capital. Thecorporate goal is to have up to 50 percent ofgross debt on fixed interest rates and termsof three to five years. At 31 December, morethan half the outstanding debt had fixedinterest rates.

Counterparty risk: specific assessmentsare made of all major contractual counter-parties and efforts are made to cover riskthrough parent company guarantees, struc-turing of payment terms or bank guarantees.Where bank risk is concerned, specific maxi-mum levels have been set for Aker Kvaerner’sexposure to each financial institution.

Liquidity risk: in addition to seeking to en-sure that all deliveries in the operational unitshave a neutral or positive effect on cash flow,Aker Kvaerner’s policy is to maintain satisfac-tory liquidity at corporate level to meet un-foreseen developments. This goal is ex-pressed as a total of undrawn bank credit fa-cilities and liquid assets corresponding toeight to 10 percent of revenues. This targetwill vary over time, depending on the compo-sition of revenues in various segments. Ef-forts will be made to ensure that debt has anaverage remaining term of three to five years.At 31 December, the liquidity buffer amountedto NOK 9 547 million or roughly 16.47 per-cent of 2007 revenues. Average duration onthe existing outstanding debt including theundrawn bank revolver is approximately 4.6years. Aker Kvaerner is in compliance withthe financial covenants in its loan agree-ments; see Note 25.6 to the consolidatedaccounts on non-current borrowings.

Guarantee portfolio: a significant propor-tion of business area contracts are sup-ported by bank or insurance guarantees. Ondemand guarantees account for a largeshare of these, particularly in Field Develop-ment, Subsea and Products & Technologies.These guarantees can fall due for payment atshort notice. Aker Kvaerner has made no

of both new and deliveries under execution.Risk management and awareness also rep-resent key elements in educational activitiesand the corporate culture. The goal is not toavoid all risk, but to understand, manage andbe paid for managing risk. Good risk assess-ment is a core competence which can delivercompetitive advantages.

A model for following up every phase of adelivery – evaluating, tendering, decision-making and execution – has been estab-lished by Aker Kvaerner. This project execu-tion model (PEM) ensures that all the busi-ness areas share a uniform tool for projectexecution and follow-up, which in turnensures a unified corporate culture and pro-vides opportunities for cross-organisationaldeliveries. Aker Kvaerner has establisheddecision-making and evaluation bodies atvarious levels to deal with project and equip-ment deliveries. At the pinnacle of this sys-tem sits the corporate risk committee, whichassesses and recommends contracts to theappropriate decision-making authority (thePresident & CEO or the Board). The risk com-mittee reviewed almost 30 projects during2007. Given today’s market conditions, keep-ing deliveries at a level which Aker Kvaernerhas the capacity and expertise to execute isimportant, as is selecting and winning theright projects. A substantial order backlogalso makes it more essential than ever tomaintain good control of risk while executingcontracts.

Financial market risk: Aker Kvaerner hasestablished guidelines and systems to manageits exposure in financial markets. These sys-tems cover currency, interest rate, counter-party and liquidity risk. Substantial amountshave been committed as bank guarantees tocustomers in connection with the company’sactivities. Aker Kvaerner has a centralisedtreasury function, which assists the opera-tional units and corporate functions. Frame-works for financial risk are set by a corporatefinance committee.

Currency risk: operational units cover theirforeign currency positions via the corporatetreasury department when contracts areawarded. In turn, the treasury departmentcovers these positions directly against externalbanks. All operational units are required tocover their currency positions against theirfunctional currency. All major contracts arehedged and documented in such a way thatthey qualify for hedge accounting. Qualifiedhedges account for about 80 percent of the

payments under such guarantees over thepast decade, apart from one case in whichan unfriendly claim was determined by thecourt. Careful assessments are made beforeproviding on-demand guarantees, with insur-ance policies taken out if necessary to pro-tect against unfriendly claims under the guar-antees. Aker Kvaerner’s guarantee portfolioat 31 December totalled some NOK 5.5 bil-lion, down about 10 percent from the yearbefore. Some NOK 1 600 million in new guar-antees were provided during 2007. Furtherdetails about uncertainties and contingentevents are presented in Note 13 to the con-solidated accounts on contingent events.

Acquisition/sale of businesses and otherinvestment decisions: proposals for majoracquisitions or sales of businesses and forsubstantial investments in fixed assets (prop-erty, machinery and equipment) are submit-ted to the investment committee for a recom-mendation before final approval by the cor-porate management or the Board. The com-mittee becomes involved at an early stage insuch processes, and evaluations from therelevant specialist staff functions form an im-portant part of the assessment process.Such work provides proactive quality assur-ance that all necessary considerations havebeen properly assessed in such processes,including the question of whether the invest-ment satisfies the required return. The com-mittee often provides guidance for furtherwork on mergers and acquisitions and oncapex investments by the business areas,and ensures that the investments made arefollowed up with requirements for ex-postcalculations of the results achieved.

The year 2007Change in ownership structureAker ASA reduced its holding in Aker Kvaer-ner from 50.01 to 40.1 percent in January2007. During June, Aker, SAAB AB, InvestorAB and the Norwegian Government reachedan agreement on the long term strategicownership of Aker Kværner ASA. Under thisdeal, Aker transferred its 40.1 percent hold-ing in Aker Kvaerner to the newly-createdcompany Aker Holding AS. Following thistransaction, Aker ASA is the majority share-holder in Aker Holding with 60 percent of theshares, while the Norwegian state owns 30percent. The Swedish companies SAAB andInvestor have holdings of 7.5 and 2.5 percentrespectively.

Aker ASA and the Norwegian Governmenthave undertaken to retain their holdings in



Our performance

Aker Kvaerner jointly for at least 10 years.They are agreed that Aker Kvaerner will con-tinue to be developed as an internationalcompetitive main contractor for technology,products, systems and services, directedprimarily at the process, metals and con-struction industries and the oil and gas sec-tor. The owners of Aker Holding will maintainthe close collaboration between Aker Kvaer-ner and other Aker companies. The principalshareholder in Aker, Kjell Inge Røkke, hasconfirmed that he will control Aker throughhis companies for as long as the ownershipcollaboration in Aker Holding continues.

Delivery of the Ormen Lange andSnøhvit projectsStatoilHydro commenced gas production atOrmen Lange on 6 October. This gas fieldlies 120 kilometres from Norway’s west coast,in a demanding area of the Norwegian Seawith water depths from 800 to 1 100 metres.Production is based on innovative subseatechnology, with the unprocessed well streamcarried in two multiphase flow pipelines tothe processing plant in Aukra. Aker Kvaernerwas the main contractor for this largeprocessing facility at Nyhamna on the islandof Gossa.

Production of liquefied natural gas (LNG)was initiated by StatoilHydro on 13 Septem-ber at its receiving and processing plant onMelkøya island outside Hammerfest. The gascomes from Snøhvit, the first offshore field tobe developed in the Norwegian sector of theBarents Sea. This development has no sur-face installations, utilising only remotely oper-ated subsea facilities and pipelines to theland-based plant. Aker Kvaerner was respon-sible for assembly of the latter.

Aker Kvaerner has won acclaim for its workon these two major projects. This successrests in part on close and positive collabora-tion with the customers; on Aker Kvaerner’ssubstantial experience with oil and gasprojects; and on its technological assets andeffective project execution. Ormen Lange andSnøhvit will be important reference projects forAker Kvaerner in the international oil and gasindustry. These projects document its leadingpositions in both innovation and execution ofmajor projects in demanding locations.

High-tech manufacturing centre inMalaysiaAfter a rapid planning and construction pe-riod, the world’s most advanced productionfacility for subsea technology was officiallyopened at Port Klang in Malaysia. Aker

Kvaerner has invested NOK 500 million inthis plant, which will increase its opportuni-ties to serve the subsea market both in Ma-laysia and in the rest of the strategically im-portant Asia-Pacific region. Technology pro-duced at this facility can also be included indeliveries from Aker Kvaerner to projects inother regions.

InvestmentsThe most substantial investments in new ac-tivities, acquisitions and capacity were madeby Subsea and P&T. Capital spending inthese business areas during 2007 totalledNOK 875 million (excluding acquisitions).Subsea investments included an expansionof the production plant at Rio das Ostras inBrazil and construction of a new Indian serv-ice base at Kakinada. Investments by P&T in-cluded the Aker Kvaerner Well InterventionAcademy at Forus in Norway and a numberof wireline tractors to meet demand in thewell service segment.

Aker Kvaerner acquired 50 percent of theshares in German drilling technology spe-cialist Wirth Maschinen- und Bohrgeräte-Fabrik GmbH (Wirth) during August 2007.The purchase agreement gives Aker Kvaer-ner an option to buy all the remaining sharesat a later date.

Wirth has been an important sub-contractorfor more than 20 years, and the acquisitionwill supplement the company’s technologyportfolio by allowing it to offer its own com-plete solutions for topside drilling equipment.

With operating revenues of NOK 1 554million and an EBITDA of NOK 236 million in2007, Wirth has some 500 employees and ishighly regarded for its expertise and technol-ogy. The company’s order backlog at 31December was NOK 1 600 million.

Presentation of the accountsAker Kvaerner prepares and presents its ac-counts in accordance with the InternationalFinancial Reporting Standards (IFRS).

Income statementConsolidated 2007 operating revenues wereNOK 57 957 million, up by 14.6 percent fromNOK 50 592 million in 2006. This increaseprimarily reflects good market conditions anda generally high level of activity in all thebusiness areas.

EBITDA (earnings before interest, tax,depreciation and amortisation) amounted toNOK 3 913 million, up 36.2 percent fromNOK 2 872 million in 2006. Profitabilitystrengthened during the year, with an EBITDA

margin of 6.8 percent as against 5.7 percentin 2006. The growth in EBITDA is primarilyattributable to operational improvements, ahigh level of activity, and positive price andmargin developments in the market.

Depreciation, impairment charges andamortisation totalled NOK 431 million, com-pared with NOK 339 million in 2006. Operat-ing profit (EBIT) was NOK 3 482 million asagainst NOK 2 533 million in 2006.

Net financial expenses amounted to NOK104 million, compared with NOK 887 millionin 2006 – including NOK 648 million in spe-cial items related to refinancing debt. Car-ried out in December 2006, this refinancingreduced annual interest expenses by roughlyNOK 180 million.

Aker Kvaerner hedges currency risk for allproject exposures in accordance with well-established practice. Although this providesa full currency hedge, parts of the hedging(about 20 percent) fail to meet the require-ments for hedge accounting specified in theIAS 39 international accounting standard.Fluctuations in the value of the associatedhedging instruments are recognised as afinancial item in the accounts. The account-ing effect appears as an income of NOK 162million in a separate line under financial itemsfor 2007. The income in 2006 was NOK 241million.

The loss from associated companies wasNOK 2 million, compared with NOK 18 mil-lion in 2006. Tax expense was NOK 1 074million as against NOK 575 million the yearbefore. This corresponded to an effective taxrate of 30 percent, compared with 31 per-cent in 2006.

Consolidated net profit for 2007 was NOK2 464 million, compared with NOK 3 789 mil-lion the year before. The latter figure includedNOK 2 495 million from discontinued opera-tions and NOK 1 294 million from continuedoperations. The 2007 performance yieldedearnings per share of NOK 8.84, up fromNOK 4.53 for continued operations in 2006.

Cash flowConsolidated cash flow from operating activ-ities depends on a number of factors, includ-ing progress with and delivery of projects,changes in working capital and pre-pay-ments from customers. Net cash flow fromoperations totalled NOK 2 675 million, com-pared with NOK 2 636 million in 2006.

Net cash flow from investment activities in2007 was negative at NOK 1 576 million, pri-marily as a result of plant investments inMalaysia and Norway. The figure for 2006

”Prioritising the right projects ismore important than simplywinning new projects.”



Our performance

was NOK 985 million, including NOK 2 054million in net cash flow from the disposal ofoperations.

Net cash flow from financing activitieswas negative at NOK 3 013 million, includingNOK 2 182 million in dividend for the yearand NOK 781 million on buying back thecompany’s own shares.

Balance sheet and liquidityConsolidated long term interest-bearing debtamounted to NOK 2 billion at 31 December,unchanged from the same date the year before.Long term debt comprised four bond loansin the Norwegian market and deferred acqui-sition cost to Trafalgar House Global (THG).The bond loans are for NOK 500 millionmaturing in 2009, NOK 650 million maturingin 2011, and NOK 150 million and NOK 300million respectively which mature in 2013.These loans have floating interest rates with theexception of the one for NOK 150 million matur-ing in 2013, which has a fixed rate. Parts of theloans with floating rates have been converted tofixed rates through interest swap agreements.Fifty percent of the total bond loans accordinglyhave fixed rates. The average term to maturityfor these loans is about four years.

Deferred acquisition cost to THG totalledNOK 407 million at 31 December (corre-sponding to GBP 37.8 million) and matures in2012. It is due to be repaid in equal annualinstalments until maturity.

A syndicated bank facility of NOK 5 974million (corresponding to EUR 750 million)has also been established, with a five-yearremaining term to maturity. This facility incor-porates two options for possible extension ofthe term by one plus one years. The first ofthese options was exercised in 2007, so thatmaturity is now in 2012. The bank facility hadnot been drawn at 31 December.

As an alternative to drawing on the bankfacility, use was made of the Norwegian cer-tificate market during 2007. This market hasgood liquidity at times, and pricing is nor-mally lower than the bank facility.

Aker Kvaerner’s current operationalassets totalled NOK 15 713 million at 31December, compared with NOK 15 118 mil-lion a year earlier.

Consolidated non-current assets totalledNOK 8 650 million at 31 December, com-pared with NOK 7 569 million a year earlier.The largest item was goodwill, whichamounted to NOK 4 995 million as againstNOK5054million.Thisgoodwill relatesprimarilyto the acquisition of Trafalgar House in 1996and the merger with Aker Maritime in 2001.

Net interest-bearing items amounted toNOK 2 056 million at 31 December, com-pared with NOK 4 140 million a year earlier.The reduction reflects the payment of divi-dend and repurchase of the company’s ownshares.

The current liabilities of NOK 17 127 millionat 31 December consisted primarily of tradeand other payables. The correspondingfigure in 2006 was NOK 17 520 million.

Book equity including minority intereststotalled NOK 7 267 million at 31 December.Minority interests amounted to NOK 168 mil-lion. The company’s equity ratio was 25.5percent of the total balance sheet at 31December. Financial adequacy and liquidityare good.

The business areasField Development (FD) continued its posi-tive development in 2007. Operating reve-nues for the year totalled NOK 16 381 million,up from NOK 16 125 million in 2006. This in-crease reflected a number of major projects,including Ormen Lange and Snøhvit. Sub-stantial activity with deliveries to the Kasha-gan project in the Caspian Sea also contin-ued throughout the year, as did the assign-ments for Aker Drilling related to constructionof the two Aker H-6e rigs, which will be theworld’s biggest and most advanced floatingdrilling units. Other large projects pursued in2007 were the construction of the semisub-mersible production platform for Gjøa on theNorwegian continental shelf, and delivery ofthe hull plus topside assembly for Chevron’sBlind Faith platform in the Gulf of Mexico.

EBITDA for 2007 was NOK 891 million,compared with NOK 903 million the yearbefore, while the EBITDA margin declinedfrom 5.6 percent in 2006 to 5.4 percent. Thebusiness area is particularly well positionedin relation to the commitment by oil compa-nies to development and production in areasof deepwater and harsh weather. However,the effect of completing both Ormen Langeand Snøhvit in 2007 will be some short-termdecline in operating revenues. These areexpected to rise again during 2008. Growthis primarily expected to come in the BarentsSea, the Caspian Sea and south-east Asia.FD will also retain its leading position in theNorth Sea, where it holds a number of impor-tant contracts and was awarded the presti-gious job of developing the Skarv field asrecently as last autumn. The order backlog at1 January 2008 was NOK 15 695 million,compared with NOK 20 385 million a yearearlier.

Maintenance, Modifications and Operations(MMO) also had a high level of activity during2007. Operating revenues came to NOK9 744 million, compared with NOK 9 677 mil-lion the year before. MMO maintained its solidposition in the Norwegian market, with a marketshare of roughly 50 percent. Purposeful effortsyielded further profitability gains both in longterm contracts covering maintenance workand in modification assignments for existinginstallations and plants.

The Statfjord Late Life project was read-ied for gas export in 2007, an important mile-stone both for customer StatoilHydro and forAker Kvaerner. Electrical, instrumentationand telecommunication installations werecompleted during the year for the OrmenLange and Snøhvit projects. Important deliv-eries were also completed in connection withthe removal of offshore installations from theabandoned Frigg field. Internationally, MMOsecured a foothold in Canada through a longterm contract for operation and maintenanceservices on Husky’s White Rose productionship. In addition, the topside assembly con-tract commenced for the Kashagan develop-ment in the Caspian Sea, and MMO wasawarded an operations contract for the AlZaafarna production ship off Egypt.

EBITDA for 2007 was NOK 530 million,compared with NOK 452 million the yearbefore, while the EBITDA margin rose from4.7 percent in 2006 to 5.4 percent. The mar-ket outlook is good, and the order backlog at1 January was NOK 10 683 million, com-pared with NOK 12 245 million a year earlier.

Subsea also made strong progress in 2007.Total operating revenues increased by noless than 42 percent from 2006 to NOK 9 851million. Construction of Aker Kvaerner’s newMalaysian integrated production centre forsubsea technology for the oil and gas indus-try was completed during the year. This rep-resents an important strategic and marketcommitment. The centre is the world’s mostadvanced production facility for completesubsea solutions, and provides a good foun-dation for serving important markets - notonly in Malaysia but also in the rest of theAsia-Pacific region. It will also be able to con-tribute to subsea equipment deliveries inother parts of the world.

A five-year frame agreement with optionsfor a further two plus two years was con-cluded with StatoilHydro in September, con-cerning the delivery of subsea productionsystems and associated maintenance andservice work to future projects. An important



Our performance

breakthrough in the market for new subseatechnology was also achieved in 2007 withthe successful implementation of the Multi-Booster™ technology on BP’s King field inthe Gulf of Mexico. Another important assign-ment was the contract worth USD 250 millionconcluded with Reliance Industries for sub-sea systems to be used on the Indian sub-continent.

EBITDA for 2007 was NOK 960 million,compared with NOK 479 million the yearbefore, while the EBITDA margin rose from6.9 percent in 2006 to 9.7 percent. Thisprogress primarily reflects better margins incertain projects, improved project executionand procurement savings. With the marginexpected to reach double figures over thenext few years, the market outlook is verygood. The order backlog at 1 January 2008was NOK 10 951 million, compared with NOK8 775 million a year earlier.

Products & Technologies (P&T) achievedresults in 2007 which were characterised bycontinued strong growth and rising marketshares. Operating revenues for 2007 came toNOK 12 353 million, up by no less than 63percent from the year before. This sharp in-crease reflects a persistently high level of ac-tivity in the market for drilling equipment aswell as new breakthroughs in other importantmarkets. P&T secured an important entryinto the Chinese offshore sector during 2007,and further strengthened its position in themarket for drilling systems for use on drill-ships. Aker Kvaerner Pusnes and AkerKvaerner Process Systems had a high levelof activity and good progress. The businessarea has a strong position and a high level ofactivity in attractive niches such as welltechnology and services. Combined withexpertise and experience from Arctic regionsand other demanding areas where growth isexpected to continue, this contributes tostrong demand and a positive outlook. Theacquisition of 50 percent of the shares inWirth will also help to strengthen Aker Kvaer-ner’s international position in the drillingequipment segment.

EBITDA for 2007 was NOK 959 million,compared with NOK 531 million the yearbefore, while the EBITDA margin rose from 7percent in 2006 to 7.8 percent. The improve-ment primarily reflects attractive technology,improved project execution and strongdemand for the business area’s products.The order backlog at 1 January 2008 wasNOK 11 520 million, slightly lower than a yearearlier.

Process & Construction (P&C) made solidprogress in 2007, with operating revenues ofNOK 10 393 million. All four of the businessareas’ global core activities showed growth.This is an effect of the successful restructur-ing carried out to secure synergies and im-prove resource utilisation, plus a further fo-cusing of attention on a few selected strate-gic market niches. Growth was particularlystrong for deliveries to mining and metallurgi-cal plants and to the building of oil- and gas-fired power stations in North America.

EBITDA for 2007 was NOK 746 million,compared with NOK 530 million the yearbefore, while the EBITDA margin rose from4.4 percent in 2006 to 7.2 percent. Progresshere partly reflected a generally strongerfocus on profitable projects, better cost controland improved quality in project execution.P&C has secured a solid foothold in severalinternational growth markets, and has wonimportant contracts in countries such asChina and India. The outlook is good, andthe order backlog at 1 January 2008 totalledNOK 10 923 million, compared with NOK7 989 million a year earlier.

Research and developmentAker Kvaerner possesses large and highlycompetent engineering teams, which workclosely with the company’s partners and cus-tomers worldwide. These engineers are oftenlocated at the customer’s premises, givingthem first-hand knowledge of the latter’stechnology challenges and requirements.Ideas and concepts which develop into newgroundbreaking technology are initiated atthis interface. Such interaction also ensuresthat research work is relevant and pursuedon the basis of customer requirements. TheOrmen Lange subsea compression stationpilot provides an example of such collabora-tion between Aker Kvaerner, customer Statoil-Hydro and sub-contractors. The goal is todevelop a subsea compression station as afully acceptable alternative to an offshoreplatform. Testing of the pilot will take place atthe Nyhamna land terminal in 2009-11. Thetechnology will be transferable to other off-shore field developments, and could dramat-ically reduce customer costs.

Aker Kvaerner invested NOK 166 millionin selected technology development projectsduring 2007. In addition, it received NOK 77million in technology development fundingfrom customers and government agencies.This commitment to technology will continue.In addition to Aker Kvaerner’s own develop-ment projects, extensive technology work is

pursued in cooperation with customers aspart of project activities. Expenses for suchdevelopment are largely charged to the rele-vant projects as they are incurred.

Events after the balance sheet dateAt 15 February 2008, the company had an-nounced new contracts worth some NOK 2billion since 1 January.

New President & CEOSimen Lieungh has been appointed President& CEO of Aker Kvaerner in succession toMartinus Brandal, who is moving to Aker ASAas Executive Vice President for Energy Tech-nologies. Mr Brandal will also be nominated asthe new Chairman of the Board of Aker Kvaer-ner. These changes will help to strengthenopportunities for Aker and Aker Kvaerner withbusiness development and value creation inthe energy sector. At the same time, AkerKvaerner will be provided with managementcapacity and quality which will help it to exploitits many competitive advantages even furtherand to secure continued growth.

Lieungh worked for Aker Kvaerner in vari-ous positions from 1988 to 2007, most recentlyas executive vice president for Field Develop-ment. He combines substantial industrialknowledge with outstanding leadership quali-ties. The Board is pleased that Lieungh hasreturned to the company, and looks forward toexcellent collaboration with him, strengtheningAker Kvaerner even further. He will take over aschief executive in March.

The Board extends its thanks to Mr Brandalfor his significant commitment as President &CEO of Aker Kvaerner. Under his leadership,the company has continued its progress inboth markets and financial results, and therebyfurther strengthened its position as a leadingglobal player. Through his new position withAker, he will continue to play a key role in AkerKvaerner, where he will be nominated as thenew Chairman of the Board.

New name: Aker SolutionsThe Board of Aker Kvaerner has resolved topropose a change of name to the company’sAnnual General Meeting (AGM) on 3 April2008. Aker Kvaerner ASA would thereby be-come Aker Solutions ASA. This proposal is aconsequence of the clarifications in 2007concerning the ownership structure of thecompany. The new name represents an endto the integration process, merging twohistoric competitors, and describes the de-velopment of complete industrial solutionsfor the company’s customers.

”Substantial amounts have beencommitted as guarantees tocustomers in connection withthe company’s activities.”



Our performance

The new Aker Solutions name will help tounderline this family association even furtherand highlight the many opportunities inherentin the affiliation to and with the other Akercompanies.

Aker Clean CarbonAker Kvaerner has devoted several years todeveloping Just Catch™, a technology forcarbon capture in gas-fired power stations.For almost a year, these efforts have largelybeen pursued under contract from Aker CleanCarbon, an Aker subsidiary. This work has re-sulted in detailed plans for the construction ofa first carbon capture facility. Aker Clean Car-bon is responsible for these plans, and AkerKvaerner has resolved to transfer its techno-logy commitment in the area to this company.That will give Aker Kvaerner a 30 percent hold-ing in Aker Clean Carbon, while Aker retainsthe remaining 70 percent.

This ownership division has been deter-mined on the basis of valuations and negoti-ations which have also aimed to secureexclusive rights for Aker Kvaerner to partici-pate in the construction of future carboncapture facilities by Aker Clean Carbon.

The plant on which Aker Clean Carbon willnow commence work is due to be completedin 2009 and to have an annual capacity of100 000 tonnes of carbon dioxide. The esti-mated investment will be about NOK 725 mil-lion. Aker Clean Carbon intends to build itsfirst facility in association with the gas-firedpower station and the gas processing plantat Kårstø, north of Stavanger. Connecting toboth these emission sources would ensurecontinuous operation for the facility even ifthe gas-fired station were to be shut down forperiods. The technology can be applied to allindustrial plants and power stations driven byfossil fuels such as oil, natural gas or coal.

By combining their resources in AkerClean Carbon, Aker and Aker Kvaerner willbe strongly placed in a market with substan-tial potential. A purposeful and long termcommitment to carbon capture will allow AkerKvaerner to strengthen its earnings whilehelping to solve the climate challenges.

Share and share capitalThe AGM of 29 March 2007 resolved tosplit the share, with one existing shareconverted to five new ones. This changed thenumber of issued shares from 55 029 234 to275 146 170. The split was implemented on30 March 2007.

A cancellation of issued shares was alsoresolved by the AGM in order to reduce the

share capital. Implemented on 3 September2007, this transaction cut the number ofshares from 275 146 170 to 274 000 000. Theshare capital was thereby reduced from NOK550 292 340 to NOK 548 000 000. At31 December, Aker Kvaerner had boughtback 4 371 830 of its own shares or 1.6 per-cent of the outstanding total.

The buy-back programme for the compa-ny’s own shares has continued under a man-date awarded to the Board by the AGM on 29March 2007. This mandate authorises thecompany to buy back up to 10 percent of theoutstanding shares. The Board has mandatedthe administration to buy back up to five per-cent. Repurchases above that percentage butwithin the AGM’s mandate must be consid-ered by the Board. The mandate runs until the2008 AGM, which will be held on 3 April 2008.

At 28 February 2008, 4 966 830 shareshad been acquired under the mandate. TheBoard will propose an extension of the man-date by 12 months from the date of theAGM’s decision. New terms will then be setfor the buy-back programme.

The 2007 AGM also mandated the Boardto raise the share capital by up to NOK109 600 000. Under this mandate, the Boardcan resolve to waive the pre-emptive right ofexisting shareholders to subscribe to newshares. The mandate can be used severaltimes, and runs until the AGM on 3 April 2008.It has so far remained unused.

Going concernBased on Aker Kvaerner’s financial results andposition, the Board affirms that the annualaccounts for 2007 have been prepared on theassumption that the company is a goingconcern.

Dividend policyAdopted by the Board in 2006, Aker Kvaerner’sdividend policy specifies an intention to payshareholders an annual dividend of 30-50percent of net profit. Dividend will be paid incash or through share buy-backs. The Boardwill propose a total dividend of NOK 3 pershare to the AGM for 2007. Shareholders willthen have received 65 percent of net profit inthe form of share buy-backs and dividend forthe fiscal year.

Parent company accounts andallocation of net profitParent company Aker Kvaerner ASA had anet profit of NOK 2 290 million for 2007.

Pursuant to the company’s dividendpolicy, the Board will propose to the AGM on

3 April that an ordinary dividend of NOK 3per share be paid. This amounts to NOK 822million or 33 percent of the net profit.

The Board thereby proposes the followingallocation of net profit:

Dividend 1) NOK 809 million

Other equity NOK 1 481 million

Total allocated NOK 2 290 million

Exclusive dividend on own shares.1)

Unrestricted equity after the proposed divi-dend payment amounts to NOK 3 447 million.

Health, safety and the environmentConcern for health, safety and the environ-ment (HSE) is one of Aker Kvaerner’s corevalues. The fundamental vision and attitudeis that all accidents can be prevented. Onthat basis, Aker Kvaerner works continuouslyto prevent incidents which could cause harmto personnel, to material or non-material assets.

Driven by careThe Just Care™ concept has been estab-lished as a symbol for Aker Kvaerner’s HSEculture and work. A key element is that eachperson accepts personal responsibility forHSE based on care for people and the envi-ronment. Through Just Care™, the HSE mes-sage reaches the individual employee moreeffectively. Managers as role models and astrong commitment to communication andtraining create attitudes which integrate HSEin everyday work. That contributes to goodprojects and better HSE results

A common HSE cultureEducation occupies a central place in AkerKvaerner’s HSE programme. From 2005 to2007, more than 1 700 leaders have gonethrough a purpose-made HSE leadershipprogramme. This programme equips manag-ers with the competence required to becomebetter role models and to drive HSE improve-ments. To reach out to all employees in an ef-ficient way, Aker Kvaerner has also devel-oped a dedicated Just Care™ eLearningprogramme. Through various modules, thiscovers the Just Care™ culture and HSE as acore value, as well as more specific topics onmastering stress and HSE risk assessments.More than 28 000 eLearning sessions havebeen delivered since the programme was in-troduced in the autumn of 2006. Three newmodules focusing on environment, travelhealth and safety, and HSE in the office are



Our performance

being introduced to complete the pro-gramme.

Aker Kvaerner conducts a people surveyat regular intervals which allows all employ-ees to provide feedback. This measures thecorporate culture in important areas, includ-ing HSE. Results from the last three surveys,held in 2004, 2005 and 2007, show a clearpositive trend in HSE culture, while the HSEstatistics show that the injury frequenciesand sick leave have been reduced over thesame period.

Systematic improvementA common HSE operating system for thewhole company defines specific expec-tations to HSE management and leadership.Regular audits uncover possible gaps rela-tive to the expectations, and the actions re-quired to close such gaps are identified andinitiated. This system also functions as aframework for cross-organisational sharingand learning

Learning from accidentsThe Board deeply regrets that a tragic fatalitywas suffered in 2007. One of Aker Kvaerner’semployees died on 6 January in a liftingaccident on the UK continental shelf. This ac-cident was also reported in the annual reportfor 2006. An extensive investigation was car-ried out and follow-up action has been taken.

The total injury frequency per million work-ing hours declined from 4.2 in 2006 to 3.7.The lost-time incident frequency per millionworking hours decreased from 1.1 in 2006 to0.68 in 2007. These figures also include AkerKvaerner’s sub-contractors.

