Annual Report • Apr 5, 2018
Annual Report
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| Description of Awilco LNG |
|---|
| Vessel Overview |
| Shareholder Information |
| Board of Directors' report |
| Statement of Responsibility |
| Consolidated Income Statement |
|---|
| Consolidated Statement of Comprehensive Income |
| Consolidated Statement of Financial Position |
| Consolidated Statement of Changes in Equity |
| Consolidated Cash Flow Statement |
| 62 | Parent Company Income Statement |
|---|---|
| 63 | Parent Company Balance Sheet |
| 64 | Parent Company Statement of Changes in Equity |
| 64 | Parent Company Cash Flow Statement |
| 65 | Parent Company Notes to the Financial Statements |
| 76 | Auditor's Report |
| 82 | Corporate Governance |
| 88 | Social Responsibility |
| 93 | Alternative Performance Measures |
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The Awilco LNG Group (the Group or Awilco LNG) is a fully integrated owner and operator of LNG vessels. The Group currently owns two 156,000 cbm 2013-built LNG TFDE membrane vessels, WilForce and WilPride.
Awilco LNG ASA (the Company) was incorporated in February 2011 by Awilco AS, a company in the Awilhelmsen Group which has fostered several companies previously listed on Oslo Stock Exchange, for the purpose of acquiring three second-hand LNG vessels.
Three LNG vessels WilGas, WilPower and WilEnergy were acquired for an aggregate price of USD 67 million in 2011, and were financed through private placements in addition to shareholder loans that were subsequently converted to equity. WilPower was sold in 2015 for net proceeds of USD 17.8 million, and WilGas and WilEnergy were sold in 2016 for net proceeds of USD 32.2 million.
On 12 May 2011, Awilco LNG signed shipbuilding contracts for construction of two LNG newbuildings, which were partly financed through a private placement of NOK 534.8 million same month.
On 6 September 2011, the Company's shares were listed at the Oslo Stock Exchange under the ticker ALNG.
On 16 September 2013, the Group took delivery of its first 156,000 cbm newbuilding WilForce, and on 28 November 2013 Awilco LNG took delivery of its second 156,000 cbm newbuilding WilPride. Both vessels were financed through sale/leaseback arrangements, financing about 75 % of the delivered cost.
In 2017 a comprehensive refinancing was completed, comprising an amended and more flexible financial lease agreement with the lessor of WilForce and WilPride, and an equity issue of USD 26.8 million to re-establish a robust financial platform.
Prior to his appointment as CEO of Awilco LNG ASA Mr. Storheill was Managing Director of Awilco AS, Director of S&P/Projects with Frontline Management and Director/Partner of shipbroking company P.F. Bassøe AS. Mr. Storheill has also been the Chairman of the Board of Wilhelmsen Marine Services AS in addition to serving with various board positions in the industry. Mr. Storheill has more than 25 years of shipping experience, is a Norwegian citizen and resides in Oslo, Norway.
Mr. Walker previously held a similar position within Golar LNG. He has previously held various Commercial, Marketing and Project Development roles in LNG projects for both BG and Shell and has been involved in the natural gas & shipping industry for more than 25 years. Mr. Walker is a Scottish citizen and resides in Bærum, Norway.
Mr. Ryssdal came from the position as VP Finance & Controlling of the Company, a position held since 2012. Prior to that he served as an auditor with EY. Mr. Ryssdal is a state authorised public accountant and a Certified Financial Analyst (AFA) from NHH. Mr. Ryssdal is a Norwegian citizen and resides in Ski, Norway.
Mr. Andersen was previously Head of Operations at Höegh LNG. He is a certified Master Mariner and has held various shore side marine related positions since 1997 following 7 years at sea. Mr. Andersen has more than 25 years of shipping experience, is a Norwegian citizen and resides in Oslo, Norway.
Awilco LNG had seven employees at the end of 2017. The Group handles the commercial and technical operation of the vessels from its main office in Oslo.
The Group purchases certain administrative services from Awilhelmsen Management AS and technical sub-management services from Awilco Technical Services AS, both companies in the Awilhelmsen Group.
Mr. Thorvildsen is the CEO of the Awilhelmsen group and Chairman of the Board of Awilco Drilling Plc. Mr. Thorvildsen has extensive experience from the shipping- and offshore industry, and has previously held several senior positions, among them the position as CEO of Awilco AS, the Chairman of the Board of Awilco Offshore ASA and Awilco Heavy Transport ASA (later Ocean HeavyLift ASA). He holds an MSc in Business and Economics from the Norwegian School of Management. Mr. Thorvildsen is a Norwegian citizen and resides in Oslo, Norway. Mr. Thorvildsen is a member of the Remuneration Committee.
Mr. Fougner is the COO of the Awilhelmsen group, and serves on the board of Awilco Drilling Plc. Mr. Fougner has extensive experience from the shipping- and offshore industry, and has previously held several senior positions, among them the position as CEO of Awilco Offshore ASA and CFO of Awilco AS. He holds an MBA from the Norwegian School of Economics and Business Administration. Mr. Fougner is a Norwegian citizen and resides in Oslo, Norway. Mr. Fougner is a member of the Audit Committee.
