Market, competitiveness & predictable execution - Welcome to Capital Market Update - Kvaerner
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Welcome to Capital Market Update Market, competitiveness & predictable execution 12 December 2019, Høyres Hus in Oslo + webcast
President & CEO
Karl-Petter Løken
Corporate Support Finance
Henrik M. Inadomi Idar Eikrem
Resources and capacity for Operations Project Delivery Win New Projects
Project Execution
EPCI Process & Structures FPSOs Renewables Business Development
Steinar Røgenes Sturla Magnus Guro Høyaas Løken Kenneth Simonsen Arnt Knudsen
Staff functions Njord A BD
Johan Castberg
Stord Yard
Hywind Tampen Front End
Sverdrup P2 Jacket
Future FPSO projects
Verdal Yard Sverdrup RP Future projects Tender process
within offshore wind
Nordstream2 onshore
Project Management and renewables Russia
Husnes onshore onshore
Engineering Canada
White Rose West
Procurement & Partnering Finland
Removal of a platform,
Completion & Canada USA
Offshore Hook-up
Decommissioning
portfolio Other inter. offices
3 © Kvaerner 2019 ׀12.12.2019
Agenda | Capital Market Update
09:00 – 09-05: Welcome Karl-Petter Løken, President & CEO
09:05 – 09:20: Market outlook Arnt Knudsen, SVP Business Dev.
09:20 – 09:30: Overall strategy Karl-Petter Løken, President & CEO
09:30 – 09:45: Process & Structures: Current business + strategy and ambitions Sturla Magnus, EVP Process & Structures
09:45 – 09:55: FPSOs: Current business + strategy and ambitions Guro Høyaas Løken, EVP FPSOs
09:55 – 10:10: Renewables: Current business + strategy and ambitions Kenneth Simonsen, EVP Renewables
10:10 – 10:25: EPCI: Kvaerner’s expertise, capabilities and delivery models Steinar Røgenes, EVP EPCI resources
10:25 – 10:40: Value creation for shareholders - Financial ambitions towards 2023 Idar Eikrem, EVP & CFO
10:40 – 10:45: Summary Karl-Petter Løken, President & CEO
10:45 – 11:00: Q&A from audience + webcast attendants
11:00 –411:30 Lunch buffet
© Kvaerner 2019 ׀and mingling
12.12.2019
Welcome to Capital Market Update Market, competitiveness & predictable execution Karl-Petter Løken, President & CEO
Adapting to changing energy markets
Fewer traditional:
Changing market presents new opportunities
Large topsides / large jackets at NCS
Large concrete GBS projects
Increasing number of:
FPSO prospects
WHP prospects
Renewable prospects
Other prospects
6 © Kvaerner 2019 ׀12.12.2019
Our message today:
Growth with sound value creation
Kvaerner 2023
Leading EPC contractor for energy
and process industry projects
Kvaerner today
Increased international activity
EPC delivery
Revenues > NOK 10 billion
Strong position at NCS
Values for shareholders
Financially robust
7 © Kvaerner 2019 ׀12.12.2019
The equity story
1 2 3 4
Shareholder
Market Strategic Enablers in place
direction values
8 © Kvaerner 2019 ׀12.12.2019
Market outlook
Arnt Knudsen, SVP Business Development
Market© Kvaerner 2019 ׀12.12.2019
Strategy P&S FPSOs Renewables Capabilities Financials
Markets
Process & Structures FPSOs Renewables
OIL AND GAS OIL AND GAS UNMANNED CONCRETE OFFSHORE
SUBSTRUCTURES OFFSHORE WIND
PLATFORM PLATFORM STEEL WELLHEAD WIND TURBINE CONVERTER
TOPSIDES SUBSTRUCTURES PLATFORMS FOR OIL AND GAS PLATFORMS
PLATFORMS PLATFORMS
FLOATING PRODUCTION
STORAGE AND
OFFLOADING VESSELS
OFFSHORE CARBON
MARINE ONSHORE UPGRADING & DECOMMISSIONING FISH FARM CAPTURE
OPERATIONS PROCESS PLANTS MODIFICATION & RE-USE / RECYCLING FACILITIES FACILITIES
10 © Kvaerner 2019 ׀12.12.2019
>165 BNOK prospect pipeline*
Contract sizes (NOK)
Share of total no of projects
>40 prospects: Value:
Early lead and target NOK > 100 billion
15 prospects: Value:
Key target and tendering ~ NOK 65 billion
FPSOs
* Projects Kvaerner has defined as addressable Renewables
Dialogue established with customers on all prospects shown on slide Process & Structures PROJECT AWARDS
11 © Kvaerner 2019 ׀12.12.2019Strategic direction
Karl-Petter Løken, President & CEO
12
Market© Kvaerner 2019 ׀12.12.2019
Strategy P&S FPSOs Renewables Capabilities FinancialsFocus on selected market segments
Process & Structures FPSOs 1/3 Renewables
1/3 1/3
1/3 1/3 1/3
13 1/3 = Expected share of annual revenues, over time
© Kvaerner 2019 ׀12.12.2019Ambition for growth
Already in place: Kvaerner 2023
Predictable project Leading EPC contractor for energy
execution and schedule and process industry projects
Wider product offering
Further improvements:
Increased international activity
HSSE – Best-in-class ambition
Continuous improvement, reduced costs Revenues >10 billion NOK
Standardisation & digitalisation Shareholder value
Strategic long term partnerships
Internationalise core products offering
14 © Kvaerner 2019 ׀12.12.2019Strong focus on Environment, Social, Governance
Reducing world CO2 emissions
E
Delivering offshore wind power + onshore facilities for CCS and green energy
Green shipping – ZEEDS initiative
C4IR initiative, green ocean technologies
Green electricity in own yard operations
Annually recycling >15 000 tonnes steel, use ~23 000 tonnes in new projects
S
Education, local value creation, diversity, health
Typically >100 apprentices every year
A key company in the «Stord-model» for education
Project execution model tailored to enable local content and jobs
Participant in «Including work» public programme
VI foundation, support to handicapped people
Governance principles
G
Based on NUES recommendations
Systematic risk monitoring
Polices for zero corruption, high standards for ethics and human rights
Step-wise implementation of TCFD reporting
15 © Kvaerner 2019 ׀12.12.2019Market position second to none
Solutions relevant for both oil & gas, offshore wind, onshore renewables, etc.
Position as trusted advisor and world leading expert on predictable project execution
Topsides, floaters and onshore facilities, Norway and internationally
Jackets, Norway and Europe
Concrete solutions, Norway and internationally
16 Some selected references
© Kvaerner 2019 ׀12.12.2019Process & Structures
Sturla Magnus, EVP
17
Market© Kvaerner 2019 ׀12.12.2019
Strategy P&S FPSOs Renewables Capabilities FinancialsThis is Process & Structures
OIL AND GAS OIL AND GAS UNMANNED CONCRETE
PLATFORM PLATFORM STEEL WELLHEAD SUBSTRUCTURES FOR OIL
TOPSIDES SUBSTRUCTURES PLATFORMS AND GAS PLATFORMS
MARINE ONSHORE UPGRADING & DECOMMISSIONING
OPERATIONS PROCESS PLANTS MODIFICATION & RE-USE / RECYCLING
18 © Kvaerner 2019 ׀12.12.2019Ongoing projects within Process & Structures
Johan Sverdrup hook-up and Johan Sverdrup Phase 2 Valhall Flank West
Njord A upgrade
modification Process platform jacket normally unmanned WHP
Removal, Canada
Decommissioning
Studies, etc.
West White Rose
Husnes upgrade Nord Stream 2 onshore facility Other projects
marine operations
19 © Kvaerner 2019 ׀12.12.2019Njord A opens up for future upgrade projects © Kvaerner 2019 ׀12.12.2019
Onshore process market provides growth opportunities
Increased interest in Kvaerner’s delivery model, first contract secured
Snøhvit O&G industry Process industry
Nyhamna
Kollsnes Tjeldbergodden Terminals About 50 process
Sture Mongstad industry plants in
Kårstø Nord Stream Refineries
Norway:
Gas / liquids
processing
Aluminium
Fertiliser
Petrochemicals
Main contractor to all of the 7 largest onshore oil Minerals, metals
and gas plants in Norway