All significant accidents and near missesare investigated and the lessons from themimplemented, with the aim of preventing sim-ilar incidents in the future. On the basis of ananalysis of incidents in recent years andexchange of experience in the industry, Aker

Kvaerner has developed and adopted a newcomponent in its HSE programme under thetitle Just Rules. Just Rules are a set of simplebut specific safety regulations for particularwork operations which experience suggestscould pose a higher level of risk. These ruleswill be implemented throughout AkerKvaerner during 2008. By making the mostimportant preventative measures obligatory,clear and simple, Just Rules will be animportant contribution to preventing seriousincidents.

Sick leaveSick leave amounted to 2.4 percent of totalworking hours in 2007, compared with 2.3percent the year before. The trend is for sickleave in the company to remain stable at alow level after a clear decline in 2003-06.It should be noted that differences in localregulations complicate a direct comparisonof sick leave between different countries.

EnvironmentThe Board takes the view that Aker Kvaerner’sactivities pose only a limited direct burden onthe external environment. No unintentionaldischarges or emissions to the environmentwere recorded in 2007. Total energy con-sumption by the business in 2007, based onrecorded use of oil, gas and electricity,amounted to 149 000 megawatt-hours. Theamount of waste recorded in connection withthe business totalled of 29 000 tonnes, ofwhich 13 000 were recycled.

Improvements in environmental reportingwere instituted during 2007, and figuresrelated to energy consumption, greenhousegases and waste handling will be reportedwith greater accuracy from 2008.

The mentioned HSE initiatives on leader-ship development, eLearning and the operat-ing system incorporate clear componentswhich focus attention on the environment.

These contribute to continuous improvementsin environmental awareness and attitudesamong managers and other employees. Thatinspires the organisation to achieve furthergains in environmental performance in AkerKvaerner’s own activities, and to assist cus-tomers in making environmental improve-ments through the products developed bythe company. Examples can be found in suchareas as carbon capture, drilling rigs andbiofuels. The company is due to completetwo H-6e drilling rigs specially designed tooperate in demanding Arctic conditions whilesatisfying the goal of discharging no harmfulsubstances to the sea. In a strategic alliancewith Praj Industries Ltd, Aker Kvaerner iscommitted to offering technology, design andconstruction of biofuel production facilities.

People and organisationDeveloping human resourcesAker Kvaerner depends on a highly positivereputation as an employer to attract the mostcompetent employees. To strengthen its visi-bility and weight in the labour market the com-pany initiated a global recruitment process,across business areas and national frontiers,in 2007. The aim is to ensure that the largestnumber of potential candidates is exposed toa professional recruitment process in a mar-ket and an industry where competition overqualified personnel is becoming ever tougher.This process involves a standardisation of therecruitment system and associated toolswhich ensure both a good overview of candi-dates and their appropriate allocation.Enhanced selection quality is also achieved.

In addition to securing access to resourcesthrough recruitment, Aker Kvaerner will givepriority to its commitment to continuing thedevelopment of expertise by individualemployees and by the organisation as awhole. An international trainee programmewas established under the Aker Kvaerner

Total Recordable Incident FrequencyPer 1 million worked hours, including subcontractors

0

2

4

6

8

2007200620052004

Sick Leave RatePercent of worked hours

0

1

2

3

4

2007200620052004

Lost Time Incident FrequencyPer 1 million worked hours, including subcontractors

0.00

0.25

0.50

0.75

1.00

1.25

1.50

2007200620052004

”Ormen Lange and Snøhvit willbe important reference projectsfor Aker Kvaerner in the inter-national oil and gas industry.”



Our performance

Academy in 2007. During the year, twentytrainees from Brazil, China, Malaysia andRussia rotated through various positionsaround the world and around the company.The selection of the trainees was precededby international marketing campaigns tobuild the Aker Kvaerner brand in the selectedregions. Trainees in 2008 will be recruitedfrom India, Norway, Russia and Malaysia.

Aker Kvaerner is strongly committed toleadership and expertise development as acompetitive advantage. The Aker KvaernerAcademy offers programmes in importantprofessional subject areas such as leader-ship, project execution, commercial manage-ment and HSE. Around 24 000 employeescompleted an Academy programme during2007. Most of these courses were providedthrough eLearning. The portfolio of eLearn-ing programmes has been expanded withcourses on executing a good recruitmentprocess, introductory for new employees,information security and the Risk Dashboard.More than 40 000 eLearning courses havebeen completed through Aker Kvaerner’sglobal eLearning portal since its launch in2006. The establishment of eLearning sup-ports both global and corporate initiatives.With more than 24 000 direct employeesworldwide, the company has a great need forunifying, cost-effective and accessiblecourses. In addition to the professional com-petence they provide in key areas such asthe project execution and HSE programme,these courses make a strong contribution tobuilding a common corporate culture througha uniform approach and consistent message.Corporate programmes offered across thecompany are supplemented by a number oftraining courses organised within Aker Kvaer-ner’s individual units.

The company carried out its global, values-based employee survey in 2007. A responserate of roughly 90 percent indicated majorsupport and involvement among the workforce

for expressing their views about their companyand their workplace. The results were the bestever achieved by Aker Kvaerner in these polls.They were particularly good for DeliveringResults, one of the company’s core values.Findings for Customer Drive, People andTeams, Corporate Responsibility and HSEwere also good. Aker Kvaerner will work during2008-09 on priority improvement areas identi-fied through the survey before a new poll isconducted in the autumn of 2009.

OrganisationAker Kvaerner is a knowledge and expertisecompany. Its business rests on the expertiseand skills of its workforce, combined with theability to combine and exploit this expertisewith experience.

Aker Kvaerner’s workforce totalled 32 717people at 31 December, including 24 427employed directly and 8 290 on contract. Ofits own personnel, 47.3 percent worked inNorway, 27.2 percent in the Americas, 12percent in Asia, 12.9 percent in Europe out-side Norway and 0.6 percent in Africa andthe Middle East. Workforce turnover in 2007averaged 10.4 percent, a decline of 0.3 per-cent from 2006. The Board notes that the sta-bility of the company’s employees and man-agement personnel is good. In a challenginglabour market with high capacity require-ments, Aker Kvaerner succeeded in recruiting4 040 people in 2007.

The company’s overriding guidelinesrequire that all employees are treated equally.Everyone has the right to enjoy a safe andsecure workplace, without any form of bully-ing or harassment, as well as a satisfactorybalance between work and leisure. Theguidelines also provide a clear framework forsystematic employee development.

Equal opportunitiesAker Kvaerner wants to be an attractive em-ployer for people regardless of their ethnicity,

gender, religion or age. With operations inmore than 30 countries and on every conti-nent, diversity is a desirable and positive partof the corporate culture and strengthens thecompany’s ability to operate in varying con-ditions and frameworks. Aker Kvaerner’s pol-icy is to pay the same salary for the samework, and to reward good performance. Keyfactors in determining pay are the area of re-sponsibility concerned, what a job involves,the employee’s level of expertise and com-mitment, results actually achieved, and localpay levels. Average pay in the company issomewhat higher for men than for women.On average, male employees have greaterpay seniority than women. Aker Kvaerner hastwo main categories of employees: skilledworkers/operators (37 percent) and whitecollar personnel (63 percent). Women consti-tute 3 percent of the first category and 24percent of the second. The corporate man-agement team had no female members at 31December. Three of Aker Kvaerner’s sixshareholder-elected Directors are women,which corresponds to 50 percent. None ofthe employee-elected Directors are women.

A performance cultureAker Kvaerner is concerned to encouragegood performance, both by the organisationand by each of its employees. Systems haveaccordingly been developed for developingperformance and results and for employeerewards. These include using a combinationof methods to develop employees, manageperformance and results, and provide re-wards in relation to results achieved. Themost important instruments for managingperformance and results are:

an annual performance and developmentcontract between manager and employee,where personal development and resultsachieved are followed up throughout theyear and evaluated at its end

Permanent employeesRegional distribution

■ Norway

■ America

■ Asia-Pacific

■ Africa &Middle East

■ Europe ex.Norway

47.3 %

27.2 %

12.0 %

0.6 %12.7 %

Total workforceRegional distribution

■ Norway

■ America

■ Asia-Pacific



52.2 %

21.9 %

11.9 %

0.6 %13.5 %

Contract staffRegional distribution

■ Norway

■ America

■ Asia-Pacific



64.6 %8.4 %

11.5 %

0.6 %

15.4 %



Our performance

a “360 degree” assessment of eachmanager, which provides them with feed-back from superiors, colleagues andsubordinates on their managementbehaviour and ability to lead in accord-ance with Aker Kvaerner’s valuesan annual review of the company’s man-agement resources to identify talentedpersonnel and to ensure career develop-ment, optimum use of managers andmanagement mobility in the organisationa regular employee survey which providesthe basis for setting improvement targetsfor the organisation and managers.

The most important instruments for rewardingmanagers and employees are:

individual variable pay for managersbased on results achieved, personaldevelopment and leadership in accord-ance with the Aker Kvaerner’s valuesvariable pay for employees is also imple-mented based on the unit’s results or theproject’s execution and results.

Rewards for senior executives are spreadover several years to ensure that these per-sonnel remain with Aker Kvaerner for the long-term. The company’s practice of variablepay for executives is an attractive and com-petitive form of reward for managers whodeliver results. Further details of the remunera-tion of senior executives are otherwise pro-vided in Note 18 to the consolidated accountson salaries, wages and social security costs.

Corporate governanceAker Kvaerner is on the whole in compliancewith the Norwegian Code of Practice forCorporate Governance. Good corporategovernance plays a key role in Aker Kvaerner’sconfidence-building efforts. The companygives weight to building confidence amongits shareholders, lenders, customers, andother stakeholders. Ensuring a professionalindependence between the company’sBoard of Directors and its executive man-agement is essential in building and main-taining such confidence. Aker Kvaerner’sannual report on corporate governance,based on the code of practice issued by theNorwegian Corporate Governance Board(NCGB) and dated 4 December 2007, canbe found on page 94 of this annual report.

Corporate responsibilityAs a strong global company, Aker Kvaernerhas an impact economically, environmentally

and in the lives of people globally. With thiscomes responsibility. The responsibility to sethigh standards, to be a business that isdriven by its values, to be a good corporatecitizen.

Aker Kvaerner’s history and values, aswell as the inspiration of international normssuch as the UN Global Compact and the Glo-bal Reporting Initiative are the basis of itscorporate responsibility principles. The com-pany is committed to continually improvingits performance against them.

As a global supplier to the energy industry,the company has singled out two areas ofcorporate responsibility on which to focus:

managing the challenges associated withentry into new and emerging marketsdeveloping and supporting effectivesolutions in line with the demands ofenvironmental protection and sustain-able development

In 2007, the company reviewed its corporatepolicies and updated the Corporate Respon-sibility (CR) principles contained within them.The company also published its CR report,Values Driven Business 2006/2007, whichcommunicates the CR challenges the com-pany faces, the results it has achieved and itsambitions going forward. The report is avail-able from Aker Kvaerner’s website.

In order to map awareness, understand-ing and use of our values, Aker Kvaernerconducted its 2007 People survey. The over-all results of the survey showed an improve-ment in both the understanding of, and com-pliance with, our values from 2005–2007.

As part of our continuous efforts toimprove our CR performance, the companycompleted the production of a CR eLearningprogramme. The programme is scheduled toroll out globally in the first quarter 2008 andwill be mandatory for all employees.

At year end, Aker Kvaerner signed a threeyear global partnership with the NorwegianRed Cross. The partnership represents a sig-nificant financial donation, as well as anexchange of skills, competence and informa-tion between the Red Cross and Aker Kvaer-ner. In addition, local employee volunteerprogrammes will be facilitated by Red Crossoffices globally.

For the last five years, Aker Kvaerner hasbeen supporting Red Cross disaster reliefactivities with annual donations. This formalpartnership marks a more focused and inte-grated approach toward the company’s com-munity support efforts. The partnership is a

result of an employee survey where the RedCross was chosen as the preferred partnerorganisation. In 2008, all business units withinAker Kvaerner globally will be encouraged toparticipate and support Red Cross initiatives.

Customer relationsAker Kvaerner’s customers are character-ised by responsibility for large and demand-ing projects, where failure to meet agreeddeadlines, budgets, quality standards andproduction efficiency can have major conse-quences. The company is recognised for itsability to deliver and for contributing solutionswhich create added value for its customers.Those customers, leading players on theworld stage, have shown great confidence inAker Kvaerner over many years by awardingimportant projects to the company. This con-fidence represents a major asset, which it isimportant to preserve and continue developing.

Customer Drive is one of Aker Kvaerner’score values. The company gives great weightto finding the best and most effective solu-tions for each customer. That is done by com-bining an understanding of the customer’sspecific challenges with Aker Kvaerner’sexpertise, experience, technology and prod-ucts - and not least with the aid of its recog-nised and well-proven model for project exe-cution, the PEM.

Contact with customers is pursued at var-ious levels - between senior executives,through the business area concerned,through project management and throughclose collaboration with relevant teams ofexperts. Both corporate management andmanagers at other levels have defined rolesfor ensuring the best possible follow-up witheach customer. Contact at several levelsensures a good overview and understandingof the customer’s requirements, both in theshort term and over a longer perspective.

In addition to direct customer contact,Aker Kvaerner utilises external market analy-ses and surveys of customer satisfaction astools to ensure that it is meeting customerexpectations and needs.

The company serves industries where thenumber of customers in each niche is rela-tively small. Most of these represent broadand long term potential for collaboration.Aker Kvaerner wants to establish good, longterm relations with its customers, based onperformance and on competitive tendering.

Mutual confidence, built up through busi-ness relationships extending over manyyears, often helps to create new opportuni-ties. These could involve new contracts with

”Aker Kvaerner’s history and values,as well as the inspiration of inter-national norms are the basis of itscorporate responsibility principles.”



Our performance

even better reward models, for instance, orthe development of innovative solutions andtechnology in close collaboration with thecustomer. Confidence is also valuable whenconsidering projects in new regions. It will oftenbe easier to manage risk, for instance, when thecustomer has an established relationship withAker Kvaerner from earlier collaboration.

OutlookThe Board would like to point out that this re-port includes and is based on, inter alia, for-ward-looking information and statements thatare subject to risks and uncertainties thatcould cause actual results to differ

Demand for energy is expected to con-tinue rising in the years to come, providingfurther growth opportunities for Aker Kvaer-ner. Since fossil fuels will remain the world’sprimary energy source in coming decades,much of this expansion must take place inthe oil and gas sector. That means continuedgrowth in the market for development, tech-nology and services related to oil and gasfields. Aker Kvaerner is well positioned totake its share of the expected increase, par-ticularly in south-east Asia - primarily inMalaysia, India and China - as well as inSouth America, in Africa and in Arctic regions.Increased need for energy is expected toencourage persistently high prices for oil andgas. Future projects will to a greater extentembrace fields where both the actual devel-opment and achieving a high recovery factorfor the reserves will be more complex anddemanding. That will in turn contribute toinvestment in solutions for enhancing therecovery factor in established fields, and willalso lead to the development of discoveriesin ultra deepwaters and harsh-weather areas.Aker Kvaerner has state-of-the-art expertise,advanced technology and practical experi-ence which will be exploited as competitive

advantages in securing such assignments.The outlook is also good in the market

niches for process technology and land-based plants. Customers in the mining andmetallurgical industries are expected to facea continuing need for major investment inupgrading existing facilities and developingnew ones to meet international demand. Thegenerally high level of activity in global indus-try will also sustain a high level of demand forenergy and processed products derivedfrom oil and gas. Aker Kvaerner utilises anumber of leading patented technologies asthe basis for the processing plants it deliversto customers in these segments.

In addition to continuing the developmentof its existing organisation, Aker Kvaernerwill increasingly assess opportunities forattractive acquisitions. Such acquisitionscould typically be implemented where theyprovide the company with the possibility ofcomplementing its value chain, or where theyoffer the chance of increasing market shareor combining existing operations with newmarket niches in an effective model.

The company is considering the acquisitionof businesses which can further strengthen itsexpansion, and will concentrate its attention onsmall and medium-sized enterprises whichcan help to supplement existing expertise,products and/or technologies.

At Aker Kvaerner’s annual Capital Mar-kets Day in December 2006, an objectiveof delivering an EBITDA margin of between6.5 and 7 percent by the end of 2007 wasannounced. This objective was achieved,with an EBITDA margin of 6.8 percent, in thesecond quarter of 2007.

Aker Kvaerner has clear ambitions of con-tinuing to increase shareholder value. Itaccordingly has clear requirements thatfuture growth must also be profitable, andmeet the goal of increasing profits and mar-

gins faster than revenues. Operating reve-nues in 2008 are expected to rise to NOK58-60 billion. The Board regards the orderbacklog as comfortable, and expects to seeoperating revenues rise by eight to 10 per-cent annually in the 2009-10 period.

Aker Kvaerner is expected to maintain itssteady progress in profitability. An EBITDAmargin of approximately eight percent hasbeen forecast for 2008, and the goal is that thisfigure will reach nine to 11 percent by 2010.These performance targets build on Aker Kvaer-ner’s solid order backlog and good marketprospects in the energy and process industries.The Subsea and Products & Technologies busi-ness areas are expected to yield an EBITDAmargin in double digits. The three other busi-ness areas – Field Development, Maintenance,Modifications and Operations and Process &Construction – are expected to show highsingle-digit margins. These performance targetsexclude the effect of possible acquisitions.

Earnings per share for Aker Kvaerner areexpected to increase by an annual averageof 15-20 percent in 2008-10.

The company gives great weight to safe-guarding and continuing to develop its exper-tise. This is done in part through various pro-grammes for expertise building and reward-ing of employees, and through purposefuland broad-based recruitment of new per-sonnel. Aker Kvaerner’s goal is to reduceemployee turnover to less than nine percent.

Set to be pursued further with high intensity,the improvement programmes introduced in2007 will help Aker Kvaerner to reduce its costbase by NOK 1 billion over the next two tothree years when compared with 2007.

The Board extends its thanks to the man-agement and workforce for the good resultsdelivered in 2007 and for the major commit-ment made to creating further progress atAker Kvaerner.


Fornebu, 4 March 2008The Board of Directors of Aker Kværner ASA

Leif-Arne LangøyChairman

Bjørn FlatgårdVice Chairman

Heidi M. Petersen Karl Erik Kjelstad Ingebreth Forus Atle Teigland

Vibeke HammerMadsen

Siri Fürst Åsmund Knutsen Arve Toft Simen LieunghPresident & CEO


Our performance

Contents: Accounts and notes

Aker Kvaerner group

38 Consolidated income statement

39 Consolidated balance sheet

40 Consolidated statement of cash flow

41 Consolidated statement of changes to equity

Notes to consolidated accounts

42 Note 1 General information

42 Note 2 Accounting principles

46 Note 3 Accounting estimates and judgements

47 Note 4 Acquisition of businesses

48 Note 5 Related parties

49 Note 6 Segment information

51 Note 7 Other operating expenses

51 Note 8 Net operating assets

51 Note 9 Current operating assets

52 Note 10 Current operating liabilities

52 Note 11 Contracts

53 Note 12 Provisions

53 Note 13 Contingent events

54 Note 14 Property, plant and equipment

55 Note 15 Operating leases

56 Note 16 Intangible assets

56 Note 17 Tax

58 Note 18 Salaries, wages and social security costs

61 Note 19 Number of employees

61 Note 20 Employee benefits – pension

64 Note 21 Investments accounted for in accordance withthe equity method

65 Note 22 Investment in joint ventures

65 Note 23 Financial risk management

69 Note 24 Financial income and expenses

70 Note 25 Financial instruments

70 Note 25.1 Cash and cash equivalents

71 Note 25.2 Investments in other companies

71 Note 25.3 Derivative financial instruments

72 Note 25.4 Non-current interest-bearing receivables

72 Note 25.5 Trade and other receivables

73 Note 25.6 Non-current borrowings

74 Note 26 Subsequent events

74 Note 27 Discontinued operations

75 Note 28 Group companies as at 31 December 2007

Aker Kværner ASA

78 Parent company income statement

79 Parent company balance sheet

80 Parent company statement of cash flow

81 Accounting principles

Notes to parent company accounts

82 Note 1 Operating expenses

82 Note 2 Net financial items

82 Note 3 Tax

83 Note 4 Investment in subsidiaries and other companies

83 Note 5 Non interest-bearing items

84 Note 6 Shareholders’ equity

84 Note 7 Interest-bearing items

85 Note 8 Non-current borrowings

85 Note 9 Guarantees

85 Note 10 Financial instruments

85 Note 11 Contingent events and related parties


Our performance

Aker Kvaerner group:

Consolidated income statement

Amounts in NOK million Note 2007 2006 2005

Revenue 6 57 957 50 592 36 940

Materials, goods and services - 36 405 - 31 299 - 21 294Salaries, wages and social security costs 18, 19, 20 - 12 197 - 10 441 - 9 699Other operating expenses 7 - 5 442 - 5 980 - 4 131

Total operating expenses - 54 044 - 47 720 - 35 124

Operating profit before depreciation 6 3 913 2 872 1 816

Depreciation 6, 14, 16 - 431 - 339 - 306

Operating profit 3 482 2 533 1 510

Financial income 24 105 194 68Financial expense 24 - 209 - 1 081 - 467Share of profit (+) / loss (-) of associates 6, 21 - 2 - 18 25Profit (+) / loss (-) on foreign currency forward contracts 1) 24 162 241 - 396

Profit before tax 3 538 1 869 740

Income tax expense 17 - 1 074 - 575 312

Net profit from continuing operations 2 464 1 294 1 052

Profit for the period from discontinued operations (net of tax) - 2 495 193

Profit for the period 2 464 3 789 1 245

Attributable toEquity holders of the parent company 2 401 3 738 1 229Minority interests 63 51 16

Net profit 2 464 3 789 1 245

Average number of shares 271 741 367 275 146 170 275 146 170Basic and diluted earnings per share continuing operations (NOK) 2) 8.84 4.53 3.77Basic and diluted earnings per share from discontinued business (NOK) 0.00 9.06 0.70Basic and diluted earnings per share (NOK) 2) 8.84 13.59 4.47

Profit / loss on foreign currency hedging instruments which do not qualify for hedge accounting.1)

Equity holders of the parent company’s share of net profit (+) / loss (-) / average number of shares. There were no potentially dilutive securities outstanding.2)


Our performance


Consolidated balance sheet as at 31.12

Amounts in NOK million Note 2007 2006

ASSETSNon-current assetsProperty, plant and equipment 14 2 815 1 761Deferred tax assets 17 548 552Intangible assets 16 4 995 5 054Pension funds 20 15 4Interest-bearing non-current receivables 25.4 14 54Other non-current operating assets 8 9 6Investments in associates 6, 21 121 122Investments in other companies 25.2 133 16

Total non-current assets 8 650 7 569

Current assetsPrepaid income tax 17 89 86Inventories 9 884 593Trade and other receivables 9, 25.5 13 361 13 712Derivative financial instruments 25.3 1 468 813Interest-bearing current receivables 25 540 546Deposit to repay second priority lien notes 25 - 2 411Cash and cash equivalents 25.1 3 524 5 666

Total current assets 19 866 23 827

Total assets 28 516 31 396

LIABILITIES AND SHAREHOLDERS' EQUITYEquityIssued capital 548 550Own shares - 9 -Other capital paid in 1 534 1 534Other equity 5 026 5 899

Total equity attributable to the equity holders of the parent company 7 099 7 983

Minority interest 168 131

Total equity 7 267 8 114

LiabilitiesBorrowings 25.6 1 998 2 126Employee benefits 20 937 931Deferred tax liabilities 17 680 60Other non-current operating liabilities 8 507 316

Total non-current liabilities 4 122 3 433

Second priority lien notes 25.6 - 2 329Interest-bearing current liabilities 25 24 -Income tax payable 17 329 230Provisions 10, 12 655 602Trade and other payables 10 15 165 16 217Derivative financial instruments 25.3 954 471

Total current liabilities 17 127 19 849

Total liabilities 21 249 23 282

Total liabilities and shareholders' equity 28 516 31 396





Vibeke HammerMadsen



Our performance


Consolidated statement of cash flow

Amounts in NOK million Note 2007 2006 1)

Cash flow from operating activitiesProfit for the period 2 464 3 789Tax cost 17 1 074 640Net interest cost 104 887Profit (-) / loss (+) on foreign currency forward contracts - 162 - 241Depreciation 14, 16 431 393Profit (-) / loss (+) on disposals / non cash effects 2) - 64 - 2 483Share of profit (-) / loss (+) of associates 21 2 18Interest paid - 172 - 450Interest received 43 214Income taxes paid - 480 - 311Changes in other net operating assets - 565 180

Net cash from operating activities 2 675 2 636

Cash flow from investing activitiesAcquisition of businesses / net of cash acquired 4 - 87 - 276Disposal of businesses / net of cash disposed of 3) - 2 054Acquisition of property, plant and equipment 6,14 - 1 596 - 826Proceeds from sale of property, plant and equipment 96 127Changes in other assets 11 - 94

Net cash from investing activities - 1 576 985

Cash flow from financing activitiesProceeds from non-current debt - 1 577Repayment of non-current debt 25.6 - 19 - 3 535Deposit to repay second priority lien notes - - 2 411Dividends paid to minority interests - 31 - 44Buy-back of own shares 4) - 781 -Dividends to shareholders 4) - 2 182 - 275

Net cash from financing activities - 3 013 - 4 688Effect of exchange rate changes on cash and bank deposits - 228 - 13

Net increase (+) / decrease (-) in cash and bank deposits - 2 142 - 1 080

Cash and cash equivalents at the beginning of the period 5 666 6 746

Cash and cash equivalents at the end of the period 5) 3 524 5 666

Of which is restricted cash 6) 661 1 146

The cash flow from operations of Pulping & Power is included above for 2006.1)

Gain on disposal of Pulping & Power and Aker Kværner Power & Automation is included in non cash effects.2)

Pulping & Power and Aker Kværner Power & Automation were sold in 2006.3)

See consolidated statement of changes to equity.4)

Additional undrawn committed non-current bank revolving credit facilities amounted to NOK 6.0 billion, and is together with cash and cash equivalents giving a total liquidity buffer5)of NOK 9.5 billion.

Restricted cash includes inter alia cash in joint ventures where the partners must agree before use.6)


Our performance


Consolidated statement of changes to equity

Amounts in NOK millionNumber of

sharesShare

capitalOwn

shares

Othercapitalpaid in

Retainedearnings

and otherreserves

Hedgingreserve

Trans-lation

reserve

Total at-tributable toparent com-pany equity

holdersMinority

interestsTotal

equity

Equity as at 1 January 2006 55 029 234 550 - 1 534 2 394 - - 216 4 262 65 4 327Dividend - - - 275 - - - 275 - - 275Profit for the period - - 3 738 - - 3 738 51 3 789Change in minority interests 59 59Dividend to minority interests - 44 - 44Cash flow hedges

Effective portion of changes in value - - - 461 - 461 - 461Reclassified to income statement - - - - 178 - - 178 - - 178Deferred tax - - - - 80 - - 80 - - 80

Currency translation differences - - - - 55 55 - 55

Equity as at 31 December 2006 55 029 234 550 - 1 534 5 857 203 - 161 7 983 131 8 114Increase caused by share split (1:5) 220 116 935Dividend - - - - 2 182 - - - 2 182 - - 2 182Share buy-back - - - 11 - - 770 - - - 781 - - 781Cancellation of shares - 1 146 170 - 2 2 - - - - - - -Profit for the period - - - 2 401 - - 2 401 63 2 464Change in minority interests - 11 - 11Dividend to minority interests - 15 - 15Cash flow hedges

Effective portion of changes in value - - - 788 - 788 - 788Reclassified to income statement - - - - 633 - - 633 - - 633Deferred tax - - - - 43 - - 43 - - 43

Currency translation differences - - - - - 434 - 434 - - 434

Equity as at 31 December 2007 274 000 000 548 - 9 1 534 5 306 315 - 595 7 099 168 7 267

Share capitalAker Kværner ASA has one class of shares, ordinary shares, with equal rights for all shares. The holders of ordinary shares are entitled to receive dividend asdeclared from time to time and are entitled to one vote per share at General meetings. At the end of 2006 Aker Kværner ASA had 55 029 234 ordinary shares at apar value of NOK 10 per share. On the Annual General Meeting in March 2007 the shareholders agreed to split one share at a par value of NOK 10 into five sharesat par value of NOK 2. The new number of shares after the share split is 275 146 170. At the Annual General Meeting the shareholders also agreed to reduce theshare capital in Aker Kværner ASA by NOK 2 292 340 to NOK 548 000 000 through cancellation of 1 146 170 treasury shares. Total outstanding shares are now274 000 000. All issued shares are fully paid.

Share buy-backOn the 2007 Annual General Meeting’s it was given an authorisation for share buy backs to purchase up to 27.4 million shares, representing 10 percent of the sharecapital of Aker Kværner ASA. Aker Kværner ASA owned 4 371 830 own shares at the end of 2007 which represented 1.6 percent of total outstanding shares. As at4 March 2008 Aker Kværner ASA has purchased further 595 000 own shares and holds 4 966 830 own shares representing 1.8 percent of total outstanding shares.

Hedging reserveThe hedging reserve relates to hedge of future revenues and expenses against exchange rate fluctuations. The income statement effects of such instruments arerecognised in accordance with progress of the underlying construction contract as part of revenues or expenses as appropriate. The hedging reserve representsthe value of such hedging instruments that are not yet recognised in the income statement. Users of the financial statment should be aware of the underlying nature ofa hedge; e.g that a positive value on a hedging instrument exists to cover a negative value on the hedged position, see note 24 Financial income and expense.

Translation reserveTranslation reserve includes exchange differences arising from the translation of the net investment in foreign operations, and foreign exchange gain / loss onloans defined as hedges / net investments, see note 24 Financial income and expense..

Minority interestsPer 31 December 2007 NOK 70 million (NOK 51 million in 2006) of the minority interests relates to Aker Marine Contractors AS in which Aker Kvaerner owns60 percent and NOK 75 million (NOK 71 million in 2006) to Aker Kvaerner Powergas Pvt Ltd where Aker Kvaerner owns 64 percent of the shares. The change inminority interests in 2007 is primarily due to the acquisition of the last 9.9 percent in Aker Insurance AS in August 2007.

Dividends 1) 2007 2006

Dividend per share in NOK – paid 8,00 1,00Ordinary dividend per share in NOK – proposed by the Board of Directors 3,00 2,00Extraordinary dividend per share in NOK – proposed by the Board of Directors - 6,00

Dividend is adjusted on the basis of the share split.1)


Our performance


Notes to the accounts

Note 1: General Information

Aker Kværner ASA (the company) is a limited liability company incorporated and domiciled in Norway. The consolidated financial statements of Aker KværnerASA incorporate the financial statements of the company and its subsidiaries (together referred to as the “group”) and the group’s interest in associates andjointly controlled entities and jointly controlled assets.

The company is listed on the Oslo Stock Exchange.

The financial statements are presented in million Norwegian kroner (NOK).

Note 2: Accounting principles

A summary of the principal accounting policiesapplied in the preparation of these consolidatedfinancial statements are set out below. Thesepolicies have been consistently applied to all theyears presented, unless otherwise stated.