Mr. Torgersen is the CEO of Astrup Fearnley AS, the parent company of a number of investment and broker companies. Mr. Torgersen has extensive board experience from a number of companies in the property, shipping, finance and offshore sectors, and serves as Chairman of the Board of Atlantic Container Line AB and Finnlines Plc. He is also a member of the boards of IM Skaugen SE and Transportation Recovery Fund. Mr. Torgersen holds an MBA (Finance) from Hochschule St. Gallen. Mr. Torgersen is a Norwegian citizen and resides in Oslo, Norway. Mr. Torgersen is a member of the Remuneration Committee.
Mrs. Syrrist previously worked as an independent consultant, and held positions as financial analyst in Elcon Securities ASA and First Securities ASA. She also has extensive non-executive experience from both listed and private companies, and is currently among others a member of the boards of Awilco Drilling Plc, Aqualis ASA and Eidesvik Offshore ASA. She holds a Master of Science from NTH and is a Certified Financial Analyst (AFA) from NHH. Mrs. Syrrist is a Norwegian citizen and resides in Oslo, Norway. Mrs. Syrrist is the chairman of the Audit Committee
Mrs. Malm Justad previously held positions as CEO in Eitzen Maritime Services, Vice President and Head of Purchasing at Yara International ASA, Vice President and Fleet Manager at Norgas Carriers AS and has held various technical and commercial positions for Norsk Hydro ASA. She also serves as Chairman of the Boards of American Shipping Company ASA and Store Norske Spitsbergen Kulkompani AS, and as board member of Småkraft AS and the Port of London Authority. Mrs. Malm Justad holds a Master in Technology Management from NTH/NHH/MIT and a Master in Chemical Engineering from NTH. Mrs. Malm Justad is a Norwegian citizen and resides in Oslo, Norway.
Both vessels are due for their first 5-year dry-dockings in 2018.
| YEAR BUILT | 2013 | DRAFT | 12.521 M |
|---|---|---|---|
| YARD | DSME | MANAGER | ALNG TM |
| CAPACITY | 156,089 M3 | FLAG | NIS |
| DWT | 87,677 MT | PROPULSION | TFDE |
Awilco LNG owns two 156,000 cbm 2013-built LNG TFDE
Awilco LNG share price development (ticker: ALNG)
| WNERSHIP O |
NUMBER OF SHARES SHAREHOLDER/ |
WNERSHIP O |
NUMBER OF SHARES SHAREHOLDER/ |
|---|---|---|---|
| 38.6 % | AWILCO AS 51 114 080 |
1.4 % | EIKA NORGE 1 906 433 |
| 8.5 % | STRAWBERRY CAPITAL AS 11 216 756 |
1.2 % | SES AS 1 550 000 |
| 8.0 % | UTHALDEN A/S 10 600 930 |
1.1 % | HOLMEN SPESIALFOND 1 478 000 |
| 6.6 % | ASTRUP FEARNLEY A/S 8 692 270 |
1.0 % | CAMACA AS 1 378 623 |
| 3.4 % | INVESCO PERPETUAL EU 4 549 614 |
1.0 % | HELMER AS 1 373 433 |
| 2.3 % | GLAAMENE INDUSTRIER 3 114 387 |
1.0 % | PATRONIA AS 1 322 988 |
| 2.0 % | INVESCO FUNDS 2 664 703 |
0.9 % | J.P. MORGAN BANK LUX 1 148 720 |
| 2.0 % | SONGA TRADING INC 2 663 700 |
0.8 % | MP PENSJON PK 1 050 938 |
| 1.9 % | ODIN ENERGI 2 500 000 |
0.8 % | TVECO AS 1 000 000 |
| 1.9 % | INVESCO PERP EURAN S 2 500 000 |
14.1 % | OTHER SHAREHOLDERS 18 688 036 |
| 1.5 % | CREDIT SUISSE SECURI 2 035 000 |
Source: Oslo Stock Exchange
Board of Directors' report
After a weak start to the year, the second half of 2017 marked a rebound of the LNG transportation market after more than three years with weak rates and utilisation. Along with new LNG production capacity starting up, delayed deliveries of newbuildings and firm LNG demand in Asia the market improved, and both utilisation and rates developed positively throughout the second half of the year.
LNG trade is estimated to have increased by 12 % in 2017, from 263 MT in 2016 to 294 MT in 2017, reflecting some of the 24 MTPA of new production added throughout the year in addition to continuing ramp up of the 36 MTPA of new production added in 2016. Average transport distance increased with 3 % in 2017, after four years of decline, which was driven by a 54 % increase in inter-basin trade, primarily from US volumes heading to Asia.
38 MTPA of new LNG production capacity is scheduled to come on stream in 2018, and a further 50 MTPA of capacity is set for start-up in 2019 to 2021. The orderbook as at end 2017 stood at 95 vessels, and although the scheduled new production is expected to require more vessels than the current orderbook, seasonality and periods of volatility in LNG spot shipping rates and utilisation may be expected.