Main contractor for North Stream 2 pig trap onshore
facility, Russia
21 © Kvaerner 2019 ׀12.12.2019Production start 1 year ahead of normal schedule
Subsea on a Stick ® Valhall Flank West
© Kvaerner 2019 ׀12.12.2019FPSOs
Guro Høyaas Løken, EVP
Market© Kvaerner 2019 ׀12.12.2019
Strategy P&S FPSOs Renewables Capabilities FinancialsJohan Castberg and Hywind Tampen at the new Stord quay © Kvaerner 2019 ׀12.12.2019
Developing the FPSO factory
Building on Castberg, gradually increasing scope and benefitting from serial production
Executed pre-FEED for Bay du Nord
New FPSO 1 New FPSO 2 New FPSO 3
Johan Castberg:
EPma : AKSO
FPSOs by Kvaerner FC Topside &
and Aker Solutions: Integration:Kvaerner
Norne Hull EPC:Sembcorp
Åsgard A Turret EPC: SBM
Triton
Jotun Implementing The FPSO factory
Sea Rose
Skarv
Cost improvements
25 © Kvaerner 2019 ׀12.12.2019Kvaerner teaming up with Aker Solutions and Samsung
Customer
Consortium / FPSO Factory
Engineering, Procurement, Fabrication
Hull Contractor
Samsung Heavy Industries and Integration of Topsides
Kvaerner / AKSO partnership
Safety & Automation Turret
System EPC subcontractor to
EPC subcontractor to Kvaerner / AKSO
Kvaerner / AKSO
MoU for FPSO Factory
26 © Kvaerner 2019 ׀12.12.2019 Illustrative model for future cooperationRenewables
Kenneth Simonsen, EVP
Market Strategy P&S FPSOs Renewables Capabilities FinancialsRenewables in Kvaerner
Offshore wind Onshore renewables
Turbine foundations Carbon capture and storage
Converter platforms Biofuels plants
Substations Hydrogen plants
28 © Kvaerner 2019 ׀12.12.2019Offshore wind and Hywind Tampen
Hywind Tampen – an important strategic breakthrough
Will reduce CO2 emissions
Position Kvaerner as a contender for offshore wind projects both
domestically and internationally
Vital for industrialising solutions and reducing costs
29 © Kvaerner 2019 ׀12.12.2019EPCI expertise will benefit wind power market
CONVERTER CONCRETE GBS STEEL JACKET FLOATING MARINE
PLATFORMS FOUNDATIONS SUBSTRUCTURES FOUNDATIONS OPERATIONS
EPCI contractor for Gravity based wind Steel jackets and Steel or concrete
In-house marine
converter platforms turbine foundations tripods for offshore floating
operations
and substations in concrete wind turbines substructures
© Kvaerner 2019 ׀12.12.2019Geographic focus 31 © Kvaerner 2019 ׀12.12.2019
What do we bring to the offshore wind industry?
OUR O&G CAPABILITIES… …ARE APPRECIATED IN NEW BUSSINES AREAS
HSSE FOCUS
PREDICTABILITY
FINANCIAL STRENGTH
KNOW-HOW
HOLISTIC APPROACH
© Kvaerner 2019 ׀12.12.2019Emerging opportunities
Shipping is responsible for nearly
1 000 000 000 tons of CO2 emission per year
6 Nordic companies from the maritime and energy
sectors have joined forces in an open innovation
consortium
Zero emission energy distribution at sea
The vision of the ZEEDS consortium is to close
the gap towards zero emission shipping
33 © Kvaerner 2019 ׀12.12.2019Expertise, capabilities and delivery models
Steinar Røgenes, EVP for EPCI
34
Market© Kvaerner 2019 ׀12.12.2019
Strategy P&S FPSOs Renewables Capabilities FinancialsThis is Kvaerner
Effective, flexible facility, Verdal Solid international track record
= Examples of delivered platforms and onshore plants.
Effective, flexible facility, Stord ~ 3 000 skilled employees
35 © Kvaerner 2019 ׀12.12.2019Competitiveness by digitalisation and robotisation
Reduce cost base with ~10%
Examples of initiatives:
Robots and automated welding
5-8 times productivity
Automated scaffolding design
Fewer man-hours and improved
access
The new insulation factory
Digital production line, new
deliveries, flexibility and reduced
man-hours
Photo from new digitalised insulation manufacturing line.
