Annual Report • Apr 27, 2016
Annual Report
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Directors' report - page 3 Statement of the members of the Board of Directors - page 14 Consolidated accounts - page 15 Accounts Prosafe SE - page 42 Independent auditors' report -- page 54
The Directors present their annual report on the affairs of Prosafe SE (the "Company" or the "parent company") and its subsidiaries (the Company and its subsidiaries referred to as the "Group" or "Prosafe") together with the Group's and the parent company's audited financial statements for the year ended 31 December 2015.
Prosafe is the world's leading owner and operator of semi-submersible accommodation support vessels, and is currently in process of completing its fleet renewal strategy which further aims at strengthening its competitive position globally. The parent company, Prosafe SE, is managed and controlled in Cyprus and is the ultimate owner of all group companies.
(The figures in brackets correspond to the 2014 comparatives)
Operating revenues totalled USD 474.7 million in 2015 (2014: USD 548.7 million), with utilisation of the fleet dropping to 70 per cent (87 per cent). Charter revenues and non-charter revenues reached USD 425.4 million (USD 481.2 million) and USD 49.3 million (USD 67.5 million), respectively.
Revenues in 2015 were lower than in 2014 as a consequence of fleet utilisation of 70% in 2015 compared to 87% in 2014. This compares to an average fleet utilisation of just over 80% over the last few years. The main reason for the reduction in utilisation was non-extension of the contract relating to Jasminia in Mexico and the yard stay for the Safe Scandinavia where she was undergoing conversion to a tender support vessel (TSV) at Ølensvåg in Norway. The vessel is now on contract for Statoll Petroleum AS at the Oseberg Øst field on the Norwegian Continental Shelf. The main markets for the Prosafe vessels are currently the North Sea and Brazil, serving primarily oil and gas operating companies as end clients on projects typically related to installation or maintenance and modification of offshore oil and gas fields. The vessels are either provided on a time charter basis where Prosafe man and operate the vessels directly, or on a bareboat basis where Prosafe provides only the vessel to a third party who is then responsible to man and operate the vessel.
Total operating expenses decreased to USD 211.8 million (USD 236.1 million), largely as a result of the lower fleet utilisation.
Depreciation increased to USD 86.5 million (USD 64.3 million) as a result of life extension investments of several vessels, as well as the delivery of the new build Safe Boreas in Q1 2015. In addition, there was an impairment charge of USD 145.6 million in the 2015 accounts related to Jasminia, Safe Hibernia, Safe Britannia, Safe Regency, Safe Lancia, Safe Bristolia, Safe Astoria and Safe Concordia. Compared to the Q4 2015 report published on 4 February 2016, the final accounts for 2015 contain an additional impairment charge of USD 136.2 million.
The resulting operating profit amounts to USD 30.8 million (USD 248.3 million).
Net interest expenses totalled USD 41.6 million (USD 37.3 million). This increase is mainly due to higher interest-bearing debt following the delivery and financing of the new build Safe Boreas in 2015. In accordance with IFRS, interest costs totalling USD 12.8 million (USD 7.9 million) have been allocated to new build and refurbishment projects and consequently capitalised as part of the vessel investment costs.
Other financial items amounted to USD -29.5 million (USD -20.0 million). This figure includes changes in value of financial currency hedging instruments and currency gains and losses. The figure also includes USD 12.8 million in amortised borrowing costs related to the new builds.
Taxes for 2015 were USD 10.5 million (USD 12.5 million).
Net loss amounted to USD 50.6 million (net profit of USD 178.8 million), resulting in basic and diluted earnings per share of USD -0.21 (USD 0.76).
Total assets amounted to USD 2,187.2 million (USD 1,816.8 million) at the end of 2015. Investments in tangible assets totalled USD 700.7 million (USD 211.0 million). The investments in 2015 mainly relate to the delivery of the new build Safe Boreas, upgrade of the Safe Scandinavia to a tender support vessel (TSV), project expenses related to three new build vessels and the five-year special periodic survey (SPS) for the Safe Bristolia and the Safe Concordia.
As at year-end 2015, the Group had total liquid assets of USD 57.1 million (USD 122.4 million). The liquidity reserve (liquid assets plus undrawn credit facilities) totalled USD 147.4 million (USD 337.4 million).
Total shareholders' equity amounted to USD 715.2 million (USD 748.5 million), resulting in a book equity ratio of 32.7 per cent (41.2 per cent).
Interest-bearing debt amounted to USD 1,247 million (USD 830.1 million) at year-end. Repayments of debt totalled USD 816.5 million (USD 198.0 million) and gross increase in borrowing amounted to USD 1,290.0 million (USD 332.2 million).
The interest-bearing debt agreements are subject to termination, repayment or buy back clauses in the event of a change of control of the Company (as control is defined in the relevant agreements).
In February 2015, the Company secured a new credit facility of USD 1,300 million for the refinancing of the existing USD 1,100 million and USD 420 million credit facilities. The credit facility, which has a maturity of seven years with semi-annual amortisations of USD 65 million, consists of two term loan tranches totalling USD 800 million (drawn on closing) and USD 200 million and a revolver loan tranche of USD 300 million. The USD 200 million tranche was drawn on delivery of the Safe Zephyrus in January 2016.
In December 2015, Prosafe raised NOK 590 million in a private placement of shares. The private placement was over-subscribed and supported by existing shareholders.
As at year-end, the fleet comprised 12 vessels in operation plus three new builds in progress.
Specifications for each of the vessels and details of the current vessel contracts can be found on the Company's website at http://www.prosafe.com/accommodation-vessels/.
Safe Hibernia, Safe Britannia, Safe Lancia and Safe Regency operated on bareboat charters in Mexico throughout 2015. Jasminia was off-hire as from the end of February 2015 and Safe Britannia came off contract at the end of 2015. Safe Hibernia came off contract on 15 February 2016, whereas the contracts for Safe Regency and Safe Lancia were suspended from mid-March 2016.
Safe Concordia operated on a three-year contract in Brazil throughout the year. The contract, which is an extension of the initial contract awarded in December 2013, commenced in July 2014 with a threeyear term.
Safe Astoria was on an 11-month contract with Shell Philippines Exploration B.V. until early September 2015, after which she relocated to Batam, Indonesia, for lay-up.
Safe Caledonia was contracted to Nexen Petroleum U.K. Limited until the end of April 2015. In early July 2015 the vessel commenced a contract for BP Exploration Operating Company Limited for support at the ETAP field in the UK. The vessel is scheduled to complete this contract in early August 2016.
Safe Scandinavia was on contract with Premier Oil UK Limited at the Solan field in the UK until the end of February 2015. In March the vessel arrived at the Westcon shipyard in Ølensvåg, Norway, where she has been undergoing conversion to a tender support vessel (TSV) to carry out a contract for Statoil Petroleum AS at the Oseberg Øst field in Norway. The contract commencement which was originally expected during the third quarter 2015 was considerably delayed until 17 March 2016. As a result the cost for the TSV conversion has increased.
Regalia was on a 450-day contract for Talisman Sinopec Energy UK Limited in the UK until late November 2015 and was sub-let to Shell U.K. Limited at Shearwater and Premier Oil UK Limited at Solan during the 450 days period. In late May 2016, the vessel will commence a 150-day contract with Shell at Brent C/Gannet.
Safe Bristolia completed repalr work at the Hanøytangen shipyard in Norway during the second quarter 2015 and was on contract for BG International Limited at the Everest field in the UK from the beginning of June 2015 until the end of the third quarter 2015. The vessel is currently undergoing a special periodic survey in Gdansk, Poland.
Prosafe had two vessels under construction in Singapore during 2015, Safe Boreas and Safe Zephyrus, which were ordered from Jurong Shipyard Pte. Ltd in December 2011 and November 2012, respectively. The vessels were constructed in accordance with strict Norwegian regulations and are the most well-equipped and sophisticated offshore accommodation support vessels in the world.
Safe Boreas was delivered from the yard in mid January 2015 and has completed its first contract for Lundin Petroleum Norway AS in Norway. The vessel commenced an 8-month contract with Talisman Sinopec at Montrose in mid-March 2016.
Safe Zephyrus was delivered in January 2016, and is currently in transit from Singapore to Norway. The vessel is scheduled to commence the contract with Det Norske Oljeselskap at Ivar Aasen in late July 2016.
In 2013 a turnkey contract was entered into with COSCO (Qidong) Offshore Co., Ltd. in China for the delivery of two accommodation support vessels, Safe Notos and Safe Eurus, for use worldwide, excluding Norway. The vessels are designed and equipped to meet the requirements of the accommodation industry and will be the leading vessels in their sector. Safe Notos was delivered in February 2016, and is currently in transit to Indonesia for lay-up. Her first contract is yet to be awarded.
In addition to the new builds, the Group has also invested substantially in the renewal of the existing fleet over the past years.
The accommodation support segment is late cyclical by nature. Historically, more than three quarters of the work has been related to producing fields, whereas the remainder has been related to hook-up and commissioning of new fields. Accommodation support vessels are also used during decommissioning of offshore installations.
The supply side is seeing significant growth in size during the period from 2012 to 2016 with the entry into the market of a number of new semi-submersible accommodation support vessels. However the growth is expected to be lower than earlier anticipated as a result of the extended down-cycle which may lead to both scrapping and delays or even cancellations of new builds.
2015 saw a continued slow-down in contracting activity and the gross value of charter contracts, including clients' extension options, was reduced by approximately 13 per cent to USD 1,595 million (USD 1,843 million).
A continued fall in oil price has led to further negative revisions of spending plans, which again results in deferral of several projects, as well as focus on cash preservation by way of contract renegotiations and contract cancellations.
As all providers of oil services are dependent on oil companies' cash flow, reductions of spending plans have led to a substantial decrease in demand for oilfield services, including accommodation support vessels. This has increasingly been evident in all geographical markets.
Despite the current down-turn and the supply side growth, the longer term prospects are promising as it is expected that field life extensions continue through enhanced oil recovery efforts. Further, in the years ahead new fields will come on stream in parallel with decommissioning of old platforms gradually becoming an interesting source of demand.
In Mexico, Prosafe's ultimate client Pernex has been cutting spending in order to adjust its budget to an oil price of USD 25 per barrel. This development has considerably increased uncertainty for the near and medium term outlook in this region. It is still expected that maintenance and modification services will be needed to support extended production from current fields. In addition, further demand may result from new fields being developed in deeper waters offshore Mexico.
The near and medium term outlook is also uncertain in Brazil. Even though accommodation support vessels are mostly used for safety and maintenance purposes on fields that are already producing, the financial situation of Petrobras has inevitably resulted in reduced activity and as a result cancellation or renegotiation by Petrobras of contracts to preserve liquidity. The longer term outlook is, however, expected to present further opportunities.
Outside the three core markets for semi-submersible accommodation vessels i.e. the North Sea, Mexico and Brazil, Australia and the US Gulf of Mexico appear to be the most promising markets. Although in the past, demand in both these markets has mostly been related to hook-up and commissioning of new platforms or larger re-developments, in the longer term as the industry normalises there should be potential for growth related to maintenance and modification.
Accordingly, Prosafe remains cautious about the near and medium term, and will continue to work proactively to ensure the best possible long-term outcome for Prosafe and its employees, shareholders, clients and lenders. The general down turn in the market combined with in particular the non-extension of contracts in Mexico has led to reduced fleet utilisation and consequently reduced charter revenues for Prosafe.
Total order backlog as of 31 December 2015 amounted to USD 997 million of which USD 598 million related to firm contracts and USD 399 million related to options. Secured utilisation for 2016 is 37%. For 2017 and 2018, secured utilisation is currently 19% and 16%, respectively.
In 2015 and in early 2016, various measures have been taken to improve the Company's financial situation and continuous efforts are ongoing. As described in the Financing section above a share issue was implemented late 2015 and in January 2016 the Company achieved i.a. additional headroom to financial covenants in bank facilities and bond loans and the option to voluntarily skip two scheduled amortisations in 2016 and/or 2017. Further information on the revised set of covenants is provided in note 15 to the consolidated financial statements. As of the date of the accounts, the Company is not in breach of any of its financial obligations.
Since the publication of the Q4 2015 report in February 2016, the offshore market has continued to develop negatively, leading to the sudden suspension of two contracts in Mexico. As a result, some of Prosafe's financial covenants have been put under pressure. Specifically, there was a material risk that the Company would breach the minimum liquidity covenant of USD 65 million in the second quarter of 2016. On 22 April 2016, Prosafe was granted a waiver of this liquidity covenant. The temporary minimum liquidity covenant is now USD 20 million until the end of the third quarter of 2016, and is applicable to both the USD 1.3 billion facility and the USD 288 million new build facility. Prosafe has initiated a review of the Company's funding situation and has engaged financial and legal advisors to assist with this process.
A dialogue has been commenced with the Company's key stakeholders, including the senior lenders, and the Company is currently working with stakeholders and advisors to evaluate alternatives to improve the financial situation of the Company. Amendments to the bank and bond agreements will be required in order to secure a robust financial foundation and to safeguard and further strengthen Prosafe's market leading position in the industry. The Company intends to communicate its financial plan during the second quarter of 2016.
Prosafe categorises its primary risks under the following headings: strategic, operational, financial and compliance related. The Company's Board and senior officers manage these risk factors through continuous reporting, board meetings, periodic reviews of the business and tenders, and rolling strategy and planning processes. This is supplemented by dialogue and exchange of views with the Group's management.
The Company aims to create shareholder value by allocating capital and resources to the business opportunities that yield the best return relative to the risk involved within its specified strategic direction.
Prosafe seeks to reduce its exposure to operational, financial and compliance related risk through proper operating routines, the use of financial instruments and insurance policies.
Market risk comprises of macro factors such as oil price and industry specific factors such as supply/demand balance and competitive position. Demand for accommodation units is sensitive to oil price fluctuations and changes in exploration and production spending.
The Gulf of Mexico contracts contain a cancellation clause allowing the ultimate customer, Pemex, to cancel the contract upon 30 days notice, without compensation, if the financing of the project is cancelled. These clauses reflect the crisis that arose in Mexico during the 1980s. In March 2016, the
two remaining contracts in Mexico were suspended, and accordingly, may be cancelled due to the ongoing downturn.
The Company is exposed to financial risks such as currency risk, interest rate risk, financing and liquidity risk and credit and counterparty risk. The continued negative development in the offshore market involves risk that reduced charter revenues will continue in the short and medium term. This development has increased the liquidity risk significantly. The Company has significant debt maturities in 2016 and 2017, though as mentioned in the Financing section above, in January 2016, the Company agreed with its banking syndicate on an option to voluntarily skip two scheduled amortisations arising in 2016 and/or 2017. Please refer to the Financial restructuring section above and the Going concern section below.
The maturity of the Group's liabilities and capital commitments related to the new builds can be summarised as follows. (Figures in USD million).
| 2016 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | |
|---|---|---|---|---|---|
| Debt repayments | 139.5 | 84.5 | 0.0 | 55.0 | 0.0 |
| Interests | 74.5 | 19.9 | 17.5 | 17.5 | 19.6 |
| Current liabilities | 17.8 | 17.8 | 0.0 | 0.0 | 0.0 |
| Total 2016 | 231.8 | 122.2 | 17.5 | 72.5 | 19.6 |
| Capital commitments | 590.0 | 410.0 | 0.0 | 180.0 | 0.0 |
| 2017 | |||||
| Debt repayments | 210.8 | ||||
| Interests | 84.4 | ||||
| Current liabilities | 0.0 | ||||
| Total 2017 | 295.2 | ||||
| 2018 | |||||
| Debt repayments | 233.5 | ||||
| Interests | 85.0 | ||||
| Current liabilities | 0.0 | ||||
| Total 2018 | 317.4 | ||||
| 2019 | |||||
| Debt repayments | 233.5 | ||||
| Interests | 81.3 | ||||
| Current liabilities | 0.0 | ||||
| Total 2019 | 318.5 | ||||
| 2020 onwards | |||||
| Debt repayments | 429.7 | ||||
| Interests | 146.4 | ||||
| Current liabilities | 0.0 | ||||
| Total 2020 onwards | 576 1 |
The Company reports in USD and generates income in USD, whereas parts of its operating costs are in other currencies such as NOK and GBP. This exposure is hedged on a 50-75% basis of estimated currency exposure on a 12-month basis using currency forward instruments. The interest rate risk is partly hedged by the use of interest swaps for 75-100% of the debt. This is carried out on the basis of a perfect match and hedge accounting basis so that any mark-to-market effects are accounted for via comprehensive income and straight to equity. The Company carries out credit checks on clients as part of its tendering processes and has a history of minimal loss from debtors. There are no material overdue receivables as of year-end. Further information on financial risk management is provided In note 19 to the consolidated financial statements.
An account of the main features of Prosafe's internal control and risk management systems is available on its website http://www.prosafe.com/risk-management/risk-management-article1496-894.html.
Internal control is effected in accordance with Prosafe's policies and procedures which aim to ensure the effectiveness and efficiency of its operations, reliability of its financial reporting and compliance with applicable laws and regulations. These policies and procedures are designed, Inter alia, to safeguard assets and protect from accidental loss or fraud.
In addition, the policies and procedures are reinforced inter alia, by the organisation and the competence of its personnel, segregation of duties, regular risk assessments and internal reporting, management meetings, board meetings, internal audit committee and internal audits together with external audit and public reporting and communication.