Awilco LNG completed a comprehensive refinancing in 2017, which included renegotiation of the sale/leaseback agreements and an equity issue to re-establish a robust financial platform.
As both WilForce and WilPride were exposed to a weak spot market in the first half of 2017, Awilco LNG's earnings were not satisfactory in 2017.
The Awilco LNG Group (Awilco LNG, ALNG or the Group) is a fully integrated pure play LNG transportation provider, owning and operating LNG vessels. The Group owns two TFDE LNG vessels built 2013. The parent company Awilco LNG ASA is listed on Oslo Axess under the ticker ALNG. Awilco LNG's registered business address is Beddingen 8, Oslo, Norway.
Both vessels were employed in the spot marked in 2017, achieving 74 % utilisation (79 % in 2016) and a total utilisation of 80 % since delivery in 2013. In 2016 WilForce was employed on a medium-term contract until she was redelivered in December 2016. Two older vessels were sold in August 2016.
The technical management of the vessels is performed by the 100 % owned Awilco LNG Technical Management AS (Awilco LNG TM).
According to shipbrokers Fearnleys LNG, the reported spot day-rates for modern TFDE vessels started 2017 at USD 45,000 per day before bottoming out at USD 28,000 per day in April 2017, and ended the year at about USD 82,500 per day. Average TFDE spot rate per day for the year was about USD 44,000, up from USD 33,500 in 2016. Ballast bonus compensation also increased throughout the year, and the last part of 2017 saw the re-emergence of full roundtrip economics.
The LNG trade increased by an estimated 12 % compared to 2016. Estimated trade was 294 MT in 2017, up from 263 MT in 2016. Five new liquefaction trains commenced production in 2017; Gorgon LNG T3 and Wheatstone T1, both out of Australia, Sabine Pass T3 and T4 in the US and Yamal LNG T1 in Russia. The total combined nameplate production capacity from the new LNG trains was about 24 MTPA. Ramp-up time to nameplate capacity is estimated to about 6 months on average, resulting in the full effect of about 10 MTPA of new capacity not impacting the market until 2018.
After four years of decline, Clarksons Platou reports average transport distances up by 3 % in 2017. The increase was driven by a massive increase in LNG demand from China, whose imports were up by 46 % in 2017. China surpassed South Korea as the 2nd largest importer of LNG behind Japan. China's increase is a result of a policy driven switch from coal to gas in an effort to reduce air pollution. South Korea and India also increased their imports, by 12 % and 9 % respectively. The increased Asian demand was partially met by US exports.
According to DNB Markets, close to 50 % of US LNG production was transported to Asia, which was reflected in a 54 % increase in inter-basin LNG trade in 2017.
In 2018 there are nine liquefaction projects scheduled for startup with a combined nameplate capacity of about 38 MTPA, of which 7 MTPA out of the US. In 2019 to 2021 a further 50 MTPA of new capacity is expected to come online, of which 36 MTPA from the US.
At the start of the year 43 vessels were scheduled for delivery in 2017, but due to reduced yard capacity and delays of certain projects only 24 were delivered. Due to the weak market the last three years, newbuilding ordering activity was restrained in 2017 and 2016 at 10 and six vessels, respectively. Ordering has picked up in 2018 with more than ten vessels ordered so far, most of which assumed against long-term contracts.
The total fleet of LNG carriers above 125,000 cbm was 434 vessels end 2017, of which 78 vessels built prior to 2000 and 21 vessels in lay-up. Three vessels were scrapped in 2017. At the end of 2017 the orderbook for vessels larger than 150,000 cbm stood at 95 LNG carriers, corresponding to about 22 % of the fleet. 49 vessels are scheduled for delivery in 2018, however some delays to this schedule may be expected.
Freight income for the year amounted to USD 20.4 million (USD 34.8 million). Both vessels were employed in the spot market in 2017, and the decrease was due to a combination of weak market rates and extended periods of idling in the first half of 2017, in addition to the effect of WilForce being redelivered from a three-year contract in December 2016. Fleet utilisation for the year ended at 74 %, compared to 79 % in 2016.
Voyage related expenses were USD 6.9 million in 2017 compared to USD 2.8 million in 2016. Bunkers expense reimbursed by charterers amounted to USD 2.1 million in 2017 (USD 0.2 million in 2016), and is presented gross in the income statement.
Operating expenses for the year were USD 7.9 million compared to USD 8.7 million in 2016. In 2016 USD 1.0 million in operating expenses was attributable to two vessels that were disposed of in August 2016.
Administration expenses amounted to USD 3.9 million in 2017 (USD 3.5 million in 2016).
EBITDA for the year was USD 1.7 million compared to USD 19.8 million in 2016.
Depreciation and amortisation was USD 12.3 million, down from USD 12.9 million in 2016 following the sale of two vessels in 2016.
Net finance expense was USD 22.3 million (USD 23.2 million), of which USD 22.2 million (USD 23.2 million) in interest charges on the WilForce and WilPride lease obligations.
Income tax expense for the year was NIL, same as in 2016. Loss before tax and for the period was USD 31.8 million compared to USD 22.8 million in 2016.