Insulation boxes can now be manufactured automatically,
36 © Kvaerner 2019 ׀12.12.2019 versus traditional process with all-manual measuring, drawing, manufacturing.A flexible delivery model together with partners
Project management:
Key scope: Key scope: Key scope: Key scope:
E P C I
Partners Partners Partners Partners
Illustrative. Scope executed by partners or subcontractors may vary between
37 © Kvaerner 2019 ׀12.12.2019 different types of contracts, projects and different geographical regions.A rare expertise with great impact and value
Integration of complex elements to a complete solution
FEED / concept development Detail engineering Procurement Project management
Project management
Fabrication / construction Assembly Hook-up, commissioning Tow-out, installation,
assistance to production start
38 © Kvaerner 2019 ׀12.12.2019Parallel EPC execution + Precision = Value
PROJECT MANAGEMENT
FEASIBILITY & CONCEPT
ENGINEERING
PROCUREMENT
CONSTRUCTION, HOOK UP
AND COMPLETION
INSTALLATION
Each month earlier first oil = typically ~ MNOK 250 – 500 increased value
39 © Kvaerner 2019 ׀12.12.2019Creating shareholder values - Financial ambitions Idar Eikrem, EVP & CFO Market Strategy P&S FPSOs Renewables Capabilities Financials
Market opportunities transformed to predictable deliveries 33 quarters in a row
NOK billion Revenue Field Development Adjusted EBITDA margin Margin % Project example
Average adjusted EBITDA margin new topside EPC
5,5 16
5.0
5 4.7 4.6 14
4,5 4.2 4.2
4.1
3.9 3.8 3.8 12
4
3.6
3.4 3.3
3,5 10
3.1
3 2.8 2.7
2.6 2.5 2.4 2.6 8
Project example,
2,5
2.12.22.0 2.2 2.12.0 2.2 modification / HUC
1.91.8 1.9
2 1.71.8 1.71.8 6
1,5 4
1
2
0,5
0 0
Q3'11
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Q1'14
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
Q3'18
Q4'18
Q1'19
Q2'19
Q3'19
Own value creation
Procurement
NOK billion 2012 2013 2014 2015 2016 2017 2018 Subcontractors
41 © Kvaerner 2019 ׀12.12.2019 Revenue Field Development 9.8 16.1 17.5 14.9 10.4 7.6 7.3Key financial perspectives
(Field Development segment)
Estimated order intake/growth (BNOK)
Backlog per Q319 (BNOK)
>10
Revenues 2017A-2019E (BNOK) 9.3
7.6 7.3
Approx 6
2017 2018 2019 (estimate) 2020 (estimate) 2023 (target)
EBITDA (%) 11.1% 6.7% 5 - 6% Approx. 3% Target 5 - 6%
NCOA (MNOK) Neg 0-1 000 Neg 0-1 000
Capex1 (MNOK) 91 334 Approx. 400 Approx. 150 Approx. 100
(1) Expected normalised annual CAPEX from 2020 and onwards:
NOK 50 mill maintenance + NOK 50 mill productivity enhancement.
CAPEX for special purposes may come in addition.
42 © Kvaerner 2019 ׀12.12.2019CAPEX from H2 2011 to Q3 2019
MNOK
Crane Storen 330
Quay, Stord 273
New crane and quay, Robotisation Service tower, Stord
Stord Yard Cranes Verdal 144
Paint shop and
assembly areas, 138
Verdal
Robotisation &
118
digitalisation
Fabrication hall, Verdal Digitalisation New cranes, Various 575
Yard Verdal Yard
Total 1 578
43 © Kvaerner 2019 ׀12.12.2019Shareholder value:
A cash generator with solid dividends over time
Cash development from listing
Field 3Q11-19 NOK million
Development Average
segment annualised
1 693 1 578
Revenue (MNOK) 11 450
792
EBITDA (MNOK) 704 155
EBITDA margin 6.1%
2 168
5 185 3 961
1 541
Dividend 3Q11-3Q19 2 420
1 776
Per share (NOK) 5.73
Total (MNOK million) 1 541
Cash Q2 Adj. Divestments Capex Tax Net interest NCOA Cash Dividend Cash Q3
Share of net profit 2011 EBITDA & Longview and fees & other before 2019
74% continuous settlement dividends
continuous ops ops
44 © Kvaerner 2019 ׀12.12.2019Summary Karl-Petter Løken
Summary
1 2 3 4
Market Strategy Enablers Shareholder
value
Focus on three HSSE - best in class Financial platform Growth combined
segments with sound margins
Pursue oil & gas and Employees & yards
Focused pursuit renewables prospects Solid cash
pipeline Delivery models generation
International growth
46 © Kvaerner 2019 ׀12.12.2019Kvaerner’s history is the industry’s history: Ability to continuously adapt to new opportunities is in our culture 1841 2020 47 © Kvaerner 2019 ׀12.12.2019
We build valuable, sustainable industries! 48 © Kvaerner 2019 ׀12.12.2019
© Kvaerner 2019 ׀12.12.2019
Copyright and disclaimer Copyright Copyright of all published material including photographs, drawings and images in this document remains vested in Kvaerner and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction. Disclaimer This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Kværner ASA and Kværner ASA’s (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as “expects”, “believes”, “estimates” or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for Kvaerner’s businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Presentation. Although Kværner ASA believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Kværner ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither Kværner ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use. 50 © Kvaerner 2019 ׀12.12.2019
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