Statement of complianceThe consolidated financial statements have beenprepared in accordance with International FinancialReporting Standards (IFRS) approved by the Euro-pean Union and its interpretations adopted by theInternational Accounting Standards Board (IASB).

New standards effective in 2007IFRS 7, Financial instruments: Disclosures and thecomplementary Amendment to IAS 1, Presentationof Financial Statements-Capital disclosures wereadopted in 2007. IFRS 7 introduces new disclosuresrelating to financial instruments. This standarddoes not have any impact on the classification andvaluation of the group’s financial instruments.IFRIC 11 – Group and Treasury Share Transactionsare implemented with no material effect.

The following IFRS/IAS standards have beenapproved but effective from 2009, with earlier appli-cation permitted. These standards are not implemen-ted with effect for the financial statements for 2007.

IAS 23 – Borrowing costsIFRS 8 – Operating segmentsIAS 1 – Presentation of financial statementsIAS 32 – Financial instruments – Presentation

Except for the standard on borrowing costs, it isassumed that the new standards will have onlyinsignificant effect on reported results or balancesheet items. The main effects will relate topresentation formats for financial statements andfor the note disclosures.

The standard on borrowing costs requires thatinterest be included as part of the cost ofqualifying assets which includes property plantand equipment and construction contracts.Today, borrowing costs are expensed as incurred.Although the company does not believe the newstandard will have a significant impact on itsfinancial statements in the aggregate, there couldbe some effects within segment reporting.

Basis of preparationThe consolidated financial statements have been

prepared under the historical cost convention, asmodified by the revaluation of available-for-salefinancial assets and financial assets and financialliabilities (including derivative instruments) at fairvalue through profit and loss.

Non-current assets and disposal groups heldfor sale are stated at the lower of carryingamount or fair value less costs to sell.

The preparation of financial statements inconformity with IFRS requires management tomake judgements, estimates and assumptionsthat affect the application of policies and reportedamounts of assets and liabilities, income andexpenses. The estimates and associated assump-tions are based on historical experience and vari-ous other factors that are believed to be reasonableunder the circumstances, the results of which formthe basis of making the judgements about carryingvalues of assets and liabilities that are not readilyapparent from other sources. The areas involving ahigher degree of judgement or complexity, or areaswhere assumptions and estimates are significant tothe consolidated financial statements are disclosedin note 3 Accounting estimates and judgements.Actual results may differ from these estimates.

The estimates and underlying assumptionsare reviewed on an ongoing basis. Revisions toaccounting estimates are recognised in theperiod in which the estimate is revised if the revi-sion affects only that period or in the period ofthe revision and future periods if the revisionaffects both current and future periods.

ConsolidationSubsidiariesSubsidiaries are entities controlled by the company.Control exists when the company has the power,directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain bene-fits from its activities. In assessing control, potentialvoting rights that presently are exercisable or con-vertible are taken into account. The financial state-ments of subsidiaries are included in the consolida-ted financial statements from the date that controlcommences until the date that control ceases.

Intragroup balances and any unrealised gainsand losses or income and expenses arising fromintragroup transactions, are eliminated in prepa-ring the consolidated financial statements. Unrea-lised gains arising from transactions with associ-ates and jointly controlled entities are eliminated

to the extent of the group’s interest in the entity.Unrealised losses are eliminated in the same wayas unrealised gains, but only to the extent thatthere is no evidence of impairment.

In preparing their individual financial state-ments, the accounting policies of some subsidia-ries, associates and Joint Ventures do not con-form to the accounting policies of the group.Where appropriate, adjustments are made inorder to present the consolidated financial state-ments on a consistent basis.

AssociatesAssociates are those entities in which the grouphas significant influence, but not control, over thefinancial and operating policies. Generally this isapplicable to a shareholding of between 20percent and 50 percent of the voting rights.

The consolidated financial statements includethe group’s share of the total recognised gains andlosses of associates on an equity accounted basis,from the date that significant influence commencesuntil the date that significant influence ceases.When the group’s share of losses exceeds itsinterest in an associate, the group’s carryingamount is reduced to nil and recognition of furtherlosses is discontinued except to the extent that thegroup has incurred legal or constructive obligationsor made payments on behalf of an associate.

Joint venturesJoint ventures are those entities over whose activi-ties the group has joint control, established bycontractual agreement. The consolidated financialstatements include the group’s proportionate shareof the entities’ assets, liabilities, revenue and ex-penses with items of a similar nature on a line byline basis, from the date that joint control commen-ces until the date that joint control ceases.

Non-current assets held for sale anddiscontinued operationsA discontinued operation is a component of thegroup’s business that represents a separatemajor line of business or geographical area ofoperations or is a subsidiary acquired exclusivelywith a view to resale.

Classification as a discontinued operation occursupon disposal or when the operation meets the crite-ria to be classified as held for sale, if earlier. A disp-osal group that is to be abandoned may also qualify.


Our performance

Upon classification of a business as a discon-tinued operation, the historical income statementsare restated and the applicable individual incomestatement balances are reclassified into oneseparate line under Net profit/loss in the incomestatement for all reporting periods. In the balancesheet no reclassifications are made for yearsprior to the year a business is first classified as adiscontinued operation.

Segment reportingA segment is a distinguishable component of thegroup that is engaged either in providingproducts or services (business segment), or inproviding products or services within a particulareconomic environment (geographical segment),which is subject to risks and rewards that aredifferent from those of other segments.

The operating segments are also consistent withthe group’s organisation into business segments.

Revenue recognitionConstruction contractsEngineering and construction contract revenuesare recognised using the percentage of comple-tion method, based primarily on contract costincurred to date compared to estimated total con-tract costs. When the final outcome of a contractcannot be reliably estimated, contract revenue isrecognised only to the extent of costs incurred thatare expected to be recoverable. Losses on con-tracts are fully recognised when identified.

Contract revenues include variation ordersand incentive bonuses when it is probable thatthey will result in revenue and the amount can bemeasured reliably. Disputed amounts are recog-nised when their realisation is reasonably certainand can be measured reliably. Contract costsinclude costs that relate directly to the specificcontract and costs that are attributable to con-tract activity in general and can be allocated tothe contract. Costs that cannot be attributed tocontract activity are expensed. Bidding costs arecapitalised when it is probable that the companywill be the preferred bidder. All other biddingcosts are expensed as incurred.

Goods sold and services renderedRevenue from the sale of goods is recognised inthe income statement when the significant risksand rewards of ownership have been transferredto the buyer. Revenue from services rendered isrecognised in the income statement in proportionto the stage of completion of the transaction atthe balance sheet date. The stage of completionis normally assessed as the proportion that costincurred for work performed to date bear to theestimated contract costs. No revenue is recogni-sed if there are significant uncertainties regardingrecovery of the consideration due, associatedcosts or the possible return of goods alsocontinuing management involvement with thegoods.

Government grantsGovernment grants are recognised in thebalance sheet initially as deferred income whenthere is reasonable assurance that they will bereceived and that the group will comply withapplicable conditions. Grants that compensatethe group for expenses incurred are recognisedas revenue in the income statement on asystematic basis in the same periods in which theexpenses are incurred. Grants that compensatethe group for the cost of an asset are deductedfrom acquisition cost.

ExpensesOperating lease paymentsPayments made under operating leases arerecognised in the income statement on a straight-line basis over the term of the lease when thereare variations in the contractual lease paymentsdue under the contract terms. Lease incentivesreceived are recognised in the income statementas an integral part of the total lease expense.

Finance lease paymentsMinimum lease payments are apportioned betweenthe finance charge and the reduction of the out-standing liability. The finance charge is allocatedto each period during the lease term so as toproduce a constant periodic rate of interest onthe remaining balance of the liability.

Financial income and expenseFinancial income and expense comprise interestpayable on borrowings calculated using the effec-tive interest rate method, interest receivable onfunds invested, dividend income, foreign exchangegains and losses, and gains and losses onhedging instruments that are recognised in theincome statement (see Hedging activities). Interestincome is recognised in the income statement as itaccrues, using the effective interest method. Theinterest expense component of finance leasepayments is recognised in the income statementusing the effective interest rate method.

Gains or losses arising from changes in thefair value of the financial assets at fair valuethrough profit or loss category are presented inthe income statement within net financial items, inthe period in which they arise.

Dividend income from financial assets at fairvalue through profit or loss is recognised in theincome statement as part of net financial itemswhen the group’s right to receive payments isestablished.

Changes in the fair value of monetary securi-ties denominated in a foreign currency and clas-sified as available for sale are analysed betweentranslation differences resulting from changes inamortised cost of the security and other changesin the carrying amount of the security. The trans-lation differences on monetary securities arerecognised in profit and loss; translation differen-ces in non-monetary securities are recognised inequity. Changes in the fair value of monetary andnon-monetary securities classified as availablefor sale are recognised in equity.

When securities classified as available for saleare sold or impaired, the accumulated fair valueadjustments recognised in equity are included inthe income statement as gains and losses frominvestment securities.

Interest on available-for-sale securities calcu-lated using the effective interest method is recog-nised in the income statement as part of netfinancial items when the group’s right to receivepayments is established.

Trade and other receivablesTrade and other receivables are carried at theoriginal invoice amount, less an allowance madefor doubtful receivables. Provision is made whenthere is objective evidence that the group will beunable to recover balances in full. Balances arewritten off when the probability of recovery isassessed as being remote.

Construction work in progressConstruction work in progress represents thevalue of construction work performed less pay-ments by customers. The value of construction

work performed is measured at revenue recogni-sed to date. Payments by customers are deductedfrom the value of the same contract or, to the extentthey exceed this value, disclosed as advancesfrom customers (see revenue recognition).

InventoriesInventories are stated at the lower of cost or netrealisable value. Net realisable value is the esti-mated selling price in the ordinary course ofbusiness, less the estimated costs of completionand selling expenses.

The cost of inventories is based on the first-infirst-out principle and includes expendituresincurred in acquiring the inventories and bringingthem to their existing location and condition. Inthe case of manufactured inventories and work inprogress, cost includes an appropriate share ofoverheads based on normal operating capacity.

Property, plant and equipmentOwned assetsProperty, plant and equipment are stated at costless accumulated depreciation (see below) andimpairment losses (see Impairment). The cost ofself-constructed assets includes the cost of ma-terials, direct labour, and, where relevant, of theestimated costs of dismantling and removing theitems and restoring the site on which they arelocated, and an appropriate proportion of pro-duction overheads.

Where components of property, plant andequipment have different useful lives, they areaccounted for as separate components.

Leased assetsLeases where the group assumes substantiallyall the risks and rewards of ownership are classi-fied as finance leases. Assets acquired by way offinance leases are stated at an amount equal tothe lower of its fair value or the present value ofthe minimum lease payments at inception of thelease, less accumulated depreciation (see below)and impairment losses (see Impairment).

Subsequent costsThe group capitalises cost of replacing part orcomponent of property, plant and equipmentwhen that cost is incurred if it is probable that thefuture economic benefits embodied with the itemwill flow to the group and the cost of the item canbe measured reliably. All other costs are expen-sed as incurred.

DepreciationDepreciation is normally recognised on a straight-line basis over the estimated useful lives of property,plant and equipment. The production unit methodis used for depreciation when appropriate.

Intangible assetsGoodwillAll business combinations are accounted forusing the acquisition method. Goodwill repre-sents the excess of the cost of an acquisitionover the fair value of the group’s share of the netidentifiable assets of acquired businesses orinterest in associates or joint ventures that arebusinesses at the date of acquisition. Goodwillon acquisitions of subsidiaries is included inintangible assets. Goodwill on acquisitions ofassociates and joint ventures is included in theinvestment balance and is tested for impairmentas part of the overall balance. Goodwill is carriedat cost less accumulated impairment losses (seeImpairment). Gains and losses on the disposal ofan entity or an interest in an entity include the


Our performance

carrying amount of goodwill relating to theownership interest sold. Negative goodwill arisingon an acquisition is recognised directly in theincome statement.

Goodwill is assumed to have indefinite usefullife because there is no foreseeable limit to theperiod over which the asset is expected to gene-rate net cash inflows for the entity. The acquisitionof a company is based upon its strategic fit andanticipated profitability of that company over along time period.

Goodwill is allocated to cash-generating unitsfor the purpose of impairment testing. The alloca-tion is made to those cash generating units orgroups of cash-generating units that are expec-ted to benefit from the business combination inwhich goodwill arose.

Research and developmentResearch and development work in Aker Kvaerneris normally related to customer contracts and areincluded as contract costs.

Expenditures on research activities, undertakenwith the prospect of obtaining new scientific ortechnical knowledge and understanding, is recog-nised in the income statement as an expense asincurred.

Expenditures on development activities, wherebyresearch findings are applied to a plan or designfor the production of new or substantially impro-ved products and processes, is capitalised if theproduct or process is technically and commer-cially feasible as well as being a separable asset.Capitalised costs include the cost of materials,external contractors and direct labour. Otherdevelopment expenditures are recognised in theincome statement as an expense as incurred.Capitalised development expenditures are statedat cost less accumulated amortisation (seebelow) and impairment losses (see Impairment).

Other intangible assetsOther intangible assets that are acquired by thegroup are stated at cost less accumulated amor-tisation (see below) and impairment losses (seeImpairment).

Subsequent expendituresSubsequent expenditures on capitalised intangi-ble assets are capitalised only when they increasethe future economic benefits embodied in thespecific asset to which they relate. All otherexpenditures are expensed as incurred.

AmortisationAmortisation is charged to the income statementon a straight-line basis over the estimated usefullives of intangible assets unless such lives areindefinite. Intangible assets are amortised fromthe date they are available for use.

ImpairmentThe carrying amounts of the group’s assets,other than inventories (see Inventories) and defer-red tax assets (see Income tax), are annuallyreviewed to determine whether there is any indi-cation of impairment. If any such indicationexists, the asset’s recoverable amount is estima-ted (see Calculation of recoverable amount).

For goodwill, assets that have an indefiniteuseful life and intangible assets that are not yetavailable for use, the recoverable amount is esti-mated annually.

An impairment loss is recognised whenever thecarrying amount of an asset or its cash-generatingunit exceeds its recoverable amount. Impairmentlosses are recognised in the income statement.

Impairment losses recognised in respect ofcash-generating units are allocated first to reducethe carrying amount of any goodwill allocated tocash-generating units (group of units) and then, toreduce the carrying amount of the other assets inthe unit (group of units) on a pro rata basis.

Goodwill and indefinite-lived intangible assetswere tested for impairment at year end.

When a decline in the fair value of an available-for-sale financial asset has been recogniseddirectly in equity and there is objective evidencethat the asset is impaired, the cumulative loss thathad been recognised directly in equity is recog-nised in profit or loss even though the financialasset has not been derecognised. The amount ofthe cumulative loss that is recognised in profit orloss is the difference between the acquisitioncost and current fair value, less any impairmentloss on that financial asset previously recognisedin profit or loss.

Calculation of recoverable amountThe recoverable amount of the group’s invest-ments in held-to-maturity securities and receiva-bles carried at amortised cost is calculated asthe present value of estimated future cash flows,discounted at the original effective interest rate(i.e., the effective interest rate computed at initialrecognition of these financial assets). Receivableswith a short duration are not discounted.

The recoverable amount of other assets is thegreater of their net selling price and value in use.In assessing value in use, the estimated futurecash flows are discounted to their present valueusing a pre-tax discount rate that reflects currentmarket assessments of the time value of moneyand the risks specific to the asset. For an asset thatdoes not generate largely independent cash inflows,the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Reversals of impairmentAn impairment loss in respect of a held-to-maturitysecurity or receivable carried at amortised cost isreversed if the subsequent increase in recoverableamount can be related objectively to an event oc-curring after the impairment loss was recognised.

An impairment loss in respect of an investmentin an equity instrument classified as available forsale is not reversed through profit or loss. If the fairvalue of a debt instrument classified as available-for-sale increases and the increase can beobjectively related to an event occurring after theimpairment loss was recognised in profit or loss,the impairment loss shall be reversed, with theamount of the reversal recognised in profit or loss.

An impairment loss in respect of goodwill isnot reversed.

In respect of other assets, an impairment loss isreversed if there has been a change in the estimatesused to determine the recoverable amount.

An impairment loss is reversed only to theextent that the asset’s carrying amount does notexceed the carrying amount that would have beendetermined, net of depreciation or amortisation, ifno impairment loss had been recognised.

ProvisionsA provision is recognised in the balance sheet whenthe group has a present obligation as a result of apast event that is probable that the group will berequired to settle. If the effect is material, provisionsare determined by discounting the expected futurecash flows at a market based pre-tax rate that re-flects current market assessments of the time valueof money and, where appropriate, the risks specificto the liability.

WarrantiesA provision for warranties is recognised when theunderlying products or services are sold. Theprovision is based on historical warranty dataand a weighting of all possible outcomes againsttheir associated probabilities.

RestructuringA provision for restructuring is recognised whenthe group has approved a detailed and formalrestructuring plan, and the restructuring haseither commenced or has been announcedpublicly. Future operating costs are not provided for.

Site restorationIn accordance with the group’s applicable legalrequirements, a provision for site restoration inrespect of contaminated land is recognisedwhen the land is contaminated.

Onerous contractsA provision for onerous contracts is recognisedwhen the expected benefits to be derived by thegroup from a contract are lower than the unavoidablecost of meeting the obligations under the contract.

Employee benefitsDefined contribution plansObligations for contributions to defined contribu-tion pension plans are recognised as an expensein the income statement as incurred.

Defined benefit plansThe group’s net obligation in respect of definedbenefit pension plans is calculated separately foreach plan by estimating the amount of futurebenefit that employees have earned in return fortheir service in the current and prior periods; thatbenefit is discounted to determine its presentvalue, and the fair value of any plan assets isdeducted. The discount rate is the yield at thebalance sheet date on government bonds / highquality corporate bonds with maturities consistentwith the terms of the obligations. The calculationis performed by a qualified actuary using theprojected unit credit method.

When the benefits of a plan to employees areincreased, the portion of the increased benefitrelating to past service by employees is recognisedas an expense in the income statement on astraight-line basis over the average period untilthe benefits become vested. To the extent that thebenefits vest immediately, an expense is recog-nised immediately in the income statement.

To the extent that any subsequent cumulativeunrecognised actuarial gain or loss exceeds 10percent of the greater of the present value of thedefined benefit obligation and the fair value ofplan assets, that portion is recognised in theincome statement over the expected averageremaining working lives of the employees partici-pating in the plan. Otherwise, the actuarial gainor loss is not recognised.

When the actual calculation results in a benefitto the group, the recognised asset is limited tothe net total of any unrecognised actuarial lossesand past service costs and the present value ofany future refunds from the plan or reductions infuture contributions to the plan.

Long term service benefitsThe group’s net obligation in respect of long termservice benefits, other than pension plans, is theamount of future benefit that employees haveearned in return for their service in the currentand prior periods. The obligation is calculatedusing the projected unit credit method and is


Our performance

discounted to its present value and the fair value ofany related assets is deducted. The discount rate isthe yield at the balance sheet date on governmentbonds/high quality corporate bonds with maturitiesconsistent with the terms of the obligations.

Share-based payment transactionsAs described in note 18 Salaries, wages and socialsecurity costs, the group has a variable payscheme for senior managers where the final pay-ments depend on percentage increase for theAker Kvaerner share price in the three year period.The fair value of the estimated amount payable tothe employee is recognised linearly as an expenseover the three year agreement period with a corres-ponding increase in liabilities. The fair value is ini-tially measured at grant date. Measurement of fairvalue takes into account the terms and conditionsupon which the instruments were granted and isbased on an expected bonus to be earned.

For cash-settled share-based payments, aliability equal to the portion of the goods or servicesreceived is recognised at the current fair valuedetermined at each balance sheet date.

Cash and cash equivalentsCash and cash equivalents include cash in hand,deposits held at call with banks and other short-term highly liquid investments with original maturityof three months or less. Restricted cash is mainlycash tied up in projects through joint ventures withexternal parties. The amounts fluctuate with theprojects’ life cycle and are usually released whenthe project is delivered or close to delivery.

Derivative financial instrumentsThe group uses derivative financial instruments tohedge its exposure to foreign exchange and inte-rest rate risks arising from operational, financingand investment activities. Derivatives that do notqualify for hedge accounting are accounted foras trading instruments.

Derivatives are initially recognised at fair valueon the date a derivative contract is entered intoand are subsequently remeasured at their fairvalue. The gain or loss on remeasurement to fairvalue is recognised immediately in profit and loss.Where derivatives qualify for hedge accounting,recognition of any resultant gain or loss dependson the nature of the item being hedged (seeHedging activities).

The fair value of interest rate swaps is theestimated amount that the group would receive orpay to terminate or eliminate the swap at thebalance sheet date, taking into account currentinterest rates and the current creditworthiness ofthe swap counterparties. The fair value of forwardexchange contracts is their quoted market priceat the balance sheet date, being the presentvalue of the quoted forward price.

The fair values of various derivative instru-ments used for hedging purposes are disclosedin note 23.3 Derivative financial instruments.Movements on the hedging reserve in sharehol-ders’ equity are shown in Statement of changesto equity (other reserves). The full fair value of ahedging derivative is classified as a non-currentasset or liability when the remaining hedged itemis classified as non-current asset or liability. Withthe exception of items related to trade receivablesand work in progress, this is when the remainingmaturity is more than 12 months; it is classified asa current asset or liability when the remainingmaturity of the hedged item is less than 12months or when it is related to trade receivablesand work in progress. Trading derivatives areclassified as current asset or liability.

Interest-bearing borrowingsInterest-bearing borrowings are recognised initiallyat fair value less attribute transaction costs. Sub-sequent to initial recognition, interest-bearing bor-rowings are stated at amortised cost with any diffe-rence between cost and redemption value beingrecognised in the income statement over the periodof the borrowings on an effective interest basis.

Income taxIncome tax on the profit or loss for the year com-prises current and deferred tax. Income tax isrecognised in the income statement except to theextent that it relates to items recognised directlyin equity, in which case it is recognised in equity.

Current tax is the expected tax payable on thetaxable income for the year, using tax rates enactedor substantially enacted at the balance sheet date,and any adjustment to tax payable in respect ofprevious years.

Deferred tax is provided using the balance sheetliability method, providing for temporary differencesbetween the carrying amounts of assets and liabili-ties for financial reporting purposes and the amountsused for taxation purposes. The following temporarydifferences are not provided for: goodwill not deduc-tible for tax purposes, the initial recognition of assetsor liabilities that affect neither accounting nor taxableprofit, or differences relating to investments in sub-sidiaries to the extent that they will not reverse in theforeseeable future. The amount of deferred taxprovided is based on the expected manner ofrealisation or settlement of the carrying amount ofassets and liabilities, using tax rates enacted orsubstantively enacted at the balance sheet date.

A deferred tax asset is recognised only to theextent that it is probable that future taxable profitswill be available against which the asset can beutilised. Deferred tax assets are reduced to theextent that it is no longer probable that the relatedtax benefit will be realised.

Additional income taxes that arise from the distri-bution of dividends are recognised at the same timeas the liability to pay the related dividend.

Share capitalOrdinary sharesOrdinary shares are classified as equity. Incre-mental costs directly attributable to the issue ofnew share or options are shown in equity as adeduction, net of tax, from the proceeds.

Repurchase of share capitalWhen share capital recognised as equity is re-purchased, the amount of the consideration paid,including directly attributable costs, is recognisedas a change in equity. Repurchase of share capi-tal is recognised as a reduction in equity and isclassified as treasury shares.

Financial instrumentsFinancial instruments in Aker Kvaerner group con-sist of cash and cash equivalents, investments inother companies, derivative financial instruments,non-current interest-bearing receivables, Trade andother receivables and non-current borrowings.

The group classifies its financial assets in thefollowing categories: at fair value through profit orloss, loans and receivables, and available forsale. The classification depends on the purposefor which the financial assets were acquired.Management determines the classification of itsfinancial assets at initial recognition.

Financial assets at fair value throughprofit or lossFinancial assets at fair value through profit and

loss are financial assets held for trading. A finan-cial asset is classified in this category if acquiredprincipally for the purpose of selling in the shortterm. Derivatives are classified as held for tradingunless they are designated as hedges. Assets inthis category are classified as current assets asderivative financial instruments.

Loans and receivablesLoans and receivables are non-derivative finan-cial assets with fixed or determinable paymentsthat are not quoted in an active market. They areincluded in current assets as trade and otherreceivables and interest-bearing receivables,except for maturities greater than 12 months afterthe balance sheet date. These are included innon-current assets as loans and receivables andinterest-bearing receivables in the balance sheet.

Available-for-sale financial assetsAvailable-for-sale financial assets are non-deriva-tives that are either designated in this category ornot classified in any other categories. They areincluded in non-current assets as investments inother companies, unless management intends todispose of the investment within 12 months of thebalance sheet date. They will then be included incurrent assets as other investments.

Regular purchases and sales of financial assetsare recognised on the trade-date – the date onwhich the group commits to purchase or sell theasset. Investments are initially recognised at fairvalue plus transaction costs for all financial assetsnot carried at fair value through profit and loss.Financial assets carried at fair value through profitand loss are initially recognised at fair value, andtransaction costs are expensed in the incomestatement. Available-for-sale financial assets andfinancial assets at fair value through profit and lossare subsequently carried at fair value. Loans andreceivables are carried at amortised cost using theeffective interest method.

Financial assets are derecognised when therights to receive cash flows from the investmentshave expired or have been transferred and thegroup has transferred substantially all risks andrewards of ownership.

The fair values of quoted investments arebased on current bid prices. If the market for afinancial asset is not active (and for unlistedsecurities), the group establishes fair value byusing valuation techniques. These include theuse of recent arm’s length transactions, refe-rence to other instruments that are substantiallythe same, discounted cash flow analysis andoption pricing models, making maximum use ofmarket inputs and relying as little as possible onentity-specific inputs. Impairment of financialinstruments is described under the impairmentsection above.

Foreign currencyFunctional and presentation currencyThe consolidated financial statements are pre-sented in Norwegian kroner (NOK), which is AkerKværner ASA’s functional currency and the pre-sentation currency for the group.

Foreign currency transactions and balancesTransactions in foreign currencies are translatedat the foreign exchange rate ruling at the date ofthe transaction. Monetary assets and liabilitiesdenominated in foreign currencies at the balancesheet date are translated to Norwegian kroner atthe foreign exchange rate at that date. Foreignexchange differences arising on translation arerecognised in the income statement. Non-


Our performance

monetary assets and liabilities that are measuredin terms of historical cost in a foreign currencyare translated using the exchange rate at thedate of the transaction. Non-monetary assetsand liabilities denominated in foreign currenciesthat are stated at fair value are translated toNorwegian kroner at foreign exchange rates atthe dates the fair value was determined.

Net investment in foreign operationsItems included in the financial statements of eachof the group’s entities are measured using thecurrency of the primary economic environment inwhich the entity operates. The results and financialposition of all the group entities (none of which hasthe currency of a hyperinflationary economy) thathave a functional currency different from thegroup’s presentation currency are translated intothe presentation currency as follows:

assets and liabilities, including goodwill andfair value adjustments, for each balance sheetpresented are translated at the closing rate atthe date of that balance sheet;income and expenses for each incomestatement are translated at average exchangerates for the year, calculated on the basis of12 monthly rates.

Exchange differences arising from the translationof the net investment in foreign operations, andof related hedges, are included as a componentof equity (Translation reserve). These translationdifferences are reclassified to the income state-ment upon disposal of the related operations.

In respect of all foreign operations, any currencyrevaluation differences that have arisen since 1 April2004, the date of transition to IFRS, are presentedas a separate component of equity.

Hedging activitiesThe group designates certain derivatives aseither:a) hedges of the fair value of recognised liabilities

(fair value hedge);b) hedges of a particular risk associated with a

recognised liability or a highly probableforecasted transaction (cash flow hedge); or

c) hedges of a net investment in a foreignoperation (net investment hedge).

Fair value hedgesChanges in the fair value of derivatives that aredesignated and qualify as fair value hedges arerecorded in the income statement, together withany changes in the fair value of the hedged assetor liability that are attributable to the hedged risk.The group only applies fair value hedge account-ing for hedging fixed interest rate risk on borrow-ings. The gain or loss relating to the effectiveportion of interest rate swaps hedging fixed rateborrowings is recognised in the income state-ment within net financial items. The gain or lossrelating to the ineffective portion of the hedgingrelationship is recognised in the income state-ment within net financial items. Changes in thefair value of the fixed rate borrowings that arehedged against interest rate risk are recognisedin the income statement within net financial items.

If the hedge no longer meets the criteria forhedge accounting, the adjustment to the carryingamount of a hedge item is amortised to profit andloss over the period to maturity using the effectiveinterest method.

Cash flow hedgesThe effective portion of changes in the fair valueof derivatives that are designated and qualify ascash flow hedges are recognised in equity. The

gain or loss relating to the ineffective portion ofderivative hedging instruments is recognisedimmediately in the income statement within netfinancial items.

Amounts accumulated in equity are reclassi-fied to the income statement in the periods whenthe hedged item is recognised in profit or loss.However, when the forecast transaction that ishedged results in the recognition of a non-financialasset or a non-financial liability, the gains andlosses previously deferred in equity are transfer-red from equity and included in the initialmeasurement of the cost of the asset or liability.

Hedge accounting is discontinued when thegroup revokes the hedging relationship, thehedging instrument expires or is sold, terminated,or exercised, or no longer qualifies for hedgeaccounting. Any cumulative gain or loss deferred inequity at that time remains in equity and isrecognised when the forecast transaction isultimately recognised in the income statement.When a forecast transaction is no longer expectedto occur, the cumulative gain or loss that wasdeferred in equity is recognised immediately inincome statement.

Net investment hedgeHedges of net investments in foreign operationsare accounted for similarly to cash flow hedges.Any gain or loss on the hedging instrument rela-ting to the effective portion of the hedge isrecognised in equity. The ineffective portion isrecognised immediately in the income statementwithin net financial items.

Gains and losses accumulated in equity areincluded in the income statement when theforeign operation is partially disposed of or sold.

Note 3: Accounting estimates and judgements

Estimates and judgements are continually reviewed and are based on historical experiences and other expectations of future events.

The group makes estimates and assumptions concerning future events. The resulting accounting estimates will, by definition, seldom accurately equal the relatedactual results, but are based on the best estimate at the time. The estimates and assumptions that have a significant risk of causing material adjustments to thecarrying amounts of assets and liabilities within the next financial year are discussed below.

Revenue recognitionAs described in the accounting principles the percentage-of-completion method is used to account for construction contracts. Use of this method requires estimatesof the final outcome (revenue and costs) of the contract as well as measurement of progress achieved to date as a proportion of the total work to be performed.

The main uncertainty of contract revenue is related to recoverable amounts from variation orders, claims and incentive payments which are recognised to theextent that it is probable that they will result in revenue, and they are capable of being reliably measured. In many projects there are frequent changes ofscope of work resulting in a number of variation orders. Normally the contracts with customers include procedures for presentation of and agreement ofvariation orders. At any point in time, there will be such variation orders and claims not being finally decided upon. Even though management has extensiveexperience in assessing the outcome of such negotiations there will always be uncertainties.