Basic and diluted earnings per share for the year were negative with USD 0.31, compared to negative USD 0.34 in 2016.
As at 31 December 2017 the Group's total assets were USD 399.6 million (USD 408.4 million).
The book value of vessels was USD 363.9 million (USD 371.8 million). The decrease reflects ordinary depreciation of USD 12.3 million (USD 12.9 million), offset by capitalisation of fees, minor vessel upgrades and periodic TFDE engine overhauls of USD 4.3 million (USD 0.1 million). The sale/leaseback agreements were renegotiated in 2017, and refinancing fees of USD 2.0 million were incurred. The fees were capitalised as cost price of the vessels and are depreciated over the remaining term of the leases. The fees are payable either upon refinancing of the vessels or by repayment of deferred amounts.
Current assets were USD 35.7 million (USD 36.4 million), of which trade receivables were USD 1.6 million (USD 0.6 million), cash and cash equivalents were USD 29.0 million (USD 30.0 million) and other short-term assets were USD 5.1 million (USD 4.0 million).
Non-current liabilities were USD 266.2 million (USD 259.3 million), of which the WilForce and WilPride lease liabilities were USD 263.9 million (USD 259.0 million). The lease agreements were renegotiated in 2017, resulting in an extension of the tenor to end of 2019, the deferral of up to USD 29.0 million of bareboat hire and the introduction of flexibility through rolling options for early termination at any time before maturity. The contractual bareboat hire per day is unchanged at USD 49,100 per vessel. From July 2017 to March 2018, the bareboat hire payable is USD 28,500 per day, from April 2018 to March 2019 USD 33,500 per day, and from April 2019 to December 2019 USD 38,500 per day. The deferred amounts will become payable at maturity of the leases, or by way of a cash sweep mechanism measured on a quarterly basis. Net earnings in excess of cash break-even levels, currently estimated at approx. USD 48,000 per day (increasing to approx. USD 53,000 per day from April 2018 and to approx. USD 58,000 per day from April 2019), is to be sweeped towards the outstanding deferred charter hire, subject to the Group retaining a minimum cash position after sweeping of approx. USD 31.0 million before the dry-dockings of both vessels scheduled for 2018, and approx. USD 23.5 million after completion of the dry-dockings.
The purchase obligations at maturity of the lease agreements in December 2019 are USD 113.3 million and USD 114.5 million for WilForce and WilPride, respectively, in addition to any deferred hire and refinancing fees.
Current liabilities were USD 6.4 million (USD 16.3 million), of which USD 2.7 million related to the short-term portion of the WilForce and WilPride lease liabilities (USD 13.8 million), USD 0.2 million was trade payables (USD 0.9 million) and USD 3.5 million provisions and accruals (USD 1.6 million). Provisions and accruals included USD 2.1 million in deferred revenue originating from invoicing of TC hire for January 2018 (NIL 31 December 2016).
Total equity at the end of the year was USD 127.0 million (USD 132.8 million), corresponding to a book equity ratio of 32 % (33 %). In 2017 USD 26.8 million was raised in equity from
the issuance of 64.8 million new shares. USD 0.7 million of transaction costs were incurred in the equity raise, resulting in net proceeds of USD 26.1 million.
In 2017 the Group had cash inflows from operating activities of USD 2.1 million (USD 19.6 million). Net cash used in investing activities was USD 2.3 million (net cash inflow of USD 32.1 million). Net cash used in financing activities amounted to USD 1.0 million (USD 39.0 million), mainly related to payment towards the WilForce and WilPride lease obligations, offset by net proceeds from equity issue of USD 26.1 million. Cash at the end of the year was USD 29.0 million (USD 30.0 million).
Cash and cash equivalents were USD 29.0 million as at 31 December 2017. The Group's vessels are trading in the spot market, and earnings are exposed to volatility and seasonality in rates and utilisation. Cash break-even for each vessel is approx. USD 48,000 per day until April 2018, USD 53,000 per day thereafter and until April 2019, and USD 58,000 per day thereafter until maturity of the leases end 2019. Earnings above cash break-even are subject to a cash sweep towards the lessor of WilForce and WilPride, subject to a minimum cash position, as described in note 22.
Operating income for the year amounted to NOK 3.2 million (NOK 6.4 million) and administration expenses NOK 23.0 million (NOK 20.4 million). Impairment losses on shares in subsidiaries amounted to NOK 126.5 million (reversal of impairment losses of NOK 36.6 million). The impairment losses were based on an assessment of recoverable amounts.
Net finance income amounted to NOK 1.3 million (NOK 33.3 million).
Loss for the period was NOK 145.1 million (profit of NOK 55.7 million).
In 2017 NOK 226.7 million was raised in equity from the issuance of 64.8 million new shares. NOK 6.3 million of transaction costs were incurred in the equity raise, and net proceeds were NOK 220.4 million.
The Board of Directors proposes that the loss for the period of NOK 145.1 million for the Parent Company is covered by retained earnings.
The Board will propose to the General Meeting scheduled for 26
April 2018 that there will be no dividend distributed for the fiscal year 2017. Awilco LNG is restricted from paying dividends to its shareholders for as long as parts of bareboat hire is deferred.