Robust HSE performance is fundamental to all of Prosafe's operations and is therefore reflected in its core values. As a consequence, Prosafe works proactively and systematically to reduce injuries and sickness absence.
During 2015, Prosafe recorded four lost time injuries (LTI) (i.e. an incident that resulted in the employee being absent from the next work shift). This translates into an LTI frequency rate of 3.3 for 2015, compared to 2.6 in 2014. The LTI frequency is calculated by multiplying the number of LTIs by 1 million and dividing this by the total number of man-hours worked.
Prosafe operates a zero accident mind-set philosophy which means that no accidents or serious incidents are acceptable. Over the past years, it has focused on preventive measures and a number of initiatives have been implemented in order to further strengthen the safety culture. These initiatives will be continuously developed in order to improve safety performance further.
Sick leave decreased from 3.0 percent in 2014 to 2.45 per cent in 2015.
Prosafe had no accidental discharges to the natural environment in 2015 and continues to actively reduce emissions by investment in more modern and fuel efficient equipment and continuous improvement in operating procedures.
Prosafe's workforce consisted of 851 individuals at the end of 2015, compared with 796 in the previous year. Prosafe's global presence was reflected in the fact that its employees came from 28 countries around the world. The overall workforce turnover in the group was 7.8 per cent in 2015, as compared to 8.0 percent in 2014.
Prosafe operates an equal opportunity policy including gender equality. Men have, however, traditionally made up a greater proportion of the recruitment base for offshore operations, and this is reflected in Prosafe's gender breakdown. As of 31 December 2015, women accounted for 13.0 per cent of the overall workforce, compared to 12.9 per cent in 2014. Onshore the proportion of women was 43.4 per cent, as opposed to 44.1 per cent in 2014.
Women constituted 12.0 per cent of the managers as at 31 December 2015, as opposed to 14.6 per cent at the end of 2014.
Prosafe aims to offer the same opportunities to all and there is no discrimination due to age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, nationality, religion or belief, sex, and sexual orientation, with respect to recruitment, remuneration or promotion.
Corporate governance in the Company is based on the principles contained in the Norwegian Code of Practice for Corporate Governance of 30 October 2014. There are no significant deviations between the Code of Practice and the way it has been implemented. The Company's full corporate governance Prosafe's report is set out on website http://www.prosafe.com/norwegian-code-ofprectice/category32.html. Significant shareholdings are presented in note 14 to the financial statements and on http://www.prosafe.com/largest-shareholders/category160.html.
By displaying robust corporate governance, the Company aims to strengthen confidence in the Prosafe among shareholders, the capital market and other interested parties, and will help ensure maximum value creation over time in the best interest of shareholders, employees and other stakeholders.
The members of the Board of Directors at 31 December 2015 and at the date of this report are set out on page 1. Except for Harald Espedal and Glen Ole Rødland, referred to below they were all members of the Board of Directors throughout the year. There were no significant changes in the assignment of the responsibilities of the members of the Board of Directors. The remuneration of the members of the Board of Directors is disclosed in note 6 to the financial statements.
All directors serve for a period of two years unless the general meeting decides that a director shall serve for a specified period shorter than two years. At the annual general meeting (AGM) on 13 May 2015, Christian Brinch, Roger Cornish and Carine Smith Ihenacho were re-elected as Directors for a one-year period.
At the extraordinary general meeting on 23 October 2015 Ronny Langeland resigned and Harald Espedal was elected as Director and Chairman of the Board until the AGM of 2017.
At the extraordinary general meeting on 15 March 2016, it was resolved that the Board of Directors of the Company be Increased from six to up to seven non-executive Directors. It was further resolved that Glen Ole Rødland was elected as an additional non-executive Director and as a result the Board of Directors now comprises seven Directors.
As at 31 December 2015 the only Director holding shares in the Company (including associated parties), was Roger Cornish who is the registered shareholder and beneficial owner of 7,000 shares (approximately 0.0027% of the issued share capital of the Company).
There have been no changes to the holdings after 31 December 2015.
Prosafe aims to be a socially responsible Group and to further develop its business in a sustainable manner. In order to ensure long-term, viable development and profit, Prosafe balances economic, environmental and social objectives and integrates them into its daily business activities and decisions.
Prosafe's objectives for corporate social responsibility are based on the Group's strategy, core values, Code of Conduct and principles for corporate governance, in addition to international recognised principles and guidelines. In order to advance its commitment to sustainability and corporate citizenship, Prosafe signed up as a member of the United Nations Global Compact in October 2008.
Going forward, the Prosafe will continue to aim for continuous improvement of internal standards, the way it works with partners and suppliers, and to manage the impact of its operations.
Further information is available on Prosafe's website http://www.prosafe.com/corporate-responsibility/
The Board of Directors confirms that the accounts have been prepared under the assumption that the Company is a going concern and that this assumption is realistic at the date of the accounts. This assumption is based on the budgets for the year and the Group's long-term forecasts for the following years. As a result of the suspension of the two contracts in Mexico and the increased liquidity risk, a material uncertainty around the going concern assumption has arisen. The Board of Directors has evaluated the financial forecasts including the assumptions for utilisation of the vessels and the charter day rates. These assumptions are based on prudent estimates compared to historical actuals. in the evaluation of the financial forecasts, factors such as the order backlog and cost saving initiatives have been considered. As referred to in the financial presentation of the Q4 2015 result, the Group has already achieved annual cost savings amounting to USD 15 million. There is a target to double these annual savings. Cost savings to date and going forward include many cost categories, e.g. offshore, travel and salaries. Activity level is forecasted to rebound from 2018 as industry cost reductions are taking full effect.
Moreover, the Board of Directors has evaluated the Company's ability to reach a solution in the ongoing dialogue with the Company's key stakeholders, and concluded that it is likely/realistic to achieve a favourable outcome of this process. This conclusion is an important factor in the going concern assumption. The Board of Directors intends to announce a plan to secure financing of the Company shortly. As of today, such a plan is likely to involve a combination of one or more different alternatives including but not limited to, renegotiated restrictive covenants and debt restructuring. The Board of Directors refers to the Risk section for additional comments i.a. on liquidity risk.
The auditors of the Company, Messrs KPMG Limited, have expressed their willingness to continue in office. A resolution for authorising the Board of Directors to fix their remuneration will be submitted at the forthcoming annual general meeting. Reference to auditors' fee is made in note 6 to the consolidated accounts.
According to the shareholder register as at 31 December 2015, the twenty largest shareholders held a total of 71.2 per cent of the issued shares. The number of shareholders was 3,961. A nominee account in the name of State Street Bank was the largest shareholder with a holding of 18.1 per cent of the issued shares.
Prosafe carries out a quarterly survey attempting to identify the underlying owners of shares held in nominee accounts. This survey can be found $at$ the Prosafe web site: http://www.prosafe.com/getfile.php/PDF%20Filer/2016-02%20RDIR%20Report.pdf.
In December 2015, the Company issued 23,597,300 additional shares of nominal value of €0.25 at a premium of €2.48. As at 31 December 2015 Prosafe had an issued share capital of 259,570,359 ordinary shares at a nominal value of EUR 0.25 each.
Further information is shown in note 14 to the consolidated financial statements.
In 2015, the Company declared and paid interim dividends of USD 34 million (USD 125.8 million). corresponding to NOK 1.12 per share (NOK 3.29). The Board of directors does not propose the payment of a final dividend.
Prosafe's aim is that its shareholders receive a competitive return on their shares through a combination of share price appreciation and a direct return in the form of dividends.
Prosafe's long-term dividend policy remains as described in the Q3 2014 report. However, in light of the reduction in industry activity levels, the Board decided in November 2015 to temporarily suspend dividend payments. The Board believes that this will be beneficial for the Company from a commercial, financial and strategic perspective, and that it will improve the Company's financial robustness and optionality. In addition, as part of the agreed amendments to its credit facilities. Prosafe has agreed that it will not issue any dividends, bond or complete any equity buy-back from 31 December 2015 unless all voluntary skipped amortisations have been prepaid or cancelled and a 12month financial forecast has been provided which confirms compliance with original financial covenants (except for the equity ratio which must be a minimum of 35 per cent).
At 31 December 2015, Prosafe SE had a distributable equity of USD 491.1 million. The parent company showed a net loss of USD 418.2 million for 2015.
Reference is made to note 24 to the consolidated accounts, and note 16 to the parent company's separate accounts for a description of events after the balance sheet date.
in January 2016, the Company agreed with its banking syndicate to amend its USD 1,300 million banking facility agreement. The amendment includes the option to voluntarily skip two scheduled amortisations amounting up to USD 130 million in total under this facility in 2016 and/or 2017. In addition, the annual interest rate on the credit facilities was revised according to a grid pricing system based on leverage ratio.
On 7 March 2016 Prosafe announced that it had been informed by its Mexican client Cotemar Group ("Cotemar"), that Safe Regency would be suspended by Petróleos Mexicanos ("Pemex") from mid-March 2016 and that it was likely that Safe Lancia would also be suspended by Pemex by mid-March 2016. On 16 March 2016, Prosafe confirmed that it had been informed by Cotemar that the Safe Lancia will be suspended by Pemex from mid-March 2016. This was in response to the fact that Pemex is cutting spending in order to adjust its budget to reflect an oil price of USD 25 per barrel. The Group has decided to scrap three of its oldest units, the Jasminia, Safe Hibernia and Safe Britannia, and to cold stack other units starting with the Safe Astoria.
As referred to in the Financial restructuring section above, Prosafe was granted a waiver of the liquidity covenant on 22 April 2016. The temporary minimum liquidity covenant is now USD 20 million until the end of the third quarter of 2016.
Lamaca, 27 April 2016 Board of Directors of Prosafe SE
Harald Espedal Non-executive Chairman
Nancy Ch. Erotocritou Non-executive Director
Chit
Rian Brinch
Carina Smith Ihenacho
Non-executive Director
Non-executive Deputy Chairman
Comish
Not-executive Director
Anastasis Ziziros Non-executive Director
Calland
Glen Ole Redland Non-executive Director
In accordance with Sections 9 (3) (c) and 9 (7) of the Cyprus Transparency Requirements (Securities for Trading on Regulated Market) Law of 2007 ("Law") and Cyprus Companies Law Cap. 113, we the members of the Board of Directors and the other responsible persons for the consolidated financial statements of Prosafe SE and the other companies included in the consolidated accounts ("the Group") and the financial statements of Prosafe SE, for the year ended 31 December 2015, confirm that, to the best of our knowledge:
Harald Espedal Non-executive Chairman
Christian Brinch
Rù kr Carnish
Non-executive Deputy Chairman
ine Smith Ihenacho on-executive Director
Tasos Ziziros Non-executive Director
Ch.-Erotocritou
Non-executive Director
Nancy Non-executive Director
WWW
Glen Ole Rødland Non-executive Director
Stig Harry Christiansen Chief Financial Officer Prosafe Management AS
Lamaca, Cyprus 27th April 2016
Prosafe SE 126 Btadiou CY-6020 Lamaca Cyprus
Telephone: +357 2462 2450 Telefax; +357 2482 2480 [email protected]
www.prosefe.com Registration No.: SE4
$14$
| (USD million) | Note | 2015 | 2014 |
|---|---|---|---|
| Charter revenues | 4 | 425.4 | 481.2 |
| Other operating revenues | 4, 5 | 49.3 | 67.5 |
| Operating revenues | 474.7 | 548.7 | |
| Employee benefits | 6 | (98.9) | (110.6) |
| Other operating expanses | 7 | (112.9) | (125.5) |
| Operating profit before depreciation and impairment | 262.9 | 312.8 | |
| Depreciation | a | (80.5) | (64.3) |
| Impairment | 8 | (145.6) | 0.0 |
| Operating profit | 30.8 | 248.3 | |
| Interest Income | 10 | 0.2 | 0.3 |
| Interest expenses | 10 | (41.6) | (37.3) |
| Other financial income | 9, 10 | 44.1 | 76.4 |
| Other financial expenses | 9, 10 | (73.6) | (90.4) |
| Net financial Items | (70.9) | (57.0) | |
| Profit before taxes | (40.1) | 191.3 | |
| Taxes | 11 | (10.5) | (12.5) |
| Net (loss)/profit | (50.6) | 178.0 | |
| Attributable to equity holders of the parent | (50.8) | 178.8 | |
| Eernings per share (USD) | 12 | (0.21) | 0.76 |
| Diluted earnings per share (USD) | 12 | (0.21) | 0.76 |
| (USD million) | Note | 2015 | 2014 |
|---|---|---|---|
| Not profit for the year | (60.6) | 178.6 | |
| Other comprehensive income to be reclassified to profit or loss in subsequent periods |
|||
| Foreign currency translation | (5.0) | (6.2) | |
| Net gain/loss on cash flow hedges Not other comprehensive income to be reclassified to profit or loss in |
19 | (9.5) | (38.0) |
| subsequent periods | |||
| (14.5) | (44,2) | ||
| Total comprehensive income for the year, net of tax | (65.1) | 134.6 | |
| Attributable to equity holders of the parent | (65.1) | 134.6 |
| (USD million) | Nata | 21.12.2015 21,12.2014 | |
|---|---|---|---|
| ABBETE | |||
| Goodwill | a | 220.7 | 228.7 |
| Vensals | a | 1578.6 | 1027.3 |
| New builds | 8.23 | 228.6 | 311.8 |
| Other tangible assets | Ă | 4.9 | 5.7 |
| Total non-current assets | 20387 | 1571.5 | |
| Cesh and deposits | 18.20 | 57.1 | 122.4 |
| Debtors | 18.19 | 60.0 | 83.9 |
| Other current assets | 18.21 | 31.4 | 38.0 |
| Total current senate | 148.5 | 245.3 | |
| Total assate | 2157.2 | 10153 | |
| EQUITY AND LIABILINES | |||
| Share capital | 14 | 72.1 | 65.9 |
| Other equity | B43.1 | 682.6 | |
| Total equity | 715.2 | 748.5 | |
| Interest-bearing non-current lishtifbes | 15, 18, 19 | 1 107.5 | 830.1 |
| Deferred tax | 11 | 7.8 | 13.4 |
| Darivatives | 17.18 | 48.6 | 39.0 |
| Other provisions | 2.6 | 3.6 | |
| Total non-cerrent (ishilties | 1165.4 | 886.0 | |
| Interest-bearing current debt | 15, 18, 19 | 139.5 | 0.O |
| Accounts payable | 17.18 | 17.1 | 18.6 |
| Taxas payable | 11 | 13.7 | 17.3 |
| Derivations | 18, 19 | 40.7 | 87.9 |
| Other current liabilities | 18, 18, 19 | 92.9 | 68.6 |
| Total current liabilities | 105.6 | 182.3 | |
| Total aquity and Unbiltime | 2187.2 | 1818.8 | |
| Lamscs, 27 April 2016 | |||
| Christian Brinch | |||
| Non-executive deputy cheirmen | |||
| -75 |
$\overline{\overline{r}}$ adlano in Ole Re Ole Redend
executive director
w
| (USD million) | Nota | 2016 | 2014 |
|---|---|---|---|
| CASH FLOW FROM OPERATING ACTIVITIES | |||
| Profit before taxes | (40.1) | 191.3 | |
| Unraalised currancy (gain)/loss on long-term debt | 15 | (56.6) | (63.7) |
| Loss/(gain) on sale of tangible assets | 1.4 | 2.3 | |
| Depreciation and impairment | я | 232.1 | 64.3 |
| Interest Income | (0.2) | (0.3) | |
| Interest expenses | 41.6 | 37.3 | |
| Taxas cald | (16.8) | (11.5) | |
| Change in working capital | 15.3 | 63.0 | |
| Other kems from operating activities | (5.2) | (14.4) | |
| Net cash flow from operating activities | 171.5 | 248.3 | |
| CASH FLOW FROM INVESTING ACTIVITIES | |||
| Proceeds from sale of tangible assets | Б | 0.0 | 03 |
| Acquisition of tangible assets | 8.23 | (700.7) | (211.0) |
| Inlerest raceived | 0.2 | 0.3 | |
| Net cash flow from Investing activities | (700.5) | (210.4) | |
| CASH FLOW FROM FINANCING ACTIVITIES | |||
| Proceeds from new interest-bearing debt | 15, 18, 19 | 1290.0 | 332.2 |
| Repayments of Interest-bearing debt | 15, 18, 19 | (616.5) | (198.0) |
| Sham haun | 14 | 65.A | 0.0 |
| Dividends paid | 13 | (34.0) | (125.8) |
| interest paid | (41.8) | (37.3) | |
| Net cash flow from financing activities | 463.7 | (28.9) | |
| Nat cash flow | (66.3) | 9.0 | |
| Cash and deposits at 1 January | 122.4 | 113.4 | |
| Cesh and deposits at 31 December | 20 | 57.1 | 122.4 |
$17$
ü
| (USD million) | Share capital | Other equity |
Cash flow hedges |
Foreign CUITURICY translation |
Total equity |
|---|---|---|---|---|---|
| Equity at 31 December 2013 | 66.9 | 623.1 | 6.2 | 42.6 | 739.7 |
| Net profit | 0.0 | 178.8 | 0.0 | a.o | 178.8 |
| Other comprehensive income | 0.0 | G.D | (38.0) | (6.2) | (44.2) |
| Total comprehensive income | 0.O | 178.9 | (38.0) | (0.2) | 134.6 |
| Dividend (note 13) | 0.0 | (125.8) | 0.0 | ûΩ | (125.6) |
| Equity at 31 December 2014 | 65.9 | 676.1 | (29.8) | 364 | |
| Net profit | 0.0 | (50.6) | 0.0 | 748.5 | |
| Other comprehensive income | 0.0 | D.D | ۵٥ | (50.5) | |
| (9.5) | (6.0) | (14.5) | |||
| Total comprehensive income | 0.0 | (50.6) | (9.5) | (5,0) | (65.1) |
| Share lasue | 6.2 | 59.5 | 0.0 | 0.0 | 66.B |
| Dividend (note 13) | 0.0 | (34.0) | 0.0 | 0.0 | (34.0) |
| Equity at 31 December 2015 | 721 | 851.1 | (39,3) | 31.4 | 715.2 |
The legal form of the share capital and the share premium accounts are reflected in the statament of changes in equity of the
accorrepenying parent financial statements. Other equity includes share premium reserve and reta
Prosafe SE (the 'Company') is a public amited company domiciled in Lamaca, Cyprus. The registered office of the Company is Stadiou 126,
6020 Lamaca, Cyprus. The Company is listed on the Oslo Stock Exchange with ticker code 8020 Lamaca, Cyprus. The Company is issue on the Caro Sides Exchange was scare cove Prio. The consolidate internative
comprise the financial statements of the Company and its subsidiaries (together referred to as the 'Grou directors on 27 April 2016. The Group is the world's leading owner and operator of semi-submersible accommodation vascals.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) endorsed by The European Union (EU) and the requirements of the Cyprus excensive memoral constraints in account to account our control of the Cyprus of the Cyprus of the Cyprus of the control of the Cyprus of the Cyprus of the Cyprus of the province financial year.
