Kvaerner, Aker Solutions, and Samsung to work together on FPSO projects

Norwegian engineering and construction services company Kvaerner has revealed its plan to grow annual revenues to above NOK 10 billion ($1.1B) for the year 2023. In addition, Kvaerner has entered into an agreement with Samsung Heavy Industries and Aker Solutions for the joint delivery of  FPSO contracts.

Johan Castberg and Hywind Tampen at the new Stord quay; Source: Kvaerner

During Kvaerner’s capital market update presentations on Thursday, the company confirmed its annual revenues growth plan and reiterated that the financial results would, in the short-term, first decline in 2020.

In addition, the company announced its strategic cooperation with other contractors for the joint delivery of future projects.

The company has over the past 15 months communicated that most of the larger new contracts are expected to be awarded in 2020 and 2021. The planned growth towards 2023 reflects the anticipated effects of new contracts.

The period with a slow market for contract awards in 2018 and 2019 is meanwhile expected to cause 2020 annual revenues to decline to a level of around NOK 6 billion for the Field Development segment. The EBITDA margin for the year 2020 is estimated to approximately 3 percent, reflecting temporarily declining revenues and that fixed costs are kept stable to position for upturn from 2021.

For 2019, Kvaerner anticipates that total annual revenues of about NOK 9.3 billion, with a corresponding EBITDA margin of around 5 to 6 percent.

Since it was listed separately in 2011, the company has had a normalized level for net working capital (NCOA) in a band between minus NOK 500 million to minus NOK 1 500 million. This has been the effect of mainly quite large newbuild projects for oil and gas installations, often with significant pre-payments from customers.

Going forward, the company estimate that the contract portfolio will be more diversified in terms of project sizes and types of industries. As an effect, Kvaerner estimates that a new normalized level for net working capital (NCOA) will be in a band between NOK 0 (zero) to negative NOK 1 billion from 2020 and onwards.

According to the company, both 2018 and 2019 have been characterized by significant investments in increased productivity, capabilities, and competitiveness. Total investments (CAPEX) are estimated to be around NOK 700 million, from the start of 2018 up to the end of 2019. From 2020 and forward, the company is expecting a lower investment level.


Growth in renewables


In September 2019, Kvaerner announced that it was building its planned growth through a focus on three market areas.

The first area is named Process & Structures and serves the market for traditional oil and gas platforms, onshore facilities, decommissioning, and marine operations.

The second area, FPSOs, was from September established as a second operating area dedicated to pursuing such projects.

The third area, Renewables, was established to pursue and execute projects within offshore wind power, green onshore facilities, and other renewable business.

It is expected that total income over time will be composed of approximately 1/3 of the revenues from each area.


New Boston office


Compared to the situation over the last two years, a growing share of future projects is expected to be won in international regions. International projects may typically include offshore wind power, FPSOs, onshore facilities, marine operations, decommissioning, etc.

The company is now opening a new office in Boston to pursue and execute renewables projects in the eastern part of the USA.


Strategic FPSO cooperation 


On Thursday, Kvaerner also announced a new agreement with Samsung Heavy Industries and Aker Solutions, for joint delivery of upcoming FPSO contracts.

The partners have identified several prospects for FPSO field developments which may be started in the coming years, especially in the northern hemisphere.

The combined capabilities of the three contractors will provide a competitive offering, which has been received positively by potential customers, Kvaerner concluded.

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