The consolidated financial statements of the Group, and the parent company financial statements of Awilco LNG ASA, have been prepared on a going concern basis pursuant to the Norwegian Accounting Act § 3-3a.
Market conditions for shipping activities have historically been volatile, and consequently the financial results may vary significantly from year to year. The risk factors in the LNG shipping market can be divided into the following main components: market risk, operational risk and financial risk.
Market risk relates to the supply of LNG vessels and the demand for LNG transportation. In the past there have been prolonged periods of oversupply of vessels due to delays in the construction of LNG production capacity, with correspondingly low utilisation and depressed market rates. In the period 2012 to 2015 there was an ordering boom in the LNG transportation market which resulted in a general excess supply of vessels, which combined with limited growth in LNG trade resulted in suppressed market both in terms of low rates and low utilisation. The LNG trade has been growing steadily, but periods of low activity introduces volatility in LNG spot shipping rates.
Market rates in the latter part of 2016 showed signs of improvement, and 2017 started on a positive note. In February 2017 the persistent tonnage overhang and depressed Far East gas prices led to downward pressure on rates, and the market bottomed out at USD 28,000 per day in April 2017. Following increased LNG production and improving ton/mile due to strong demand from China, market rates increased steadily thereafter, and hit a three-year high in December 2017 at above USD 80,000 per day.
In 2018 49 vessels are scheduled for delivery, of which 3 are assumed not committed. As in 2017, evident by 24 deliveries compared to 43 scheduled, some slippage is also to be expected in 2018 as yard capacity has been reduced the last couple of years.
Projecting the supply of LNG involves uncertainty. Historically new projects have tended to be delayed as liquefactions plants are highly complex construction projects, but in general project execution has gradually improved. Actual LNG production may
fluctuate from one year to another. Lower LNG production will have an impact on the market rates for LNG vessels, as the oversupply of vessels is likely to reduce rate levels.
The demand for LNG is affected by the importing countries' demand for energy as well as the relative pricing of LNG compared to alternative energy sources. A high relative pricing spread between LNG and other energy sources will reduce the demand for LNG and thereby negatively impact demand for LNG transportation.
Gas price levels in different geographic markets has a significant impact on demand for LNG transportation to execute arbitrage opportunities. The arbitrage going forward is difficult to predict as it is closely linked to the gas price level in Europe, the US and Far East, which is highly dependent upon several factors including weather, domestic demand and the price of alternative energy sources. When further production capacity from the US comes online in 2018 and 2019 it may be expected that ton-mile is set for further improvement.
The Group's ability to obtain charters will depend upon the prevailing market conditions. If the Group is unable to employ its vessels, revenue will be substantially reduced.
The Group's operations and vessels are subject to international laws and regulations, which have become more proliferate and stringent in recent years. Although the Group is doing its outmost to comply, changes in laws and regulations may expose the Group to liability.
LNG vessels are highly sophisticated, and there is a risk that equipment may fail despite pre-emptive maintenance. Even though the Group obtains loss of hire insurance for contracts over a certain length, a technical breakdown will affect the earnings for a period of at least 14 days (deductible).
A piracy attack or outbreak of war may affect the trading and earnings of the vessels.
The world-wide LNG carrier fleet will increase by more than 20 % over the coming years, and exposes the Group to the risk related to attracting qualified officers and seafarers. The Group has, and will, continue to take steps in order to mitigate this risk.
The Group is exposed to bunker price risk when the vessels are not on charter.
Both vessels are financed through sale/leaseback agreements with Teekay LNG Partners L.P. The leases mature end 2019. The lease agreements include rolling repurchase options at any time before maturity, and repurchase obligations at the end of the period. The purchase obligation for WilForce is USD 113.3 million and for WilPride USD 114.5 million, in addition to any deferred hire of up to MUSD 29.0 in total and refinancing fees of USD 2.0 million. Lease payments are in USD. At the end of the lease period there is refinancing risk. The level of debt financing that the Company will be able to obtain at maturity of the lease agreements depends upon vessel values, market rates for the vessels as well as the contract status.
The companies in the Group have USD as functional currency. Currency risks therefore arise in connection with transactions in other currencies than USD. The Group is to a certain degree exposed to currency fluctuations as it is exposed to NOK administration expenses. The Group may use financial derivatives to reduce short-term currency risk.
The shipping business is capital intensive. Insufficient liquidity will severely impact the ability to operate. The Group's approach to manage liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity at all times to meet its obligations without incurring unacceptable losses or risking employees' safety or damage to the Group's reputation.
Currently the Group has no other long-term debt than fixed interest rate lease liabilities, and interest rate risk is therefore limited to bank deposits and a floating interest charge on the deferred bareboat hire. If the Group enters into new long-term financing facilities, it will evaluate using financial derivatives in order to hedge interest rate exposure.
The Group is exposed to credit risk from its operating activities through freight income trade receivables and from its financing activities, including deposits with banks. The Group aims to do business with creditworthy counterparties only. Charter hire is normally received monthly in advance, effectively reducing the potential exposure to credit risk. Bank deposits are only
deposited with internationally recognised financial institutions with a high credit rating.