JUDGMENTS. The preparation of the Group's consolidated financial statements requires management to make judgments, estimates and sumplions that affect the reported amounts of revenue, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
ESTIMATES AND ASSUMPTIONS. The estimates and assumptions are assessed on a continuous basis. The estimates and assumptions which have the most significant effect on the amounts recognised in the financial statements relate to the going concern assumption, depreciation of fixed assets and imperment assessment of non-financial assets. Estimated useful life of the Group's semi-submersible accommodation/service vessels is 30 to 50 years dependent on the age at the time of acquisition and subsequent refurbishments. The decommodifications and the cash-
management determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-
generating units to which the goodwill is alloca and to apply a suitable discount rate. Further details are given in note 6.
The accounting policies adopted are consistent with those of the previous financial year. The following new and amended standards are
The accounting policies adopted are consistent with those of the previous financial stat
ir rue a - - ------
IFRIC 21 darilles when to recognise a liability to pay a levy that fails within the scope of IAS 37. The interpretation was issued by IAS8 in May
2013 and endorsed by the EU in June 2014. The amendments
An international control of the Activity of Service of the S2011-2013 Cycle" and was endorsed by the EU in December 2014. The
In December 2013 IASB issued "Annual Improvements to IFRS 2011-2013 Cycle" and was endorsed by t Group's consolidated financial statements.
Standards issued but not yet effective, which the Group has not early adopted
IASB has issued multiple new standards and interpretations that may impact the Group, which are described below. These standards are not yet effective, and the Group has not early adopted these standards. The Group has not yet finalised the full analysis of the summer of the full analysis of the standard in the full analysis of the standards of the standard statements is currently unknown.
IFRS 9 will eventually rapiace IAS 39 Financial Instruments: Recognition and Measurement and is effective from 1 January 2018 with earlier in the state of the standard was leaved July 2014, but is not yet and moderations and is energy non-company able with easier
adoption allowed. The standard was lesued July 2014, but is not yet and made by the EU. The stand
IFRS 15 is a joint revenue recognition standard Issued from IASB and FASB and is effective from 1 January 2018, with earlier adoption and the standard presents a single, principles-based five-step model for determination and recognition of revenue to be applied to all
allowed. The standard presents a single, principles-based five-step model for determina supplemental IFRIC guidence. The standard is not yet endorsed by the EU.
IFRS 16 was issued by IASB in January 2018. The standard principally requires lessees to recognize assets and llabilities for all leases and to present the rights and obligations associated with these leases in the statement of financial position, and is effective from 1 January 2019.
Going forward, lessees will therefore no longer be required to make the distinct the past in accordance with IAS 17. The standard is not yet endorsed by the EU.
BASIS OF CONSOLIDATION. The consolidated financial statements comprise the financial statements of the parent company and its subsidiaries. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the data that such control casess. The financial statements of the sus on which the use on solution continue to
as the parent company, using consistent accounting policies. All intra-group balances, i dividends resulting from Intra-group transactions are allminated in full.
BUSINESS COMBINATIONS AND GOODWILL. Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregale of the consideration transferred, measured at acquisition date fair value. Acquisition related costs incurred are expensed and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and perlinent conditions as at the acquisition date.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-
controlling interest over the net identifiable assets acquired and liabilities es assets of the subsidiary acquired, the difference is recognised in profit and loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill
acquired in a businese combination is, from the acquisition date, allocated to benefit from the combination, irrespective of whether other assets or ilabilities of the acquired are assets not a unital
Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill associated with the wriers gournal loims pair of a cash goneroing unit and pair or we operatum winning the gain or loss on disposal chief operation.
Operation disposed of is included in the carrying amount of the operation when determining th generating unit retained.
FOREIGN CURRENCY TRANSLATION. The presentation currency is USD. This is also the functional currency for the parent company. Transactions in other currencies than the functional currency are translated at the exchange rate prevailing at the transaction date. Monetary thems in other currencies than the functional currency are translated to the functional currency at the exchange rate on the reporting date, and the currency difference is recognised in the profit and loss account. Non-monetary tiems in other currencies than the functional currency are translated at the exchange rate at the transaction date. When consolidating companies with a functional currency other than the USD, on the and loss kems are translated at the monthly average exchange rate, while balance aheet homs are translated at the exchange rate on the and loss nems are pansions as the monoing eventual soundings rate, while below he most removement on the extra one production. The operation, the deferred cumulative
reporting date. Translation differences are taken to oth
SEGMENT REPORTING. For management and monitoring purposes, the Group is organised into one segment; chartering and operation of
eccommodation/service vessels. For geographical Information, reference is made to note 4.
REVENUE RECOGNITION. Some of the Group's vessels operate on time chartors, and others on bareboat charters. Revenue is recognised to the extent that it is probable that the economic benefits will flow to Prosafe and the revenue in benefits were the state in the content of the state in the fair value of the consideration received. Charter income is recog transfer the risks or benefits of ownership of the asset to the customers and none of the contracts are accounted for as a financial lease. Management, crew services and other related income are recognised in the period the services are rendered. Interest income is recognised on theregoing, were connected and when reason internet are recognised in the period the services are remediated internet income is recognised on
an accrual basis, interest income is included in financial liams in the income s recognised as reimbursement revenue. These services are recognised in the period when the services are rendered.
PROVISIONS are recognised when, and only when, the Group has a present obligation as a reault of events that have taken place, and it can
be proven probable that a financial settlement will take place as a reault of this l
When Prosafe expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.
TANGIBLE ASSETS are stated at acquisition cost less cumulative depreciation and accumulated impairment losses, if any. Assets are depreciated on a straight-line basis over their estimated economically useful lives, with account taken of their estimated restinated restinance Management makes annual assessments of rasidual value, methods of depreciation and the remaining economic life of the assets. Components of an asset which have an estimated shorter ifte than the main component of the asset are accordingly depreciated ever this shorter period. Acquisition cost includes costs directly attributable to the acquisition of the assets. Subsequent expenditures are added to the book value of the asset or accounted for on a separate basis, when it is likely that future benefits would derive from the expenditures. The vessels are subject to a periodic survey every five years, and associated costs are amortised over the five-year period to the next survey. Other repair and maintenance costs are expensed in the period they are incurred.
Expenditures for new builds are capitalised, including instalments paid to the yerd, project management costs, and costs relating to the initial
preparation, mobilisation and commissioning until the vessel is placed into s on qualifying assats.
Tangible fixed assets are depreciated on a straight line basis over their useful ilfetime as follows:
. Semi-submersible vessels - 5 to 50 years dependent on the age at the time of the acquisition and subsequent returbishments - Buildings - 20 to 30 years
· Equipment - 3 to 5 years
IMPAIRMENT OF NON-FINANCIAL ASSETS. The Group assesses at each reporting date whether there is an indication that an asset may be impaired, if any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amparet, a ery excessive model of the higher of an assets or cash generating unit's fair value less costs to sell and its value in use and to determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash generating unit exceeds its recoverable amount, the asset is considered Impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-lex discount rate that reflects current market assessments of the time value of money and risks specific to the asset. in determining fair value less costs to sell, recent market bansactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples.
The Group bases its impairment calculation on a detailed forecast calculation which is prepared for the Group's cash generating units. The forecast calculation is generally covering a period of five years. Calculation which is prepared for the Group's cash generating units. The
forecast calculation is generally covering a period of five years. For longer peri
For non-financial assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously not iterrations assess weaving governity an essession, is more at each reporting sine as an enterior electric and is any inclusion initial previously recognised impairment bases may no longer exist or may have decreased. I recoverable amount since the tast impairment loss was recognise
IMPAIRMENT OF GOODWILL. Goodwill is tested for impairment annually, and when circumstances indicate that the carrying value may be
Impaired. Impairment is determined by assessing the recoverable amount of the cash generati goodwill cannot be reversed in future periods.
Financial assets are classified as financial assets at feir value through profit or loss, loans and receivables or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Prossie determines the classification of its financial assets at initial recognition. Financial assets are recognised initially at fair value plus directly attributable costs, with the exception of assets measured at fair value through profit and loss
Prosafe's financial assets include cash and short-term deposits, trade and other receivables and financial derivatives,
Financial assets at fair value through profit and loss include financial assets held for trading. Financial assets are classified as held for trading if
they are acquired for the purpose of saling in the near future. This hadge accounting criteria as defined by IAS 39. Financial assets at fair value through profit and loss are carried in the balance sheet at fair the value with gains and losses recognised in the income statement.
Luence and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such
Enancial assets are carried at amortised cost using the effective interest rate m income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is Impaired. A financial asset or a group of financial assets are deemed to be impaired if, and only if, there is objective evidence of Impairment as a result of one or more events that have occurred after the initial recognition of the asset and that loss event has an impact on the estimated
A result of one or more events that have occurred after the initial recognitio
Financial fabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, financial tightities measured at amortised cost or as derivativas designated as hedging instruments in an effective hedge, as appropriate. Prosafe determines the classification of its financial liabilities at initial recognition.
Financist liabilities are recognised initially at fair value and, in case of loans and borrowings, net of directly attributable costs.
Prosafe's financial liabilities include non-derivative financial instruments (trade and other payables, bank overdraft, loans and borrowings, financial guarantee contracts) and derivative financial instruments.
Subsequent to initial recognition, these flabilities are measured at amortised cost using the effective interest method.
Financial liabilities at fair value through profit and loss include financial liabilities held for trading. Financial liabilities are classified as held for r nest-mail and they are acquired for the purpose of selling in the methods served in the unit sequences are cassisted as new ror in the transmission and they are acquired for the purpose of selling in the next round that
Darecognition
A financial liability is derecognised when the obligation under the ilability is discharged or cancelled or expires.
When an existing financial fiability is replaced by another from the same lender on substantially different terms, or the terms of an existing llability are substantially modified, such an exchange or modification is insated as a derecognition of the original llability and substantially modified, such an exchange or modification is insated as a derecognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For financial instruments where there is no ective market, fair value is determined using valuation techniques. Such techniques may include using recent arm's length market transactions, reference to the current feir value of
EMPLOYEE BENEFITS. Companies within the Group make contributions to pension schemes that are defined contribution plans. The companies' payments are recognised in the income statement for the year to which the contribution applies.
SHARE-BASED PLANS. The Group has an option plan for key personnel which provides a cash settlement if an option is exercised. The fair value of the options is expensed over the period until vesting with recognition of a corresponding liability which also includes social security tax
where relevant. This liability is remeasured at each balance sheet data u recognised in the Income statement.
BORROWING COSTS. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or sale are capitalise
DERIVATIVE FINANCIAL INSTRUMENTS. Prosafa uses derivative financial instruments such as forward currency contracts and interest rate system of the second and the content of the second of the second content and the second and the content conducts and the date
In the second of the second that is entered into and are subsequently remeasured at fair value a the fair value is positive and as financial liabilities when the fair value is negative.
Any gains and losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting and the
Ineffective portion of an effective hedge, are recognised in the income statement.
The fair value of forward currency contracts is the discounted difference between the forward exchange rate and the contract price. The fair
value of interest rate swap contracts is determined by reference to market price
At the inception of a hedge relationship, Prosafe formally designates and documents the hadge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity wil assess the hedging instrument's effectiveness in offsetting the exposure to changes in the hadged 'tem's fair value or cash flows attributable to the hadged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows, and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Prosafe applies hedge accounting only for the interest rate swaps. Hedges which meet the strict criteria for hedge accounting are accounted for as follows
The effective portion of the gain and loss on the hedging instrument is recognised directly in other comprehensive income, while any institctive portion is recognised immediately in the income statement.
Amounts recognised as other comprehensive income are transferred to the income statement when the hedged transaction affects profit and loss, such as when the hedged financial income or financial expense is recognised.
Current versus non-current classification
Derivative instruments that are not a designated and effective hedging instrument are clossified as current or non-current or separated into a current and non-current portion based on an essessment of the facts and circumstances.
When Prosafe holds a derivative as an economic hedge for a period beyond 12 months after the balance sheet date or a derivative instrument is designated as an effective hadging instrument, the fair value of the derivative instrument is classified as current or non-current consistent with the classification of the underlying hem. Economic hedges are not treated as hedging for accounting purposes.
INCOME TAXES in the income statement include taxes payable and changes in deferred tax. Deferred tax is calculated on the beals of temporary differences between book and tax values that exist at the end of the period. Deferred tax asset is recognised in the statement of financial position when it is probable that the lax benefit can be utilised. Deferred lax and deferred tax asset are massured at nominal value. Income lax assets and liabilities for the current and prior pariods are measured at the amount expected to be recovered or paid to the taxation aulhorilles.
Deferred tax liabilities are measured at the tax rates that are expected to apply in the year when the liability is settled, based on tax rates that
have been enacted or substantively enacted at the reporting date. Deferre
Deferred tax assets and liabities are offset if a legally enforceable right exists to set off current tax assets against current income tax itabitities
and the deferred taxes relate to the same taxable entity and the same
The canying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient laxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future landbig profits will allow the deferred lax asset to be recovered.
CASH AND DEPOSITS comprise cash at banks and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
DIVIDEND distribution to the shareholders is recognised in the financial statementson the date on which the shareholders' right to receive payment is established.
SHAREHOLDER'S EQUITY. Any difference between the issue price of share capitet and the nominal vatue is recognised es share premium.
The costs incurred attributable to the issue of share capital are deducted from equity.
OWN SHARES. Own equity instruments which are reacquired are recognised at cost and deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Group's own equity instruments.
Prosafe has one segment, which is chartering and operation of accommodation/service vessels.
| Openting revenues by geographical location | 2015 | 2014 |
|---|---|---|
| Europe excl, Cyprus | 307.3 | 322.8 |
| Cyprus | 0.0 | 0.0 |
| Americas | 111.5 | 165.2 |
| Australia/Asis | 55.9 | 60.7 |
| Total operating revenues | 474.7 | 548.7 |
The revenue allocation is based on place of operation of the vessel.
| Operating revenues from major customers situated in: | 2015 | 2014 | ||
|---|---|---|---|---|
| 1) | 司 | 11 | 勾 | |
| Europa1 | 64.0 | 18 % | 0.0 | 0% |
| Americas? | 78.2 | 16 % | 110.9 | 20% |
| Australia/Asia1 | 55.8 | 12% | 39.4 | 7% |
| Europe2 | 47.3 | 10% | 25.9 | 5% |
| Americas2 | 33.3 | 7% | 54.3 | 10% |
| Europa3 | 32.5 | 7% | 60.3 | 11% |
| Europa4 | 0.0 | 0% | 113.4 | 21% |
$n_{\text{Operating}}$ revenues in USD million
23 Percentage of total revenues
| Total assets by geographical location | 2015 | 2014 |
|---|---|---|
| Europe axcl. Cyprus | 1603.2 | 1031.B |
| Cyprus | 31.2 | 58.7 |
| Americas | 198.6 | 266.5 |
| Australia/Aala Total assets |
354.2 2187.2 |
459.8 1816.6 |
| NOTE 5: OTHER OPERATING REVENUES | ||
| 2015 | 2014 | |
| Mobilisation/demobilisation income | 5.4 | 8.8 |
| Rambursoment revenues | 43.B | 68.7 |
| Total other operating revenues | 49.3 | 67.5 |
NOTE 6: EMPLOYEE BENEFITS, MANAGEMENT REMUNERATION AND AUDIT FEE
| 2015 | 2014 | |
|---|---|---|
| Wages and salaries | 68.5 | 58.9 |
| Contract personnal | 14.6 | 21.7 |
| Other personnel-related expenses | 11.2 | 13.7 |
| Social security taxes | 5.8 | 7.6 |
| Pension expenses | 6.1 | 6.2 |
| Other remuneration | 3.4 | 3.0 |
| Change in share option provision | 0.0 | (0.4) |
| Total employee benefits | 98.9 | 110.6 |
nonke sone......