Cost to complete depends on productivity factors as well as the cost level for the input factors. In an environment with high capacity utilisation in the industry thereis an increasing uncertainty in the cost estimates. Experience, systematic use of the project execution model and focus on core competencies reduces this risk.

Progress measurement based on costs has an inherent risk related to the cost estimate as described above. In situations where cost is not seen to properlyreflect actual progress, alternative measures such as hours or plan progress are used to achieve more precise revenue recognition. The estimationuncertainty during the early stages of a contract is mitigated by a policy of normally not recognising revenue in excess of costs on a large project before thecontract reaches 20 percent completion.

WarrantiesAt the end of each contract, a provision is set up to cover any warranty expenditures. The warranty period is normally two years. The provision is often set at onepercent of the contract value, but can also be a higher or lower amount following a specific evaluation of the actual circumstances for each contract. Both the generalone percent provision and the evaluation of project specific circumstances are based on experience from earlier projects. Factors that could impact the estimatedclaim information include the group’s quality initiatives and project execution model. Reference is made to note 12 Provisions, for further information about provisions.

Property, plant and equipment and intangible assetsAt every balance sheet date, it is considered whether there are indications of impairment of the book values of long term assets. If such indications exist, a valuation isperformed to assess whether or not and if applicable by which amount the asset should be written down for impairment.


Our performance

Such valuations will often have to be based on estimates of future results for a number of cash flow generating units.

References are made to note 14 Property, plant and equipment and note 16 Intangible assets.

GoodwillIn accordance with the accounting policy stated, the group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates and are consistent with the marketvaluation of the group. Further details about goodwill and impairment reviews are included in note 16 Intangible assets.

Income taxesThe group is subject to income taxes in numerous jurisdictions. Significant judgement is required to determine the worldwide provision for income taxes. There aremany transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Provisions for anticipated tax auditissues are based on estimates of eventual additional taxes. Tax assets arise following tax losses that can be brought forward to reduce the income tax on futureyear’s taxable profits. The recognition of such a tax asset, consequently, depends on there being sufficient evidence of the future taxable profit which is necessaryto use the brought forward loss. Such judgements are reasonably easy in countries with significant group activities, but may be more difficult in other tax jurisdictions.Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred taxprovisions in the period in which such determination is made. Reference is made to note 17 Tax for further information about income taxes.

Pension benefitsThe present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Theassumptions used in determining the net cost (income) for pensions include financial factors such as the discount rate, expected salary growth, inflation and returnon assets as well as demographical factors about mortality, employee turnover, disability and early retirement. Assumptions about all these factors are set based onthe situation at the time when the assessment is made. However, it is reasonably certain that such factors will change over the very long time periods for whichpension calculations are made. Any changes in these assumptions will impact the calculated pension obligations. The effect on the accounts of such changes arehowever, spread over relatively long time periods by the use of the corridor approach, where changes are amortised over many years. Further information about thepension obligations and the assumptions used are included in note 20 Employee benefits.

Note 4: Acquisition of businesses

Wirth Maschinen- und Bohrgeräte-Fabrik GmbHAker Kvaerner acquired 50 percent of the shares in the company in September 2007. Wirth is a German provider of drilling machines and pumps. Aker KvaernerMH AS has cooperated with Wirth for about 20 years. There is a shareholders’ agreement with the other shareholders of Wirth with put / call option arrangementsfor the remaining 50 percent ownership to be transferred to Aker Kvaerner at a price based on future earnings. The options are exercisable during 2009–2010. Theagreements also results in the owners exercising joint control of Wirth in the period until the options become excercisable. The current analysis and allocation offair value is provisional and will be updated when the analysis is complete.

Phoenix Polymers International LtdIn June 2007, Aker Kvaerner Subsea Ltd acquired 50 percent and obtained control over Phoenix International Ltd in Aberdeen. The company is an importantsub-supplier of buoyancy elements to Aker Kvaerner Subseas’ drilling and riser projects.

Aker Insurance ASIn August 2007, Aker Kvaerner acquired 9.9 percent of the shares and now owns 100 percent of the company.

The total acquistion cost was NOK 217 million. Consolidated net profit from acquired businesses in the period from acquisition to year end is NOK 31 million.

Values at time of acquisition

Amounts in NOK millionPre acquisition

carrying amountsAdjustment

to IFRSFair value

adjustmentsRecognised values

on acquisitionOf which

Joint Venture

Plant and equipment 13 13 - 26 26Patents / trademarks 1 - 54 55 54Interest-bearing current receivables - - - - -Non-current investments 2 - - 2 2Current operating assets 387 - 31 418 405Cash and cash equivalents 84 - - 84 70Minority interests 7 - - 1 6 -Deferred tax liabilities - 3 - 32 - 29 - 28Other non-current liabilities - 280 - 8 - - 288 - 288Current operating liabilities - 173 - 13 - - 186 - 164

Net assets and liabilities 41 - 5 52 88 77Goodwill on acquisition 1) 129 78Deferred payment - 46 - 46

Cash 171 109

Cash paid - 171 - 109Cash and overdraft facilities 84 70

Net cash outflow - 87 - 39

The goodwill arising from the acquisitions is attributable to the anticipated profitability of the operations and to the anticipated synergies.1)

Later acquisitionsFor acquisitions in 2008, see note 26 Subsequent events.


Our performance

Note 5: Related parties

The group has several related party relationships between parents and subsidiaries (see note 28 Group companies as at 31 December 2007), associates(see note 21 Investments accounted for in accordance with the equity method), joint ventures (see note 22 Investments in Joint Ventures) and with its direc-tors and executive officers (see note 18 Salaries, wages and social security costs).

The largest shareholder Aker Holding AS is controlled by Aker ASA which is controlled by Kjell Inge Røkke through TRG Holding AS. All entities whichKjell Inge Røkke controls or has significant influence over are considered related parties to the Aker Kvaerner group.

In accordance with recommended accounting practice, information regarding significant related party transactions, benefits and agreements should bedisclosed where such information may assist users of the financial statements in their understanding of the activities of the group. All transactions havebeen based on arm’s length terms. The transactions below are considered to be significant related party transactions not disclosed in the notes listedabove.

Aker Drilling ASAIn 2005, Aker Drilling ASA and Aker Kvaerner entered into a contract for the turn-key delivery of two sixth-generation deepwater drilling semisubmersibles.The contract value including mooring systems was originally approximately NOK 7.8 billion. The two drilling rigs are scheduled for delivery in July andDecember 2008.

Aker Floating Production ASAA contract with Aker Floating Production ASA to deliver a complete subsea production system for a Reliance Industries Ltd in India was signed in 2007.Aker Kvaerner will also deliver the marine installation of the floating production storage and offloading (FPSO) vessel to be leased out by Aker FloatingProduction. There is a seperate contract with Aker Floating Production ASA to deliver process technology to the FPSO. The total value of Aker Kvaerner’scontracts is approximately USD 250 million and NOK 610 million.

Aker Oilfield ServicesAker Kvaerner has invested NOK 72.3 million in Aker Oilfield Services and owns 19.1 percent of the shares, see note 26 Subsequent events. Aker Kvaernerhas signed a letter of intent with Aker Oilfield Services and is set to expand its subsea service offering by providing equipment and personnel to the world’s firstdeepwater Subsea Equipment Support Vessel (SESV). The contract, to commence latest 2010, is worth approximately USD 60 million over an initial five yearperiod.

Aker Clean Carbon ASAker Kvaerner has agreed to transfer its Just Catch technology for CO

2capture to the company Aker Clean Carbon AS, which will develop CO

2capture

projects. The transaction to take place i 2008 will give Aker Kvaerner 30 percent of the shares in Aker Clean Carbon AS, while Aker ASA will own 70 percent.The ownership ratio has been determined following valuations and negotiations that have also recognised the value of Aker Kvaerner’s exclusive rights toparticipate in building future carbon capture facilities in co-operation with Aker Clean Carbon.

Intellectual Property Holding ASAker Kværner ASA has an agreement with Intellectual Property Holdings AS (IPH) that holds all rights, titles and interests in and to registered trademarksand domain names containing ”Aker” and ”Kværner”. IPH will act as a joint branding tool where the companies in the Aker group join forces in selectedinitiatives. The annual royalty cost for Aker Kvaerner is approximately NOK 10 million.

Aker Insurance ASAfter Aker ASA had received an accumulated dividend of NOK 80 million, Aker Kvaerner acquired in 2007 the 9.9 percent of the shares controlled by AkerASA for NOK 10 million. After the transaction, Aker Kvaerner owns 100 percent of the shares in Aker Insurance AS.

Shared ResourcesAker Kvaerner Business Partner and Aker Kvaerner’s corporate functions are offering services to other Aker companies on arm’s length terms.


Our performance

Note 6: Segment information

A segment is a distinguishable component of the group that is engaged either in providing products or services (business segment), or in providing products orservices within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.See page 14–23 of the annual report for a description of the business segments. The transactions between the segments have been based on arm’s length terms.

Operating revenue in geographical segments are based on the geographical location of customers whereas segment assets and capital expenditure are basedon geographical location of the companies.

At the end of first quarter 2007 Aker Kvaerner reorganised its segments and prior year figures are restated.

2007 – Business segments

Amounts in NOK millionField

Development

Maintenance,Modifications

and Operations SubseaProducts &

TechnologiesProcess &

ConstructionUnallo-

cated Total

External revenueConstruction contracts 16 163 3 199 7 239 9 128 7 010 - 102 42 637Services revenue - 6 465 1 437 1 725 2 948 1 021 13 596Products - - 993 494 87 - 1 574Other 6 2 - 32 99 11 150

Total revenue from external customers 16 169 9 666 9 669 11 379 10 144 930 57 957Inter-segment revenue 212 78 182 974 249 -1 695 -

Operating revenue 16 381 9 744 9 851 12 353 10 393 - 765 57 957

Operating profit / loss before depreciation 891 530 960 959 746 - 173 3 913Depreciation - 118 - 9 - 112 - 72 - 24 - 96 - 431

Operating profit (+) / loss (-) 773 521 848 887 722 - 269 3 482Share of earnings in associated companies - - - 2 - - 4 - 2

Capital expenditures 201 289 577 298 53 178 1 596

Net current operating assets excl. tax - 893 127 849 323 - 1 367 - 100 - 1 061Net non-current operating assets excl. tax 1 354 1 372 1 616 1 051 1 035 - 38 6 390

Net operating assets excl. tax 461 1 499 2 465 1 374 - 332 - 138 5 329Tax - 372Investment in associates 53 - - 18 21 29 121Investments in other companies 133Net interest-bearing items 2 056

Total equity incl. minority interests 7 267

Order intake (unaudited) 12 124 8 422 12 377 10 733 14 242 44 57 942Order backlog (unaudited) 15 695 10 683 10 951 11 520 10 923 - 1 511 58 261

Own employees (unaudited) 3 586 4 855 3 673 2 666 8 367 1 280 24 427

Intangible assets 1 105 1 434 646 824 900 86 4 995

Total operating assets excl. tax 5 147 3 468 5 027 6 234 3 321 350 23 547Total operating liabilities excl. tax - 4 686 - 1 969 - 2 562 - 4 860 - 3 653 - 488 - 18 218

Total net operating assets excl. tax 461 1 499 2 465 1 374 - 332 - 138 5 329


Our performance



Development




ConstructionUnallo-

cated Total

External revenueConstruction contracts 15 236 3 236 2 724 3 908 8 245 - 46 33 303Services revenue 36 6 025 1 274 1 427 3 396 706 12 864Products - - 2 589 1 355 - - 3 944Other 342 1 5 7 124 2 481

Total revenue from external customers 15 614 9 262 6 592 6 697 11 765 662 50 592Inter-segment revenue 511 415 349 875 242 - 2 392 -

Operating revenue 16 125 9 677 6 941 7 572 12 007 - 1 730 50 592

Operating profit / loss before depreciation 903 452 479 531 530 - 23 2 872Depreciation - 54 - 6 - 100 - 62 - 34 - 83 - 339

Operating profit (+) / loss (-) 849 446 379 469 496 - 106 2 533Share of earnings in associated companies - - 1 - 1 3 - 21 - 18

Capital expenditures 77 16 369 119 72 173 826

Net current operating assets excl. tax - 1 972 124 762 - 364 - 684 - 38 - 2 172Net non-current operating assets excl. tax 1 238 1 115 1 340 895 1 141 - 151 5 578

Net operating assets excl. tax - 734 1 239 2 102 531 457 - 189 3 406Tax 348Investment in associates 53 - 1 18 20 30 122Investments in other companies 16Net interest-bearing items 4 222

Total equity incl. minority interests 8 114

Order intake (unaudited) 17 140 9 933 11 747 12 997 11 670 - 1 216 62 271Order backlog (unaudited) 20 385 12 245 8 775 12 741 7 989 - 2 440 59 695

Own employees (unaudited) 3 562 5 187 3 028 2 167 7 758 1 020 22 722

Intangible assets 1 099 1 436 755 706 1 013 45 5 054

Total operating assets excl. tax 4 788 3 704 5 007 3 910 4 096 438 21 943Total operating liabilities excl. tax - 5 522 - 2 464 - 2 905 - 3 379 - 3 639 - 628 - 18 537

Total net operating assets excl. tax - 734 1 240 2 102 531 457 - 190 3 406



Development




ConstructionUnallo-

cated Total

External revenueConstruction contracts 9 646 2 571 2 614 1 162 6 811 - 19 22 785Services revenue 27 4 391 1 075 1 724 3 042 483 10 742Products - - 1 619 1 336 - - 1 2 954Other 122 2 57 - 217 61 459

Total revenue from external customers 9 795 6 964 5 365 4 222 10 070 524 36 940Inter-segment revenue 155 391 113 426 66 - 1 151 -

Operating revenue 9 950 7 355 5 478 4 648 10 136 - 627 36 940

Operating profit / loss before depreciation 530 279 339 336 314 18 1 816Depreciation - 53 - 9 - 86 - 67 - 23 - 68 - 306

Operating profit (+) / loss (-) 477 270 253 269 291 - 50 1 510Share of earnings in associated companies - 13 - 7 1 18 - 25

Order intake (unaudited) 18 546 9 777 6 394 9 290 10 842 - 2 912 51 937Order backlog (unaudited) 19 978 12 028 4 019 7 370 8 340 - 3 213 48 522


Our performance

Geographical segments Operating revenues bycustomer location

Total operating assets bycompany location

Capital expenditure bycompany location

Amounts in NOK million 2007 2006 2005 2007 2006 2007 2006

Norway 23 396 20 567 14 685 11 029 9 119 963 354Europe 8 628 9 619 8 471 5 713 6 580 219 96North America 9 243 9 976 6 846 4 730 3 761 101 139Asia 11 336 5 282 2 341 546 1 020 212 221Other 5 354 5 148 4 597 1 529 1 463 101 16

Total 57 957 50 592 36 940 23 547 21 943 1 596 826

Note 7: Other operating expenses

Other operating expenses amounts to NOK 5.4 billion in 2007 (NOK 6.0 billion in 2006 and NOK 4.1 billion in 2005). The expenses includes agency costs, audit fees,operating lease costs, research and development costs and other expenses regarding premises, electricity, maintenance, travelling, IT-equipment and insurance fees.

Fees to KPMGFees for statutory audit of the whole Aker Kvaerner group amounted to NOK 26 million (NOK 25 million in 2006 and NOK 22 million in 2005), fees for other assuranceservices amounted to NOK 2 million (NOK 5 million in 2006 and NOK 2 million in 2005), fees for tax advisory service amounted to NOK 4 million (NOK 4 million in 2006and NOK 3 million in 2005) and fees for other advisory services amounted to NOK 2 million (NOK 2 million in 2006 and NOK 2.5 million in 2005).

Note 8: Net operating assets


Inventories 884 593Trade and other receivables 9,25.5 13 361 13 712Provisions 12 - 655 - 602Trade and other payables 10 - 15 165 - 16 217Derivative financial instruments (net assets and liabilities) 25.3 514 342

Net current operating assets excl. tax 6 - 1 061 - 2 172Pension funds 20 15 4Other non-current operating assets 9 6Intangible assets 6,16 4 995 5 054Property, plant and equipment 14 2 815 1 761Employee benefits 20 - 937 - 931Other non-current operating liabilities 1) - 507 - 316

Net non-current operating assets excl. tax 6 6 390 5 578

Net operating assets excl. tax 6 5 329 3 406Income tax payable 17 - 329 - 230Prepaid income tax 17 89 86Deferred tax assets 17 548 552Deferred tax liabilities 17 - 680 - 60

Net operating assets incl. tax 4 957 3 754

Non-current insurance liabilities for 2007 are NOK 315 million (NOK 293 million in 2006).1)

Note 9: Current operating assets


Trade debtors 1), 2) 5 815 5 756Other receivables 1) 2 338 3 085Work in progress to be invoiced 11 4 774 3 924Advances to suppliers 434 947

Trade and other receivables 25.5 13 361 13 712Derivative financial instruments 25.3 1 468 813Inventories 3) 884 593

Current operating assets 15 713 15 118

Trade debtors include NOK 89 million falling due after one year and other receivables includes NOK 19 million falling due after one year (for 2006 the numbers were NOK 100 million1)and NOK 42 million respectively). Book value of trade and other receivables are approximately equal to fair value.

Receivables from related parties at the end of 2007 are NOK 425 million (NOK 0 million in 2006).2)

Write-downs of inventories are NOK 9 million in 2007 (NOK 13 million in 2006).3)Aker Kvaerner annual report 2007 51

Our performance

Note 10: Current operating liabilities


Trade creditors 1) 3 217 4 237Advances from customers 2) 2 852 5 261Accrued operating and financial costs 8 644 5 393Other current liabilities 1) 452 1 326

Trade and other payables 15 165 16 217Provisions 12 655 602Derivative financial instruments 25.3 954 471

Current operating liabilities excl. tax 16 774 17 290

Trade creditors include NOK 11 million falling due after one year and NOK 13 million of other current liabilities falling due after one year (for 2006 the numbers were NOK 16 million1)and NOK 24 million respectively). Book value of trade creditors and other current liabilities are approximately equal to fair value.

Remaining prepayment from Aker Drilling was at the end of 2006 NOK 720 million.2)

Note 11: Contracts


Value all contracts 126 967 124 596Costs from ongoing contracts 62 013 60 869Results from ongoing contracts 6 693 4 032

Order backlog 6 58 261 59 695

Value of work performed 68 706 64 901Invoiced 63 932 60 977

Work in progress to be invoiced 9 4 774 3 924Trade debtors 9 5 815 5 756

Recoverable on contracts 10 589 9 680

Receivables where payment is withheld by customers based on non-fulfilled contract obligations 13 3Advances from customers 2 852 5 261

Order intake (unaudited)

Amounts in NOK million 2007 2006

Field Development 12 124 17 140Maintenance, Modifications and Operations 8 422 9 933Subsea 12 377 11 747Products & Technologies 10 733 12 997Process & Construction 14 242 11 670Unallocated 44 - 1 216

Total 57 942 62 271

Order backlog (unaudited)


Field Development 15 695 20 385Maintenance, Modifications and Operations 10 683 12 245Subsea 10 951 8 775Products & Technologies 11 520 12 741Process & Construction 10 923 7 989Unallocated - 1 511 - 2 440

Total 58 261 59 695

The group enters into delivery commitments prior to commencement of production. Of the current backlog of NOK 58.3 billion, NOK 5.4 billion (NOK 3.2 billion in2006) relate to certain major contracts which are not expected to yield any profit. Expected losses on such contracts have been charged to profit and lossand based on best estimates. The overall quality of the order backlog has improved during 2007, which is reflected in results from ongoing contracts.


Our performance

Largest projects in progress at year end 2007 (unaudited)

Project Business segment Customer Estimated delivery

Adriatic LNG Terminal (ALT) FD Terminale GNL Adriatico s.r.l 2008Sempra FD Cameron 2008Kashagan ePF1 FD/MMO Agip 2008Aker Drilling FD/MMO/P&T Aker Drilling AS 2008Yansab P&C Yansab 2008Reliance Subsea Reliance Ltd 2008Frigg Cessation MMO/FD Total 2009Dalia Subsea (Phase 2) Subsea Total E&P Angola 2009Gjøa FD/MMO StatoilHydro 2010Longview Power Project P&C Hitachi 2011

During 2007, the following large contracts are delivered or have marginal revenue recognition for 2008:Blind Faith, Dalia EPC, Hitachi, Ormen Lange MIC, Hammerfest LNG (Snøhvit) and West-E Drill.

Note 12: Provisions

Amounts in NOK million Warranties Other Provisions

Balance as at 1 January 2007 328 274 602Reclassified - 24 24 -Charged to operations 168 130 298Utilised - 21 - 155 - 176Reversed - 4 - 44 - 48Sale / acquisition 1 - 1 -Translation effects - 11 - 10 - 21

Balance as at 31 December 2007 437 218 655

See note 3 Accounting estimates and judgements and note 13 Contingent events.

WarrantiesThe provision for warranties relates mainly to the possibility that Aker Kvaerner, based on contractual agreements, needs to perform guarantee work related toproducts and services delivered to customers. The provision is based on estimates of liabilities arising from existing contracts and the cost of work that needsto be done. The warranty period is normally two years and any cash effects will arise in this period.

OtherOther includes primarely a provision for onerous leases.

Note 13: Contingent events

Project risks and uncertaintiesThe group’s operations are to a large extent subject to long term contracts, some of which are fixed-price, turn-key contracts that are awarded on acompetitive bidding basis. Failure to meet schedule or performance guarantees or increases in contract costs may result in non-recoverable costs, whichcould exceed revenues realised from the applicable project. Where a project is identified as loss making, provisions for future losses are made (see note 12Provisions). The accounting treatment is based on the best estimate at the time. Inevitably, such circumstances and information may be subject to changes insubsequent periods and thus the eventual outcome may be better or worse than estimated.

The Frigg Cessation project is a pioneer project for decommissioning of larger fields in the North Sea. The project is challenging related to execution andthere are environmental and safety issues which creates uncertainty with regards to the final outcome.

Legal proceedingsWith its extensive worldwide operations, companies included in the group are in the course of their activities involved in legal disputes. Provisions have beenmade to cover the expected outcome of the disputes to the extent negative outcomes are likely and reliable estimates can be made. However, the finaloutcome of these cases will always be subject to uncertainties and resulting liabilities may exceed recorded provisions.

Blind FaithAker Kvaerner has successfully completed the semisubmersible hull for Chevron’s Blind Faith platform. The semisubmersible left the Aker Kvaerner Verdalyard in Norway 24 June 2007 and has been transported to a Gulf of Mexico integration yard to be outfitted with the topsides. Aker Kvaerner is in discussionswith the client regarding an estimated Schedule Recovery Contractor Work Estimate (SRCWE) of USD 71 million. Although there can be no assurance regar-ding the outcome, the expectation is that this will not have a material impact on Aker Kvaerner’s financial position or results.

HolbornIn 2000, Aker Kvaerner Netherlands BV and Holborn Europa Raffinerie GmbH (Holborn) entered into contracts for delivery of a steam reformer and a unit forremoval of sulphur and conversion of aromatics in refinery streams. This is in order to produce ultra low sulphur and low aromatics diesel in accordance withthe EU Fuel Directives.


Our performance

Aker Kvaerner Netherlands BV has launched legal proceedings against Holborn claiming payment of outstanding invoices in the amount of EUR 9.2 million inaddition to reimbursement of amounts drawn on bank guarantees in the amount of EUR 7.0 million. Holborn has rejected the claim and raised counter claimsof approximately EUR 34.2 million based on alleged defects, delays and acts of gross negligence and / or wilful misconduct in the execution of the project.Aker Kvaerner Netherlands BV has rejected the counter claims from Holborn.

The courts have encouraged the parties to try to reach a commercial settlement honouring EUR 10 million of Holborn’s claims. However, no settlement hasbeen reached. A partial ruling from District Court of Hamburg rejecting Holborn’s counterclaim was received in September 2007. Holborn has appealed anda ruling on the appeal is expected to take 6–12 months. Although there can be no assurance regarding the outcome, the expectation is that this will not have amaterial negative impact on Aker Kvaerner’s financial position or results.

Note 14: Property, plant and equipment

Amounts in NOK millionBuildingsand sites

Machinery,equipment and

softwareConstruction

in progress Total

Historical costBalance as at 1 January 2006 1 101 3 415 29 4 545Additions 114 685 27 826Additions regarding acquisition 102 43 - 145Disposals - 76 - 436 - - 512Disposals regarding sale of business - 71 - 596 - 10 - 677Translation differences - 8 - 4 - 1 - 13

Historical cost as at 31 December 2006 1 162 3 107 45 4 314

Balance as at 1 January 2007 1 162 3 107 45 4 314Additions 371 966 259 1 596Additions regarding acquisition 1) - 26 - 26Disposals - 51 - 279 - - 330Disposals regarding sale of business - - - -Translation differences - 47 - 114 - 2 - 163

Historical cost as at 31 December 2007 1 435 3 706 302 5 443

Accumulated depreciationBalance as at 1 January 2006 - 564 - 2 430 - 2 - 2 996Depreciation in the year 2) - 59 - 331 - - 390Depreciation regarding acquisition - 20 - 25 - - 45Impairment loss - - - -Disposals 37 419 - 456Disposals regarding sale of business 35 384 1 420Translation differences 3 - 1 - 2

Accumulated depreciation as at 31 December 2006 - 568 - 1 984 - 1 - 2 553

Balance as at 1 January 2007 - 568 - 1 984 - 1 - 2 553Depreciation in the year - 129 - 301 - - 430Depreciation regarding acquisition - - - -Impairment loss - - - -Disposals 62 236 - 298Disposals regarding sale of business - - - -Translation differences 19 38 - 57

Accumulated depreciation as at 31 December 2007 - 616 - 2 011 - 1 - 2 628

Book value as at1 January 2006 537 985 27 1 54931 December 2006 594 1 123 44 1 76131 December 2007 819 1 695 301 2 815

Of which capitalised leases31 December 2006 2 - - 231 December 2007 7 - - 7

Regarding acquisition of 50 percent in Wirth Maschinen- und Bohrgeräte-Fabrik GmbH which is proportionally consolidated in the accounts.1)

Including depreciation in Pulping & Power business area with NOK 51 million in 2006.2)


Our performance

Assets are written down on a straight-line basis over their expected economic lives, as follows

Machinery and equipment 3 - 15 yearsBuildings 8 - 30 yearsSites No depreciation

The estimated residual value is reviewed annually.

See note 25.6 Non-current borrowings for information about bank borrowings which are secured by property, plant and equipment.

Note 15: Operating leases

Total non-cancellable operating lease commitments are payable as follows


Contracts due within one year 522 505Contracts running for one to five years 1 635 1 625Contracts running for more than five years 1 253 1 336

Total 3 410 3 466

Lease and sublease payments recognised in the income statement in 2007

Amounts in NOK million BuildingsConstruction

equipmentOther plant and

machinery Other Total

Minimum lease payments 380 160 188 4 732Contingent rents 2 - 1 - 3Sublease payments 1 - - - 1

Total 383 160 189 4 736

Lease and sublease payments recognised in the income statement in 2006

Amounts in NOK million BuildingsConstruction

equipmentOther plant and

machinery Other Total

Minimum lease payments 334 - 95 - 429Contingent rents 11 8 8 - 27Sublease payments - - - - -

Total 345 8 103 - 456

The major part of the operating lease costs and commitments relates to rent of office facilities. Aker Kvaerner has a twelve year leasing agreement withNorwegian Property of Aker Kvaerner Headquarters.

In 2007 Aker Kvaerner Industrial Constructions had extensive costs relating to lease of construction equipment in several mining projects for the client Phelps Dodge.

Other plant and machinery costs include leasing primarely of IT-equipment, inventory and lease of the ship Boa Sub C. IT-equipement is a three year agree-ment with Hewlett Packard International Bank PLC. From January 2008, inventory and IT equipment are leased from SG Finans. There is no intention to purchasethe equipment and it cannot be sublet.

None of the leases include significant contingent rent.


Our performance

Note 16: Intangible assets

Amounts in NOK million Note Goodwill PatentsTotal intangible

assets

Book value as at 1 January 2006 4 559 22 4 581Additions 763 14 777Disposals - 291 - 32 - 323Impairment - - -Amortisation - - 3 - 3Translation differences 20 2 22

Book value as at 31 December 2006 6 5 051 3 5 054

Book value as at 1 January 2007 5 051 3 5 054Additions 4 129 58 187Disposals - - 3 - 3Impairment - - -Amortisation - - 1 - 1Translation differences - 242 - - 242

Book value as at 31 December 2007 6 4 938 57 4 995

The increase in goodwill is mainly caused by the acquisitions of Phoenix Polymers International Ltd and Wirth Maschinen- und Bohrgeräte-Fabrik GmbH withrespectively NOK 34 million and NOK 78 million. The acquisitions of Wirth caused an increase in patents of NOK 50 million.

Research and Development costsMost of the costs for research and development in Aker Kvaerner are related to projects and are booked as contract costs. Research and development costsof NOK 166 million have been expensed during the year as the criteria for capitalisation is not met. In addition, research and development costs paid by customerstotalled NOK 77 million in 2007.

Cash generating unitGoodwill originates from a number of acquisitions, the acquisitions of Trafalgar House in 1996 and Aker Maritime in 2002 being the largest. Subsequent to themain acquisitions, the group has been reorganised a number of times, including mergers and de-mergers of individual businesses. As a result of this, it is nolonger possible to identify and allocate goodwill to individual businesses from past acquisitions. Consequently, we have identified the business areas as thelowest identifiable cash generating units for goodwill allocation.

Determination of recoverable amounts / Fair valueRecoverable amounts are based on value in use calculations. The calculations use cash flow projections based on the future cash flow, budgets for the periods2008-2010 and an annual growth of 2.5 percent for subsequent periods. A discount rate (WACC) of 13.3 percent before tax has been used for discountedcash flows.

For all business areas the recoverable amounts are higher than the carrying amounts and consequently the analysis indicates that no write-down for impairment isnecessary. As a sensitivity analysis, recoverable amount has also been calculated using discount rates up to 40 percent, without any effect for the conclusions.

Note 17: Tax

Income tax expense

Amounts in NOK million 2007 2006 2005

Current tax expenseCurrent year 548 318 115Adjustments for prior years 9 35 34

Total current tax expense 557 353 149

Deferred tax expenseOrigination and reversal of temporary differences 550 244 78Benefit of tax losses / timing differences recognised - 33 - 22 - 539

Total deferred tax expense 517 222 - 461

Total tax expense in income statement 1 074 575 - 312Tax expense discontinued operations - 65 85

Tax expense incl. tax related to discontinued operations 1 074 640 - 227


Our performance

Effective tax rateThe table below reconciles the reported income tax expense to the expected income tax expense according to the corporate income tax rate of 28 percentin Norway.