The Group has a lean onshore organisation and has outsourced certain services. At year end 2017 the Group had 7 onshore employees. Shipping has historically been male dominated, and there is currently no female representation among management. The Group is aware of this imbalance and is positive to improve this ratio in the future. The Board of Directors of the Company has two female directors, representing 40 % of the Board.
The safety and well-being of Awilco LNG's employees and seafarers has the highest priority. All ships shall be operated and maintained, safe for crew, visitors, cargo and the environment. The Group's quality of operations is supported by experienced, educated and well trained staff onboard and onshore. The Group shall adhere to national and international laws and regulations and constantly promote best practices identified within its own operations and the industry in order to improve the competence of individual crewmembers and vessel safety performance. ALNG's management is actively engaged in monitoring the Group's performance to further encourage and promote positive trends, and to provide advice and take corrective action where negative trends are detected. To ensure retention of personnel, Awilco LNG aims to ensure a stable and motivating work environment for both onshore and offshore employees. The Group is proactively seeking to identify requirements and needs for additional training through regular audits, master and management reviews.
Absence due to illness for onshore employees was 0.9 % in 2017 (1.4 % in 2016). No work-related injuries were reported during the year for shore-based employees. For seafarers, no LTIFs (accidents per one million-man hours worked) were reported during the year, same as in 2016.
Based on the long-term goal of environmental excellence, Awilco LNG works towards minimising the environmental impact from its vessels. The Group has a zero tolerance for environmental spills, emissions of ozone depleting substances and unauthorised disposal of any type of garbage or waste to the marine environment. Awilco LNG aims to minimise the emissions of CO2, NOx and SOx from engines, boilers, incinerators and cargo and fuel oil tanks and systems through evaporation.
For further information please see the Social Responsibility section in the annual report, which complies with the requirements under the Norwegian Accounting Act § 3-3c.
Awilco LNG strives to protect and enhance shareholder equity through openness, integrity and equal shareholder treatment, and sound corporate governance is a key element in the basis of the Awilco LNG strategy.
The corporate governance principles of the Company are adopted by the Board of Directors. The principles are based on the Norwegian Code of Practice for Corporate Governance as of 30 October 2014 (the «Code of Practice»). Please see the Corporate Governance section in the annual report, and also the Company's web site www.awilcolng.no.
The main strategy for Awilco LNG is to create shareholder value through the provision of a quality, reliable and customer oriented service to the market, in the best manner for its shareholders, employees and business connections. The management team shall safely, efficiently and effectively deliver LNG transportation services to customers with an objective to secure the most lucrative contracts coupled with the highest achievable vessel utilisation.
Awilco LNG shall evaluate growth opportunities in terms of vessel acquisitions and disposals which best complement the Group's financial and operational aspirations.
After three disappointing years, the LNG shipping market rebounded in the second half of 2017. The continuing start-up of new LNG production facilities led to increased LNG trade, coupled with strong demand growth in Asia improving average sailing distances, which resulted in higher utilisation, headline rates and full round voyage economics.
Scheduled new LNG production capacity in 2018 is estimated to 38 MTPA, a 13 % increase over 2017 trade. 49 newbuildings are scheduled for delivery in 2018, corresponding to a 11 % growth in the fleet. As in 2017 several deliveries may be expected to be delayed in 2018. Due to seasonality and the potential mismatch between timing of new LNG production starting up and newbuilding deliveries, volatility in spot market rates and utilisation may be expected in 2018 also.
The long-term outlook for LNG remains positive. Natural gas is available, affordable and environmentally friendly compared to other fossil alternatives. Gas is expected to increase its share in the global energy mix, and is forecasted to be the fastest growing fossil fuel the next 20 to 25 years. The outlook for LNG shipping the next three years looks favorable as 88 MTPA of new production capacity is scheduled to start-up, which is expected to require more vessels than the current available tonnage and orderbook.
Oslo, 4 April 2018
Jon-Aksel Torgersen
Board member
Jon Skule Storheill CEO
Synne Syrrist
Board member
Henrik Fougner
Board member
We confirm to the best of our knowledge that the consolidated financial statements for 2017 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, as well as additional information requirements in accordance with the Norwegian Accounting Act, and that the financial statements for the parent company for 2017 have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting practice in Norway, and that the information presented in the financial
statements gives a true and fair view of the assets, liabilities, financial position and profit/(loss) for the period of Awilco LNG ASA and the Awilco LNG Group as a whole. We also confirm to the best of our knowledge that the Board of Directors' Report includes a true and fair review of the development and performance of the business and the position of Awilco LNG ASA and the Awilco LNG Group, together with a description of the principal risks and uncertainties that they face.