The Company's bonus scheme embraces the executive management and other key employees. The bonus dapends on echieving defined
results relating to eamings, the etteinment of strategic goals and HSE,
Share options
The executive management and other key employees (in total 12 persons) were included in a synthelic share option programme that expired in
2016. The outscaling options were granted in 2011, When a synthelic o
| 2015 | 2014 | |
|---|---|---|
| Share price at 31 December (NOK) | NA | 23.00 |
| Weighted average fair value (NOK) at 31 December | NA | 0.18 |
| Provision at 31 December (USD million) | 0.0 | 0.0 |
| Options granted 2008 | 2768829 | |
| Options granted 2009 | 910 000 | |
| Options granted 2011 | 770 000 | |
| Forfelled in 2010 | (017524) | |
| Exarcised in 2011 | (70 000) | |
| Forfelled In 2011 | (20000) | |
| Exercised in 2012 | (673000) | |
| Forfaltad in 2012 | (2036306) | |
| Exercised in 2013 | (32000) | |
| Forfalted In 2013 | (70 000) | |
| Forfatted In 2014 | (30 000) | |
| Expired In 2014 | (315 000) | |
| Expired In 2015 | (285000) | |
| Outslanding options at 31 December 2015 | ۰ | |
| Exardsable at 31 December 2015 | 0. |
Territori and excessive pay
Certain members of the corporate management have agreements on severance pay. Under these agreements, the Company guarantees a
numeration corresponding to the base salary received at the time of
In accordance with the code of practice for corporate governance recommended by the Oslo Stock Exchange, remuneration for the corporate
management and the board of directora is specified betow.
| Senior officers (USD 1 000) |
Year | Salary | Bonus 11 | Pension 3 | Other benefits |
|---|---|---|---|---|---|
| Karl Ronny Klungtvadt (CEO) | 2015 | 496 | 213 | 159 | 28 |
| Robin Laird (Deputy CEO) | 2015 | 523 | 251 | 79 | 189 |
| Stig Christiensen (CFD from Aug 2015) | 2015 | 117 | ٥ | 1B | 10 |
| Sven Berra Larsen (CFO to Aug 2015) | 2015 | 227 | 127 | 29 | 25 |
| Karl Ronny Klungtvedt (CEO) | 2014 | 619 | 354 | 161 | 36 |
| Robin Laird (Deputy CEO) | 2014 | 561 | 329 | 84 | 264 |
| Sven Berra Larsen (CFO) | 2014 | 381 | 220 | 44 | 58 |
11 Psyment besed on previous year's schievements
23 For the CEO, the figures include increase in seriy retirement pension ilability
| Board of directors (USD 1 000) |
Year | Board face 1) |
|---|---|---|
| Harald Espedal (chair from Oct 2015) | 2015 | 25 |
| Ronny Johan Langeland (chair to Oct 2015) | 2015 | 113 |
| Christian Brinch | 2015 | 119 |
| Roger Comish | 2016 | 101 |
| Tasos Ziziros | 2015 | 87 |
| Nancy Ch. Erotocritou | 2015 | 65 |
| Carino Smith thomacho | 2015 | 81 |
| Ronny Johan Langeland (chair from May 2014) | 2014 | 159 |
| Michael Raymond Parker (chair to May 2014) | 2014 | 66 |
| Christian Brinch | 2014 | 122 |
| Roger Comish | 2014 | 112 |
| Carine Smith Ihenacho | 2014 | 95 |
| Nancy Ch. Erotocritou (from May 2014) | 2014 | 69 |
| Tasos Ziziros (from May 2014) | 2014 | 69 |
| Christakis Pavlou (to May 2014) | 2014 | 38 |
13 If applicable, figures include compensation from sudit committee and compensation committee.
| Auditors' fee (USD 1 000) |
2015 | 2014 |
|---|---|---|
| Audit | 324 | 298 |
| Fees for other services | 15 | 34 |
| Total auditors' fee | ||
| 338 | 332 |
Auditor's fee is included in general and administrative expenses (note 7).
| 2015 | 2014 | |
|---|---|---|
| Repair and maintenance | 24.3 | 28.5 |
| Other vessel operating expenses | 49.6 | 53.1 |
| General and administrative expenses | 39.1 | 43.B |
| Total other operating expenses | 112.9 | 125.5 |
| Vessala | New builds | Equipment | Buildings | Goodwill | Total | |
|---|---|---|---|---|---|---|
| Acquisition cost 31 December 2013 | 1837.0 | 248.9 | 4.7 | 7.4 | 226.7 | 2024.8 |
| Additions | 1464 | 62.9 | 1.2 | 0.5 | 0.0 | 211.0 |
| Disposals | (4.0) | 0.0 | 0.0 | 0.0 | 0.0 | (4.0) |
| Acquisition cost 31 December 2014 | 1679A | 311.8 | 5.9 | 7.9 | 228.7 | 2231.6 |
| Additions | 783.6 | (83.3) | 0.2 | 0.0 | 0.0 | 700.7 |
| Disposals | (2.1) | 0.O | 0.0 | 0.0 | 0.0 | (2.1) |
| Acquisition cost 31 December 2015 | 2461.1 | 228.5 | 6.1 | 7.0 | 226.7 | 2930.2 |
| Accumulated depreciation 31 December 2013 | 590.1 | 6.0 | 3.5 | 3.8 | 0.0 | 597.2 |
| Accumulated depreciation on disposals | (1.4) | 0.0 | 0.0 | 0.0 | 0.0 | (1.4) |
| Depreciation for the year | 63.4 | 0.0 | 0.1 | 0.9 | 0.0 | 64.3 |
| Accumulated depreciation 31 December 2014 | 652.1 | 0.0 | 3.6 | 4.5 | 0.0 | 680.2 |
| Accumulated depreciation on disposals | (0.7) | 0.0 | 0.0 | 0.0 | 0.0 | |
| Depreciation for the year | 85.5 | 0.0 | 0.4 | 0.6 | 0.0 | (0.7) |
| impairment | 145.6 | 0.0 | 0.0 | 0.0 | 86.5 | |
| Accumulated deprectation 31 December 2015 | 882.6 | 0.0 | 4.0 | 5.0 | 0.0 0.0 |
145.6 891.5 |
| Net carrying amount 31 December 2016 | 1575.6 | 228.5 | 2.1 | 2.9 | 226.7 | 2038.7 |
| Net carrying amount 31 December 2014 | 1027.3 | 311.8 | 2.2 | 3.4 | 226.7 | 1571.5 |
| Depreciation rate (%) | $2 - 20$ | $\blacksquare$ | 20-33 | $3-5$ | $\bullet$ | |
| Economically useful life (years) | 5-50 | ٠ | $3-6$ | 20-30 | $\bullet$ | ٠ |
New builds include prepayment of 20 % of the yard cost for the new builds, owner-furnished equipment and other project costs incurred. For details, reference is made to note 24.
Tengible fixed assets and goodwill are initially recorded at cost. Subsequent to recognition, tengible fixed assets are stated at cost less
accumulated depreciation and any accumulated impairment losses. These assets are d upgrades and modification of vessels are capitalised.
Borrowing costs are capitalised as part of the asset in accordance with revised IAS 23. As at 31 December 2015, capitalised borrowing costs portuwing costs are capturised as part of the esset in economics were revised too 23. On at 31 becomings and it, capturised buriously costs
amount to USD 28.4 million (31 December 2014: USD 15.8 million). The amount of bor Estimated useful life for the semi-submersible accommodation vessels is 30-50 years. Cartain equipment on a vessel is depreciated over a
Estimated useful life for the semi-submersible accommodation vessels is 30-50 years. and la reviewed on an annual basis.
Management performed an annual imperment assessment of the fixed assets in the with IFRS. Management looked at each individual vessel rearing control of the first and concluded that there is an impairment relating to several of the accommodation vessels due to a weaker market
as a cash generating unit, and concluded that there is an impairment relating t amounts of the assets - the values in use - are as follows.
| Impairment | Recoverable amount | |
|---|---|---|
| Jasminia | 9.1 | 0.0 |
| Safe Hibarnia | 4.3 | 0.0 |
| Sale Britannia | 21.1 | 0.0 |
| Sele Regency | 21.0 | 0.0 |
| Safe Lancla | 13.7 | 0.0 |
| Safe Bristolla | 57.1 | 71.B |
| Safa Astoria | 2.3 | 90.2 |
| Safe Concordia | 17.0 | 183.2 |
| 145.6 | 345.2 |
The goodwill of USD 226.7 million relates to the acquisition of Consafe Offshore AB tn 2008. Prosafe has only one reporting segment comprising of all accommodalion/service vessels which the goodwill has been allocated to. The recoverable anount has been allocated to the recoverable monitoring of all accommodalion/service vessels which the goodwill has management's estimate of the risks specific to each unit. The present value of this cash flow exceeds the carrying value, and no need for a write-down is indicated.
27
The present value of the estimated cash flows from the cash-generating units, is based on the following inputs:
Free association on all the pre-tax discount rate would have lead to an additional impairment of around USD 30 million on the cash-
Sensitivity: a 1% increase in the pre-tax discount rate would have been impaired by USD 10
| 2015 | 2014 | |
|---|---|---|
| Currency gain | 0.0 | 76.4 |
| Fair value adjustment currency forwards | 44.1 | 0.0 |
| Totel other financial income | 44.1 | 78.4 |
| Currency loss | (55.7) | 0.0 |
| Fair value adjustment currency forwards | 0.0 | (63.4) |
| Amortisation of borrowing costs | (12.8) | (5.3) |
| Other financial exponses | (5.1) | (7.7) |
| Total other financial expenses | (73.8) | (96.4) |
| Year ended 31 Dec 2016 | Loans and receivables |
Fair value profit and loss |
rmancum Rabilities through measured at amortised cost |
Total |
|---|---|---|---|---|
| Inlerest income | 0.2 | 0.0 | 0.0 | 0.2 |
| Fair value adjustment currency forwards | 0.0 | 44.1 | 0.0 | 44.1 |
| Total financial income | 0.2 | 44.1 | 0.0 | 44.3 |
| Interest expenses | 0.0 | 0.0 | (41.8) | (41.8) |
| Amortisation of borrowing costs | 0.0 | 0.0 | (12.8) | (12.0) |
| Other financial expenses | 0.0 | 0.0 | (5,1) | (6.1) |
| Currency loss 17 | 0.0 | 0.0 | 0.0 | (66.7) |
| Total financial expenses | 0.0 | Õ.Ŭ | (59.5) | (115.2) |
| Net Dnancial Items | 0.2 | 44.1 | (59.5) | (70.9) |
| Loans and | Fair value profit and |
Financial ilabilities through measured at amortised |
||
|---|---|---|---|---|
| Year ended 31 Dec 2014 | racaivables | loss | cost | Total |
| Interest Income | 0.3 | 0.0 | 0.0 | 0.3 |
| Currency gain 11 | 0.0 | 0.D | 0.0 | 76.4 |
| Total financial Income | 0.3 | a.o | 0.0 | 78.7 |
| Interest expenses | 0.0 | 0.0 | (37.3) | (37.3) |
| Fair value adjustment currency forwards | 0.0 | (83.4) | 0.0 | (63.4) |
| Amortisation of borrowing costs | 0.0 | 0.0 | (5.3) | (5.3) |
| Other financial expenses | 0.0 | 0.0 | (7.7) | (7.7) |
| Total financial expenses | 0.0 | (0.3.4) | (50.3) | (133.7) |
| Net financial Items | 0.3 | (83.4) | (60.3) | (57.0) |
1 Currency effects (gaintizes) are excluded from the category break-down, but added to the total for net affect.
| 2015 | 2014 | |
|---|---|---|
| Taxes In Income statement: | ||
| Taxos payablo | 13.2 | 16.8 |
| Change in deferred tax | (2.7) | (3.3) |
| Total taxes in income statement | 10.B | 12.5 |
| Temporary differences: | ||
| Exit from Norwegian tonnage tax system | 32.6 | 48.5 |
| Non-current assals | (1.5) | (2.2) |
| Current assets | 0.0 | 0.0 |
| Current Itabilities | 0.0 | 3.3 |
| Basis for deferred tax | 31.3 | 49.7 |
| Recognised deferred tax | 7.8 | 13.4 |
| Deferred tax 1 January | 13.4 | 20.1 |
| Change in deferred tax in income statement | (2.7) | (3.3) |
| Translation difference | (2.9) | (3.4) |
| Deferred tax 31 Decomber | 7.8 | 13.4 |
| Payable tax as at 31 December | 13.7 | 17.3 |
The cumulated tax loss carried forward in Cyprus as at 31 Dacember 2015 and 2014 amounts to USD 47 million and USD 63.1 million The cumulated tax loss carried forward in Cyprus as at 31 December 2015 and 2014 amounts to UBD 47 million and UBD 63.1 million
respectively. The tax rate in Cyprus is 12.5%. No deferred tax asset la recognised in respect
which it operates.
The deferred tax fieldily related to the enforced departure of the vessel business from the Norwegian tonnage tax system effective 1 January
2006, was initially calculated to NOK 780 milion equivalent to USD 115 million sp lax rate is 25%.
Earnings per share are calculated by dividing net profit by the weighted average number of ordinary shares outstanding during the year. There are no dilutive share options.
| 2015 | 2014 | |
|---|---|---|
| Net profit | (50.6) | 178.B |
| Welghted average number of outstanding shares (1 000) | 237719 | 235973 |
| Beek camings per share | (0.21) | 0.76 |
| Weighted average number of outstanding and potential shares (1 000) | 237 719 | 236 973 |
| Diluted esmings per share | (0.21) | 0.76 |
NOTE 13: DIVIDENDS
| --- | 2015 | 2014 |
|---|---|---|
| Dividend declared during the year Total dividends declared |
34.0 34.0 |
125.8 125.8 |
| Dividends per share (NOK) | 1.12 | 3.29 |
NOTE 14: SHARE CAPITAL AND SHAREHOLDER INFORMATION
| 2015 | 2014 | |
|---|---|---|
| lasued and paid number of ordinary shares at 31 December | 269 570 369 | |
| Authorised number of shares at 31 December | 235 973 059 | |
| Nominal value at 31 December | 275 924 148 275 924 148 | |
| Number of shareholders at 31 December | EUR 0.26 | EUR 0.25 |
| 3961 | 4335 | |
| During the year the Company issued 23,587,300 additional shares of nominal value of €0.25 at a premium of €2.48. | ||
| Largest sharsholders/groups of sharsholders at 31,12,2015 | No of shares Percentage | |
| State Street Bank (nom.) | 47071218 | 18.1% |
| North Sea Strategic Investments AS | 31 526 403 | 12.1 % |
| RBC Investor Services Trust (nom.) | 20 176 567 | 7.8% |
| DNB | 16 452 694 | 6.3% |
| State Street Bank (nom.) | 11 643 537 | 4.5% |
| Folketrygdfondet | 8 815 958 | 3.3% |
| Pareto Akaje Norge | 6717697 | 26% |
| Odin Nome | 6 058 000 | 2.3% |
| FLPS | 5 374 600 | 2.1% |
| Six Sis AG (nom.) | 4 389 896 | 1.7% |
| Swedbank Robur Småbolegsfond Norden | 3969484 | 1.5% |
| State Street Bank (nom.) | 3 503 573 | 1.3% |
| Schröder International Selection | 2922040 | 1.1% |
| Parato AS | 2752292 | 1.1% |
| JP Morgan Chase Bank (nom.) | 2 591 036 | 1.0% |
| Nordnet Bank AB (nom.) | 2587560 | 1.0% |
| Statoli Pension | 2 335 927 | 0.9 % |
| Verdipapirfondet Alfred Berg Norge | 2087232 | 0.8% |
| KLP AksjeNorge Indeks | 2058031 | D.B % |
| Swedbank Robur Nordanfond | 2000057 | 0.8% |
| Total 20 largest shareholders/groups of shareholders | 184792802 | 71.2% |
All ordinary shares rank equally with regard to the Company's residual assets. Holders of these shares are entitied to dividends from time to
If me and are entitled to one vote per share at general meetings of the Company.