Profit before tax 3 538 1 869 740Expected income taxes (28 percent) of profit before tax 991 523 207Tax effect of prior year adjustments - 12 26 24Tax effect of items booked against equity - 31 -Tax effect of permanent differences 23 - 32 - 12Tax effect of tax losses / other timing differences not included in the period incurred - 33 - 22 - 539Tax effect of change in tax rates 15 - -Tax effect of differences in tax rates from 28 percent 90 49 12Other - - - 4

Income tax expense 1 074 575 - 312Effective tax rate 30 % 31 % - 42 %Tax effect of differences 83 52 - 519

Comments to selected lines in the table aboveTax rates outside Norway different from 28 percent.The major part of the difference relates to the US where the tax rate is 41 percent.

Permanent differencesIn 2007 the differences mainly relates to tax exemption in Malaysia and certain differences in UK. In 2006 the main difference was the gain on disposal ofAker Kværner Power & Automation Systems as.

The change in effective tax rate from 2005 to 2006 is mainly caused by the recognition of a deferred tax asset in 2005 regarding losses (NOK 1 796 million) thatexisted but did not qualify for recognition in 2004.

Deferred tax assets and liabilitiesDeferred tax assets

Amounts in NOK millionProperty, plant

and equipment PensionsTax loss

cfwd Other Total

Deferred tax assets as at 1 January 2006 67 268 424 92 851Recognised in profit and loss 22 - 24 - 333 53 - 282Recognised in equity - - - - -Disposal / acquisition of companies - - - - 21 - 21Translation differences 2 2 - - 4

Deferred tax assets as at 31 December 2006 91 246 91 124 552Recognised in profit and loss - 84 - 23 105 44Recognised in equity - - - - 43 - 43Disposal / acquisition of companies - - - - -Translation differences - 2 - - - 3 - 5

Deferred tax assets as at 31 December 2007 5 246 114 183 548

Deferred tax liabilities

Amounts in NOK millionProperty, plant

and equipment Projects Other 1) Total

Deferred tax liabilities as at 1 January 2006 15 632 - 601 46Recognised in profit and loss - 9 789 - 840 - 60Recognised in equity - - 80 80Disposal / acquisition of companies - - 6 - - 6Translation differences - - - -

Deferred tax liabilities as at 31 December 2006 6 1 415 - 1 361 60Recognised in profit and loss 21 - 75 615 561Recognised in equity - - 43 43Disposal / acquisition of companies - - 25 25Translation differences - - - 9 - 9

Deferred tax liabilities as at 31 December 2007 27 1 340 - 687 680

Includes the tax effect of tax losses carried forward of NOK 2 849 million used to offset positive timing differences.1)


Our performance

Tax losses carried forwardTax losses carried forward expire as follows

Amounts in NOK million NorwayEurope

otherNorth

AmericaSouth

AmericaAsia

Pacific Other Total

2008 - - 355 - - - 3552009 - - 163 - - - 1632010 - - - - - - -2011 - - 68 - - - 682012 - - - - - - -2013 and later - - 476 - - - 476Indefinite 2 849 539 - 57 193 13 3 651

Total tax losses carried forward 2 849 539 1 062 57 193 13 4 713Tax losses not recognised as deferred tax asset - - 477 - 805 - 31 - 193 - - 1 506

Tax losses recognised as deferred tax asset 2 849 62 257 26 - 13 3 207

Comments regarding recognitionDeferred tax losses are recognised in the balance sheet to the extent that forecasts and realistic expectations about results show that Aker Kvaerner will beable to use the tax losses before they expire.

Geographical split2007

Amounts in NOK millionCurrent

tax expenseDeferred

tax expenseTotal

tax chargeNet deferred

tax liabilityNet payable

tax liability

Norway 40 566 606 - 307 - 38Europe 29 50 79 - 83 - 59North America 346 - 93 253 236 - 105South America 21 5 26 16 - 15Asia 74 2 76 5 - 5Other countries 47 - 13 34 1 - 18

Total 557 517 1 074 - 132 - 240Tax asset 548 89Tax liability - 680 - 329

2006

Amounts in NOK millionCurrent

tax expenseDeferred

tax expenseTotal

tax chargeNet deferred

tax liabilityNet payable

tax liability

Norway 28 252 280 344 - 11Europe 30 34 64 - 15 - 45North America 175 - 38 137 141 - 11South America 19 - 9 10 25 - 28Asia 61 - 7 54 8 - 14Other countries 40 - 10 30 - 11 - 35

Total 353 222 575 492 - 144Tax asset 552 86Tax liability - 60 - 230

Note 18: Salaries, wages and social security costs

Amounts in NOK million Note 2007 2006 2005

Salaries and wages including holiday allowance 9 741 8 365 8 009Social security tax / National insurance contribution 1 373 1 304 1 046Pension costs 20 543 337 302Other employee costs 540 435 342

Salaries, wages and social security costs 12 197 10 441 9 699

Loans to employees are shown in note 25.4 Non-current interest-bearing receivables. No guarantees are granted to any employees.


Our performance

Directors and nomination committee’s annual feesThe board fees for 2007 were NOK 3 150 000, including NOK 600 000 transferred to the labour union covering occupational activities in the group. In addition,fees to the reward committee were NOK 75 000 and to the audit committee NOK 75 000, the fees for 2006 were the same. The chairman of the Board ofDirectors and the Board of Directors did not receive any other payments for 2007. The members of the Board of Directors have no agreements which entitlesthem to any extraordinary remuneration.

Fees paid to the nomination committee in 2007 and 2006 were NOK 30 000 per year, 10 000 per member.

Board of Directors 1)

Amounts in NOK in 2007Reward

committeeAudit

committee Board fees

Leif-Arne Langøy 2) 25 000 400 000Bjørn Flatgård 25 000 350 000Helge Midttun 4) 25 000 75 000Heidi Marie Petersen 4) 225 000Vibeke Hammer Madsen 25 000 300 000Karl Erik Kjelstad 2) 300 000Siri Fürst 25 000 300 000Atle Teigland 3) 25 000 150 000Åsmund Knutsen 3) 150 000Bernt Harald Kilnes 3), 4) 37 500Arve Toft 3), 4) 112 500Øyvind Hopland 3), 5) 50 000Ingebreth Forus 3), 5) 100 000

Amounts in NOK in 2006Reward

committeeAudit

committee Board fees

Leif-Arne Langøy 2) 25 000 400 000Bjørn Flatgård 25 000 350 000Helge Midttun 25 000 300 000Vibeke Hammer Madsen 25 000 300 000Martinus Brandal 2), 6) 75 000Karl Erik Kjelstad 2), 6) 225 000Siri Fürst 25 000 300 000Atle Teigland 3) 25 000 150 000Åsmund Knutsen 3) 150 000Eldar Myhre 3), 7) 50 000Øyvind Hopland 3), 7) 100 000Bernt Harald Kilnes 3) 150 000

Members of Board of Directors, the reward committee and the audit committee are elected for two years at the General Meeting.1)

According to policy in the Aker group, Board of Directors employed in Aker companies will not be paid Board fees but have their Board fees directly paid to their employing company.2)Leif-Arne Langøy and Karl Erik Kjelstad therefore had their Board fees for 2007 paid to Aker ASA, while for 2006, Leif-Arne Langøy and Martinus Brandal had their Board fees paid toAker ASA and Karl Erik Kjelstad had his Board fees paid to Aker Yards ASA.

According to agreement and initiative from the employees, NOK 150 000 is transferred to the labour union covering occupational activities in the group, for each Board members3)elected from the employees.

As at 29 March 2007, Director of the Board Helge Midttun was replaced by Heidi Marie Petersen and Director of the Board Bernt Harald Kilnes was replaced by Arve Toft.4)

Director of the Board Øyvind Hopland resigned as at May 2007. He was replaced by alternate director Ingebreth Forus.5)

As at 15 March 2006, Director of the Board Martinus Brandal was replaced by Karl Erik Kjelstad as Mr. Brandal entered into the position as President & Chief Executive Officer (CEO)6)as at 1 July 2006.

Director of the Board Eldar Myhre resigned as at 11 May 2006. He was replaced by his alternate director Øyvind Hopland.7)

Nomination committeeThe Aker Kværner ASA nomination committee comprises the following individuals as at 31 December 2007: Kjell Inge Røkke (Chairman), Kjeld Rimberg andGerhard Heiberg.

The reward committeeThe reward committee has three independent members chosen by and from the Directors. As at 31 December 2007 the members of the reward committeeare Leif-Arne Langøy, Bjørn Flatgård and Vibeke Hammer Madsen.

The reward committee shall ensure that the company’s reward policy serves the interest of the shareholders and that the company has an internally consis-tent and externally competitive remuneration of executives.

Guidelines for remuneration to the President and CEO and the members of the Executive Management TeamThe main purpose of the executive reward programme is to encourage a strong and sustainable performance-based culture, which supports growth in share-holder value. The total remuneration to executives consists of a market based salary, a few standard employee benefits and a variable pay programme.

The President and CEO and the Executive Management Team participate in the standard pension and insurance schemes applicable to all employees. Thecompany practice standard employment contracts and standard terms and conditions regarding notice period and severance pay for President and CEO andthe members of the Executive Management Team. The company does not offer share option programmes to any managers or employees.

The objective of the variable pay programme is to contribute to the company achieving good financial results and management according to the company’svalues and business ethics.


Our performance

The variable pay programme is based on the achievement of financial and personal performance targets, leadership performance in accordance with thecompany’s values and the development of the company’s share price. The programme represents a potential for an additional variable pay up to the value of100 percent of base salary, up from 60 percent last year. Earnings are paid over three years. The first half of the variable pay is paid the following year. Theremaining amount is paid two years later with the addition of a retention element provided the executive is still employed by the company. The annual pay-ments are restricted to one annual base salary and the restriction will be fully effective from 2009. The actual reward of leaders for 2007 was according to theguidelines of the company. The variable pay in 2007 represents amounts earned in 2006 and 2004.

Remuneration to members of the Executive Management TeamMembers of the Executive Management Team as at 31 December 2007 are: Martinus Brandal, Bjørn Erik Næss, Pål Helsing, Mads Andersen, Torleif Gram,Raymond Carlsen and Jarle Tautra. Pål Helsing replaced Simen Lieungh as at 1 October 2007. Gary Mandel left the Executive Management Team as at30 April 2007. Total taxable remuneration of the Executive Management Team for 2007 was NOK 61 341 631 (NOK 37 125 476 in 2006). In addition AkerKvaerner also had NOK 1 290 782 in 2007 (NOK 4 129 720 in 2006) in pension cost for the Executive Management Team.

The following remunerations have been paid:

Ex. Management Team

Amounts in NOK in 2007Base

salary 1)

Total variablepay 2)

Otherbenefits 3)

Total taxableremuneration

Pension benefitearned / cost

to company

Martinus Brandal January - December 3 906 965 577 499 19 023 4 503 487 76 229Bjørn Erik Næss January - December 2 496 864 2 222 303 22 831 4 741 998 89 513Simen Lieungh January - September 1 984 483 6 292 094 45 660 8 322 237 71 602 4), 6)

Pål Helsing October - December 512 500 - 21 094 533 594 19 135Mads Andersen January - December 2 303 615 5 152 378 28 382 7 484 375 59 260Torleif Gram January - December 2 239 582 5 443 460 994 381 8 677 423 586 699 4)

Raymond Carlsen January - December 2 130 755 8 345 521 26 100 10 502 376 206 649 4)

Gary Mandel January - April 1 287 029 5 701 121 3 398 6 991 548 47 121 5)

Jarle Tautra January - December 2 606 790 6 956 552 21 251 9 584 593 134 574

Sum 19 468 582 40 690 929 1 182 120 61 341 631 1 290 782

Amounts in NOK in 2006

Martinus Brandal July - December 1 770 694 - 23 401 1 794 095 95 459Inge K. Hansen January - June 2 223 224 2 000 000 26 992 4 250 216 3 063 725 7)

Bjørn Erik Næss January - December 2 387 967 708 750 26 992 3 123 709 70 902Simen Lieungh January - December 2 229 725 2 679 513 26 992 4 936 230 73 615 4)

Mads Andersen January - December 1 789 730 2 387 141 26 992 4 203 863 38 173Torleif Gram January - December 2 013 464 2 005 779 25 792 4 045 035 460 794 4)

Raymond Carlsen January - December 1 833 435 1 997 877 26 992 3 858 304 119 925 4)

Gary Mandel January - December 3 004 616 3 016 913 20 654 6 042 183 111 842 5)

Jarle Tautra January - December 2 114 777 2 730 072 26 992 4 871 841 95 285

Sum 19 367 632 17 526 045 231 799 37 125 476 4 129 720

Includes holiday allowance.1)

The variable pay in 2007 are amounts earned in 2006 and 2004.2)

Other benefits include insurance agreements, which is membership in the standard employee scheme and an additional executive group life and disability insurance with a cover of3)maximum NOK 4 505 640.

Includes management pension rights where contributions stopped in 2002 . The schemes were wound up following the merger between Kvaerner and Aker Maritime.4)

Gary Mandel has a defined contribution plan only.5)

Simen Lieungh was included in the pension benefit program until 31.12.07.6)

Includes special management pension scheme for the previous President & CEO Inge K. Hansen.7)

There are no loans granted to members of the Executive Management team.

Period of notice, severance pay and pension benefits for each member of the current Executive Management Team

Name/TitleAgreed period ofnotice Severance pay Pension benefits

President & CEOMartinus Brandal

6 months 12 months Standard employee defined benefit plan as described in note 20.

Executive Vice President & CFOBjørn Erik Næss


Executive Vice PresidentPål Helsing


Executive Vice PresidentMads Andersen


Executive Vice PresidentTorleif Gram

6 months 6 months Standard employee defined benefit plan as described in note 20.In addition vested company pension rights (see description above).

Executive Vice PresidentRaymond Carlsen

6 months 6 months Standard employee defined benefit plan as described in note 20.In addition vested company pension rights (see description above).

Executive Vice PresidentJarle Tautra



Our performance

Share based paymentsIncluding the members of the Executive Management Team, a total of 47 managers are entitled to variable pay according to the programme described above.The development of the company’s share price is an element of the variable pay programme.

Amounts in NOK 2007 2006 2005

Paid in the year 115 419 678 35 122 508 672 014Expensed in the year - 90 094 622 82 166 301Accrued at the end of the year 21 046 724 136 466 401 81 494 287

Directors’ and Executive Management Team’s ShareholdingThe following number of shares were owned by the Directors and the members of the Executive Management Team (and their related parties) as at 31 December2007.

Shares

Leif-Arne Langøy, Chairman 75 000Bjørn Flatgård, Vice Chairman 5 535Åsmund Knutsen, Director 1 505Karl Erik Kjelstad, Director 2 500Martinus Brandal, President & CEO 7 500Bjørn Erik Næss, Executive Vice President & CFO 5 000Torleif Gram, Executive Vice President 5 000Mads Andersen, Executive Vice President 2 395Raymond Carlsen, Executive Vice President 5 000

Note 19: Number of employees (unaudited)

2007 2006

Field Development 3 586 3 562Maintenance, Modifications and Operations 4 855 5 187Subsea 3 673 3 028Products & Technologies 2 666 2 167Process & Construction 8 367 7 758Other 1 280 1 020

Total Aker Kvaerner employees 24 427 22 722Agencies 8 290 10 322

Total 32 717 33 044Employees in Norway 10 931 10 806Employees in other countries 13 496 11 916

Note 20: Employee benefits – pension cost and liabilities

The group companies in Norway, Canada and Germany have retirement benefit plans that give the employees a right to future benefits (defined benefit plans).Normally, retirement benefits are based on the number of years of service and the expected salary upon retirement. Retirement plans are either organised byindependent pension funds, through insurance companies, in collective co-operations or directly by the company. Contributions to the pension funds aremade in accordance with local laws and accounting rules based on standard actuarial assumptions in the applicable country.

The Norwegian group companies are obliged by law to have a pension plan for their employees. The companies have, through Aker Pension Fund , a pensionplan according to the law. About 11 000 Aker Kvaerner employees are covered by the Aker Pension Fund which also covers employees from some Aker companies.Aker Kvaerner participates together with the Norwegian state and other employers in a multi-employer plan called AFP. The participating employers pay a contribu-tion to the plan independent of the company’s use of it. The employers also pay 25 percent of the pension paid to own pensioneers. The Norwegian state pays acontribution of 40 percent of paid pensions. The figures regarding defined benefit below include Aker Kværner’s cost and liability related to the AFP-plan.

Outside Norway, Canada and Germany most companies have defined contribution plans where the employer only contributes an agreed amount that is separatelyadministered. See note 26 Subsequent events.


Our performance

Net periodic pension cost / return (-)


Defined benefit plansService cost 263 195 174Interest on projected benefit obligation 180 143 143Expected return on plan assets - 138 - 122 - 115Net amortisations and deferrals 68 9 4Administration cost 9 7 8Social security tax 53 31 30

Pension cost defined benefit plans 435 263 244Pension cost defined contribution plans 108 74 58

Total pension cost 543 337 302

Status of pension plans reconciled with the balance sheet

2007 2006

Amounts in NOK million Funded Unfunded Total Funded Unfunded Total

Defined benefit plansAccumulated benefit obligation (ABO) 2 931 509 3 440 2 674 485 3 159Effect of projected future compensation levels 827 83 910 786 89 875

Projected benefit obligation (PBO) 3 758 592 4 350 3 460 574 4 034Social security tax on plan assets in excess of / less than PBO 150 74 224 143 72 215Plan assets at fair value 2 662 - 2 662 2 438 - 2 438

Plan assets in excess of (+) / less (-) that PBO - 1 246 - 666 - 1 912 - 1 165 - 646 - 1 811Unrecognised net gain (-) / loss (+) 906 84 990 803 81 884

Net prepaid pension (+) / accrued pension liability (-) - 340 - 582 - 922 - 362 - 565 - 927

Pension prepayment 15 - 15 4 - 4

Accrued pension liability - 355 - 582 - 937 - 366 - 565 - 931

Economic assumptions (Norwegian plans)Discount rate 5.00 % 5.00 % 5.00 % 4.50 % 4.50 % 4.50 %Asset return 6.00 % 6.00 % 6.00 % 5.50 % 5.50 % 5.50 %Salary progression 4.25 % 4.25 % 4.25 % 4.25 % 4.25 % 4.25 %Pension indexation 2.50 % 2.50 % 2.50 % 2.50 % 2.50 % 2.50 %

Economic assumptions (Norwegian plans)The discount rate is based on the Norwegian 10-year government bond rate. The asset return is expected to be higher than the discount rate because theassets are invested in instruments with a higher risk than government bonds. Experience has shown that the rate of return on pension assets has been about1 percent higher than the discount rate over long time.

Generally, a 1 percent increase in the discount rate will lead to around a 20 percent decrease in service cost / projected benefit obligation.

For the Canadian plans, a discount rate of 5.25 percent (5 percent in 2006), an expected rate of return on assets of 7.25 percent (same as in 2006) and anexpected salary increase of 3.5 percent (4 percent in 2006) are used.


Our performance

Movement in net prepaid pension (+) / accrued pension liability (-)


Projected benefit obligation as at 1 January 4 034 3 339Service cost 1) 263 201Interest on projected benefit obligation 180 143Benefits paid - 107 - 106Members moved - 13 - 43Acquisition / disposal 26 - 108Change in unrecognised gain (-) / loss (+) - 40 615Translation difference 7 - 7

Projected benefit obligation as at 31 December 4 350 4 034

Plan assets at fair value as at 1 January 2 438 2 073Expected return on plan assets 138 122Contribution from scheme members 383 249Benefits paid - 80 - 76Members moved - - 22Change in unrecognised gain (-) / loss (+) - 199 101Administration costs - 20 - 6Translation difference 2 - 3

Plan assets at fair value as at 31 December 2 662 2 438

The pension cost in Pulping and Power is included in this reconciliation for 2006 as the disposal took place in the end of that year.1)

Analyses of the plan assets and the expected return on plan assets at the balance sheet date 2007 2006

Major categories of plan assets in percent of total plan assets Norge Norge

Equity instruments 6,9 % 9,2 %Debt instruments 66,2 % 48,9 %Money market 22,3 % 39,6 %Other assets 4,6 % 2,3 %

Plan assets 100,0 % 100,0 %

The estimated contributions expected to be paid to the plans during 2008 are NOK 185 million in Norway and NOK 16 million in Canada. Annual return onplan assets is NOK 182 million in 2007 (NOK 133 million in 2006 ).

Overview over net pension obligation and change in unrecognised gains and losses


Projected benefit obligation 4 350 4 034 3 339Plan assets at fair value 2 662 2 438 2 073

Net pension obligation - 1 688 - 1 596 - 1 266

Change in unrecognised gain (-) / loss (+) projected benefit obligation - 40 615 112Change in unrecognised gain (-) / loss (+) plans assets - 199 101 4


Our performance

Note 21: Investments accounted for in accordance with the equity method

Associated companies 2007

Amounts in NOK million

Book valueas at

1.1.2007

Additions /Disposals /

Payments

Profitafter tax /

Impairment

Currencyand other

adjustments

Book valueas at 31.12.

2007

RR Offshore Oy 16 - - - 1 15Siva Verdal Eiendom 14 - - - 14JSC Astrakhan Korabel 31 - - - 31Power Maintenance and Constructors, LLC 19 3 - - 3 19Aker Bravo 6 - - 4 - 2Beijing Bomco - MH Offshore 5 - 1 - 6Other companies 31 2 1 - 34

Total 122 5 - 2 - 4 121

Associated companies 2006


Book valueas at

1.1.2006

Additions /DisposalsPayments

Profitafter tax /

Impairment

Currencyand other

adjustments

Book valueas at 31.12.

2006

Aker Kvaerner Powergas Pvt Ltd 1) 53 - 51 2 - 4 -RR Offshore Oy 32 - - 16 - 16Siva Verdal Eiendom 14 - - - 14JSC Astrakhan Korabel - 31 - - 31Power Maintenance and Constructors, LLC - 19 - - 19Aker Arctic Technology AB 9 - - 1 - 8Aker Bravo - 7 - 1 - 6Beijing Bomco - MH Offshore - 6 - 1 - 5Other companies 5 15 - 1 4 23

Total 113 27 - 18 - 122

Subsidiary from March 2006.1)

The group’s interest in its principal associates were as follows 2)

2007Amounts in NOK million Business office

Percentageof voting rights

Percentageheld Assets Liabilities Equity Revenues

Net profit /loss

RR Offshore Oy 4) Ulvila, Finland 40,0 % 26,0 % 186 183 3 255 7Siva Verdal Eiendom Trondheim, Norway 46,0 % 46,0 % 44 8 36 6 1JSC Astrakhan Korabel 3), 4) Astrakhan, Russia 56,0 % 56,0 % 31 - 31 - -Power Maintenance and Constructors, LLC Hammond, USA 49,0 % 49,0 % 69 27 42 306 5Aker Bravo Oslo, Norway 45,0 % 45,0 % 24 21 3 2 - 10Beijing Bomco - MH Offshore Beijing, China 50,0 % 50,0 % 11 3 8 2 1

2006Amounts in NOK million Business office

Percentageof voting rights

Percentageheld Assets Liabilities Equity Revenues

Net profit /loss

RR Offshore Oy Ulvila, Finland 40,0 % 26,0 % 83 86 - 3 251 - 31Siva Verdal Eiendom Trondheim, Norway 46,0 % 46,0 % 41 8 33 4 2JSC Astrakhan Korabel 3) Astrakhan, Russia 56,0 % 56,0 % 95 88 7 26 - 7Power Maintenance and Constructors, LLC Hammond, USA 49,0 % 49,0 % 68 30 38 398 - 3Aker Arctic Technology AB Helsinki, Finland 12,5 % 12,5 % 102 38 64 28 - 1Aker Bravo Oslo, Norway 45,0 % 45,0 % 33 20 13 2 - 1Beijing Bomco - MH Offshore Beijing, China 50,0 % 50,0 % 14 4 10 1 - 3

Balance sheet and profit and loss items listed above are 100 percent of total.2)

Despite the fact that Aker Kvaerner owns 56 percent of JSC Astrakhan Korabel the group does not have controlling interest.3)

In February 2008, Aker Kvaerner entered into an agreement which gives full ownership of RR Offshore OY and as part of the agreement, Aker Kvaerner sells its shares in the4)Astrakhan Korabel yard to ST Holding. See note 26 Subsequent events for more details.


Our performance

Note 22: Investment in joint ventures

The group has interests in several joint venture activities, whose principal activities are construction contracts. The group’s share of assets, liabilities, income andexpenses of the joint ventures operating agreements and entities are included in the consolidated financial statements. The material agreements and entities arelisted below.

Joint venture operating agreements

Percentage share 2007 2006

Aker Kvaerner Clough Murray & Robertsen Joint Venture 61 % 61 %Aker Maritime Kiewit Contractors 49 % 49 %AKTIV Joint Venture 40 % 40 %ALT GBS JV 1) - 51 %Angel 50 % 50 %Anglian Water 3 Joint Venture 50 % 50 %Anglian Water 4 Joint Venture 50 % 50 %Cameron LNG (Sempra) 50 % 50 %Hull Water 50 % 50 %IHI Ingleside 50 % 50 %JV Yansab 50 % 50 %O&G Solutions Joint Venture 50 % 53 %Snøhvit 65 % 65 %Halton Hills Power Partners Joint Venture 50 % 50 %Siemens / Aker Kvaerner Songer - Longview Consortium 50 % -AK / IHI Gulf 50 % -

ALT GBS joint venture agreement was terminated in September 2007.1)

Joint venture operating entities

Percentage share 1) Business Office 2007 2006

AKCS Offshore Partner New Foundland, Canada 40 % 40 %Aker Reinertsen AS Trondheim, Norway 50 % 50 %Aker Kvaerner & Soapro Egenharia Ltda Luanda, Angola 50 % 50 %Wirth Maschinen- und Bohrgeräte-Fabrik GmbH Erkelenz, Germany 50 % -

The share of legal ownerships equals the share of voting shares for all joint ventures.1)

The table below presents the assets, liabilities, income and expenses included in the annual accounts relating to joint venture operating entities.

Amounts in NOK million 2007 1) 2006

Current assets 568 42Non-current assets 157 0Current liabilities - 363 - 37Non-current liabilities - 229 1

Net assets / liabilities 133 6

Income 559 264Expenses - 492 - 260

Total 67 4

The increase in assets, liabilities, income and expenses are mainly caused by the acquisition of 50 percent in Wirth.1)

Note 23: Financial risk management

Financial risksThe group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk, liquidity risk andcapital risk. The market risks will affect the group’s income or the value of financial instruments held. The objective of market risk management is to manageand control market risk exposures, within acceptable parameters. The group’s overall risk management programme focuses on the unpredictability of financialmarkets and seeks to minimise potential adverse effects on the group’s financial performance. The Aker Kvaerner group uses financial instruments to hedgecertain risk exposures and seeks to apply hedge accounting in order to reduce the volatility in the income statement.

Risk management is the responsibility of project managers in cooperation with the central treasury department (Group Treasury) identifying, evaluating andhedging financial risks under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well aswritten policies covering specific areas. There have been no changes in these policies during the year.


Our performance

Currency riskThe group operates internationally and is exposed to currency risk on commercial transactions, recognised assets and liabilities and net investments inforeign operations which are denominated in a currency other than the respective functional currencies of group entities. The currency risk exposure relatedto future commercial transactions, recognised assets and liabilities are primarily the USD, EUR and GBP. In addition there are several others. The currencies inwhich these transactions primarily are denominated are NOK, EUR, USD and GBP.

The Aker Kvaerner policy requires group companies to hedge their entire currency risk exposure with Group Treasury using forward contracts and currencyoptions. Group Treasury manage the internal exposures in accordance with the Group Treasury’s risk management policy and hedge 100 percent of anticipatedcash flow from sales and purchases that are in a different currency than the relevant entity’s functional currency. This is done for the project’s lifetime usingforward contracts or currency options. Variations to forecasted cash flows are hedged as they occur. See note 25.3 Derivative financial instruments for furtherdetails.

For segment reporting purposes, each subsidiary designates contracts with Group Treasury as fair value hedges or cash flow hedges, as appropriate. Externalforeign exchange contracts are designated at group level as hedges of currency risk on specific assets, liabilities or future transactions on gross basis, andhedge accounting is applied to more than 80 percent of these hedges. The Aker Kvaerner segment reporting, therefore handles all foreign currency hedgesas qualifying hedges. The correction where disqualifying hedges no longer are reflected in accordance to hedge accounting, is performed at group level andis included in the ”unallocated” part of the segment reporting.

The principal amounts and interests of the group’s non-current borrowings are denominated in currencies that match the cash flows generated by the groupcompanies holding the loans, primarily NOK, but also GBP. This provides an economic hedge without entering into any derivatives.

The group has several investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising fromthe net assets of the group’s foreign operations is not hedged, except for USD 200 million of net investments in US entities being hedged by foreign exchangeforwards. See note 23.3 Derivative financial instruments for further details.

The group’s exposure to the main foreign currency risk was as follows based on notional amounts as per 31 December.

2007 2006

Amounts in million USD EUR GBP USD EUR GBP

Bank -229 -20 -22 -143 243 -1Intercompany loans 17 -21 35 184 -17 19External funding - - - - -282 -Trade receivables 598 36 - 586 23 7Trade payables -191 -106 -43 -82 -164 -20

Balance sheet exposure 195 -111 -30 545 -197 5Estimated forecast sales 1 243 66 - 1 500 51 -Estimated forecast purchases -198 -219 -49 -378 -263 -19

Cash flow exposure 1 045 -153 -49 1 122 -212 -19Forward exchange contracts -1 250 255 80 -1 657 419 15

Net exposure -10 -9 1 10 10 1

Trade receivables, trade payables and estimated forecast sales and purchases in the table above are calculated based on the groups hedge transactions.These are considered to be the best estimate of the currency exposure given that all currency exposure is hedged, in accordance with the group’s policy.Currency exposure in intercompany loans occurs when the loan is in another currency than the functional currency of one or both of the parties of the loanagreement. Normally only one of the parties has a currency exposure related to an internal loan.

The group also has minor exposure to other currencies such as AUD, SGD, SEK, DKK and JPY.

The following significant exchange rates applied during the year.

Average rate Reporting date mid-spot rate

NOK 2007 2006 2007 2006

USD 5,853 6,428 5,403 6,255EUR 8,016 8,058 7,966 8,238GBP 11,700 11,814 10,792 12,268

A foreign currency sensitivity analysis indicates that a changes in the foreign currency rates results in minor effects on equity and profit and loss. A 10 percentstrengthening of the NOK against the following currencies at 31 December would have increased (decreased) equity and profit or loss by the amounts shownbelow. The selected rate of 10 percent reflects the recent years’ changes in currency rates. The sensitivity analysis is calculated based on the hedged trans-actions as in the currency exposure table above. It includes only project related items and assumes that all other variables, in particular interest rates, remainconstant. Calculations are based on amounts and foreign currency exchange rates as at 31 December, and the outstanding amounts are representative forthe whole year due to a low degree of seasonality. The analysis is performed on the same basis for 2006.