Oslo, 4 April 2018
Jon-Aksel Torgersen
Board member
Jon Skule Storheill CEO
Synne Syrrist Board member
Henrik Fougner Board member
Annette Malm Justad Board member
Consolidated Financial Statements And Notes
GROUP
In USD thousands, except per share figures
| Note | 2017 | 2016 | |
|---|---|---|---|
| Freight income | 4,5 | 20 437 | 34 769 |
| Voyage related expenses | 6 | 6 883 | 2 808 |
| Net freight income | 13 554 | 31 961 | |
| Operating expenses | 7 | 7 949 | 8 658 |
| Administration expenses | 8 | 3 915 | 3 474 |
| Earnings before interest, taxes, depr. and amort. (EBITDA) | 1 691 | 19 829 | |
| Depreciation and amortisation | 11 | 12 269 | 12 903 |
| Impairment of vessels Earnings before interest and taxes |
11 | - (10 579) |
6 569 357 |
| Finance income | 17 | 1 045 | 105 |
| Finance expenses | 17 | 22 269 | 23 260 |
| Net finance income/(expense) | (21 224) | (23 156) | |
| Profit/(loss) before taxes | (31 803) | (22 798) | |
| Income tax expense | 10 | - | - |
| Profit/(loss) for the period | (31 803) | (22 798) | |
| Earnings per share in USD attributable to ordinary equity holders of Awilco LNG ASA: | |||
| Basic, profit/(loss) for the period | 9 | (0.31) | (0.34) |
| Diluted, profit/(loss) for the period | 9 | (0.31) | (0.34) |
| Total comprehensive income/(loss) for the period | (31 803) | (22 798) |
|---|---|---|
| Other comprehensive income: Other comprehensive income items |
- | - |
| Profit/(loss) for the period | (31 803) | (22 798) |
In USD thousands
| Note | 31.12.2017 | 31.12.2016 | |
|---|---|---|---|
| ASSETS Non-current assets |
|||
| Vessels | 11 | 363 917 | 371 847 |
| Other fixed assets | 11 | 12 | 94 |
| Total non-current assets | 363 929 | 371 941 | |
| Current assets | |||
| Trade receivables | 12 | 1 611 | 552 |
| Inventory | 13 | 2 335 | 1 847 |
| Other short term assets | 14 | 2 730 | 3 983 |
| Cash and cash equivalents | 15 | 28 979 | 30 047 |
| Total current assets | 35 655 | 36 430 | |
| TOTAL ASSETS | 399 584 | 408 371 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 19 | 49 407 | 48 420 |
| Share premium | 133 384 | 126 463 | |
| Other paid-in capital | 19 | 18 157 | - |
| Retained earnings | (73 921) | (42 118) | |
| Total equity | 127 028 | 132 764 | |
| Non-current liabilities | |||
| Pension liabilities | 8 | 263 | 301 |
| Long-term interest bearing debt | 22 | 263 907 | 258 984 |
| Other non-current liabilities | 22 | 2 000 | - |
| Total non-current liabilities | 266 170 | 259 285 | |
| Current liabilities | |||
| Short-term interest bearing debt | 22 | 2 682 | 13 820 |
| Trade payables | 240 | 904 | |
| Income tax payable | 10 | - | - |
| Provisions and accruals | 16 | 3 464 | 1 598 |
| Total current liabilities | 6 386 | 16 322 | |
| TOTAL EQUITY AND LIABILITIES | 399 584 | 408 371 |
Oslo, 4 April 2018
Jon Skule Storheill CEO
Synne Syrrist Board member
Annette Malm Justad Board member
In USD thousands
| For the period ended 31 December 2017 | Share | Share | Other | Retained | Total | |
|---|---|---|---|---|---|---|
| In USD thousands | Note | capital | premium | paid-in capital | earnings | equity |
| Equity at 1 January 2016 | 48 420 | 126 463 | - | (42 118) | 132 764 | |
| Profit/(loss) for the period | - | - | - | (31 803) | (31 803) | |
| Other comprehensive income for the period | - | - | - | - | - | |
| Total comprehensive income | - | - | - | (31 803) | (31 803) | |
| Share capital reduction | 19 | (18 157) | - | 18 157 | - | - |
| Equity issue | 19 | 19 145 | 7 658 | - | - | 26 803 |
| Transaction costs equity issue | - | (736) | - | - | (736) | |
| Balance as at 31 December 2017 | 49 407 | 133 384 | 18 157 | (73 921) | 127 028 |
| Cash Flows from Operating Activities: | |
|---|---|
| Items included in profit/(loss) not affecting cash flows: | |
| Changes in operating assets and liabilities: | |
| Cash Flows from Investing Activities: | |
| For the period ended 31 December 2016 | ||||||
|---|---|---|---|---|---|---|
| In USD thousands | Note | Share capital |
Share premium |
Other paid-in capital |
Retained earnings |
Total equity |
| Equity at 1 January 2016 | 48 420 | 126 463 | - | (19 320) | 155 563 | |
| Profit/(loss) for the period | - | - | - | (22 798) | (22 798) | |
| Other comprehensive income for the period | - | - | - | - | - | |
| Total comprehensive income | - | - | - | (22 798) | (22 798) | |
| Balance as at 31 December 2016 | 48 420 | 126 463 | - | (42 118) | 132 764 |
| Note | 2017 | 2016 | |
|---|---|---|---|
| Cash Flows from Operating Activities: | |||
| Profit/(loss) before taxes | (31 803) | (22 798) | |
| Income taxes paid | - | (12) | |
| Interest and borrowing costs expensed | 17 | 22 152 | 23 189 |
| Items included in profit/(loss) not affecting cash flows: | |||
| Depreciation and amortisation | 11 | 12 269 | 12 903 |
| Impairment of vessels | 11 | - | 6 569 |
| (Gain)/Loss on sale of other fixed assets | 27 | - | |
| Changes in operating assets and liabilities: | |||
| Trade receivables, inventory and other short term assets | (1 571) | 1 315 | |
| Trade payables, provisions and accruals | 1 059 | (1 517) | |
| i) Net cash provided by / (used in) operating activities | 2 134 | 19 649 | |
| Cash Flows from Investing Activities: | |||
| Investment in vessels | 11 | (2 327) | (99) |
| Proceeds from sale of vessels | 11 | - | 32 185 |
| Proceeds from sale of other fixed assets | 43 | - | |
| ii) Net cash provided by / (used in) investing activities | (2 284) | 32 085 | |