As of 31 Dacember 2015, Presefe's Interest-besting debt totalled USD 1 247 million. Loans secured by mortgages (credit facility) accounted for
USD 945 million of this total and unsecured bond loans accounted for about USD bond loan agreements.
| 2015 | 2014 | |
|---|---|---|
| Credit facility | 945.0 | 440.0 |
| Bond loans | 302.0 | 390.1 |
| Total Interest-bearing debt | 1 247.0 | 830.1 |
| Dabt in NOK | 302.0 | 390.1 |
| Dabt in USD | 945.0 | 440.D |
| Total Interest-bearing debt | 1247.0 | 830.1 |
| Long-term interest-bearing debt | 1 107.5 | 830.1 |
| Current Interest-bearing debt | 139.5 | 0.0 |
| Total Interest-bearing debt | 1247.0 | 830.1 |
USD 1,300 militon credit facility
In February 2015, the USD 1,100 milion and USD 420 million credit facilities were refinanced in a new credit facility of USD 1,300 milion with a
tenor of seven years. The credit facility c Zephyrus in January 2016) and a revolving credit facility of USD 300 million. The term ioan tranches are reduced semi-ennually with USD 55 and USD 10 million, respectively. In January 2016, the syndicate banks granted voluntary options to skip two acheduled amortizations. As of 31
December 2015, USD 100 million was available under the revolving credit facilit
2.00 per cent. per annum if below 3.00
2.15 per cent. per annum if above 3.00 and less than or equal to 4.00 2.30 per cent, per annum if above 4.00 and less than or equal to 5.00
2.60 per cent. per annum if above 5.00 and less than or equal to 5.50
2.75 per cent. per annum if above 5.00 and less than or equal to 5.50
| Financial covenants as per amendment in December 2015 (ref note 24) | |
|---|---|
| Liquidity. | Minimum USD 65 million 1) |
| Leverage ratio: | Net Debt 27 / EBITDA 3 must not exceed: |
| 5.0 until 31 December 2015 | |
| 6.0 1st January 2016 - 31 December 2016 | |
| 5.0 1st January 2019 - maturity | |
| Equity ratio: | Minimum 25 per cent 4) |
| Collateral maintenance: | Market value collateral vessels / facilities outstanding above 125 per cent until 31 December 2018, and |
| 150 per cent thereafter |
said and the consequence of the control of the credit facility. The credit facility, which has a maturity of seven years, consists of two tranches of
In May 2014, the company secured a new credit facility. The credit facil
2.50 per cent, per annum if above 5.00 and less than or equal to 5.50
2.50 per cent, per annum if above 5.00 and less than or equal to 5.50
Financial covenants as per amendment in December 2015 (ref note 24) Minimum USD 65 million11 Liquidity:
| Leverage ratio: | Net Debt 29 / EBITDA 37 must not exceed: 5.0 until 31 December 2015 |
|---|---|
| 6.0 1st January 2016 - 31 December 2018 | |
| 5.0 1st January 2019 - maturity | |
| Equity ratio: | Minimum 25 per cent 41 |
| Collatoral maintananca: | Collateral maintenance; Market value vessets/total outstanding loans above 125 per cent |
1) including up to USO 25 million of commitment available for utilization
2) Less cash and excluding debi raisiad is new builds under construction
3) Annualisation of contribution from new vessels that have not been in operation for a full year
Financial covenants as of 31 December 2015 - Bank credit facilities
| Cash and deposits | 57.1 |
|---|---|
| Amount available for utilisation, revolving cradit facility (max USD 25 million) | 25.0 |
| Liquidity (minimum USD 65 million) | 82.1 |
| Credit facility | 945.0 |
| Bond loan PRS07 | 29.5 |
| Bond loan PRS08 | 56.8 |
| Bond loan PRS09 | 66.8 |
| Bond loan PRS10 | 79.5 |
| Bond loan PRS11 | 79.5 |
| Total Interest-bearing debt | 1247.0 |
| Cash and deposits | 57.1 |
| interest-bearing debt ralated to new builds | 228.5 |
| Bank guarantees | 32.9 |
| EBITDA 17 last 12 months | 391.0 |
| Leverage ratio (maximum 5.0) | 2.5 |
| 13 including annualisation of contribution from new butida and conversions that have rot been in operation for a full year. | |
| Equity | 715.2 |
| Total assets | 2 187.2 |
| Equity ratio (minimum 25%) | 33 % |
| Morket value collateral vessels | 1707.5 |
| Facilities outstanding | 945.0 |
| Collateral maintenance (minimum 125%) | 181 % |
The bond debt is divided into five loans of NOK 500 million maturing February 2016 (PRS07), NOK 500 million maturing February 2017
(PR508), NOK 500 million maturing January 2020 (PRS09), NOK 700 million maturing October 20
| Loan | Principal | Outstanding | Maturity | Interest | Loan margin |
|---|---|---|---|---|---|
| PRS07 | NOK 260 million | NOK 260 million | Feb 2016 | 3m Niber | 3.50% |
| PRS 08 | NOK 500 million | NOK 500 million | Fab 2017 | 3m Nibor | 3.76 % |
| PRS09 | NOK 500 million | NOK 500 million | Jan 2020 | 3m Nibor | 3.75% |
| PRS10 | NOK 700 million | NOK 700 million | Oct 2018 | 3m Nibor | 2.95 % |
| PRS11 | NOK 700 million | NOK 700 million | Sep 2019 | 3m Nibor | 3.10% |
Bond Inana - Financial covenante
Value adjusted aguily ratio: Minimum 30 per cant Leverage Ratio: Debt / EBITDA11 must not ascend: 5.0
1) Annualisation of contribution from new vessels and conversions that have not been in operation for a full year,
As of 31 December 2015, the Group was in compliance with all covenants on interest-bearing debt, in February 2016, the bond holders
approved to adjust the equity and leverage ratio covenants to be aligned with the covenant information
ուստուստու.
The Group has on 22 April 2016 been granted a walver of a liquidity coverient relating to the credit facilities. The new temporary minimum
Ilquidity level is USD 20 million until the end of the third quarter o million new build financing facility.
| Credit facility | 945.0 |
|---|---|
| Bond loan PRS07 | 29.5 |
| Bond loan PRS08 | 56.8 |
| Bond loan PRS09 | 66.8 |
| Bond loan PRS10 | 79.5 |
| Bond loan PR811 | 79.5 |
| Total interest-bearing debt | 1247.0 |
| Bank guarantees | 32.9 |
| EBITDA 1 last 12 months | 448.3 |
| Leverage ratio (maximum 5.0) | 2.9 |
| $\overline{0}$ Excellent DOAA Andre continues of the second location of the second location of $\overline{0}$ |
.
Ive not bean in coaration for a full year. For " For PRSD8, PRSQ8, PRS10 and PRS11 EBITDA includes annualisation of contibution from new builds and conversions that hav
PRS07, maturing February 2018, no EBITDA annualisation applies. As of 31 December 2015, Laverage Rat
| Value adjusted total equity | 1161.9 |
|---|---|
| Value adjusted total assets | 2 633.9 |
| Equity ratio (minimum 30%) | 44 X |
As of 31 December 2015, the Group was in compliance with all covenants on Interest-beaming debt. In February 2016, the bond holders
approved to adjust the equity and leverage ratio covenants to be aligned with the covenant information.
3 month LIBOR is the basis for interasts on the loans denominated in USD, whereas 3 month NIBOR is the basis for interests on the loans denominated in NOK. On average, LIBOR Interest forings were higher and NIBOR interest fixings were lower in 2015 compared to 2014.
In November 2015, Jurong Shipyard Pte Ltd. granted Prosate a sellers' credit of USD 30 million as a reduction on the final delivery instalment of the Safe Zephyus. The sellers' credit is due to be repaid in a single payment on or before 15 June 2017, together with the annual interest rata of 6.7%.
in January 2016, Cosco (Qidong) Offshore Co. Ltd. granted a selers' credit of around USD 29 million as a reduction on the final delivery
Instalment of the Safe Notos. The amount reduces the final delivery instalment for th
| 2015 | 2014 |
|---|---|
| Various accrued coste | |
| 79.8 | 53.1 |
| Accrued Interest costs 6.0 |
3.B |
| Deferred income 4.6 |
1.2 |
| Public laxes 0.3 |
0.4 |
| Provision share option costs | |
| 0.0 | 0.0 |
| Other interest-free current liabilities 4.1 |
0.0 |
| Total Interest-free current Rabilities 93.9 |
SA.S |
As of 31 December 2015, Prosent's interest-bearing debt secured by mortgages totalled USD 945 million. The debt was secured by mortgages
on the accommodation/service vessels Safe Asioria, Safe Bristolia, Safe Caledonia, Sa subsidiaries. Earnings accounts are pledged as security for the credit facilities, but cash will only be restricted if a continuing event of default occurs.
Bank guarantees amounted to NOK 290 million at 31 December 2015 (no outstanding bank guarantees as at 31 December 2014). The Denis guernitures enturnmental process and instantant of a recommental extra procession agreeminate selection extrapolitical company. The
guarantees were secured by parent company guerantee and mortgages on the accommodati
As of 31 December 2015, Prosafe had issued parent company guarantees to customers on behalf of its subsidieries in connection with the
award and performance of contracts totalling approximately USD 124 million.
As of 31 December 2014, Prosens's interest-bearing debt secured by mortgages totalled USD 440 million. The debt was secured by mortgages
on shares in Prossie Rigs Pte Ltd and Prossie Offshore Pte Ltd, and the accommodation subsidiaries in connection with the award and performance of contracts.
As of 31 December 2016, the group had financial assets and liabilities in the following categories:
| Year ended 31 Dec 2015 | Loans and receivables |
Fair value profit and foes |
Financial Uabilitiea through measured at amortised COS! |
Book value | Fair value |
|---|---|---|---|---|---|
| Cash and deposits | |||||
| 57.1 | 0.0 | 0.0 | 57.1 | 67.1 | |
| Accounts receivable | 60.0 | 0.0 | 0.0 | 60.0 | 60.0 |
| Other current assets | 26.3 | 0.0 | 0.0 | 26.3 | 26.3 |
| Total financial assets | 143.4 | 0.0 | 0.0 | 143.4 | 143.4 |
| Credit facility 1300 million 11 | 0.0 | 0.0 | 945.0 | 945.0 | DO5.0 |
| Bond loan PRS07 2 | 0.0 | 0.0 | 29.6 | 29.5 | |
| Bond loan PRS08 37 | 29.6 | ||||
| Bond loan PRS09 4 | 0.0 | 0.0 | 56.8 | 56.B | 55.4 |
| 0.0 | 0.0 | 56.8 | 56.8 | 46.6 | |
| Bond loan PRS10 9 | 0.0 | 0.0 | 79.6 | 79.5 | 69.0 |
| Bond loan PRS11 6 | 0.0 | 0.0 | 79.5 | 79.5 | 65.1 |
| Fair value interest sweps 7 | 0.0 | 48.5 | 0.0 | 48.5 | 48.5 |
| Fair value currency forwards | 0.0 | 40.7 | 0.0 | 40.7 | 40.7 |
| Accounts payable | 0.0 | 0.0 | |||
| Other current liabilities | 17.8 | 17.8 | 17.8 | ||
| Total financial Nabilities | 0.0 | 0.0 | 84.6 | B4.6 | 84.8 |
| 0.0 | 89.2 | 1349.7 | 1438.9 | 1362.4 |
1) Fair valus reflects current market conditions with the assumption that the credit margin would increase from the scius! 200 basis points to 275 basis points. The net present
value of the interset sovertage, discounted
23,444) Fair value refects current market conditions based on last trade prices as of 31 December 2015 (Bloomberg rates): PRS07 100.202, PRS08 97.487, PRS09 82.000,
PRS10 86,757, PRS11 81.883
7) Interest swaps are trasted as effective hadges (hadge accounting), and changes in fair value affect other comprehensive income, not profit and loss.
Management assessed the cash and deposits, accounts receivables, other current assets, accounts payable and other current liabilities to approximate their carrying amounts largely due to the short-term maturities of these instruments.
The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investments grade
credit ratings. Derivatives valuad using valuation techniques with market observ
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
The currency forwards and interest sweps are valued based on current exchange rates and forward curves.
| Year ended 31 Dec 2015 | Total | Level 1 | Laval 2 | Level 3 |
|---|---|---|---|---|
| Fair value currency forwards | (40.7) | 0.0 | (40.7) | 0.0 |
| Fair value interest swaps | (45.5) | a.o | (48.5) | 0.0 |
| Total financial assets/liabilities | (89.2) | 0.0 | (09.2) | 0.0 |
As of 31 December 2014, the group had financial assets and liabilities in the following categories:
| Year ended 31 Dec 2014 | Loans and receivables |
Fair value profit and losa |
Financial Nublilities through measured at amortleed cost |
Book value | Fair value |
|---|---|---|---|---|---|
| Cash and deposits | 122.4 | 0.0 | 0.0 | 122.4 | 122.4 |
| Accounts receivable | 83.9 | 0.0 | 0.0 | 53.9 | 83.9 |
| Other current assets | 32.4 | 0.0 | 0.0 | 32.4 | 32.4 |
| Total financial assets | 236.7 | 6.0 | 0.0 | 238.7 | 238.7 |
| Credit facility 1100 million 11 | 0.0 | 0.0 | 440.0 | 440.0 | 432.0 |
| Bond loan PRS07 71 | 0.0 | 0.0 | 67.3 | 67.3 | 66.6 |
| Bond loan PRS08 3) | 0.0 | 0,0 | 67.3 | 87.3 | 65.4 |
| Bond loan PRS09 4) | 0.0 | 0.0 | 67.3 | 87.3 | 59.2 |
| Band laan PRS10 9 | 0.0 | 0.0 | 94.2 | 94.2 | 84.7 |
| Bond loan PRS11 91 | 0.0 | 0.0 | 94.2 | 94.2 | 89.8 |
| Fair value interest swaps | 0.0 | 39.0 | 0.0 | 39.0 | 39.0 |
| Fair value currency forwards | 0.0 | 87.9 | 0.0 | 87.9 | 67.9 |
| Accounts payable | 0.0 | 0.0 | 18.6 | 18.6 | 18.6 |
| Other current lisbilities | 0.0 | 0.0 | 56.9 | 56.9 | 56.9 |
| Total financial ilabilitias | D.O | 126.9 | 905.B | 1032.7 | 1000.1 |
1) Fair value reflects current market conditions with the assumption that the credit mergin would increase from the eclue! 187.5 basis points to 200 basis points. The net pratent
value of the interest adventage, discount
state of the contract of the contract or the conditions based on prices stimsted by the Norwegian Becurities Deskra Association as of 31 December 2014; PRS07 99.000, and the Condition as of 2010, per contract 2014; PRS07 9
n
Tintenat avaps are treated as offective hedges (hedge accounting), and changes in fair value affect other comprehensive income, not profit and loss.
| Year ended 31 Dec 2014 | Total | Level 1 | Leval 2 | Laval 3 |
|---|---|---|---|---|
| Felr value currency forwards | (87.9) | 0.0 | (87.9) | 0.0 |
| Fair value interest swaps | (39.0) | 0.0 | (39.0) | 0.0 |
| Total financial assets/liabilities | (126.9) | 0.0 | (126.9) | 0.0 |
Prossfe operates on a global basis with cash flows and financing in various currencies. This means that the Group is exposed to market risks related to fluctuations in exchange rates and interest miss. Prosafe's presentation currency is USD, and financial risk exposure is managed
with financial instruments in accordance with internal policies and standards appr
Currency rrsk
Prossie is axposed to currencies other than USD associated with operating axpenditure, capital expenditure, interest-bearing debt, tax, cash
and deposits. Cash and deposits are mainly denominated in USD, GBP,
Operating expenditure are mainly denominated in GBP and NOK, but depending on the country of operation and the nationality of the crew, operating expenses can also be in SGD, SEK, EUR, USD and BRL. Operating expenditure and maintenance related capital expenditure currencies other than USD is typically currency-hedged using forward contracts with a time horizon of 8-12 months.
Capital expenditure will, depending on the origin of equipment and the location of the yard, tend to be in USD, GBP, EUR and NOK. Planned capital expenditure in currencies other than USD is typically currency-hedged independent of time horizon, by using forward contracts.
Interest bearing debt consists of both USD and NOK denominated Ilabilities. The principal amounts of liabilities denominated in other currencies then USD are fully hadged by using multiple forward contracts with different settlement dates with a time horizon of up to 12 months. At
maturity, the forwards are rolled for further 12 months until debt maturity.
Tax ilabilities predominantly consist of a NOK denominated deferred tax associated with the exit from the Norwegian tonrage lax system effective 1 January 2006. Payable tax related to the deferred tax liability is also currency-hedged.
Fair value of forward exchange contracts are estimated using quoted market prices. The fair value estimates the gain or lose that would have
been raalised if the contracts had been closed out at the belance sheet date. As exposure of forward exchange contracts was USD 40.7 million negative.
A nogative foir morket value on currency forwards will be associated with a positive effect on the fair market value of the underlying hedged
Item. For example, a NOK depreciation will cause a negative fair market value on value of future operating expenses, capital expanditure, NOK denominated interest-bearing debt and NOK denominated tax itabilities. A NOK appreciation will have the opposite effects.