2007 2006

Effect in NOK million Profit or loss Equity 1) Profit or loss Equity 1)

USD - 262 - 328 - 34 - 663EUR - 4 119 - 21 204GBP 34 22 8 16

The effects to equity that follows directly from the effects to profit or loss are not included.1)


Our performance

A 10 percent weakening of the NOK against the above currencies at 31 December would have had the equal but opposite effect on the above amounts, onthe basis that all other variables remain constant.

Although hedge accounting is not applied to all foreign exchange contracts, these contracts are still ”economic-wise” hedged. This means that the effect onprofit or loss under financial items in the table above, will have an opposite effect on future operating income or expense as progress on projects increase.

The most important risk, related to currency, is the risk of reduced competitiveness abroad in the case of a strengthened NOK. This risk is related to futurecommercial contracts and is not included in the sensitivity analysis above.

Interest rate riskThe group’s interest rate risk arises from non-current borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. Borrowingsissued at fixed rates expose the group to fair value interest rate risk, however as these borrowings are measured at amortised cost, interest rate variationsdoes not affect profit or loss. Group policy is to maintain approximately 30-50 percent of its borrowings in fixed rate instruments using interest rate swaps toachieve this when necessary.

As the group has no significant interest-bearing operating assets, operating income and operating cash flows are substantially independent of changes in marketinterest rates. At year end 50 percent of the NOK 1.6 billion bond debt interest rate was fixed between two to six years through interest swaps. In addition to thebonds the deferred acquisition payments of TH Resources of GBP 38 million (see note 25.6 Non-current borrowings) has a fixed interest rate.

The group does not account for any fixed rate financial assets or liabilities at fair value through profit and loss, and the group does not designate derivatives(interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would notaffect profit or loss with respect to the fixed rate instruments.

An increase of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below.This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2006.

2007 2006

Amounts in NOK million Profit or loss Equity 1) Profit or loss Equity 1)

Cash and cash equivalents 35 - 57 -FRA (forward rate agreement) 1 - - -Interest rate swap 12 19 26 24Non-current interest-bearing receivables - - - -Current interest-bearing receivables 5 - 5 -Deposit to repay second priority lien note - - 24 -Borrowings - 15 - - 1 -Second priority lien note - - - -Interest-bearing current liabilities - - - -

Cash flow sensitivity (net) 39 19 111 24

The effects to equity that follows directly from the effects to profit or loss are not included.1)

A decrease of 100 basis points in interest rates at the reporting date would have had the equal but opposite effect on the above amounts, on the basis that allother variables remain constant.

Price riskThe group is exposed to fluctuations in market prices both in the investment portfolio and in the operating businesses related to individual contracts.

The investment portfolio is limited and does not include shareholdings in listed companies.

The businesses may be exposed to changes in market price for raw material, equipment and development in wages. This is partly managed in the bid phaseby locking in committed prices to clients without adequate protection on such costs and partly managed in the execution phase after award. The group makesindividual assessment of such risks and protects itself either through escalation clauses with clients, locking in subcontractor or equipment providers or byadding risk contingencies to the price calculations. The group does not enter into commodity derivative contracts.

Credit riskCredit risk is the risk of financial losses to the group if customer or counterparty to financial investments / instruments fails to meet its contractual obligations,and arises principally from investment securities and group receivables.

The investment portfolio is primarily related to deposits with banks. There is a separate procedure for the acceptance of final counterparties both for derivativesand deposits, and counterparties have to be investment graded. Credit risk on financial counterparties is viewed as insignificant.

Assessment of credit risk related to clients and subcontractors are made when necessary on an individual basis. Such assessments are based on creditratings, income statement and balance sheet reviews and using credit assessment tools available (e.g. Dun & Bradstreet). Sales to customers are settled incash. The group does not require collateral in respect of trade and other receivables.

Based on estimates of incurred losses in respect of trade and other receivables, the group establishes an allowance for impairment. Main components of thisallowance are a specific loss component relating to individually significant exposures, and a collective loss component in respect of losses incurred but notyet identified. Provisions for impairment of receivables are low (NOK 83 million in 2007, NOK 41 million in 2006), which is higher than the historical losses(NOK 4 million in 2007, NOK 13 million in 2006). Revenues are mainly related to large and long term projects closely followed up in terms of payments upfront and in accordance with agreed milestones. Normally, lack of payments are due to disagreements of project deliveries and are solved by change ofdeliveries (see note 13 Contingent events). The clients are mainly large and highly reputable oil companies with a low credit risk, which reduces the credit risksignificantly. Based on the above the Group’s credit risk is considered to be insignificant.

At the balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk at the reporting date equals the fairvalue of each category of financial instruments (see note 25 Financial instruments). The group does not hold collateral as security.


Our performance

Aker Kværner ASA gives parent company guarantees to group companies. For further information, see note 9 Guarantees in the Aker Kværner ASA account.

Liquidity riskLiquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due. The group’s approach to managing liquidity is to ensure,as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. This is under both normal and stressed conditions, without incurringunacceptable losses or risking damage to the group’s reputation.

Prudent liquidity risk management includes maintaining sufficient cash, the availability of funding from an adequate amount of committed credit facilities andthe ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group Treasury maintains flexibility in funding by maintainingavailability under committed credit lines (note 25.6 Non-current borrowings).

Management monitors rolling weekly and monthly forecasts of the group’s liquidity reserve on the basis of expected cash flow. For information regardingcapital expenditures and net operating assets, see note 6 Segment information.

Financial liabilities and the period in which they are mature

2007 2006

Amounts in NOK million Total

6 mthsandless

6-12mths

1-2years

2-5years

Morethan 5years Total

6 mthsandless

6-12mths

1-2years

2-5years

Morethan 5years

Unsecured bond issues 1)

Fixed rate bondNOK 150 mill. - 204 - 5 - 4 - 9 - 27 - 159 - 213 - 5 - 4 - 9 - 27 - 168

Floating rate bondsNOK 500 mill. - 566 - 17 - 17 - 533 - - - 569 - 11 - 12 - 23 - 523 -NOK 650 mill. - 834 - 23 - 23 - 46 - 742 - - 810 - 16 - 16 - 32 - 746 -NOK 300 mill. - 432 - 11 - 11 - 22 - 66 - 322 - 405 - 7 - 8 - 15 - 45 - 330

Deferred acquisition costs TH GlobalGBP 38 mill. 2) - 480 - - 96 - 96 - 288 - - 654 - - 109 - 109 - 327 - 109

Other non-current liabilitiesUSD - 20 - - - - 20 - - 33 - - - 29 - 4 -

Derivative financial instrumentsAssets 3) 26 210 16 478 6 704 2 523 505 - 36 236 14 623 7 516 13 248 849 -Liabilities 3) -25 647 -16 151 -6 528 -2 480 - 488 - -35 977 -14 481 -7 464 -13 187 - 845 -Trade and other payables -15 165 -15 141 - - 24 - - -16 217 -15 962 - - 255 - -Interest-bearing current liab. - 25 - - 25 - - - - - - - - -

Sum -17 163 -14 870 1 - 687 - 1 126 - 481 -18 642 -15 859 - 97 - 411 -1 668 - 607

Nominal currency value including interests.1)

The difference of payments in 2006 and 2007 is due to changes in the foreign exchange rate (GBP / NOK).2)

The numbers represent grossing effects caused by time adjustments (ie. by using forward-forwards to adjust maturities).3)

See note 25.3 Derivative financial instruments for maturity analysis of foreign currency contracts included in cash flow hedge accounting.

Capital riskThe group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholdersand benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the group may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issuenew shares or sell assets to reduce debt. From time to time, the group purchases its own shares in the market; the timing of these purchases depends onmarket prices.

During the first quarter 2007 Aker Kvaerner announced a buy-back of own shares and in connection with the Annual General Meeting it was decided to cancelparts of the own new shares. In addition, there were several share buy-backs in 2007 and as per year end the group holds 1.6 percent of outstanding shares.Please see Statement of changes to equity for more details.

The group monitors capital on the basis of a gross debt / EBITDA ratio. The target for the ratio is to be kept below 2. This ratio is calculated as gross debt, includingall interest bearing liabilities as shown in note 25 Financial instruments, divided by EBITDA (earnings before interest, tax, depreciation and amortisation). The secondpriority lien note in 2006 is excluded.

The ratio as at 31 December 2007 and 2006 were as follows


Gross debt 2 022 2 126EBITDA 3 912 2 872

Gross debt / EBITDA 0,5 0,7


Our performance

Note 24: Financial income and expenses

Recognised in profit and loss


Ineffective portion of changes in fair value of cash flow hedges 7 - -Net change in fair value of financial assets at fair value through profit or loss 1) 155 241 - 396

Profit (+) / loss (-) on foreign currency forward contracts 162 241 - 396

Interest income on bank deposits 85 172 50Net foreign exchange gain / loss 18 20 18Other finance income 2 2 -

Finance income 105 194 68

Interest expense on financial liabilities measured at amortised cost - 209 - 429 - 467Refinancing cost 2) - - 652 -

Finance expense - 209 -1 081 - 467

Net finance expense recognised in profit or loss 3) 58 - 646 - 795

All hedging instruments did not qualify for hedge accounting in accordance with IAS 39 in 2005 and January 2006. The hedging instruments for the minor contracts did not qualify for1)the rest of 2006 and for 2007. The fair value changes on foreign exchange forward contracts, not hedge accounted, have been recorded in the income statement as financial items.Hedge accounting is explained in note 25.3 Derivative financial instruments.

Refinancing costs consists of capitalised refinance costs from the refinancing in 2004, unwinding of discount, interest on second priority lien notes due 15 June 2007 and interest on2)deposit for neutralisation of loan 15 June 2007.

Net finance expense recognised in profit and loss includes income and expense from financial instruments only (see not 25 Financial instruments). Share of profit or loss from3)associates is therefore not included.

The above financial income and expense include the following in respect of assets (liabilities) not at fair value through profit or loss

Total interest income on financial assets 85 172 50Total interest expense on financial liabilities - 209 -1 081 - 467

Recognised directly in equity


Hedging reserve as at 1 January 203 - -Fair value of cash flow hedges transferred to profit and loss - 633 - 178 -Effective portion of changes in fair value of cash flow hedge 788 461 -Deferred tax - 43 - 80 -

Hedging reserve movements 112 203 -

Hedging reserve as at 31 December 315 203 -

Translation reserve as at 1 January - 161 - 216 - 360Effective portion of change in fair value of net investment hedge 120 7 42Foreign currency translation differences for foreign operations - 554 48 102

Translation reserve movements - 434 55 - 216

Translation reserve as at 31 December - 595 - 161 - 216

An impairment loss of NOK 4 million (NOK 13 million in 2006) in respect of trade receivables was recognised in cost of sales.

See note 25 Financial instruments for information of the financial income and expenses generating items.


Our performance

Note 25: Financial instruments

2007 2006

Amounts in NOK million Note Assets Liabilities Assets Liabilities

Cash and cash equivalents 25.1 3 524 - 5 666 -Investments in other companies 25.2 133 - 16 -

Non-current available-for-sale financial assets 133 - 16 -Derivative financial instruments 25.3 1 468 - 954 813 - 471

Current financial assets and liabilities through profit or loss 1 468 - 954 813 - 471Non-current interest-bearing receivables 25.4 14 - 54 -Non-current loans and receivables 9 - 6 -Trade and other receivables 25.5 13 361 - 13 712 -Current interest-bearing receivables 540 - 546 -Deposit to repay second priority lien notes 25.6 - - 2 411 -Borrowings 25.6 - -1 998 - - 2 126Second priority lien notes 25.6 - - - - 2 329Trade and other payables - - 15 165 - -16 217Interest-bearing current liabilities - - 24 - -

Total loans and receivables and financial liabilities at amortised cost 13 924 - 17 187 16 729 - 20 672Less non-current portion loans and receivablesand financial liabilities at amortised cost - 23 1 998 - 60 2 126

Current portion loans and receivablesand financial liabilities at amortised cost 13 901 - 15 189 16 669 - 18 546

Basis for determining fair values and fair values versus carrying amountsCash and cash equivalentsThe carrying amount is a reasonable approximation of fair values for cash and cash equivalents.

Non-current available-for-sale financial assetsAvailable-for-sale financial assets are measured at fair value. Fair values are estimated using market-based pricing techniques.

Current financial assets and liabilities through profit or lossFinancial assets and liabilities through profit or loss is measured at fair value. The fair value of financial instruments traded in active markets (such as currencyforward contracts and options, interest swaps and FRA’s) is based on quoted market prices (current bid price) at the balance sheet date.

Loans and receivables and financial liabilities at amortised costDue to the short term nature, the carrying amount is a reasonable approximation of fair values for the financial instrument current receivables and liabilities,with the exception of non-current borrowings, which is detailed in the table below.

2007 2006

Amounts in NOK millionCarryingamount Fair value

Carryingamount Fair value

Bonds 1) 1 571 1 600 1 559 1 600Other borrowings 2) 427 427 567 567

Total Borrowings 1 998 2 027 2 126 2 167

Fair value is quoted prices on the Oslo Stock Exchange. The difference between the carrying amount and the fair value of the bonds is due to amortisation of issue costs and accrued1)interests.

Include deferred acquisition costs of TH Resources of NOK 407 million, which is the calculated NPV of yearly payments to TH Global for agency business, using a discount rate of2)6 percent. The remaining debt of NOK 20 million are related to several minor loans where the carrying amount is used as fair value due as the difference between carrying amountand fair value is immaterial.

In all material financial instruments measured at fair value, the measurment is performed by using valuation techniques based on assumptions supported byobservative market prices or rates.

Note 25.1: Cash and cash equivalents

Group cash pool systemsThe group policy for the purpose of optimising availability and flexibility of cash within the group is to operate a centrally managed cash-pooling arrangement.Such arrangements are either organised with a bank as a service provider, or as a part of the operation of the internal treasury function. An important condi-tion for the participants (business units) in such cash pooling arrangements is that the group as an owner of such pools is financially viable and is able toprove its capability to service its obligations concerning repayment of any net deposits made by business units.


Our performance

Note 25.2: Investments in other companies


Investments in other companies as at 1 January 16 22Additions 1) 119 3Disposals - 2 - 9

Investments in other companies as at 31 December 133 16

Additions are mainly related to Aker Kværner ASA purchase 19.1 percent of Aker Oilfield Services in 2007.1)

Available-for-sale financial assets are shares in unlisted companies and are mainly dominated in NOK (NOK 83 million in 2007 and NOK 11 million in 2006).

Note 25.3: Derivative financial instruments

2007 2006

Amounts in NOK million Assets Liabilities Assets Liabilities

Forward foreign exchange contracts – cash flow hedges 925 - 409 440 - 151Forward foreign exchange contracts – not hedge accounted 500 - 545 355 - 317Forward foreign exchange contracts – hedge of net investments in US entities 25 - 1 -Interest rate swaps - cash flow hedges 17 - 8 -Interest rate swaps - not hedge accounted 1 - 9 - 3

Total 1 468 - 954 813 - 471

Trading derivatives are classified as current assets or liabilities. The full fair value of a hedging derivative is classified as a non-current asset or liability if theremaining maturity of the hedged item is more than 12 months, and as a current asset or liability if the maturity of the hedged item is less than 12 months. Ifthe hedged item is related to projects, such as work in progress or trade receivables, the hedging derivative is always classified as current asset or liability.

The ineffective portion recognised in the profit and loss that arises from cash flow hedges amounts to a gain of NOK 7 million (gain of NOK 2 million in 2006).No ineffectiveness arose from net investment in foreign entity hedges in 2007 or 2006. In 2007 there were no fair value hedges and the ineffectiveness fromfair value hedges was NOK 0 million in 2006.

Foreign currency forward contractsGroup Treasury hedge future transactions in foreign currencies. Due to the large number of transactions, Treasury may bundle the contracts (both foramounts and currency) before hedging the net portion externally. This procedure means that it is not possible to achieve hedge accounting (due mainly to themix of currency bundles). Approximately 80 percent of the exposure to foreign exchange variations in future cash flows is related to a few large projects.These projects have been hedged as one-to-one contracts from February 2006 in order to meet the requirements for hedge accounting. All other hedges arenot designated as IAS 39 hedges and will have a small but volatile effect on profit or loss.

The notional principal amounts of the net qualifying forward foreign exchange cash flow hedges at 31 December 2007 were NOK 516 million (NOK 289 millionin 2006).

The hedged highly probable forecast transactions denominated in foreign currency are expected to occur at various dates during the next 1–7 years, depen-ding on progress in the projects. Gains and losses on forward foreign exchange contracts recognised in the hedging reserve in equity as of 31 December2007 are recognised in the income statement in the period or periods during which the hedged transactions affect the income statement. This is generallywithin 12 months from the balance sheet date unless the gain or loss is over the lifetime of the asset.

The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to occur and whenthe cash flows related to project revenues are expected to impact profit and loss. Given the hedging policy this table also constitutes a maturity analysis forderivative financial assets and liabilities.

2007 2006


Expectedcashflows

6 mthsor less

6-12mths

1-2years

2-5years

Morethan 5years

Expectedcashflows

6 mthsor less

6-12mths

1-2years

2-5years

Morethan 5years

Interest rate swaps 1)

Receivables 288 41 43 77 74 53 142 16 16 64 43 3Payables - 251 - 32 - 38 - 69 - 62 - 50 - 132 - 15 - 15 - 59 - 40 - 3

Foreign currency forwardcontracts 2)

Receivables 10 160 5 693 2 756 1 426 285 - 10 693 3 472 1 575 5 612 34 -Payables - 6 619 - 3 861 - 1 660 - 905 - 193 - - 3 961 - 1 558 - 1 098 - 1 305 - -

Total 3 578 1 841 1 101 529 104 3 6 742 1 915 478 4 312 37 -

Half of the group’s interest exposure related to the Norwegian bonds is swapped to fixed interest rate. The cash flows in the table are based on fixed rate of 4.5 percent and market floating rate.1)

The figures include the hedges that qualify for hedge accounting, which comprises approximately 400 transactions and 80 percent of the group’s exposure. The amounts are NOK2)nominal values of foreign currency cash flows at NOK closing exchange rates 31 December 2007. The group has economic hedges on the remaining exposures which are not hedgeaccounted. These economic hedges constitute about 1 900 transactions.


Our performance

The following table shows the unsettled cash flow hedges’ impact on profit and loss and equity as at 31 December.

2007 2006


Fair value of allhedging

instruments as at31.12.2007

Recognised inprofit and loss

Deferred in equity(the hedging

reserve)

Fair value of allhedging

instruments as at31.12.2006

Recognised inprofit and loss

Deferred in equity(the hedging

reserve)

Interest rate swaps 1) 17 9 17 8 8 8Forward exchangecontracts 2) 516 308 208 288 118 170

Total 533 317 225 296 126 178

The value of the interest swaps is attributable to changes in the interest swap curve for Norwegian kroner during the period from inception of the hedge on 1 December 2006 to year1)end 2007. Based on an assumption of unchanged interest swap curves after 1 January 2008, this value will come to Income statement during the next seven years.

The purpose of the hedging instrument is to secure a situation where the hedged item and the hedging instrument together represent a predetermined value independent of2)fluctuations of exchange rates. Revenue and expense on the underlying construction contracts are recognised in the income statement in accordance with progress. Consequently,NOK 308 million of the value of the forward contracts have already affected income statement indirectly as revenues and expenses are recognised based on updated forecasts andprogress. The NOK 208 million that are currently recorded directly in the hedging reserve, will be reclassified to income statement over approximately the next three years.

A USD forward contract is used to hedge USD 200 million of the net investment in the group’s US entities. The hedge replaces a hedge of USD 85 millionwhich was entered into 1 December 2006 and replaced in June 2007. The foreign exchange gain of NOK 120 million (NOK 4 million in 2006) on translation ofthe forward contract to NOK at the balance sheet date is recognised in translation reserves, in shareholder’s equity, offsetting the same amount of currencylosses / gains on translation of the net assets of the group’s US entities.

Interest rate swapsAs per 31 December 2007, Aker Kvaerner has one bond of NOK 150 million with fixed interest rates at 6 percent and three bonds with a total of NOK 1 450million with floating interest rates. Parts of the cash flow interest rate risks represented by these floating interest rates (mainly NIBOR and LIBOR) are hedgedto fixed interest rates using interest rate swaps. The share of floating / fixed interest rates is 50 / 50. Hedge accounting is applied using the cash flow hedgeaccounting model which means that gains and losses on interest rate swap contracts as at 31 December 2007 are recognised in the hedging reserve inequity and will be continuously released to the income statement until the repayment of the bank borrowings (note 25.6 Non-current borrowings).

The fair value amounts of the outstanding interest rate swap contracts at 31 December 2007 were NOK 17 million (NOK 8 million in 2006).

Note 25.4: Non-current interest-bearing receivables


Restricted deposits - 42Loans to employees 1) 10 12Other 4 -

Non-current interest-bearing receivables 14 54

Average interest rate for loans to employees is 4.42 percent in 2007, and was 2.92 percent in 2006.1)

The group has not recognised any impairment losses related to its non-current interest-bearing receivables.

Note 25.5: Trade and other receivables


Trade receivables 1) 5 898 5 797Less provision for impairment of receivables - 83 - 41

Trade receivables net 5 815 5 756Advances to suppliers 434 947Receivables from related parties 3 9Work in progress 4 774 3 924Other receivables 1) 2 335 3 076

Trade and other receivables 13 361 13 712Derivative financial instruments 1 468 813

Total trade and other current receivables 14 829 14 525

Trade receivables and other receivables include NOK 89 million and NOK 19 million respectively, falling due after one year (NOK 100 million and NOK 42 million in 2006).1)


Our performance

Note 25.6: Non-current borrowings

31 December 2007:

Amounts in NOK millionNominal

currency valueBookvalue

Interestrate

Fixed int.margin

Interestcoupon

Maturitydate Interest terms

Norwegian bondsISIN NO 0010341316 NOK 500 million 491 5.81 % 0.70 % 6.51 % 01.12.2009 Floating, 3 monthsISIN NO 0010341324 NOK 650 million 638 5.81 % 1.05 % 6.86 % 01.12.2011 Floating, 3 monthsISIN NO 0010341332 NOK 300 million 295 5.81 % 1.35 % 7.16 % 01.12.2013 Floating, 3 monthsISIN NO 0010342587 NOK 150 million 147 6.00 % 6.00 % 01.12.2013 Fixed, 7 years

Total bonds 1) 1 571

Bank debtRevolving credit facility EUR 750 million - 0,50 % 25.10.2011 LIBOR + Margin 2)

Deferred acquisition cost TH Global 3) GBP 38 million 407 6.00 % 13.10.2012

Other loans 20

Total non-current borrowings 1 998

31 December 2006:

Amounts in NOK millionNominal

currency valueBookvalue

Interestrate

Fixed int.margin

Interestcoupon

Maturitydate Interest terms

Norwegian bondsISIN NO 0010341316 NOK 500 million 487 3.67 % 0.70 % 4.37 % 01.12.2009 Floating, 3 monthsISIN NO 0010341324 NOK 650 million 634 3.67 % 1.05 % 4.72 % 01.12.2011 Floating, 3 monthsISIN NO 0010341332 NOK 300 million 292 3.67 % 1.35 % 5.02 % 01.12.2013 Floating, 3 monthsISIN NO 0010342587 NOK 150 million 146 6.00 % 6.00 % 01.12.2013 Fixed, 7 years

Total bonds 1) 1 559

Bank debtRevolving credit facility EUR 750 million - 0.625 % 25.10.2011 LIBOR + Margin 2)

Deferred acquisition cost TH Global 3) GBP 54 million 534 6,00 % 13.10.2012

Other loans 33

Total non-current borrowings 2 126

The book value is calculated by reducing the nominal value of NOK 1 600 million by total issue costs related to the new financing of NOK 38 million (NOK 47 million in 2006). It also1)comprises accrued interest and issue costs related to the bonds.

The margin applicable to the facility is decided by a price grid based on the gearing ratio. Commitment fee is 40 percent of the margin.2)

The acquisition of TH Resources. The book value is net present value of yearly payments, discounted by 6 percent per year.3)

Norwegian bondsAker Kvaerner has issued four bonds with maturities of three, five and seven years (two loans), starting 1 December 2006. The bonds are denominated in Nor-wegian kroner and are issued in the Norwegian bond market. Three of the bonds are issued based on a floating interest rate plus a predefined margin. Oneof the bonds, NOK 150 million with seven years maturity, has a fixed interest rate of 6 percent.

The bonds are issued with Norsk Tillitsmann as trustee and the loan agreements are based on Norsk Tillitsmann standard loan agreement for such bonds. Thebonds are unsecured on a negative pledge basis and include no dividend restrictions.

The bonds are listed on the Oslo Stock Exchange.

Bank debtThe bank debt is a multicurrency revolving credit facility of EUR 750 million with initial maturity in October 2012. The facility includes two one-year extensionoptions meaning that the maturity may be extended to October 2014. The facility is provided by a bank syndicate consisting of Nordic and international highquality banks. The facility was undrawn at year end 2007. The terms and conditions include restrictions which are customary for this kind of facility, includinginter alia negative pledge provisions and restrictions on acquisitions, disposals and mergers. Furthermore, there are certain changes of control provisionsincluded. The facility includes no dividend restrictions and is unsecured.

The financial covenants are based on two sets of key financial ratios; a gearing ratio based on gross debt / EBITDA and an interest coverage ratio based on EBITDA /net finance costs. The financial covenants are tested on a quarterly basis. The margin applicable to the facility is based on a price grid determined by the gearing ratio.

The facility is unsecured.


Our performance

Refinancing 1 December 2006On 1 December 2006, Aker Kvaerner concluded a refinancing of all credit facilities. The refinancing included repayment of all subordinated credit facilitiesestablished in 2002 with final maturity in 2011, cancellation of credit facilities and neutralisation of second priority lien notes 2004 / 2011. All costs related tothe old debt were recognised in the income statement as at 31 December 2006 and the final settlement of the second priority lien notes took place 15 June2007 in accordance with the assumptions in December 2006.

Repayments of non-current borrowingsBonds 1)

Deferred costTH Global 2) Other Total

2008 - -96 - - 962009 - 500 -96 - - 5962010 - - 96 - 18 - 1142011 - 650 - 96 - 2 - 7482012 - - 96 - - 962013 - 450 - - - 450

Total repayments - 1 600 - 480 - 20 - 2 100

All figures are stated at nominal value.1)

The payment amounts include interest.2)

Mortgages and guarantee liabilitiesThe group has NOK 1 million in mortgage liabilities, which is secured by pledges on property, plant and equipment with book values of NOK 1 million.The group has no guarantee liabilities as at 31 December 2007, except for guarantees related to contracts.

Note 26: Subsequent events

Acquisition of own sharesDuring January 2008, Aker Kvaerner has acquired in total 595 000 own shares for a total consideration of NOK 70 million.

DividendThe Board of Directors will propose an ordinary dividend of NOK 3 per share which amounts to NOK 822 million

RR Offshore OY / JSC Astrakhan KorabelIn February 2008 Aker Kvaerner has entered into an agreement which gives full ownership of the Finnish engineering and project management companyRR Offshore OY and ends the co-operation between Aker Kvaerner and its former Russian partner ST Holdings. As part of the agreement, Aker Kvaerner sellsits shares in the Astrakhan Korabel yard to ST Holding. The parties have agreed to not disclose any transaction values.

First Interactive ASIn February 2008, Aker Kvaerner has acquired a majority shareholding in the Norwegian company First Interactive. The agreement includes an option to buythe remaining shares. First Interactive is a software company specialising in 3D visualisation and simulation for the oil & gas sector. First Interactive and AkerKvaerner MH are jointly developing applications for 3D visualisation and simulation of offshore drilling operations. The technology and competence can alsobe applied to other parts of Aker Kvaerner’s business such as marine installation, subsea and well services. First Interactive’s headquarter is in Stavanger,Norway, with a subsidiary in St. Petersburg, Russia. In 2007, First Interactive realised revenues in excess of NOK 25 million.

New Pension plan for employees in NorwayDuring the summer of 2008 Aker Kvaerner in Norway will start the process of transitioning its current Defined Benefit pension plans for employees below 58years of age over to a Defined Contribution plan. Employees in the existing plan will keep their vested rights (accrued benefit) in the form of a “paid-up policy.” Thenew Defined Contribution plan is designed so that existing employees in the current pension scheme will not lose out on the change over to the new plan.

Aker Oilfield ServicesIn February 2008 Aker Kvaerner has increased the ownership in Aker Oilfield Services from 19 percent to 32 percent by investing NOK 167 million in newequity in the company.

Note 27: Discontinued operations

Aker Kvaerner’s Pulping & Power businesses were sold in the fourth quarter of 2006.


Our performance

Note 28: Group companies as at 31 December 2007

Company Location Ownership (percent) 1)

Aker Kværner ASA Fornebu, Norway 100Aker Kvaerner Business Partner Ltd London, UK 100Aker Kværner E&C Group AS Fornebu, Norway 100Aker Kvaerner Australia Pty Ltd Melbourne, Australia 10011259 Newfoundland Ltd British Columbia, Canada 100Aker Oil & Gas Technology Canada British Columbia, Canada 100Aker Kvaerner Chemetics Offshore Services Inc British Columbia, Canada 100Aker Kvaerner E&C US Inc Houston, USA 100Aker Kvaerner E&C Inc Houston, USA 100Aker Kvaerner Industrial Constructions Inc Houston, USA 100Aker Kvaerner Metals Inc Houston, USA 100Aker Kvaerner Pharmaceuticals LLC Houston, USA 100Aker Kvaerner Caribe LLP San Juan, Puerto Rico 98Aker Kvaerner US LLP Houston, USA 100Aker Kvaerner E&C Worldwide Corporation Houston, USA 100Aker Kvaerner Chile S.A. Santiago, Chile 100Aker Kvaerner Business Partner Inc Houston, USA 100Aker Kvaerner Songer Inc Houston, USA 100Aker Kvaerner Power Inc Charlotte, USA 100DSI Constructors Houston, USA 100Aker Kvaerner Willfab Inc Williamsport, USA 100Kvaerner Peru SA San Isidro, Peru 100Aker Kvaerner E&C (Thailand) Ltd Bankok, Thailand 100Aker Kvaerner E&C Europe Ltd London, UK 100Aker Kvaerner Engineering Services Ltd Stockton on Tees, UK 100Aker Kvaerner Europe BV Zoetermeer, Netherlands 100Aker Kvaerner Belgium NV / SA Antwerp, Belgium 100Aker Kvaerner Germany GmbH Lagenfeld, Germany 100Aker Kvaerner Netherlands BV Zoetermeer, Netherlands 100Aker Kvaerner Projects Ltd London, UK 100Aker Kvaerner Gulf Ltd Al Khobar, Saudi Arabia 100Kvaerner Construction (Stevanage) Ltd London, UK 100Kvaerner (Ireland) Ltd Dublin, Ireland 100MC Engenharia Ltda São Paulo, Brazil 100Kvaerner Pulping SL Barcelona, Spain 100Kvaerner Water AB Ørnskjøldsvik, Sweden 100Aker Kværner O&G Group AS Fornebu, Norway 100Aker Kværner AS Fornebu, Norway 100Aker Kværner Business Partner AS Fornebu, Norway 100Aker Kværner Carbon AS Lysaker, Norway 100Aker Kværner Contracting AS Lysaker, Norway 100Aker Kværner Contracting International (Spain) AS Fornebu , 'Norway 100Aker Kværner Geo AS Stavanger, Norway 100Aker Kvaerner Well Services Ltd Aberdeen, UK 100Aker Kværner Elektro AS Stord, Norway 100Aker Kværner Offshore Partner AS Stavanger, Norway 100Aker Inspection and Consulting AS Verdal, Norway 100Aker Kværner Advantage AS Bergen, Norway 100Aker Kvaerner Oilfield Services Canada Inc St. Johns Newfoundland, Canada 100Aker Kvaerner Oil & Gas Brazil Ltda Curitiba, Brazil 100Aker Kvaerner Songer Canada Ltd Ontario, Canada 100Aker Kvaerner Oil & Gas US LLC Houston, USA 100Aker Kvaerner Inc Houston, USA 100Aker Kvaerner Enercon Inc Houston, USA 100Aker Kvaerner Michigan Inc Houston, USA 100Aker Kvaerner Plant Services Group Inc Houston, USA 100Aker Kvaerner Subsea Inc Houston, USA 100Kvaerner Process Services Inc Houston, USA 100Aker Kvaerner Process Systems US Inc Houston, USA 100Aker Kværner Subsea AS Fornebu, Norway 100Kvaerner Oilfield Products Group Ltd London, UK 100PT Aker Kvaerner Subsea Indonesia Jakarta, Indonesia 100Aker Kvaerner Subsea Ltd Maidenhead, UK 100Aker Kværner Operations AS Stavanger, Norway 100Aker Kvaerner Operations Ltd London, UK 100Aker Kvaerner Advantage Ltd London, UK 100


Our performance


Aker Kvaerner Advantage BV Gravenhage, Netherlands 100Aker Kvaerner Advantage Pty Ltd Melbourne, Australia 100Aker Kværner Process Systems AS Fornebu, Norway 100Aker Kvaerner Process Systems Asia Pacific Sdn Bhd Shah Akam, Malaysia 100Aker Kvaerner Process Systems Australia Pty Ltd Welshpool, Australia 100Aker Kvaerner Process Systems SA Vincennes Cedex, France 100Aker Kværner Cool Sorption AS Glostrup, Denmark 100Aker Kvaerner Process Systems Ltd Aberdeen, UK 100Aker Kværner Engineering & Technology AS Fornebu, Norway 100KB eDesign AS Oslo, Norway 100Norwegian Contractors AS Fornebu, Norway 100Aker Marine Contractors AS Fornebu, Norway 60Aker Marine Contractors Pty Ltd Perth, Australia 60Aker Marine Contractors US Inc Houston, USA 60Aker Maritime US Inc Houston, USA 100Aker Offshore International Ltd London, UK 100Aker Kvaerner Offshore Partner Ltd London, UK 100Aker Kværner Stord AS Stord, Norway 100Stord Montasje AS Stord, Norway 100Stord Verft AS Stord, Norway 100Aker Valves AS Stord, Norway 100Aker Kværner Verdal AS Verdal, Norway 100Aker Kværner Cold Bending AS Verdal, Norway 100Aker FDV AS Verdal, Norway 100Aker Kværner Industributikk AS Verdal, Norway 100Aker Kværner Sakyndig Virksomhet AS Verdal, Norway 100Aker Kværner Jacket Technology AS Verdal, Norway 100Kogas AS Fornebu, Norway 100Aker Kværner Egersund AS Egersund, Norway 100Kværner Eureka AS Tranby, Norway 100Kvaerner Holdings Switzerland AG Zug, Switzerland 100Kvaerner E&C Singapore Pte Ltd Singapore, Singapore 100Aker Kvaerner Subsea (Services) Pte Ltd Singapore, Singapore 100Aker Kvaerner Oil & Gas Australia Pty Ltd Melbourne, Australia 100Aker Kvaerner Angola Ltd Maidenhead, UK 100Aker Kvaerner Nigeria Ltd Lagos State, Nigeria 100Kvaerner Process Overseas Holding Ltd London, UK 100Aker Kvaerner E&C (Shanghai) Co Ltd Shanghai, China 100Aker Kvaerner Engineering S.E.A. Snd Bhd Kuala Lumpur, Malaysia 90Aker Kvaerner (Mauritius) Ltd Port Louis, Mauritius 100Aker Kvaerner (Thailand) Ltd Bankok, Thailand 100PT Aker Kvaerner Indonesia Snd Bhd Jakarta, Indonesia 100Aker Kværner MH AS Kristiansand S, Norway 100Drilltech AS Kristiansand S, Norway 100Aker Kvaerner MH UK Ltd Aberdeen, UK 100Maritime Promeco AS Kristiansand S, Norway 100Aker Kvaerner MH India Pvt Mumbai, India 51Aker Kvaerner MH Inc Katy, USA 100RIG Specialities Inc Houston, USA 100Aker Kvaerner MH Singapore Pte Ltd Singapore, Singapore 100Woodfield Systems Co Ltd Kent, UK 100Aker Kværner Pusnes AS Arendal, Norway 100Aker Kværner Porsgrunn AS Porsgrunn, Norway 100Pusnes Korea Co Ltd Pusan, South Korea 80Aker Kværner Well Service AS Stavanger, Norway 100Aker Kvaerner Advantage Inc Houston, USA 100Aker Insurance AS Fornebu, Norway 100Aker Kværner E&C Europe AS Fornebu, Norway 100Aker Kvaerner Engineering Services BV Maastrichts, Netherlands 100Aker Kvaerner OGPE Projects (Shanghai) Co Ltd Shanghai, China 100Aker Kvaerner Strategic Operations Inc Washington, USA 100Aker Kværner E&C Americas AS Fornebu, Norway 100Step Offshore AS Hvalstad, Norway 51Aker Kvaerner Kazakhstan Ltd London, UK 100Aker Kværner Contracting Italy AS Fornebu, Norway 100Aker Kvaerner Canada Inc British Columbia, Canada 100Kvaerner Davy GOT Moscow, Russia 51Aker Kvaerner E&C Holdings (Thailand) Ltd Bankok, Thailand 100Aker Kvaerner Powergas Pvt Ltd Mumbai, India 64


Our performance


Aker Kvaerner Powergas Systems Pvt Ltd Mumbai, India 64Aker Kvaerner Well Services Inc Houston, USA 100Aker Kvaerner Process Systems Snd Bhd Kuala Lumpur, Malaysia 100Aker Kvaerner Malaysia Snd Bhd Kuala Lumpur, Malaysia 100Aker Kvaerner Contracting Ltd Aberdeen, UK 100Aker Kvaerner Operations APS Glostrup, Denmark 100Aker Kvaerner Asia Pacific Snd Bhd Kuala Lumpur, Malaysia 100Kværner Engineering AS Fornebu, Norway 100Aker Kvaerner US Inc Houston, USA 100Aker Kvaerner US Holdings Inc Houston, USA 100Aker Kvaerner Development Inc Houston, USA 100Aker Kværner Process Systems International AS Fornebu, Norway 100Aker Kvaerner Cool Sorption Siam Ltd Rayong, Thailand 100Aker Kvaerner SA de CV Lomas de Chaputtepec, Mexico 100Aker Kværner Academy AS Fornebu, Norway 100Phoenix Polymers International Ltd Aberdeen, UK 50

The share of legal ownership equals the share of voting shares.1)


Our performance

Aker Kværner ASA:

Income statement


Operating revenues 17 21Operating expenses 1 - 171 - 135

Operating loss - 154 - 114

Income from investments in subsidiaries 2 157 3 970Net financial items 2 436 - 364

Profit before tax 2 439 3 492

Tax 3 - 149 52

Net profit 2 290 3 544

Net profit for the year is distributed as followsProposed dividends 809 2 200Other equity 1 481 1 344

Total distributed 2 290 3 544


Our performance

Aker Kværner ASA:

Balance sheet as at 31 December


ASSETSDeferred tax asset 3 40 193Investments in group companies 4 6 856 6 593Investments in other companies 4 72 -Interest-bearing non-current receivables 7 8 8

Total non-current assets 6 976 6 794

Interest-bearing current receivables from group companies 7 9 726 5 737Interest-bearing current receivables other 7 - 45Non interest-bearing receivables from group companies 5 2 843 5 816Other current receivables 5 1 494 171Cash and cash equivalents 7 1 855 3 294

Total current assets 15 918 15 063

Total assets 22 894 21 857

LIABILITIES AND SHAREHOLDERS' EQUITYIssued capital 6 548 550Own shares 6 - 9 -Share premium reserve 6 4 279 4 279Other equity 6 3 447 2 713

Total equity 8 265 7 542

Interest-bearing debt 7, 8 1 571 1 559

Total non-current borrowings 1 571 1 559

Interest-bearing current debt to group companies 7 9 999 10 250Provision for dividend 809 2 200Non interest-bearing debt to group companies 5 1 259 212Other current liabilities 5 991 94

Total current liabilities 13 058 12 756

Total liabilities and shareholders' equity 22 894 21 857





Vibeke HammerMadsen



Our performance

Aker Kværner ASA:

Statement of cash flow


Profit (+) / loss (-) before tax 2 439 3 492

Unrealised exchange gain (-) / loss (+) - 26 - 186Accrued interest long term debt 2 6Depreciation and amortisation (+) 28 -Changes in other net operating assets 3 684 - 2 427

Net cash flows operating activities 6 127 885

Acquisition of businesses - 394 - 310Disposal of businesses 31 -

Net cash flow from investing activities - 363 - 310

Proceeds from non-current debt - 1 553Repayment of non-current debt - - 3 535Changes in net borrowings from group companies - 4 240 4 362Purshase of shares - 781 -Dividends paid - 2 182 - 275

Net cash from financing activities - 7 203 2 105

Net decrease(-) / increase (+) in cash and bank deposits - 1 439 2 680

Cash and cash equivalent at 1 January 3 294 614

Cash and cash equivalent at the end of the period 1 855 3 294


Our performance

Aker Kværner ASA:

Accounting principles

Aker Kværner ASA is a company domiciled in Norway. The accounts are presented in conformity with Norwegian legislations and Norwegian generally acceptedaccounting principles.

Investment in subsidiaries / other companiesInvestments in subsidiaries / other companies are accounted for using the cost method in the parent company accounts. The investments are valued at costless impairment losses. Write down to fair value are according to good accounting practice recognised when the impairment is considered not to betemporary and reversed if the basis for the write down is no longer present.

Dividends and other payouts are recognised as income the same year as it is appropriated in the subsidiary. If the dividend exceeds accumulated profits inthe subsidiary after the day of acquisition, the payment is treated as a reduction of the carrying value of the investment.

Classification and valuation of balance-sheet itemsCurrent assets and current liabilities include items due within one year or items that are part of the operating cycle. The rest is classified as fixed assets /non-current debt.

Current assets are valued at the lowest of cost and fair value. Current debt is valued at nominal value at the time of recognition.

Fixed assets are valued at cost less accumulated depreciation, but are written down to fair value if impairment is not expected to be temporary. Non-currentdebts are initially valued at transaction value less attributable transaction costs. Subsequent to initial recognition, interest-bearing non-current debt is stated atamortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowing on aneffective interest basis.

Trade receivables and other receivables are recognised at nominal value less provision for expected losses. Provision for expected losses is considered on anindividual basis.

Other receivables are valued at nominal value less provisions for expected loss. Provisions for losses are based on individual judgement of each receivable.

Cash and cash equivalents is the parent company’s cash as well as net deposits from subsidiaries in the group cash pooling systems owned by the parentcompany. Correspondingly the parent company’s current debt to group companies will include the same net deposits in the group’s cash pooling system.

Foreign currency and interest swapsCash, receivables and foreign currency debt are valued at the exchange rate at the end of the fiscal year. Subsidiaries have entered into agreements with theparent company to hedge their foreign exchange exposure. In the parent company this risk is hedged in the external financial markets. All agreements arebooked at fair value with any gains or losses booked against the income statement. In order to reduce the financial market exposure, interest swap agreements areentered. The value of these are recognised directly against equity and released to income statement in proportion to the relevant interest expense.

TaxTax expense in the profit & loss account comprises current tax and changes in deferred tax. Deferred tax is calculated as 28 percent of temporary differencesbetween accounting and tax values as well as any tax losses carry forward at the year end. A net deferred tax asset is recognised only to the extent it isprobable that future taxable profits will be available against which the asset can be utilised.


Our performance

Aker Kværner ASA:

Notes to the accounts

Note 1: Operating expenses

There are no employees in Aker Kværner ASA. Group management and corporate staff are employed by other Aker Kværner companies and costs for theirservices as well as other parent company costs are charged to Aker Kværner ASA. Directors and senior managements remuneration and shareholding aredescribed in note 18 Salaries, wages and social security costs to the consolidated accounts.

Fees to KPMG in 2007 for statutory audit of the parent company amounted to NOK 4 million. Fees for statutory audit of the whole Aker Kvaerner groupamounted to 26 million, fees for other assurance services amounted to NOK 2 million, fees for tax advisory service amounted to NOK 4 million and fees forother advisory services amounted to NOK 2 million.

Note 2: Net financial items


Interest income 945 238Interest expense - 664 - 366

Net interest 281 - 128

Expenses of refinancing - - 336Net foreign exchange gain 155 100

Net other financial items 155 - 236

Net financial items 436 - 364

Note 3: Tax


Basis for taxable incomeNet profit (+) / loss (-) before tax 2 439 3 492Group contribution without taxes impact - 1 935 - 3 632Changes in non-current assets 28 - 45Change in timing differences 100 - 313Transferred to (utilisation of) tax loss carried forward - 632 498

Taxable income - -

Positive / (negative) timing differencesCurrent assets - 75 16Tax loss carry forward - 67 - 707

Total negative timing differences - 142 - 691

Deferred tax asset (28 percent of negative timing differences) 40 193

Deferred tax expenseOrgination and reversal of temporary differences 28 - 87Benefit of tax losses recognised - 177 139

Total income tax expense in income statement - 149 52

The tax loss carry forward is assumed to be fully deductible against future taxable income in the Norwegian group companies.


Our performance

Note 4: Investments in subsidiaries and other companies

Investments in subsidiaries

Amounts in NOK millionRegisteredoffice

Sharecapital

Number ofshares held

Bookvalue

Owner- /votingshare

Aker Kværner E&C Group AS Norway 500 500 000 1 189 100 %Aker Kværner O&G Group AS Norway 1 110 1 110 000 5 555 100 %Aker Kvaerner Business Partner Ltd U.K. 163 14 000 000 112 100 %

Total investments in group companies 6 856

Investments in subsidiaries are held at the lower of cost and estimated fair value.

Investments in group companies are changed by NOK 263 million and hereof NOK 321 million represent capital increase in Aker Kværner O&G GroupAS, partly offset by NOK 23 million write down of the shares in Aker Kvaerner Business Partner Ltd and NOK 35 million for sale of shares in Aker KværnerShared Services AS.

Investments in other companies

Amounts in NOK millionRegisteredoffice

Sharecapital

Number ofshares held

Bookvalue

Owner- /votingshare

Aker Innovation AS Norway - 165 - 16,17 %Aker Oilfield Services Ltd Cyprus 1 5 143 621 72 19,10 %

Total investments in other companies 72

Note 5: Non interest-bearing items


Non interest bearing receivables from group companies 1) 2 843 5 816Other receivables 2) 1 494 171

Current assets 4 337 5 987Non interest bearing liabilities to group companies 1) - 1 259 - 212Other current liabilities 2) - 991 - 94

Current liabilities excl. tax and dividend - 2 250 - 306

Net current assets excl. tax and dividend 2 087 5 681Dividend - 809 - 2 200Deferred tax assets 40 193

Net assets incl. tax and dividend 1 318 3 674

Hereof NOK 2 185 million in group contributions from subsidiaries, NOK 626 million in unrealised gains on group companies foreign exchange hedging with the parent company and1)NOK 32 million in other receivables from group companies.

Unrealised gains and losses in relation to foreign exchange hedging of the company’s borrowing and lending portefolio.2)

Hereof NOK 1 239 million are unrealised losses on group companies foreign exchange hedging with a parent company and NOK 20 million in other liabilities to group companies.3)

All current assets and liablities are due within one year.


Our performance

Note 6: Shareholders’ equity

Amounts in NOK million Number of shares Share capital Own shares Share premium Other equity Total

Equity as at 1 January 2006 55 029 234 550 4 279 1 361 6 190Net profit 3 544 3 544Proposed dividend - 2 200 - 2 200Cash flow hedge 1) 8 8

Equity as at 31 December 2006 55 029 234 550 4 279 2 713 7 542Dividend from shares held by Aker Kværner ASA 19 19Change in 2006 dividend - 1 - 1Increase caused by share split (1:5) 220 116 936Cancellation of shares - 1 146 170 - 2 2 - -Share buy-back 2) - 11 - 770 - 781Net profit 2 290 2 290Proposed dividend 3) - 809 - 809Cash flow hedge 1) 5 5

Equity as at 31 December 2007 274 000 000 548 - 9 4 279 3 447 8 265

The value of interest swap agreements changing interest from floating to fixed interest is recognised directly in equity and will be released to income together with the corresponding1)interest expense.

A further 595 000 shares were bought in January 2008. After the acquisition, Aker Kværner ASA holds in total 4 966 830 shares.2)

Proposed dividend is excl. dividend on own shares as at 31 December 2007.3)

The share capital of Aker Kværner ASA is divided into 274 000 000 shares with a nominal value of NOK 2. The shares can be freely traded. An overview ofthe company’s largest shareholders is to be found in page 88 Share and shareholder information.

Own shares have been aquired for the purpose of being used in prospective share programs for employees, as settlement in future corporate aquisitions orfor other purposes as decided by the Board of Directors.

Note 7: Interest-bearing items


Cash and cash equivalents 1 855 3 294Interest-bearing current receivables from group companies 9 726 5 737Other interest-bearing current receivables - 45Other interest-bearing non-current receivables 1) 8 8Interest-bearing current borrowings from group companies - 9 999 - 10 250Interest-bearing non-current borrowings - 1 571 - 1 559

Net interest-bearing assets (+) / liabilities (-) 19 - 2 725

Interest income 945 238Interest expense - 664 - 366

Net interest 281 - 128

Loan to Aker Bravo AS due for repayment December 2016 with interest rate 4.5 percent.1)

For information on the group cash pooling system see note 25.1 Cash and cash equivalents to the consolidated accounts.


Our performance

Note 8: Non-current borrowings


Non-current borrowings at 1 January - 3 167Discounting effect - 223Foreign exchange effects - - 191

Non-current borrowings as per time of refinancing 1 December 2006 - 3 199Discounting effect - 289Repayments - - 3 535Premium refinancing - 42Foreign exchange effects - 5Nominal value 1) 1 600 1 600Refinancing costs to be amortised - 37 - 47Accrued interest 8 6

Non-current borrowings at 31 December 1 571 1 559

The company’s loans are described in note 25.6 Non-current borrowings to the consolidated accounts.1)

Repayments of non-current loans 1)

2009 - 500 - 5002011 - 650 - 6502013 - 450 - 450

Total repayments - 1 600 - 1 600

All figures are stated at nominal value.1)

For information regarding interest rates, covenants and pledges, see the note 25.6 Non-current borrowings to the consolidated accounts.

Note 9: Guarantees


Parent company guarantees to group companies 1) 34 725 44 966Counter guarantees for bank / surety bonds 2) 5 548 6 349

Total guarantee liabilities 40 273 51 315

Parent Company Guarantees to support subsidiaries in contractual obligations towards clients. Aker Kværner ASA has also issued counter indemnities in relation to office rental on1)behalf of subsidiaries.

Bank guarantees and surety bonds are issued on behalf of Aker Kvaerner subsidiaries, and counter indemnified by Aker Kværner ASA.2)

Note 10: Financial Instruments

Derivative financial instruments are used to hedge cash flow exposure due to fluctuations in foreign exchange rates and interest rates. Investments in subsidiariesare normally not hedged and will be subject to currency fluctuations. Management has a credit policy in place and the exposure to credit risk is monitored on anongoing basis. For more information please see note 23 Financial risk management to the consolidated accounts.

Note 11: Contingent events and related parties

Contingent events and transactions with related parties are described in note 13 Contingent events and note 5 Related parties to the consolidated accounts.


Our performance

Auditor’s report


Our performance


Our performance

Share and shareholder information

Accumulated buy-back of own shares in Q1 2007, and adjusted for cancellation of 1 146 170 shares (NOK 154 283 651)1)and NOK 8 dividend per share.

Aker Kvaerner’s objective is to secure thatthe company’s shareholders will, over time,receive competitive returns on their invest-ments through a combination of dividends,share buy-back and share price.

Dividend policyThe Board of Directors considers that thelong-term average dividend payments toshareholders should amount to 30 to 50percent of the net profit, through cashdividend and/or share buy-back. Considera-tions that affect such payments include alter-native use of assets and strengthening of thecompany’s financial structure.

The Board of Directors will propose toAker Kvaerner’s Annual General Meeting thata total dividend of NOK 3 per share shouldbe paid for 2007. The following table showsAker Kvaerner’s dividend payments:

Year Ordinary dividend

2005 NOK 1

2006 NOK 2

2007 – proposed NOK 3

Shares and share capitalAker Kværner ASA has 274 000 000 ordinaryshares. Each share has a par value of NOK 2(see page 41, the Consolidated accounts).As of 31 December 2007, the company had3 197 shareholders, of whom 53.33 percentwere non-Norwegian shareholders.

The Annual General Meeting in March2007 adopted a share split where each exist-ing Aker Kværner ASA share, with a par valueof NOK 10, was split into five (5) new shares,each with a par value of NOK 2. The company’sshare capital was also reduced by NOK2 292 340, from NOK 550 292 340 to NOK548 000 000, by cancelling 1 146 170 of thecompany’s treasury shares, each with a parvalue of NOK 2. Accordingly, the number ofcompany shares was reduced from 275 146 170to 274 000 000. The reduction correspondsto the cancellation of the company’s treasuryshares.

Aker Kvaerner has a single share class.Each share is entitled to one vote. As of 31December 2007 the company held 4 371 830

or 1.6 percent of its own shares. No shareissues were carried out during 2007.

Stock exchange listingAker Kvaerner was listed on the Oslo StockExchange on 2 April 2004. The company’sshares are listed on the Oslo Stock Exchange’smain list (OSEBX) with the ticker code AKVER.Aker Kvaerner shares are registered in theNorwegian Registry of Securities; the shareshave the securities registration number ISINNO NO0010215684. DnB NOR Bank ASA isthe company’s registrar.

Largest shareholderAker Kvaerner’s largest shareholder is AkerHolding AS, which holds 40.27 percent of thecompany’s shares (as of 31 December 2007).In June 2007, Aker ASA, the Wallenberg-related companies SAAB AB and Investor AB,and the Norwegian Government entered intoagreements that provide long term strategicownership for Aker Kvaerner. Under the agree-ments, Aker transferred its 40.1 percentownership interest in Aker Kvaerner to thecompany Aker Holding AS. Aker ASA holds acontrolling 60 percent stake in Aker Holding.The Norwegian Government owns 30 percentof Aker Holding, the Swedish companies

Aker Kvaerner is committed to maintaining an open and direct dialoguewith its investors, analysts and the financial community in general. Thetimely release of information relevant to the equity market, is important inensuring that the share price reflects Aker Kvaerner’s underlying value.

Open and direct dialogue

SAAB AB and Investor AB own 7.5 percentand 2.5 percent respectively. The parties haveagreed that Aker Kvaerner will continue to bedeveloped as an internationally competitive,major supplier of technology, products, sys-tems, and services, with operations primarilydirected at the energy, oil and gas sectors.Aker Holding’s owners will continue the estab-lished, close industrial cooperation betweenAker Kvaerner and other Aker companies.

Current Board authorisationsAt Aker Kvaerner’s Annual General Meetingon 29 March 2007, the Board of Directorswas granted the authorisation to:

Increase the company’s share capital byup to NOK 109 600 000. The authoritygranted may be used for purposes thatinclude mergers and contributions inkind and may be used in take-oversituations. Shareholders’ preferentialrights may be set aside.Acquire company (treasury) shares up toa total par value of NOK 54 800 000 (10percent). The authorisation also allows foragreement liens in company shares. Thelowest per share price to be paid underthis authorisation is NOK 1; the highest isNOK 300.

2007 share buy-back overviewAs of 31 December 2007

Date No. of shares Share price NOK million

30 March 2007 1) 1 268 830 126.60 160 633 878

25 April 2007 517 000 144.62 74 768 540

9 May 2007 341 000 143.26 48 851 660

15 May 2007 364 000 137.20 49 940 800

15 August 2007 45 000 146.73 6 602 850

16 August 2007 306 000 141.81 43 393 860

21 August 2007 270 000 144.27 38 952 900

29 August 2007 310 000 139.81 43 341 100

30 November 2007 625 000 159.55 99 718 750

7 December 2007 325 000 153.67 49 942 750

Total accumulated NOK investment 4 371 830 140.94 616 147 088

Own shares of total 1.6 %


Our performance

Indexed share price development in NOK■ Aker Kvaerner ■ Philadelphia Oil Service Index (OSX) ■ Oslo Stock Exchange (OSEBX)

0

100

200

300

400

500

600

700

800

02.0

4.04

02.0

7.04

02.1

0.04

02.0

1.05

02.0

4.05

02.0

7.05

02.1

0.05

02.0

1.06

02.0

4.06

02.0

7.06

02.1

0.06

02.0

1.07

02.0

4.07

02.0

7.07

02.1

0.07

02.0

1.08

15.0

2.08


Geographic distribution ofownershipAs of 15 February 2008

Nationality Number ofshares

Owner-ship in %

Non-Norwegian 144 588 696 52.77

Norwegian 129 411 304 47.23

Total 274 000 000 100

All authorisations are valid until the company’s2008 Annual General Meeting, or 30 June2008, whichever occurs sooner.

Acquisition of own sharesThe share buy-back programme was contin-ued using the existing Board authorisationfrom the 2007 Annual General Meeting tobuy company (treasury) shares. The Boardhas authorised the administration to repur-chase treasury shares up to 5 percent. Theprogramme will last until the Annual GeneralMeeting 3 April 2008. As of 28 February2008, 4 966 830 (1.81 percent) shares hadbeen acquired pursuant to the Board’sauthorisation. The Board of Directors of AkerKvaerner will also propose an extension ofthe current authorisation, both for the sharecapital increase of up to NOK 109 600 000million and share buy-back of up to 10 per-cent of outstanding shares, by a period of 12months from the date of the authorisationgranted by the Annual General Meeting. Newterms and conditions for the share buy-backprogramme will be determined at that point.

Investor relationsAker Kvaerner seeks to maintain an open anddirect dialogue with shareholders, financialanalysts, and the financial community in general.In addition to meetings with analysts andinvestors, the company schedules regularpresentations at major financial centres inEurope and the United States. Visitors to AkerKvaerner’s website can subscribe to emaildeliveries of Aker Kvaerner’s press releases. AllAker Kvaerner press releases and investorrelations (IR) publications, including archivedmaterial, are available at the company’s website,

2007 share data

2007 2006

Highest closing share price NOK 190.175 158

Lowest closing share price NOK 131.75 81.2

Average closing share price NOK 152.15 118.74

Closing price as of 31 December NOK 144.50 155.6

Own (treasury) shares as of31 December

Number ofshares

4 371 830 0

Shares issued and outstanding as of31 December

Number ofshares

274 000 000 55 029 234

Market capitalisation as of31 December

NOK million 39 593 42 813

Average daily turnover Number ofshares

2 171 728 1 705 299

Turnover ratio Percent 197.5 155.6

Earnings per share continuing operations NOK 8.84 4.53

Change in share capital

Date Change inshare capital

Share capitalin NOK

Number ofshares

Par valuein NOK

1 January 2005 550 292 340 55 029 234 10.00

31 December 2005 550 292 340 55 029 234 10.00

1 January 2006 550 292 340 55 029 234 10.00

31 December 2006 550 292 340 55 029 234 10.00

Change in 2007 (2 292 340)

31 December 2007 548 000 000 274 000 000 2.00


Our performance


www.akerkvaerner.com. This online resourceincludes the company’s quarterly and annualreports, prospectuses, corporate presenta-tions, articles of association, financial calen-dar, and the company’s Investor Relationsand Corporate Governance policies, alongwith other information. Aker Kvaerner’s annualcapital markets day, open to all stakeholders,is where key executives provide detailed,up-to-date information about the company’sbusiness activities and market conditions.Shareholders can contact the company byemail at: [email protected]. The OsloStock Exchange displays special symbolsalongside company listings to indicate satis-factory distribution of information (i) andinformation in English (E). Both the i and Esymbols have been awarded to Aker Kvaerner.Details on these designations are available atwww.oslobors.no.

Electronic interim and annualreportsAker Kvaerner encourages its shareholders toreceive the company’s annual reports via theelectronic delivery service of the NorwegianRegistry of Securities (VPS). Subscribers tothis service receive annual reports in PDF for-mat by email. VPS services (VPS-Investor-tjenester)aredesignedprimarily forNorwegianshareholders. VPS distribution takes place atthe same time as distribution of the printedversion of Aker Kvaerner’s annual report toshareholders who have requested it. Quarterlyreports, which are generally only distributedelectronically,areavailable fromthecompany’swebsite and other sources. Shareholders whoare unable to receive the electronic version ofquarterly reports may subscribe to the printedversion by contacting Aker Kvaerner’s investorrelations staff.

Nomination committeeAker Kvaerner has a nomination committee,as set forth in the company’s articles ofassociation.

Pursuant to the articles of association, thenomination committee comprises no fewerthan three members. The composition of thenomination committee must reflect the interestsof shareholders, and must ensure the nomina-tion committee members’ independence.

The nomination committee has the followingmembers:

Kjell Inge Røkke (Chairman), 2006-2008Gerhard Heiberg, 2006-2008Kjeld Rimberg, 2007-2009

Annual General MeetingAnnual General Meetings are normally held inlate March or early April. Written notification issent to all shareholders individually or to theshareholder’s nominee. All relevant informationabout the Annual General Meeting is also avail-able on the company’s website. To vote at theshareholders’ meeting, shareholders (or theirduly authorised representative) must either be

physically present, or must vote by proxy, underprovisions set out on the company’s website.

2007 share dataThe company’s total market capitalisation asof 31 December 2007 was NOK 39 593 mil-lion. During 2007, a total of 542 682 000 AkerKvaerner shares were traded, correspond-ing to 3.3 times the company’s freely tradablestock. Of the Company’s shares, 59.73 percentwere freely tradable in 2007; the remaining40.27 percent was owned by Aker Holding.The shares traded on all of the 250 possibletrading days. The average daily trading volumewas 2 171 728 shares.