As of 31 December 2015, Prossfe had entered into the following forward exchange contracts:
| Prosafa buy | Prosafe sell | ||
|---|---|---|---|
| Maturity | NOK Amount | Rate | USD Amount |
| 14.01.2016 | 125 000 000 | 7.77 | 16 089 229 |
| 20.01.2016 | 30 000 000 | 8.46 | 3 548 377 |
| 28.01.2016 | 150 000 000 | 7.79 | 19 251 390 |
| 03.02.2016 | 50 000 000 | 7.53 | 169 C6C 6 |
| 11.02.2016 | 150 000 000 | 7.54 | 19 834 004 |
| 29.02.2016 | 150 000 000 | 7.62 | 19 889 581 |
| 04.03.2016 | 30 000 000 | 8.74 | 3 434 336 |
| 31.03.2016 | 150 000 000 | 8.04 | 18 653 666 |
| 13.04.2016 | 150 000 000 | 8.12 | 18 472 204 |
| 13.04.2016 | 60 000 000 | 8.13 | 6 153 683 |
| 04.05.2016 | 30 000 000 | 7.40 | 4053914 |
| 13.05.2016 | 150 000 000 | 7.61 | 19704 577 |
| 31.05.2016 | 150 000 000 | 7.73 | 19 393 250 |
| 08.06.2016 | 30 000 000 | 7.49 | 4002768 |
| 16.06.2016 | 150 000 000 | 7.83 | 19 159 780 |
| 02.07.2016 07.07.2016 |
150 000 000 30 000 000 |
7.91 | 16951 698 |
| 11.07.2016 | 150 000 000 | 7.50 | 4000962 |
| 03.08.2016 | 30 000 000 | 8.24 | 18 211 597 |
| 08.08.2016 | 150 000 000 | 7.49 8.28 |
4003614 18 126 100 |
| 17.08.2016 | 150 000 000 | 8.19 | 18 326 206 |
| 03.09.2016 | 100 000 000 | 8.32 | 12019086 |
| 07.09.2018 | 30 000 000 | 7.49 | 4003433 |
| 09.09.2016 | 100 000 000 | 8.30 | 12055019 |
| 15.09.2016 | 150 000 000 | 8.24 | 18 201 895 |
| 05.10.2018 | 30 000 000 | 751 | 3994837 |
| 17.10.2018 | 150 000 000 | 6.17 | 18 3 83 44 9 |
| 17.10.2016 | 60 000 000 | 8.17 | 6 123 256 |
| 04.11.2016 | 50 000 000 | 6.48 | 6898918 |
| 09.11.2016 | 30 000 000 | 7.51 | 3995012 |
| 16.11.2016 | 150 000 000 | 8.70 | 17248893 |
| 07.12.2016 | 30 000 000 | 7.54 | 3980004 |
| 09.12.2016 | 50 000 000 | 8.64 | 5788042 |
| 15.12.2016 | 150 000 000 | 8.64 | 17 362 116 |
| 20.01.2017 | 30 000 000 | 8.46 | 3547171 |
| 08.02.2017 | 30 000 000 | 8.46 | 3 545 419 |
| 06.03.2017 | 30 000 000 | 8.45 | 3 550 691 |
| Prosafe buy | Prosafa sell | ||
| Maturity | GBP Amount | Rato | USD Amount |
| 11.02.2016 | 6000000 | 1.52 | 9 134 668 |
| 04.03.2016 | 6 000 000 | 1.54 | 9 228 572 |
| 13.04.2015 | 6 000 000 | 1.48 | 8889770 |
| V4.VJ.ZVIO | o uuu uuu | 1.54 | 8 ZZB D / Z |
|---|---|---|---|
| 13.04.2015 | 6 000 000 | 1.48 | 8889770 |
| 05.05.2010 | 6 000 000 | 1.54 | 9217471 |
| 10.06.2016 | 5 000 000 | 1.52 | 9 128 850 |
| 08.07.2016 | 4 000 000 | 1.56 | 6 210 440 |
| 12.08.2016 | 4 000 000 | 1.55 | 6 193 440 |
| 09.09.2016 | 4 000 000 | 1.52 | 6098000 |
| 05.10.2016 | 4 000 000 | 1.49 | 5957118 |
| 09.11.2016 | 4000000 | 1.49 | 5964 692 |
| 07.12.2016 | 4 000 000 | 1.40 | 5 867 028 |
Currency risk - sensitivity
The sensitivity analysis is based on a reasonably possible change in the relevant exchange rates and reflects the main effects on profit or loss
and equity assuming that the change had occurred
Ŷ.
| 2815 Incorne statement |
2014 Income statement |
|||
|---|---|---|---|---|
| Pre-tax effects | effect | OCI effect | effect | OCI effect |
| USD +10% | ||||
| Re-valuation cash and deposits | (3.2) | 0.0 | (5.0) | 0.0 |
| Re-valuation currency forwards | (40.0) | 0.0 | (60.0) | 0.0 |
| Re-valuation NOK bonds | 27.6 | 0.0 | 29.D | 0.0 |
| Total | (15.7) | 0.0 | (36.0) | 0.0 |
| USD-10% | ||||
| Re-valuation cash and deposits | 3.7 | 0.0 | 5.0 | 0.0 |
| Re-valuation currency forwards | 52.0 | 0.0 | 71.0 | 0.0 |
| Re-valuation NOK bonds | (33.5) | 0.0 | (35.0) | 0.0 |
| Total | 22.2 | 0.0 | 41.0 | 0.0 |
$36$
interest on debt is in principle floating, but has been hedged to reduce the variability of cash flows in the interest payments through the use of
Interest rate swap agreements. Prosefe eveluates the hedge profile in relat of contracts, cash flow and cash in hand. The proportion hedged will normally lie between 75 and 100 per cant for all loans.
The objective of the interest rate hedging is to reduce the variability of cash flows in the interest payments for the floating-rate debt (i.e. cash flow hedging). Changes in the cash flows of the Interest rate swaps are expected to offset the changes in cash flows (i.e. changes in interest payments) attributable to fluctuations in the benchmark interest rate on the part of the flucture rate debt that is hedged. At the two set of the matter of the flucture of the flucture of the flucture of the flucture of th change in fair value of the actual swop designated as the hedging instrument and the change in fair value of a hypothetical swap (dollar offset). the terms of the swap and debt differ (notional amount, interest rate reset dates, maturity/expiration date, underlying index) or the
counterparty's ability to honour its obligation under the swap change during the life of be based on a comparison of the change in fair value of the ectual swap designated as the hedging instrument and the change in feir value of a by pothelical swap (dollar offset). Changes in fair value for interest evaps transled as effective hedges (hedge accounting) will affect expressions that the comprehensive income comprehensive income comprehensive income c sistement
As of 31 December 2015, Prosefs's hedging agreements totalled USD 1 600 million (including USD 300 million with forward start):
| Notional amount | Fixed rate | Maturity | Swap type | Fair value | |
|---|---|---|---|---|---|
| USD 100 million | 1.2650 % | 2016 | Bullet | (0.4) hedge accounting | Started |
| USD 150 million | 1.7780 % | 2017 | Bullet | (1.8) hedge accounting | Started |
| USD 150 million | 2.1000 % | 2017 | Bullet | (2.7) hedge accounting | Started |
| USD 150 million | 1.6120% | 2017 | Bullet | (1.4) hedge accounting | Started |
| USD 150 million | 1.6624 % | 2019 | Bullet | (0.7) hadge accounting | Started |
| USD 150 milion | 1.3625 % | 2018 | Bullet | (0.1) hedge accounting | Started |
| USD 150 million | 2.2325% | 2020 | Bullet | (4.0) hedge accounting | Started |
| USD 150 million | 2.7195% | 2020 | Bullet | (7.4) hedge accounting | Started |
| USD 150 million | 2.3265 % | 2020 | Bullet | (4.6) hadge accounting | Started |
| USD 150 million | 3.6865 % | 2021 | Bullet | (12.6) hedge accounting | Forward start |
| USD 160 million | 3.8820 % | 2022 | Bullet | (13.1) hadge accounting | Forward start |
| Total | (40.5) |
Fair value of interest rale swap agreements are estimated using quoted market prices. The fair value estimates the gain or loss that would have been realised if the contracts had been closed out at the balance sheet date. As of 31 December 2015, the fair value and meximum credit risk exposure of Interest rate even agreements was USD 48.5 million negative.
The sensitivity analysis is based on a reasonably possible change in the relevant forward curves and reflects the main effects on profit or loss and equity assuming that the change had occurred at the balance sheet date. A forward curve shift of ±100bps is applied in the analysis.
| 2018 | 2014 | |||
|---|---|---|---|---|
| Income statement |
Income statement |
|||
| Pre-tax effects | affact | OCI effect | effect | OCI effect |
| Forward curve +100bps | ||||
| Re-valuation Interest rate swaps. | 0.0 | 39.2 | 0.0 | 60.1 |
| Total | 0.0 | 39.2 | 0.0 | 60.1 |
| Forward curve -100bps | ||||
| Re-valuation Interest rate swaps | 0.0 | (70.7) | 0.0 | (60.1) |
| Total | 0.0 | (70.7) | 0.0 | (60.1) |
As of 31 December 2015, the following changes in other comprehensive Income were related to financial instruments:
| Change | 2018 | 2014 | |
|---|---|---|---|
| Re-valuation Interest rate swaps | 28.5 | (9.5) | (38.0) |
| Ineffectiveness | 0.0 | Đ.O | D.Q |
| Total | 28.6 | (9.5) | (30.0) |
The Gulf of Mexico contracts contain a cancelation clause allowing the ultimate customer, Pernex, to cancel the contract with 30 days notice rre Sum or weaken compare commitme cancelated casted anowing the unimate customer, Pamex, to cancel the contract with 30 days notice
Without companisation, if the financing of the project is cancelled. These clauses reflec be cancelled due to the ongoing crises.
In the with industry practice, other contracts normally contain clauses which give the customer an opportunity for early cancellation under specified conditions. Providing Prosafe has not acted negligently, however, the effect on results in such cases will normally be wholly or partly
offset by a financial settlement in the company's favour. Following a potent Prosate a substantial part of the remaining contract value.
Credit assessment of financial institutions issuing guarantees in favour of Prosafe, yards, sub-contractors and equipment suppliers is part of Prossfa's project evaluations and risk analyses.
The counterparty risk is in general limited when it comes to Prossfe's clients, since these are typically major oil companies and national oil companies.
As of 31 December 2015, there is no objective evidence that accounts receivable is impaired, and no impairment loss has been recognised in the Income statement,
| Accounts receivables | Total | Not due – | < 30 days 30 - 60 days 61-90 days > 90 days | |||
|---|---|---|---|---|---|---|
| 31 December 2015 | 60.0 | 59.5 | 0.3 | 82 | 0.0 | 0.0 |
| 31 December 2014 | 83.9 | 60.0 | 15.8 | 8.1 | 0.1 | 0.0 |
Liquidity dek
Prosefe is exposed to liquidity risk in a scanario when the Group's cash flow from operations is insufficient to cover payments of financial tablities. Prosafe manages liquidity and funding on a group level. In order to mitigate the aquidity risk, Prosafe makes active use of a syst for planning and forecasting the development of its liquidity, and utilises accurate and source stable and sound development in order to maintain sufficient cash to cover its financial and operational obligations.
In February 2015, Prosafe completed the refinancing of two bank facilities. In Q3 2016, the Board of Directors decided to suspend dividend payments in light of the near term reduction in industry activity levels.
As of 31 December 2015, Prosafe had a liquidity reserve totaling USD 157.1 million (cash and deposits of USD 57.1 million and undrawn
portion of revolving credit facility of USD 100 million). Under the existing credit faci
The continued negative development in the cil and gas industry has increased the risk of reduced charter revenues in the short and mid term. This development have inversions in the on-and gas mutustry nes anticeased the man or recuded change in the same structure and man with.
This development has increased the liquidity risk compared to prior years. The Compan
As of 31 December 2015, the Group's main financial liabilities had the following remaining contractual maturities:
| Per year | 2016 | 2017 | 2018 | 2019 | $2020 -$ |
|---|---|---|---|---|---|
| Interest-bearing debt (downpayments) 11 | 139.5 | 210.8 | 233.5 | 233.5 | 429.7 |
| Interest-bearing debt (interest including interest swaps) 21 | 74.5 | 84.4 | 85.0 | 86.3 | 146.4 |
| Accounts payable and other current liabilities | 17.8 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total | 231.8 | 295.2 | 318.5 | 319.8 | 576.1 |
| Per quarter 2016 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | Total |
| Interest-bearing debt (downpayments) 1) | 84.5 | 0.0 | 55.0 | 0.0 | 139.6 |
| Interest-bearing debt (Interest Including Interest swaps) 2) | 19.9 | 17.6 | 17.5 | 19.6 | 74.6 |
| Accounts payable and other current liabilities | 17.8 | 0.0 | 0.0 | 0.0 | 17.8 |
| Total | 122.2 | 17.6 | 72.5 | 19.6 | 231.5 |
q in January 2016, the syndicate banks granted two voluntary skip options in an aggregate amount of USD 130 million for the USD 1,300 million credit fecklies. Prossie has the
Aght to exercise the options until and includ
35 Based on forecasted avarage debt, average LIBOR per 31 December 2015 and average weighted margin.
As of 31 December 2015, the commitments under the USD 1,300 million credit facility totalled USD 1,245 million (including the USD 200 million As on a location and the Daphynus, of which USD 85 million. At year-end, the USD 288 facility was unuiting of Safe Zephynus, or which USD 85 million. At any year-end, are used to million, following cells and the involving Reference is made to note 15 for further information.
As of 31 December 2014, the Group's main financial liabilities had the following remaining contractual maturities:
| 2015 | 2016 | 2017 | 2016 | $2019 -$ | |
|---|---|---|---|---|---|
| Interest-bearing debt (downpayments/credit facility reductions) Interest-bearing debt (interest including interest ewaps) Accounts payable and other current liabilities |
0.0 56.9 10.6 |
87.3 66.3 0.0 |
382.3 70.5 0.0 |
94.2 67.0 0.0 |
286.3 100.0 0.0 |
| Total | 75.5 | 136.8 | 452.B | 161.2 | 388.3 |
As of 31 December 2014, the availability under the credit factiity secured in 2011 totalied USD 655 million (USD 215 million undrawn credit Thes), meaning that the first actual downpayment on the credit facility will not occur until 2016.
Capital management
The primary objective of the Group's capital management is to ensure that it maintains a healthy capital structure in the with sconomic
conditions. Prosafe manages the total of shareholder's equity and l
| 2015 | 2014 | |
|---|---|---|
| Restricted cash deposits (withholding personal income tax) | 0.2 | 0.2 |
| Free cash and short-term deposits | 56.9 | 122.2 |
| Total cash and deposits | 57.1 | 122.4 |
| NOTE 21: OTHER CURRENT ASSETS | ||
| 2015 | 2014 |
| Receivables | 7.2 | 16.7 |
|---|---|---|
| Prepayments | 4.2 | 6.8 |
| Stock | 0.9 | 0.8 |
| Other current assets | 19.1 | 15.7 |
| Total other current assets | 31.4 | 39.0 |
The financial statements comprise the parent company, Prosafe SE, and the aubaldiaries listed below.
| Company name | Country of Incorporation | Ownership | Voting share |
|---|---|---|---|
| Prosafa AS | Norway | 100 % | 100 % |
| Prosefe Management AS | Norway | 100% | 100 % |
| Prosafa Offshore AS | Norway | 100 % | 100 % |
| Prosafe (UK) Holdings Limited | United Kingdom | 100% | 100 % |
| Prosafe Rigs Limited | United Kingdom | 100 % | 100% |
| Prosafe Offshore Limited | United Kingdom | 100 % | 100 % |
| Prosefe Rigs (Cyprus) Limited | Cyprus | 100% | 100% |
| Prosafe Holding Limited | Cyprus | 100 % | 100 % |
| Prosafe Offshore Accommodation Ltd | Jersey | 100 % | 100 % |
| Prosafa Riga Pte. Ltd. | Singapora | 100 % | 100% |
| Prosafe Offshore Pta, Limited | Singapore | 100 % | 100 % |
| Prosafe Offshore Employment Company Pts. Limited | Singspore | 100 % | 100 % |
| Prosafe Offshore Services Pts. Ltd. | Singapore | 100 % | 100 % |
| Prosafe Offshore Asia Pacific Pta. Ltd. | Singspore | 100 % | |
| Prosafe Offshore S.e.r.l. | 100 % | ||
| Luxembourg | 100 % | 100 % | |
| Prosafa Offshore Sp.zo.o. | Poland | 100 % | 100 % |
| Prosafe Offshore BV | Natherlands | 100 % | 100 % |
| Prosafe Bervices Maritimos Ltda | Brazil | 100 % | 100% |
Transactions and outstanding balances within the Group have been eliminated in full.
Shares owned by senior officers and directors at 31 December 2016: (includes shares owned by wholly-owned companies)
| Senior officers: Karl Ronny Klungtvadt - CEO Robin Laird - Deputy CEO |
Shares 72500 68 000 |
|---|---|
| Stig Christiansen - CFO | a |
| Harald Especial - chair | O |
| Christian Brinch - deputy chair | ٥ |
| Roger Cornish - director | 7000 |
| Carine Smith Ihenacho - director | ۵ |
| Nancy Ch. Eretocritou - director | O |
| Tasos Ziziros - director | O |
As at 31 December the Group had three new builds under construction. Sele Zephyrus was delivered in January 2016. The amount paid on delivery equalled USD 230 million. Safe Notos was delivered in February 2018. The amount paid on delivery equalled USD 180 million. Sellers' Cradits ware given for these two vessels. (See more details in note 24). The estimated final instalment on the third new build, the Safe Eurus, is
USD 160 million. This vessel is scheduled to be delivered in Q3 2018.
NOTE 24: EVENTS AFTER THE BALANCE SHEET DATE
In December 2015/January 2016, the company agreed with its bank syndicates to amend the USD 1,300 million and USD 288 million credit facilities. The additional liquidity, flexibility and headroom created by the amendments, which cover both coverant headroom and voluntary option to skip two scheduled emortisations, provides Prossfe with Increased operational and financial flexibility and makes the company more robust in a challenging market. The amendments to the credit facilities include:
Leverage ratio (ratio of net borrowings divided by adjusted EBITDA):
1 January 2016 - 31 December 2018: Net debt/EBITOA < 8.0 1 January 2019 and thereafter: Net debt//EBITDA < 6.0
"Net debt" is excluding debt related to new builds under construction and conversions, and "EBITDA" includes the annualisation of contribution from such vessels that have not been in operation for a full year.
Equity ratio to be minimum 25 per cent from 31 December 2015 until 31 December 2017, and 30 per cent thorcafter.
Prosafe has secured an option to voluntary skip scheduled amort sations amounting to two instalments of USD 65 million under the USD 1,300
million facility, in total amounting to USD 130 million. These voluntary amortisati until 31 December 2017, subject to completion of formal documentation.
Other conditions: No dividends, bond- or equity buy-backs from 31 December 2016 unless;
i) all voluntary skipped amortisations have been prepaid or cancelled; and
ii) a 12 month financial forecast has been provided which confirms compliance with originst financial covenants, except for the equity ratio to be minimum 35 per cent of book equity.
In February 2018, bondholders approved edjustments of the financial covenants in all outstanding bond issues, in order to align with the covenants in the bank facilities. The amendments include:
Leverage ratio (ratio of net borrowings divided by adjusted EBITDA):
31 March 2016 - 31 December 2018: Net debt/EBITDA < 6.0 1 January 2019 and thereafter: Net debt//EBITDA < 5.0
"Net debt" is excluding debt related to new builds under construction and conversions, and "EBITDA" includes the annualisation of contribution from such vessels that have not been in operation for a full year,
Equity ratio to be minimum 25 par cent from 31 March 2016 until 31 December 2017, and 30 per cent thereafter.
The new build, Safe Zephyrus, was delivered from Jurong Shipyard in Singapore in January 2016. The final delivery instalment was reduced by USD 30 million, which represents a seller's credit from Jurong Shipyard Pis Ltd. This amount is to be repeated in a single payment on or before the SD 30 million, which represents a seller's credit from Jurong Shipyard Pis
On 7 March 2016 Prosafe announced that it had been informed by its Maxican client Cotemar Group ("Cotemar"), that Safe Regency will be suspended by Petroleos Maxicanos ("Pernex") from mid-March 2016 and that it is likely that Safe Lancia will also be suspended by Petroleos Maxicanos ("Pernex") from mid-March 2016 and that it is likely that Safe Lancia wil now was from mid-March 2018. This is in response to the fact that Pemex is culting spending in order to easie Lenca was be auspended by
USD 25 per berrel. The Group has decided to scrap three of its oldest units, the Jasmi other units starting with the Safe Astoria.
In April 2016, the Company agreed with its lenders an amendment to the credit facilities. A new bank covenant minimum fiquidity level of USD 20 million was set until the end of the third quarter of 2016. The new temporary covenant are applicable to both the USD 1.3 billion facility and the USD 288 million new build financing facility.
A dislogue has been commenced with the Company's key staksholders, including the senior lenders, and the Company is currently working
with stakeholders and sdvisors to evaluale alternatives to improve the financial stuatio position in the industry. The Company intends to communicate its financial plan during the second quarter of 2016.
The Board of Directors confirms that the accounts have been prepared under the assumption that the Company is a going concern and that
this assumption is realistic at the date of the accounts. This assumption is based on t assumptions for utilisation of the vessels and the charter day rates. These assumptions are based on prudent estimates compared to historical examplions for the weaken of the weavers and the charger day rates, these assumptions are based on photont estimates compared to historical schedule. In the evaluation of the marcial forcests, factors auch as it is discuss travel and salaries. Activity level is forecasted to rebound from 2018 as industry cost reductions are taking full effect.
Moreover, the Board of Directors has evaluated the Company's ability to reach a solution in the ongoing dialogue with the Company's key
stakeholders, and concluded that it is likely to achieve a favourable outcome of this concern assumption. The Board of Directors intends to announce a plan to secure financing of the Company shortly. As of today, such a plan is
likely to involve a combination of one or more different alternatives including
| (USD 1 000) | Note | 2015 | 2014 |
|---|---|---|---|
| Income from investments in subsidiaries | 9670 | 739 646 | |
| Impairment of shares in subsidiaries | 7 | (331 209) | (483 609) |
| Results of Investing activities | (321 539) | 256 037 | |
| Operating expenses | 2 | (11 634) | (11950) |
| Depreciation | $\overline{\mathbf{3}}$ | (8) | (10) |
| Operating profit | (333 180) | 244 077 | |
| Other financial income | 4.6 | 167 061 | 140 817 |
| Other financial expenses | 4, 5 | (252063) | (198649) |
| Net financial Items | 5 | (85 002) | (57832) |
| (Loss)/profit before taxes | (418 182) | 186 245 | |
| Texes | 6 | (1) | (1) |
| Net (loss)/profit | (418 183) | 186 244 | |
| Attributable to the owners of the company | (416163) | 186 244 | |
| STATEMENT OF COMPREHENSIVE INCOME - PROSAFE SE (USD 1 000) |
2015 | 2014 | |
| Net (loss)/prafit | (418 183) | ||
| 186 244 | |||
| Other comprehensive income to be reclassified to profit or loss in subsequent periods Net loss on cash flow hedges |
(9530) | ||
| (38043) | |||
| (9530) | |||
| Other comprehensive loss to be reclassified to profit or loss in subsequent periods Total comprehensive (loss)/income for the year, net of tax |
(427 713) | (38043) 148 201 |
| (USD 1 000) | Note | 31.12.15 | 31.12.14 |
|---|---|---|---|
| ARSETS | |||
| Tangible assets | 3 | 19 | 27 |
| Sharas in subsidiaries | T | 2 227 991 | 2 335 450 |
| intra-group long-term receivables | 12, 14 | 556 225 | 547 320 |
| Total non-current assets | 2784235 | 2882797 | |
| Cash and deposits | 14 | 12 194 | 17 28 5 |
| Other current seasts | U.14 | 22 557 | 13747 |
| Total current assets | 34751 | 31032 | |
| Total assats | 2813986 | 2913829 | |
| EQUITY AND LIABILITIES | |||
| Share capital | ٠ | 72 135 | 65894 |
| Share promium reserve | 804700 | 745 109 | |
| Total paid-in aquity | 876 835 | 811 003 | |
| Retained earniscs | 491 143 | Q52 R36 | |
| Total retained earnings | 491 143 | 952 336 | |
| Total equity | 1367978 | 1763839 | |
| Interest-bearing long-term debt | 10 | 1107484 | 830 142 |
| Darlvativas | 14 | 48 510 | 38 980 |
| Interest-free long-tarm liabilities | 14, 15 | 1733 | 2081 |
| Total fong-term liabilities | 1 157 707 | 871 203 | |
| interest-bearing current debt | 10, 15 | 139 500 | O |
| Darivatives | 14 | 40707 | 74 676 |
| Intra-group current itabilities | 12, 14, 15 | 105 063 | 197 838 |
| Other Internet-free current flabilities | 11, 14, 15 | 8041 | 6275 |
| Total current liabilities | 293 301 | 278787 | |
| Total squity and Itabilities | 2818986 | 2813829 |
On 15 March 2018 the Board of Directors of Prosafa SE approved and authorized these financial statements for lasue.
Harald Espedal utive chairman N
henacho ictor
Ch. Emiocritou Codland Sian Ole Redi $\overline{\text{ind}}$ (
Non-sxacutive director
Lamsca, 27 April 2016 Brinch $\overline{\text{ch}}$ hm d ٥ contak culiva diracind
Āñ 30. PR Non-executive director
| (USD 1 000) | Note | 2015 | 2014 |
|---|---|---|---|
| Cash flow from operating activities | |||
| Profit/loss before taxes | |||
| (418 182) | 186 245 | ||
| Unrealised currency loss / (gain) on long-term debt | (56715) | (83 701) | |
| Depreciation | Э | 8 | 10 |
| Impairment shares in subsidiaries | 331 209 | 483 609 | |
| Interest income | (14506) | (5974) | |
| Interest expenses | 54 381 | 45 309 | |
| Change in working capital | (7044) | 1090 | |
| Taxes pald | 6 | (1) | (1) |
| Other Items from operating activities | (34315) | 67704 | |
| Net cash flow from operating activities | (145 165) | 694 292 | |
| Cash flow from Investing activities | |||
| Acquisition of shares | (223 750) | (320018) | |
| Change in intra-group balances | 12 | (101690) | (335 514) |
| Interest received | 14 506 | 5974 | |
| Net cash flow from investing activities | (310933) | (649 558) | |
| Cash flow from financing activities | |||
| Proceeds from issue of share capital | Đ | 65832 | 0 |
| New interest-bearing long-term debt | 10 | 1 290 000 | 332 220 |
| Repayment of interest-bearing long-term debt | 10 | (816463) | (198 000) |
| Dividends paid | (33980) | (125 774) | |
| Interest paid | (54381) | (45, 309) | |
| Net cash flow from financing activities | 451 008 | ||
| (36883) | |||
| Net cash flow | (5090) | 7871 | |
| Cash and deposits at 1 January | 17 285 | 9414 | |
| Cash and deposits at 31 December | 12 194 | 17 285 |
| H |
|---|
i |
| CLASS CREATER |
| i I . |
| (USD 1000) | Share capital |
Share premium |
Retained earnings |
Cash flow hedges |
Total equity |
|---|---|---|---|---|---|
| Equity at 31 December 2013 | 65894 | 745 109 | B 081 | 741 412 | |
| Net profit | 922 328 186 244 |
||||
| Other comprehensive income | |||||
| Total comprehensive income 11 | 186244 | (38 043) (38 043) |
|||
| Dividends | |||||
| Equity at 31 December 2014 | Š 9 |
745109 | $(125 774)$ 982 798 |
(29992) | 186 244 (38 043) (38 201 (125 774) (125 774) |
| Net profit Other comprehensive income |
(418183) | ||||
| (9530) | |||||
| Total comprehensive income 11 | (9530) | ||||
| Dividends | (418 183) (33 980) |
$(418$ 183) $(9 530)$ $(427 713)$ $(33 980)$ $(33 980)$ |
|||
| Share Issue | $\frac{1}{2}$ Ó |
59 591 | |||
| Equity at 31 December 2015 | 72135 | BOA 700 | 530 635 | (39492) | S26 567 59 |
1)Total comprehensive income is attributable to the owners of the company
All figures in USD 1 000 unless otherwise stated.
The financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS)
endorsed by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap 113. The accou consolidated accounts provide additional information to the parent company's accounts which is not presented here separately. The Company's functional currency is US dollars (USD), and the financial statements are presented in USD. Investments in subsidiaries are measured at historic cost, unless there is any indication of impairment. In case of Impairment, an investment is written down to recoverable amount.
| 2015 | 2014 | |
|---|---|---|
| Services from subsidiaries | 6 6 9 2 | 8 2 0 3 |
| Directors' fees | 574 | 731 |
| Salaries and management bonus | 453 | 620 |
| Other remuneration | 37 | 75 |
| Payroll laxes | 34 | 46 |
| Share option costs | (7) | (403) |
| Pension expanses | (92) | (69) |
| Auditors' audit fees | 24 | 270 |
| Auditors' other fees | 10 | 6 |
| Other operating expenses | 3909 | 2471 |
| Total operating expenses | 11834 | 11950 |
| Equipment | Total | |
|---|---|---|
| Acquisition cost 31,12,13 | 206 | 204 |
| Additions | Б | 5 |
| Disposals at acquisition cost | o | D |
| Acquisition cost 31.12.14 | 211 | 211 |
| Additions | o | o |
| Disposals at acquisition cost | o | 0 |
| Acquisition cost 31.12.15 | 211 | 211 |
| Accumulated depreciation 31.12.13 | 174 | 174 |
| Accumulated depreciation on disposals | 0 | D |
| Depredation for the year | 10 | 10 |
| Accumulated depreciation 31.12.14 | 184 | 184 |
| Accumulated depreciation on disposals | o | o |
| Depreciation for the year | 8 | a |
| Accumulated depreciation 31.12.15 | 192 | 192 |
| Carrying value 31.12.15 | 19 | 19 |
| Carrying value 31.12.14 | 27 | 27 |
| Depreciation rate (%) | 20-30 |
| 2015 | 2014 | |
|---|---|---|
| Interest receivable from subsidiaries | 14 436 | 5917 |
| Other Interest receivable | 70 | 57 |
| Loan from subsidiary written off | 0 | 8407 |
| Currency gain | 108 254 | 126 437 |
| Fair value adjustment currency forwards | 44 123 | Đ |
| Other financial income | 178 | O |
| Total other financial income | 167061 | 140 817 |
| interest payable to subsidiaries | 0 | (123) |
| Interest expenses | (54381) | (4518) |
| Currency loss | (178 280) | (72 047) |
| Fair value adjustment currency forwards | a | (68 170) |
| Other financial expenses | (19 402) | (13123) |
| Total other financial expenses | (252063) | (198 649) |
| Year ended 31 Dec 2015 | receivables | Fair value Loans and through profit |
Financial IlahHitlas meesured at and loss amortland cost |
Total | |
|---|---|---|---|---|---|
| Interest Income | 14 506 | 0 | ٥ | 14 50 6 | |
| Currency gain 11 | a | 0 | O | 108 254 | |
| Fair value adjustment currency forwards | 0 | 0 | 44 123 | 44 123 | |
| Other financial income | o | 0 | 178 | 178 | |
| Total financial Income | 14 506 | ٥ | 44 301 | 167061 | |
| Interest expenses | 0 | o | (54381) | (54381) | |
| Currency loss 1) | o | 0 | O | (178, 280) | |
| Other financial expenses | 0 | Ð | (19 402) | (10 402) | |
| Total financial expenses | ۵ | a | (73783) | (252 063) | |
| Net financial items | 14 506 | o | (29482) | (85002) | |
| Fair value | Financial lishilties |
||||
| Loans and through profit | measured at | ||||
| Year ended 31 Dec 2014 | receivables | and loss amortised cost | Total | ||
| Interest income | 5974 | 0 | Ð | 6974 | |
| Currency gain 1) | D | 0 | Đ | 126 437 | |
| Loan from subsidiary written off | Ω | 0 | 8407 | 8407 | |
| Total financial income | 5974 | ۰ | 8407 | 140818 | |
| Interest expenses | 0 | 0 | (45, 309) | (45 309) | |
| Currency loss 11 | $\mathbf 0$ | n | o | (72 047) | |
| Fair value adjustment derivatives | 0 | (68170) | $\Omega$ | (68170) | |
| Other financial expenses | 0 | o | (13123) | (13123) | |
| Total financial expenses | 0 | (68 170) | (58432) | (198649) | |
| Net financial items | 5974 | (68 170) | (50025) | (57332) |
1) Excluded from the category breakdown, but added to the total for net effect.
47
| 2015 | 2014 | |
|---|---|---|
| (Loss)/profit before taxes | (418 182) | 532 245 |
| Permanent differences | 399 962 | (506554) |
| Change in tax loss carried forward | 18 220 | (25691) |
| Tax base | Đ | |
| Taxes | ||
| Temporary differences: | ||
| Loss carried forward | (44873) | (63093) |
| Basis for deferred tax ilability (+)/benefit (-) | (44873) | (63 093) |
| Deferred tax liability (+)/benefit (-) | O | |
| Taxes payable at 31 December | O | a |
No deferred tax asset has been recognised in respect of the tax loss carried forward as utilisation of this deferred tax asset is deemed not probable. Tax losses for each year are carried forward for 5 years. The tax rate in Cyprus is 12.5%.
Reconciliation in accordance with IAS 12.81
| ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, | ||
|---|---|---|
| 2015 | 2014 | |
| (Loss)/profit before taxes | (418182) | 532 245 |
| Corporation tax thereon at the applicable lax rates | (52 273) | 66 531 |
| Tax effect of expenses not deductible for tax purposes | 30 472 | 37 777 |
| Tax on income not taxable in determining taxable profit | (20280) | (108866) |
| Effect of unused current year tax losses | 680 | 4560 |
| Special contribution to defence fund | ||
| Tax charge | ||
(Share capital and carrying value in 1 000)
| Share | Carrying | Carrying | Owner- | ||
|---|---|---|---|---|---|
| Company | capital | value 2015 | value 2014 | ship | |
| Prosafe AS | NOK | 100 | 69 316 | 69 316 | 100 % |
| Prosafe Offshore AS | NOK | 100 | 270 | 270 | 100 % |
| Prosafe Management AS | NOK | 100 | 15 | 15 | 100 % |
| Prosafe (UK) Holdings Ltd | GBP | 11000 | 9826 | 9826 | 100 % |
| Prosafe Offshore Pte Ltd | USD | 10 000 | 244 533 | 320 037 | 100 % |
| Consafe Offshore AB | SEK | 27786 | o | 4371 | 100 % |
| Prosafe Offshore Services Pte Ltd | USD | 10 | 150 | 150 | 100 % |
| Prosafe Asia Pacific Pie Ltd | SGD | 10 | 0 | 100 % | |
| Prosafe Rigs Pte Ltd | USD | 2 500 040 | 1903873 | 1931464 | 91% |
| Total carrying value | 2 227 991 | 2 335 450 |
Consafe Offshore AB was liquidated in 2015.
In the income statement for 2015, the following impairment charges were made:
Prosafe Rigs Pte Ltd USD 255.7 million and Prosafe Offshore Pte Ltd USD 75.5 million.