AnalystsThe following security brokers provide analytic coverage of Aker Kvaerner:

Company Name Phone

ABG Anders Kirkhorn Rosenlund + 47 22 01 60 59

ABN AMRO Thomas Deitz + 44 207 67 881 07

Carnegie Rachid Bendriss + 47 22 00 93 71

Citigroup Fiona Maclean + 44 207 98 641 44

Crédit Agricole Cheuvreux Geoffroy Stern + 33 1 41 89 73 79

Danske Bank Endre Storløkken + 47 85 40 70 71

Deutsche Bank Christyan F. Malek + 44 207 54 582 49

DnB NOR Lars-Daniel Westby + 47 22 94 89 83

Fearnley Fonds Kjell Erik Eilertsen + 47 22 93 63 88

Fondsfinans Christian Must + 47 23 11 30 44

Glitnir Securities Terje Mauer + 47 22 01 63 24

Goldman Sachs Henry Tarr + 44 207 55 259 81

Handelsbanken Anne S. Ulriksen + 47 22 94 08 24

HSBC David Phillips + 44 207 99 153 88

JP Morgan Tao Ly + 44 207 32 56 292

Kaupthing Christopher Moe + 47 24 14 74 28

Merrill Lynch Alejandro Demichelis + 44 207 99 615 68

Orion Securities Aleksandr Solovjov + 37 05 24 61 968

Pareto Rune Juliussen + 47 22 87 87 32

SEB Enskilda Pål Dahl + 47 21 00 85 61

Standard & Poor’s Jan-Sigurd Sørensen + 44 207 17 678 16

UBS Alex Brooks + 44 207 56 758 04


Our performance


20 largest shareholdersAs of 15 February 2008

Name Nominee No. of shares held Ownership in %

Aker Holding AS 110 333 615 40.27

JPMorgan Chase Bank x 15 478 531 5.65

JPMorgan Chase Bank Fidelity Lending 14 802 100 5.40

State Street Bank x 11 932 254 4.35

Fidelity Funds-Europe 5 635 450 2.06

Mellon Bank As x 5 046 596 1.84

Clearstream Banking x 5 011 426 1.83

Aker Kværner ASA 4 966 830 1.81

The Northern Trust x 4 497 556 1.64

Mellon Bank As x 4 414 907 1.61



Morgan Stanley & Co 3 405 166 1.24

JPMorgan Chase Bank 3 148 317 1.15

Bank of New York x 3 083 611 1.13

UBS AG x 2 618 593 0.96

SIS Segaintersettle x 2 158 760 0.79

Bank of New York 2 102 550 0.77

Citibank x 2 038 000 0.74

The Northern Trust x 1 954 800 0.71

Total, 20 largest shareholders 210 938 627 75.74

Other shareholders 63 061 373 24.26

Total 274 000 000 100

Ownership structure by number of shares heldAs of 15 February 2008

Shares held No. of shareholders % share capital

1 – 100 1 129 0.02

101 – 1000 1 451 0.21

1001 – 10 000 583 0.71

10 001 – 100 000 258 3.65

100 001 – 500 000 109 8.48

More than 500 000 49 86.93

Total 3 579 100


Our performance

Analytical information

Analytical information Aker Kvaerner


Order backlog 31.12 58 261 59 695 48 522Order intake 57 942 62 271 51 937Revenue 57 957 50 592 36 940EBITDA 3 913 2 872 1 816

EBITDA-margin 6.8 % 5.7 % 4.9 %

Profit before tax 3 538 1 869 740Rate of taxation 30.4 % 30.8 % -42.2 %Net profit from continuing operations 2 464 1 294 1 052Interest cover 17.16 6.36 3.59Basic earnings per share continuing operations 8.84 4.53 4.47Cash flow from operating activities 2 675 2 636 3 674Cash flow from investing activities -1 576 985 -443Cash flow from financing activities -3 013 -4 688 -306Cash flow per share -7.82 -3.93 11.06Total capital 28 516 31 396 26 295Borrowings 1 998 2 126 5 279Equity ratio 25.48 % 25.84 % 16.46 %Liquidity ratio 116,04 % 120.04 % 124.86 %Gearing ratio 65.24 % 60.97 % 74.44 %Return on total capital 11.81 % 9.98 % 5.04 %Return on equity 46.59 % 30.05 % 24.48 %Return on capital employed 38.37 % 29.73 % 13.73 %

Revenue

Amounts in NOK million 1Q06 2Q06 3Q06 4Q06 2006 1Q07 2Q07 3Q07 4Q07 2007

Field Development 3 139 4 228 4 027 4 731 16 125 4 817 4 598 3 807 3 159 16 381MMO 1 969 2 517 2 315 2 876 9 677 2 564 2 588 2 275 2 317 9 744Subsea 1 513 1 842 1 489 2 097 6 941 2 136 2 429 2 571 2 715 9 851P&T 1 207 1 588 1 958 2 819 7 572 2 513 2 690 3 287 3 863 12 353P&C 2 920 3 029 2 722 3 336 12 007 2 459 2 607 2 601 2 726 10 393Other -201 -522 -452 -555 -1 730 -342 -215 -304 96 -765

Total group 10 547 12 682 12 059 15 304 50 592 14 147 14 697 14 237 14 876 57 957

Earnings per share 1)

NOK

0

2

4

6

8

10

200720062005

Return on capital employed

0 %

10 %

20 %

30 %

40 %

200720062005

EBITDA margin

0 %

1 %

2 %

3 %

4 %

5 %

6 %

7 %

200720062005

RevenueAmounts in NOK million

0

10 000

20 000

30 000

40 000

50 000

60 000

200720062005

Continuing operations.1)


Our performance

Analytical information

EBITDA


Field Development 201 251 209 242 903 220 246 222 203 891MMO 107 116 107 122 452 132 140 130 128 530Subsea 85 114 142 138 479 171 222 282 285 960P&T 90 118 156 167 531 202 218 245 294 959P&C 100 108 176 146 530 152 213 181 200 746Other 66 -31 -29 -29 -23 -21 -46 -63 -43 -173

Total group 649 676 761 786 2 872 856 993 997 1 067 3 913

EBIT


Field Development 188 237 196 228 849 206 231 208 128 773MMO 105 115 105 121 446 130 138 128 125 521Subsea 61 82 121 115 379 150 198 250 250 848P&T 75 104 141 149 469 188 202 227 270 887P&C 94 100 169 133 496 144 208 175 195 722Other 47 -47 -46 -60 -106 -46 -72 -83 -68 -269

Total group 570 591 686 686 2 533 772 905 905 900 3 482

Order intake


Field Development 3 192 919 11 608 1 421 17 140 5 347 821 4 543 1 413 12 124MMO 2 071 909 5 189 1 764 9 933 2 353 1 233 2 172 2 664 8 422Subsea 1 463 4 789 3 255 2 240 11 747 2 266 4 200 1 905 4 006 12 377P&T 3 123 3 655 2 566 3 653 12 997 1 889 3 476 1 872 3 496 10 733P&C 3 078 2 596 2 286 3 710 11 670 6 270 2 957 3 289 1 726 14 242Other -51 92 -1 268 11 -1 216 -821 629 252 -16 44

Total group 12 876 12 960 23 636 12 799 62 271 17 304 13 316 14 033 13 289 57 942

Order backlog


Field Development 19 557 16 174 23 822 20 385 20 385 20 881 16 973 17 540 15 695 15 695MMO 12 060 10 404 13 365 12 245 12 245 11 977 10 605 10 406 10 683 10 683Subsea 4 008 6 719 8 704 8 775 8 775 8 838 10 618 9 706 10 951 10 951P&T 9 271 11 287 11 946 12 741 12 741 12 092 12 861 11 371 11 520 11 520P&C 8 651 7 949 7 852 7 989 7 989 11 706 11 848 11 749 10 923 10 923Other -2 903 -2 282 -3 002 -2 440 -2 440 -2 736 -1 973 -1 443 -1 511 -1 511

Total group 50 644 50 251 62 687 59 695 59 695 62 758 60 932 59 329 58 261 58 261

Order intakeAmounts in NOK million

0

10000

20000

30000

40000

50000

60000

70000

20072006

■ Field Development

■ MMO

■ Subsea

■ P&T

■ P&C

Order backlogAmounts in NOK million

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

20072006

■ Field Development

■ MMO

■ Subsea

■ P&T

■ P&C


Our performance

PurposeAker Kvaerner’s corporate governance prin-ciples are intended to ensure an appropriatedivision of roles and responsibilities amongthe company’s owners, its Board of Directors,and its executive management. An appropri-ate division of roles is intended to ensure thatgoals and strategies are established, thatadopted strategies are implemented, andthat performance is subject to measurementand follow-up.

Our corporate governance principles alsohelp ensure that Aker Kvaerner’s activitiesare subject to satisfactory control. An appro-priate division of roles and satisfactory con-trol contribute to the greatest possible valuecreation over time, to the benefit of ownersand other stakeholders.

The corporate governance policy hasbeen prepared by the Board of Directors ofAker Kværner ASA. The principles are basedon the Norwegian Code of Practice for Cor-porate Governance, dated 4 December 2007.The following presents Aker Kvaerner’s prac-tices regarding each of the recommenda-tions contained in the Code of Practice.

Our valuesThe Board has approved and adopted AkerKvaerner’s corporate values, which are pre-sented on page 8 of this annual report. Ourethical guidelines and other policy docu-ments have been prepared in accordancewith these values.

Our businessAker Kvaerner’s business purpose clausereads as follows: “The company’s purpose isowning and operating industrial businessesand other, related activities, capital manage-ment and other Group functions, and partici-pation in or acquisition of other businesses.”

The business purpose clause ensuresthat shareholders have control of the scopeof the business activities and their risk profile,without limiting the Board or management’sability to carry out strategic and financiallyviable decisions within the defined purpose.Aker Kvaerner’s financial goals and mainstrategies are presented on page 7 ofthis report and in the Board of Directors’report.

Equity and dividendsAker Kvaerner’s equity as of 31 December2007 amounted to NOK 7 267 million, whichcorresponds to an equity ratio of 25.5 per-cent. Aker Kvaerner regards the currentequity structure as appropriate and adaptedto its objectives, strategy, and risk profile.

Aker Kvaerner’s dividend policy is dis-cussed in the section Share and shareholderinformation, see page 88 of this annualreport. Dividend policy is among the factorsconsidered in preparing the Board’s pro-posal for allocation of profit for 2007.

Current Board authorisations to increaseshare capital and acquire own (treasury)shares are also presented in the sectionShare and shareholder information in thisannual report.

Equal treatment of shareholdersAker Kvaerner has a single class of shares;all shares carry the same rights in the com-pany. Equal treatment of all shareholders iscrucial. If existing shareholders’ pre-emptiverights are waived upon an increase in sharecapital, the Board must justify the waiver.Transactions in own shares must be executedon the Oslo Stock Exchange or by othermeans at the listed price.

Transactions with related partiesWith regard to material transactions betweenthe company and a shareholder or memberof the Board or executive management, orparties closely related to the aforementioned,the Board shall ensure that such transactionsare entered into on an arm’s length basis. Ifneeded, external, independent evaluationsof such transactions are sought.

Aker Kvaerner has prepared guidelinesdesigned to ensure that members of theBoard of Directors and executive manage-ment notify the Board of any direct or indirectstake they may have in agreements enteredinto by the Aker Kvaerner.

Aker ASA owns 60 percent of the sharesin Aker Holding AS; as of 31 December 2007,Aker Holding owns 40.27 percent of AkerKværner ASA stock. The Norwegian parlia-mentary bill St.prp. no. 88 (2006-2007) pro-vides more details on the establishment ofAker Holding AS and the agreement between

Aker Kvaerner’s ambition is to ensure the greatest possible value creationover time, based on good corporate governance. The following presentsAker Kvaerner’s practices regarding each of the recommendationscontained in the most recent version of the Norwegian Code of Practicefor Corporate Governance.

Safeguarding the interests ofour stakeholders

Aker ASA and the other Aker Holding ASshareholders.

Based on its shared industrial history andownership ties, Aker Kvaerner aims to main-tain its close cooperation with the Aker com-panies and certain other companies associ-ated with Aker ASA. For example, there maybe mutual business opportunities in jointprojects between Aker Kvaerner and otherAker companies that serve the oil and gasindustry.

Aker Kværner ASA is not viewed as arelated party with regard to Aker ASA or com-panies in which Aker ASA has ownershipinterests, under the Norwegian Public Lim-ited Liability Companies Act. Nevertheless,the Board and management of Aker Kvaer-ner are aware that Aker Kvaerner must con-duct relations with Aker companies on anarm’s length basis. Further, transactions of acertain size between Aker Kværner ASA andAker companies are subject to the proce-dures set forth in section 3-8 of the Norwe-gian Public Limited Liability Companies Act.

For further information, see Note 5 to theconsolidated accounts Related parties.

Freely negotiable sharesAker Kvaerner shares are freely negotiable.No restrictions on transferability are found inthe company’s articles of association.

Annual General MeetingsAker Kvaerner encourages shareholders toparticipate in its Annual General Meetings.Our goal is to publish notices of sharehold-ers’ meetings and comprehensive support-ing information – including the recommenda-tions of the nomination committee – on thecompany’s website no later than 21 daysbefore the Annual General Meeting. Thesedocuments are distributed to shareholderswith known addresses no later than twoweeks before the Annual General Meeting.

The deadline for shareholders to givenotice of their intention to attend the meetingis set as close to the date of the meeting aspossible, but not earlier than five days beforethe Annual General Meeting.

Shareholders who are unable to attend themeeting in person may vote by proxy. Pursuantto Aker Kvaerner’s articles of association, the

Corporate governance


Our organisation and governance

Board Chairman, or other person appointedby the Board Chairman, chairs Annual GeneralMeetings. To the extent possible, Board mem-bers, the nomination committee leader, and theauditor attend Annual General Meetings.

Minutes of Annual General Meetings arepublished as soon as practically possible viathe Oslo Stock Exchange messaging servicewww.newsweb.no (ticker: AKVER) and on thecompany’s website www.akerkvaerner.comunder the heading Investor Relations.

Nomination committeeThe company has a nomination committee,as set forth in the company’s articles of asso-ciation. Pursuant to the articles of associa-tion, the nomination committee comprises nofewer than three members. The compositionof the nomination committee must reflect theinterests of shareholders, as well as maintainthe committee members’ independence fromAker Kvaerner’s Board and executive man-agement. Nomination committee membersand chair are elected by the company’s An-nual General Meeting, which also determinesremuneration payable to committee mem-bers.

Pursuant to the articles of association, thenomination committee recommends candi-dates for the Board of Directors. The nomina-tion committee also makes recommendationsas to remuneration of Board members. Thecomposition of the nomination committee ispresented under the section Shares andshareholder information in this annual report.

Board composition andindependencePursuant to the company’s articles of asso-ciation, the Board comprises between sixand ten members, one-third of whom are tobe elected by and among Aker Kvaerner em-ployees. Further, up to three shareholder-elected deputy board members may beelected. The Board chairman and deputychairman are elected by the Board under anagreement with employee representatives;the agreement provides that the company isnot to have a corporate assembly. Boardmembers are elected for a period of twoyears.

The current composition of the Board ispresented on page 96 of the annual report;the Board members’ expertise, capabilities,and independence are also presented. Boardmembers’ shareholdings are presented inNote 18 to the consolidated accounts Salaries,wages, and social security costs. The share-holder-elected Board members have a broad

range of expertise, capabilities, and experi-ence from finance, industry, and non-govern-mental organisations.

The work of the Board of DirectorsThe Board has adopted board instructionsthat regulate areas of responsibility, tasks,and division of roles of the Board, BoardChairman, and President & CEO. The Boardinstructions also feature rules as to Boardschedules, rules for notice and chairing ofBoard meetings, decision-making rules, thegeneral manager’s duty and right to discloseinformation to the Board, professional se-crecy, impartiality, and other matters.

Pursuant to the Board instructions, theBoard evaluates its own performance andexpertise once a year. The Board hasappointed a compensation committee.

Risk management and internalcontrolAker Kvaerner has established a comprehen-sive set of internal procedures and systemsto ensure unified and reliable financial re-porting. Each of Aker Kvaerner’s businessunits must annually evaluate its internal con-trol systems and procedures with regard tofinancial reporting. Aker Kvaerner also regu-larly conducts internal audits of individualunits’ adherence to systems and procedures.The Board receives monthly reports on thecompany’s financial performance and statusreports on Aker Kvaerner’s most importantindividual projects.

Page 27 of the annual report presents amore detailed description of the manage-ment of operational and financial risks asso-ciated with Aker Kvaerner’s business activi-ties.

Remuneration to the Board ofDirectorsAker Kvaerner’s Annual General Meeting de-termines the Board’s remuneration based onthe recommendations of the nominationcommittee. Additional information on remu-neration paid to Board members for 2007 ispresented in Note 16 to the consolidated ac-counts: Salaries, wages, and social securitycosts.

Remuneration of executivemanagementAker Kvaerner’s guidelines for remunerationof executive management are presented inNote 18 to the consolidated accounts Sala-ries, wages, and social security costs. Theguidelines are given to Aker Kvaerner’s An-

nual General Meeting each year as part of itsprocessing of the annual accounts. Note 18also provides details as to remuneration paidin 2007 to individual members of Aker Kvaer-ner’s executive management.

Information and communicationThe company has prepared an Investor Rela-tions (IR) policy, which is available at AkerKvaerner’s website. Aker Kvaerner’s report-ing of financial and other information is to bebased on openness and on equal treatmentof market participants.

The purpose of Aker Kvaerner’s system-atic IR work is to ensure the company’saccess to capital at competitive terms and toensure shareholders correct pricing ofshares. These goals are to be accomplishedthrough correct and timely distribution ofinformation that can affect the company’sshare price; the company is also to complywith current rules and market practices,including the requirement of equal treatment.All stock-exchange notices and pressreleases are made available on the compa-ny’s website www.akerkvaerner.com; stock-exchange notifications are also availablefrom www.newsweb.no. All information that isdistributed to shareholders is simultaneouslypublished on Aker Kvaerner’s website.

The company’s financial calendar is foundon page 4 of this annual report.

TakeoversIn light of Aker Kvaerner’s ownership struc-ture, the Board has thus far not deemed it ap-propriate to prepare separate guidelines fortakeover situations.

AuditorThe auditor participates in the Board meetingthat deals with the annual accounts.

Remuneration for auditors, presented inNote 7 to the consolidated accounts Otheroperating expenses, is separately stated forauditing and non-auditing services. The Boardwill evaluate whether guidelines should beestablished for executive management’s useof auditors for services other than auditing.

Corporate governance



Presentation of the Board of Directors

Leif-Arne LangøyChairman of the Board

Leif-Arne Langøy (born 1956) hasbeen President and CEO of AkerASA, formerly Aker RGI, since 2003,and Chairman of the Board since2006. He has previously served asPresident & CEO of Aker Yards and,for 13 years, as Managing Directorof Aker Brattvaag. He is Chairman ofthe Board of Aker ASA, Aker Holding,Aker Seafoods, Aker Drilling, AkerFloating Production, Aker BioMarine

and Aker Exploration, deputy chair-man of TRG Holding and a Boardmember of Aker Philadelphia Ship-yard. Langøy holds an MBA from theNorwegian School of Economicsand Business Administration. As of31 December 2007, Langøy holds75 000 shares in the company, andhas no stock options. Langøy is aNorwegian citizen. He has beenelected for the period 2007-2009.

Heidi M. PetersenDirector

Heidi M. Petersen (born 1958) is anindependent businesswoman. Sheholds an MSc from the University ofTrondheim (now NTNU). In the periodfrom 2000 to July 2007, she wasmanaging director of Future Engi-neering AS and of Rambøll Oil &Gas AS. Petersen was employed inKvaerner Oil & Gas from 1988, be-coming head of Kvaerner Oil & GasSandefjord in 1997. Petersen hasvaried board experience of industrial,

oil and gas-based operations as wellas of energy supply and financialenterprises. She currently chairs theboard of Sandefjord Airport and is amember of the boards of NorskHydro ASA, Ocean Heavy Lift andAwilco Offshore. As of 31 December2007, Petersen holds no shares inthe company, and has no stockoptions. Petersen is a Norwegiancitizen. She has been elected for theperiod 2007–2009.

Karl Erik KjelstadDirector

Karl Erik Kjelstad (born 1966) isSenior Partner & President, Mari-time Technologies of Aker ASA. Hehas been with the Aker group since1998. Kjelstad was President &CEO of Aker Yards ASA from Janu-ary 2003–June 2007. Prior to joiningAker, he held the position as seniorconsultant at PA Consulting Group.From 1992 to 1996 he held variousmanagement positions in the TTSGroup. Kjelstad is Chairman of

Aker Philadelphia Shipyard ASA,Aker Oilfield Services Ltd, and AkerDOF Supply AS. Kjelstad holds aMaster of Science (M.Sc) degree inMarine Engineering from the Nor-wegian University of Science andTechnology (NTNU). As of 31December 2007, Kjelstad holds2 500 shares in the company, andhas no stock options. Kjelstad is aNorwegian citizen. He has beenelected for the period 2006–2008.

Ingebreth ForusDirector

Ingebreth Forus (born 1950) waselected by the employees of AkerKvaerner as a deputy boardmember in 2007. He took over fromØyvind Hopland as a full boardmember in May 2007. Forus wasemployed by Kvaerner between 1975and 1980, and joined Aker KvaernerWell Service as a wireline supervisorin 1995, becoming a union represen-tative on a full-time basis in 2004.

He is a member of the board ofIndustri Energi (former NOPEF).Forus holds a degree in civil eng-ineering from Stavanger TechnicalSchool and a cand.mag. degreefrom the University of Bergen. As of31 December 2007, Forus holds noshares in the company, and has nostock options. Forus is a Norwegiancitizen. He has been elected for theperiod 2007-2009.

Atle TeiglandDirector

Atle Teigland (born 1957) was electedby the employees of Aker Kvaernerto the Board of Directors in October2004. He has served on the boardof Aker RGI for several years.Teigland is a Group Union Represen-tative for Aker Kvaerner on a full-time basis and has been employedby Aker Kvaerner Elektro since1978. Teigland is a certifiedelectrician. As of 31 December

2007, Teigland holds no shares inthe company, and has no stockoptions. Teigland is a Norwegiancitizen. He has been elected for theperiod 2007–2009.



Presentation of the Board of Directors

Vibeke HammerMadsenDirector

Vibeke Hammer Madsen (born1955) has been CEO of The Fede-ration of Norwegian Commercialand Service Enterprises since 2002.Prior to this, she was Partner in PAConsulting Group. From 1993 to 1999Madsen was Vice President and heldvarious positions in Statoil. She is agraduate of the Norwegian Schoolof Radiography. As of 31 Decem-ber 2007, Madsen holds no shares

in the company, and has no stockoptions. Madsen is a Norwegiancitizen. She has been elected forthe period 2007–2009.

Siri FürstDirector

Siri Fürst (born 1958) has beenPartner and Business Consultant inConsidium Consulting Group sinceJanuary 2005. From 1984 to 1999she held various management posi-tions in Hafslund, Hafslund Nycomedand Nycomed Pharma. From 1999to 2003 she was Managing Directorof DiaGenic ASA. Fürst is a graduateof the Norwegian School of Econo-mics and Business Administration.

As of 31 December 2007, Fürstholds no shares in the company,and has no stock options. Fürst is aNorwegian citizen. She has beenelected for the period 2007–2009.

Åsmund KnutsenDirector

Åsmund Knutsen (born 1959) waselected by the employees of AkerKvaerner to the Board of Directorsin October 2004. He has heldvarious positions in Aker KvaernerEngineering & Technology since1991 and is now a Group UnionRepresentative for white-collaremployees on a full-time basis.Knutsen holds an MSc in Hydro-dynamics. As of 31 December

2007, Knutsen holds 1 505 sharesin the company, and has no stockoptions. Knutsen is a Norwegiancitizen. He has been elected for theperiod 2007–2009.

Arve ToftDirector

Arve Toft (born 1966) was electedby the employees of Aker Kvaernerto the Board of Directors in March2007. Toft is a Group Union Repre-sentative for Aker Kvaerner on a full-time basis and has been employedby Aker Kvaerner since 1983. Toft isa certified mechanic and scaffolder.He has been a full-time local unionrepresentative at Aker KværnerStord AS for 5 years. Toft holds no

shares in the company, and has nostock options. Toft is a Norwegiancitizen. He has been elected for theperiod 2007-2009.

Bjørn FlatgårdDeputy Chairman

Flatgård (born 1949) runs his ownbusiness, the principal activities ofwhich are participation on boardsof directors and investing. Flatgårdwas President and CEO of ElopakAS from 1996–2007. He previouslyserved as President and CEO forNycomed Pharma and Executive VicePresident for Hafslund Nycomed andNycomed AS. Flatgård holds multipleboard positions in major Norwegian

companies. Flatgård holds a Masterof Science in Chemical Engineeringfrom the Norwegian University ofScience and Technology and adegree from the Norwegian Schoolof Management. As of 31 December2007, Flatgård holds 5 535 sharesin the company, and has no stockoptions. Flatgård is a Norwegiancitizen. He has been elected for theperiod 2006–2008.



Presentation of the Executive Management Team

Martinus Brandal 1)

President & CEO

Martinus Brandal (born 1960) hasbeen President & CEO of AkerKværner ASA since July 2006. Priorto this, Brandal was Executive VicePresident (EVP) in charge of opera-tions, strategy and business develop-ment at Aker ASA. He joined the Akergroup in July 2004. From 1985 to2004, Brandal held various manage-ment positions in the ABB Group atits headquarters in Zurich, includingGroup Senior Vice President and

Head of Business Area ProcessAutomation. He has also held boardpositions in several of the Aker com-panies, including Aker Kvaerner, AkerYards and Aker Seafoods. Brandalhas a BSc in Electrical Engineeringfrom Oslo University College. As of15 February 2007, Brandal holds7 500 shares in the company, andhas no stock options. Brandal is aNorwegian citizen.

Bjørn Erik Næss 2)

EVP & Chief Financial Officer

Bjørn Erik Næss (born 1954) hasbeen EVP & Chief Financial Officer(CFO) of Aker Kværner ASA sinceOctober 2004. Prior to this, he wasEVP and CFO of Carlsberg BreweriesA/S from 2000. From 1995 to 2000,Næss was CFO of the Orkla group.Næss is a graduate of theNorwegian School of Economicsand Business Administration. As of31 December 2007, he holds 5 000

shares in the company, and has nostock options. Næss is a Norwegiancitizen.

Pål HelsingEVP Field Development

Pål Helsing (born 1960) has beenan EVP with Aker Kvaerner since2007. Prior to this appointment, hewas Senior Vice President for SubseaSystems. He joined Aker Kvaerner in1993 and has extensive industryexperience from several high levelmanagement positions within thecompany in Norway and inter-nationally. Before starting with AkerKvaerner, Helsing worked with FMC

Kongsberg as Engineering Man-ager. He is a graduate of GlasgowUniversity and the NorwegianSchool of Management. As of 31December 2007, he holds noshares in the company, and has nostock options Helsing is aNorwegian citizen.

Torleif GramEVP MMO

Torleif Gram (born 1949) has beenan EVP with Aker Kvaerner since2002. Prior to this appointment, hewas Managing Director of AkerOffshore Partner AS from 1994 andof Aker Contracting AS from 1991.Gram joined Aker Kvaerner in 1976and has extensive experience fromboth Aker Engineering AS and AkerStord AS where he held variouspositions. He is a graduate of the

Norwegian University of Scienceand Technology (NTNU). As of 31December 2007, he holds 5 000shares in the company, and has nostock options. Gram is a Norwegiancitizen.

Raymond CarlsenEVP Subsea

Raymond Carlsen (born 1955) hasbeen an EVP with Aker Kvaernersince 2003, heading the Subseabusiness since 2002. He has 26years of broad international man-agement experience. Carlsen hasbeen with Aker Kvaerner since1989, with senior managementassignments in south-east Asia,Europe, and the United States.Carlsen is a graduate of the Florida

Institute of Technology. As of 31December 2007, he holds 5 000shares in the company, and has nostock options. Carlsen is aNorwegian citizen.



Presentation of the Executive Management Team

Mads AndersenEVP Products &Technologies

Mads Andersen (born 1965) joinedAker Kvaerner in 2000 and hasbeen an EVP since 2003. He has19 years of experience in theupstream oil and gas industry.Andersen has held a range oftechnical and managerial positionsin oilfield service and oil companiesincluding Schlumberger and SagaPetroleum (now StatoilHydro).Andersen is a graduate of Glasgow

University and the NorwegianSchool of Management. As of 31December 2007, he holds 2 395shares in the company, and has nostock options. Andersen is aNorwegian citizen.

Jarle TautraEVP Process & Construction

Jarle Tautra (born 1953) has beenan EVP with Aker Kvaerner since2002. He has 26 years of experi-ence in offshore-related activities.From 1997 to 2002 Tautra served asPresident of Aker Oil & Gas and asEVP of EPC Norway in Aker MaritimeASA. Prior to this, he held variouspositions in Norsk Hydro ASA.Tautra is a graduate of theNorwegian University of Science

and Technology. As of 31 Decem-ber 2007, he holds no shares in thecompany, and has no stock options.Tautra is a Norwegian citizen.

Martinus Brandal will be nominated as new Chairman of the Board of Aker Kværner ASA, and has been appointed Senior Partner & President for the Energy Technologies sector in1)Aker ASA. Simen Lieungh has been appointed President & CEO of Aker Kvaerner from 1 March 2008.

Bjørn Erik Næss will leave Aker Kvaerner in March 2008 to take the position as CFO in the leading Norwegian financial institution, DnBNOR. Leif Borge has been appointed CFO of2)Aker Kvaerner.



COPYRIGHT AND LEGAL NOTICE Copyright in all published material including photographs, drawings and images in this magazine remains vested in Aker Kvaerner and third party contri-butors to this magazine as appropriate. Accordingly, neither the whole nor any part of this magazine can be reproduced in any form without express prior permission. Articles and opinionsappearing in this magazine do not necessarily represent the views of Aker Kvaerner. While all steps have been taken to ensure the accuracy of the published contents. Aker Kvaerner doesnot accept any responsibility for any errors or resulting loss or damage whatsoever caused and readers have the responsibility to thoroughly check these aspects for themselves. Enquiriesabout reproduction of content from this magazine should be directed to the editor.

Aker Kværner ASASnarøyveien 361364 Fornebu

Postal address:P.O. Box 169NO-1325 Lysaker

Telephone: +47 67 51 30 00Telefax: +47 67 51 30 10

[email protected]

Address



Consept & design:Haugvar Communications & Design

Consulting:MonsenHejna as

Photos:Aker KvaernerAker Kvaerner Gulf LimitedEivind Røhne, beyond the iceJo Michael StudioKjetil AlsvikMoment Studio / Eva Helene Storm HanssenNils VikRenato LangfeldtSteven SheaSør Stangebye, KF21

Translation:Flom-Jacobsen & Fish (page 94-95)Rolf E. Gooderham (page 26-35)

Production:Signatur AS

Print:RKGrafisk AS

www.akerkvaerner.com

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