In the income statement for 2014, the following impairment charges were made:
Consafe Offshore AB USD 137.6 million, Prosafe Rigs Pte Ltd USD 333 million and
Prosafe (UK) Holdings Ltd USD 13 million.
There are mortgages on the shares in Prosafe Rigs Pte Ltd and Prosafe Offshore Services Pte Ltd. Please refer to note 13.
| 2015 | 2014 | |
|---|---|---|
| Current receivables from group companies | 4218 | |
| Other current assets | 18 339 | 13666 |
| Total other current assets | 22 557 | 13747 |
The main part of other current assets consists of capitalised borrowing costs.
| 2015 | 2014 | |
|---|---|---|
| Authorised shares as of 31 December | 275924148 | 275924148 |
| Issued and paid number of ordinary shares as of 31 December | 259 570 359 | 235 973 059 |
| Nominal value | EUR 0.25 | EUR 0.25 |
On 8 December 2015, Prosafe completed a private placement of 23 597 300 new shares directed towards Norweglan and International Institutional Investors. The placement was made at a subscription price of NOK 25 per share. Net proceeds amounted to USD 65.8 million.
As of 31 December 2015, Prosafe SE's interest-bearing debt totalled about USD 1,247 million. Loans secured by mortgages (credit facility) accounted for USD 945 million of this total and unsecured bond loans accounted for about
USD 302 million.
| 2015 | 2014 | |
|---|---|---|
| Credit facility | 945 000 | 440 000 |
| Bond loans | 301964 | 390 142 |
| Total Internat-bearing debt | 1 246 964 | B30 142 |
| Debt in NOK | 301984 | 390 142 |
| Debt in USD | 945 000 | 440 000 |
| Total Interest-bearing debt | 1 246 964 | 830 142 |
| Lang-term Interest-bearing debt | 1 107 464 | 830 142 |
| Current Interest-bearing debt | 139 500 | o |
| Total interest-bearing debt | 1 246 964 | 830 142 |
For further information, see note 15 of the consolidated accounts.
| 2015 | 2014 | |
|---|---|---|
| Accrued Interest costs | 4957 | 3776 |
| Other current liabilities | 3083 | 2500 |
| Total other interest-free current liabilities | B041 | 6 275 |
| 20 T D | ZU 14 | |
|---|---|---|
| NOK loan to Prosafe AS | 76 225 | 66 02B |
| USD loan to Prosafe Offshore Pta Ltd | 480 000 | 4B1 292 |
| intra-group long-term receivables | 656 225 | 547 320 |
Loan agreements with subsidiaries are made at market prices using 3M NIBOR (NOK loan) and 3M LIBOR (USD loan) Interest rates and a margin of 2.00%. Outstanding balances at year-end are unsecured, and settlement normally occurs in cash
| Transactions with related parties | 2015 | 2014 | |
|---|---|---|---|
| Transactions | |||
| Administrative services from subsidiaries | (6692) | (0, 203) | |
| Interest income | 14 43 6 | 5917 | |
| Interest expenses | (123) | ||
| Dividend | 9670 | 739 B46 |
Prosafe AS and Prosafe Management AS are performing services on behalf of Prosafe SE relating to management. corporate activities, investor relations, financing and insurance. The services are invoiced on monthly basis and paid on market terms. Please refer to note 7 to the consolidated accounts for disclosure of remuneration to directors.
| ------------------- | ||
|---|---|---|
| Current receivables of the ultimate parent to subsidiaries | 4218 | |
| Intra-group long-term receivables | 556 225 | 547 320 |
| Current payables from the ultimate parent to subsidiaries | 105053 | 197 838 |
Current receivables and payables are not subject to any interest calculation. The balancas will be settled on ordinary market terms.
As of 31 December 2015, Prosafe's interest-bearing debt secured by mortgages totalled USD 945 million. The debt was secured by mortgages on the accommodation/service vessels Safe Astoria, Safe Bristolla, Safe Caledonia, Safe Concordia, Safe Scandinavia, Regalia, Safe Boreas (net carrying value USD 1,391 million) and Safe Zephyrus when delivered. Negative pledge clauses apply on shares in the vessel owning subsidieries. Earnings accounts are pledged as security for the credit facilities, but cash will only be restricted if a continuing event of default occurs.
Bank guarantees amounted to NOK 290 million at 31 December 2015 (no outstanding bank guarantees as at 31 December 2014). The guarantees were secured by parent company guarantee and mortgages on the accommodation/service vessels Safe Regency, Safe Lancia, Safe Hibernia, Safe Britannia and Jasminia (net carrying value USD 0 million).
As of 31 December 2015, Prosafe had issued parent company guarantees to customers on behalf of its subsidiaries in connection with the award and performance of contracts totalling approximately USD 124 million.
As of 31 December 2014, Prosafe's interest-bearing debt secured by mortgages totalled USD 440 million. The debt was secured by mortgages on shares in Prosafe Rigs Pie Ltd and Prosafe Offshore Pie Ltd, and the accommodation/service vessels owned by these entities. The book value of the mortgaged fleet was USD 1 027.3 million. Prosafe had issued parent company guarantees to customers on behalf of its subsidiaries in connection with the award and performance of contracts.
As of 31 December 2015, Prosafe SE had financial assets and liabilities in the following categories:
| Fair value | Financial Habilities |
|||
|---|---|---|---|---|
| Loans and through profit | measured at | |||
| Year ended 31 Dec 2015 | receivables | and loss amortised cost | Book value | |
| Intra-group long-term receivable | 556 225 | ٥ | 0 | 558 225 |
| Cash and deposits | 12 194 | 0 | 0 | 12 194 |
| Other current assats | 22 557 | 0 | ٥ | 22 557 |
| Total assets | 590 976 | o | 0 | 590976 |
| Credit facility | ٥ | a | 945 000 | 945 000 |
| Bond loan PRS07 | o | o | 29 515 | 29 515 |
| Bond loan PRS08 | o | o | 56 760 | 56 760 |
| Bond loan PRS09 | O | o | 56760 | 56760 |
| Bond loan PRS10 | a | ٥ | 79 464 | 79 464 |
| Bond loan PRS11 | a | o | 79464 | 79464 |
| Fair value derivatives | 0 | 89 217 | 0 | 89 217 |
| Interest-free long-term habilities | 0 | o | 1733 | 1733 |
| Intra-group current fiabilities | 0 | a | 105053 | 105 063 |
| Other interest free current liabilities | 0 | O | 8041 | 8041 |
| Total liabilities | ٥ | 89 217 | 1361791 | 1451008 |
As of 31 December 2014, Prosafe SE had financial assets and liabilities in the following categories:
| Fair value | Financial Ilabilities |
|||
|---|---|---|---|---|
| Year ended 31 Dec 2014 | racalvables | Loans and through profit | measured at and loss amortised cost |
Book value |
| intra-group long-term receivable | 547 320 | O | O | 547 320 |
| Cash and deposits | 17285 | 0 | 0 | 17 285 |
| Other current assets | 13747 | 0 | 0 | 13747 |
| Total assets | 578 352 | 0 | ۰ | 578 352 |
| Credit facility | Đ | 0 | 440 000 | 440 000 |
| Bond Joan PRS07 | O | $\mathbf o$ | 67 266 | 67 266 |
| Bond loan PRS08 | Đ | o | 67 266 | 67 266 |
| Bond loan PRS09 | 0 | ٥ | 67 266 | 67 266 |
| Bond loan PRS10 | o | O | 94 172 | 94 172 |
| Bond loan PRS11 | 0 | O | 94 172 | 94 172 |
| Fair value derivatives | 0 | 113 654 | o | 113 654 |
| Interest-free long-term liabilities | a | a | 2081 | 20B1 |
| Intra-group current liabilities | a | O | 197838 | 197838 |
| Other Interest free current liabilities | a | a | 6 2 7 5 | 6275 |
| Total ilabilities | 0 | 113 654 | 1036336 | 1 149 990 |
For further information, see note 18 of the consolidated accounts.
As of 31 December 2015, Prosafe SE's main financial liabilities had the following remaining contractual maturities:
| Year ended 31 Dec 2015 | 2016 | 2017 | 2018 | 2019 | $2020 \rightarrow$ |
|---|---|---|---|---|---|
| Interest-bearing debt (downpayments) | 139 500 | 210 800 | 233 500 | 233 500 | 429 700 |
| Interests incl interest swaps | 74 500 | 84 400 | 85000 | 86 300 | 146 400 |
| Intra-group current liabilities | 105 053 | a | O | ||
| Interest-free long-term liabilities | o | 2081 | a | ||
| Other interest-free current liabilities | 8041 | a | |||
| Total | 327 094 | 297 281 | 31B 500 | 319 800 | 576 100 |
As of 31 December 2014, Prosafe SE's main financial liabilities had the following remaining contractual maturities:
| Year ended 31 Dec 2014 | 2015 | 2016 | 2017 | 2018 | $2019 -$ |
|---|---|---|---|---|---|
| Interest-bearing debt (downpayments) | 0 | 67300 | 382 300 | 94 200 | 286 300 |
| Interests incl Interest swaps | 56 900 | 68 300 | 70 500 | 67000 | 100 000 |
| Intra-group current liabilities | 197838 | o | o | ||
| Interest-free long-term liabilities | 0 | 2081 | ٥ | ||
| Other Interest-free current liabilities | 6 2 7 5 | o | ٥ | ||
| Total | 261 013 | 137 681 | 452800 | 161 200 | 386 300 |
In December 2015/January 2016, the company agreed with its bank syndicates to amend the USD 1,300 million and USD 288 million credit facilities. The additional aquidity, flexibility and headroom created by the amendments, which cover both covenant headroom and voluntary option to skip two scheduled amortisations, provides Prosafe with increased operational and financial flexibility and makes the company more robust in a challenging market. The amendments to the credit facilities include:
Leverage ratio (ratio of net borrowings divided by adjusted EBITDA):
| 1 January 2016 - 31 December 2018: | Net $deb/EB$ itDA < 8.0 |
|---|---|
| 1 January 2019 and thereafter: | Net debt//EBITDA < $5.0$ |
"Net debt" is excluding debt related to new builds under construction and conversions, and "EBITDA" Includes the annualisation of contribution from such vessels that have not been in operation for a full year.
Equity ratio to be minimum 25 per cent from 31 December 2015 until 31 December 2017, and 30 per cent thereafter,
Prosafe has secured an option to voluntary skip scheduled amortisations amounting to two instalments of USD 65 million under the USD 1,300 million facility, in total amounting to USD 130 million. These voluntary amortisations options will be available to the company immediately and until 31 December 2017, subject to completion of formal documentation.
Other conditions: No dividends, bond- or equity buy-backs from 31 December 2015 unless;
i) all voluntary skipped amortizations have been prepaid or cancelled; and
ii) a 12 month financial forecast has been provided which confirms compliance with original financial covenants, except for the equity ratio to be minimum 35 per cent of book equity.
In February 2016, bond holders approved adjustments of the financial covenants in all outstanding bond issues, in order to align with the covenants in the bank facilities. The emendments include:
Leverage ratio (ratio of net borrowings divided by adiusted EBITDA);
31 March 2016 - 31 December 2018: Net debt/EBITDA < 6.0 1 January 2019 and thereafter: Net debt//EBITDA < 5.0
"Net debt" is excluding debt related to new builds under construction and conversions, and "EBITDA" includes the annualisation of contribution from such vessels that have not been in operation for a full year.
Equity ratio to be minimum 25 per cent from 31 March 2016 until 31 December 2017, and 30 per cent thereafter.
In April 2016, the Company agreed with its lenders an amendment to the credit facilities. A new bank covenant minimum liquidity laval of USD 20 million was set until the end of the third quarter of 2016. The now temporary covenant are applicable to both the USD 1.3 billion facility and the USD 288 million new build financing facility.
A dialogue has been commenced with the Company's key stakeholders, including the senior lenders, and the Company is currently working with stakeholders and advisors to evaluate alternatives to improve the financial situation of the Company. Amendments to the bank and bond agreements will be required in order to secure a robust financial foundation and to safeguard and further strengthen Prosafe's market leading position in the industry. The Company Intends to communicate its financial plan during the second quarter of 2016.
The Board of Directors confirms that the accounts have been prepared under the assumption that the Company is a going concern and that this assumption is realistic at the date of the accounts. This assumption is based on the budgets for the year and the Group's long-term forecasts for the following years. As a result of the suspension of the two contracts in Mexico and the increased liquidity risk, a material uncertainty around the going concern assumption has arisen. The Board of Directors has evaluated the financial forecasts including the assumptions for utilisation of the vessels and the charter day rates. These assumptions are based on prudent estimates compared to historical actuals. In the evaluation of the financial forecasts, factors such as the order backlog and cost saving initiatives have been considered. As referred to in the financial presentation of the Q4 2015 result, the Group has already achieved annual cost savings amounting to USD 15 million. There is a target to double these annual savings. Cost savings to date and going forward include many cost categories, e.g. offshore, travel and salaries. Activity level is forecasted to rebound from 2018 as industry cost reductions are taking full effect.
Moreover, the Board of Directors has evaluated the Company's ability to reach a solution in the ongoing dialogue with the Company's key stakeholders, and concluded that it is likely to achieve a favourable outcome of this process. This conclusion is an important factor in the going concern assumption. The Board of Directors Intends to announce a plan to secure financing of the Company shortly. As of today, such a plan is likely to trivolve a combination of one or more different alternatives including but not limited to, renegotiated restrictive covenants and debt restructuring. For additional comments on liquidity risk, please refer to note 19 to the consolidated accounts.
KPMG Limited Chartered Accountants 11, June 16th 1943 Street 3022 Limassol, Cyprus P.O.Box 50161 3601 Limassol, Cyprus
Telephone +357 25 869000 Fax +357 25 363842 E-mail [email protected] Internet www.kpmg.com.cy
We have audited the accompanying consolidated financial statements of Prosafe SE ("the Company") and its subsidiaries (together with the Company, the "Group") and the separate financial statements of the Company, on pages 15 to 53, which comprise the consolidated statement of financial position of the Group and the statement of financial position of the Company as at 31 December 2015, and the consolidated income statement, and statements of other comprehensive income, changes in equity and cash flows of the Group, and the income statement, and statements of comprehensive income, changes in equity and cash flows of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information.
The Board of Directors is responsible for the preparation of consolidated and separate financial statements of the Group and the Company that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap. 113, as amended from time to time (the "Companies Law, Cap. 113"), and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatements, whether due to fraud or error.
Our responsibility is to express an opinion on these consolidated and separate financial statements of the Group and the Company based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal control relevant to the entity's preparation of consolidated and separate financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated financial statements of the Group and the separate financial statements of the Company give a true and fair view of the financial position of the Group and the Company, respectively, as at 31 December 2015, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Companies Law, Cap. 113, as amended form time to time.
KPMG Limited, a private company kinited by shares, registered in Cyprus. nder registration number HE 132822 with its registered office a 14. Espendon Street, 1087. Nicosia. Cyprus
Nicosla P.O.Box 21121 1502 Telephone +357 22 209000
Fax +357 22 209000 Fax
Larnaca P.O.Box 40075, 6300 Telephone +357 24 200000 +357 24 200200
Paphos P.O.Box 60266, 6101 Telephone +357 26 943050
Fax +357 26 943062 54
Parallmoi / Avia Nana P.O.Box 33200, 5311 Telephone +357 23 820080
Fax +357 23 820084
Polls Chrysochos P.O.Box 66014, 8330 Telephone +357 26 322098 Fax: +357 26 322722
Without qualifying our opinion, we draw attention to the Group's and the Company's statement of financial position on pages 16 and 43 which indicate that the Group's and the Company's current liabilities as at 31 December 2015 exceeded current assets by USD157,1m and USD258,6m, respectively. This condition, along with other matters as set forth in notes 24 and 25 to the Group's financial statements and notes 16 and 17 to the Company's financial statements, indicate the existence of a material uncertainty which may cast significant doubt as to the Group's and the Company's ability to continue as a going concern.
The financial statements have been prepared on a going concern basis which assumes that the financial restructuring referred to in the aforesaid notes will be concluded favourably. As explained in the notes, such financial restructuring will likely involve a combination of one or more different alternatives including, but not limited to, renegotiated restrictive covenants and debt restructuring. The financial statements do not include the adjustments that would result if the Group and the Company were unable to continue as a going concern.
Pursuant to the additional requirements of the Auditors and Statutory Audits of Annual and Consolidated Accounts Law of 2009, L.42(I)/2009, as amended from time to time ("Law 42(I)/2009"), we report the following:
Pursuant to the requirements of the Directive DI190-2007-04 of the Cyprus Securities and Exchange Commission, we report that a corporate governance statement has been made for the information relating to paragraphs (a), (b), (c), (f) and (g) of article 5 of the said Directive, and it forms a special part of the Report of the Board of Directors.
This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Section 34 of Law 42(I)/2009 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.
The financial statements of the Company for the year ended 31 December 2014 were audited by another auditor who expressed an unmodified opinion on those financial statements on 17 March 2015.
Sylvia A. Voizules
Certified Public Accountant and Registered Auditor for and behalf of
KPMG Limited Certified Public Accountants and Registered Auditors
KPMG Center, No.11, 16th June 1943 Street, 3022 Limassol, Cyprus.
Limassol, 27 April 2016
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