| Cash Flows from Financing Activities: | |||
| Gross proceeds from equity issue | 19 | 26 803 | - |
| Transation costs of equity issue | 19 | (736) | - |
| Repayment of borrowings | (5 580) | (13 882) | |
| Interest and borrowing costs paid | (21 405) | (25 103) | |
| iii) Net cash provided by / (used in) financing activities | (919) | (38 985) | |
| Net change in cash and cash equivalents (i+ii+iii) | (1 068) | 12 749 | |
| Cash and cash equivalents at start of period | 30 047 | 17 299 | |
| Cash and cash equivalents at end of period | 15 | 28 979 | 30 047 |
Awilco LNG ASA (the Company or Parent Company) is a public limited liability company incorporated and domiciled in Norway. Its registered office is Beddingen 8, 0250 Oslo, Norway. The Company was incorporated 2 February 2011, and is listed on Oslo Axess with the ticker ALNG.
The consolidated financial statements of the Company comprise the Company and its subsidiaries, together referred to as the Group or Awilco LNG.
The principal activity of the Group is the investment in and operation of LNG transportation vessels. The Group owns and operates two 2013-built TFDE LNG vessels.
The consolidated financial statements for the period ended 31 December 2017 were authorised for issue by the Board of Directors on 4 April 2018 and will be presented for approval at the Annual General Meeting on 26 April 2018.
The consolidated financial statements of Awilco LNG have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the additional applicable disclosure requirements of the Norwegian accounting act. The consolidated financial statements have been prepared on a historical cost basis, except for liabilities for cash-settled sharebased payments which are measured at fair value, pensions which are measured according to IAS 19 and receivables and payables denominated in foreign exchange which are translated at period-end exchange rates.
The consolidated financial statements are presented in US Dollars (USD) rounded off to the nearest thousands, except as otherwise indicated. The consolidated financial statements have been prepared based on a going concern assumption. Please see the Board of Directors' report for further information on this matter.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
The consolidated financial statements include Awilco LNG ASA and its subsidiaries as of 31 December 2017. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intercompany transactions and balances are eliminated in the consolidation. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control over the subsidiaries, and continue to be consolidated until the date that such control ceases.
Revenue is recognised to the extent that it is probable that a transaction will generate future economic benefits that will accrue to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received.
Revenues include minimum operating lease payments under time charters and fees for positioning and repositioning of vessels, which are presented as Freight Income net of offhire deductions. Revenue from time charter parties classified as operating leases is recognised in straight-line over the term of the charter as services are provided based on number of days before and after the reporting period. Where the repositioning fees depend upon final redelivery location, they are recognised at the end of the charter when the revenue becomes fixed and determinable.
The determination of whether an arrangement contains a lease element is based on the substance of the arrangement. Leases are
classified as finance leases if the terms of the lease agreement transfer substantially all the risks and benefits incidental to ownership of the leased item. All other leases are classified as operational leases.
Lease payments received under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease revenue over the term of the lease. Contingent rent is recognised as revenue in the period in which they are earned.
Operational lease expenses are recognised as an expense in the income statement on a straight-line basis over the lease term. Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased asset, are capitalised at the commencement of the lease at the fair value of the leased asset or, if lower, at the present value of future minimum lease payments. Initial direct costs are included in the leased asset's cost price. Monthly lease payments are apportioned between finance charges and reduction of the lease liability to achieve a constant rate of interest on the remaining balance of the liability according to the effective interest method. Finance charges are recognised as finance expenses in the income statement. Assets under financial leases are separated into components, which are depreciated over the useful life of the component
No gain or loss is recognised in the income statement related to sale-leaseback arrangements where the vessel is sold and subsequently leased back on a financial lease with repurchase obligations to the Group.
The consolidated financial statements are presented in USD, which is also the functional currency of all entities in the Group. Transactions in foreign currencies are recorded at the rate of exchange on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate applicable at the reporting date. Realised and unrealised foreign currency gains or losses on monetary items are presented as finance income or finance expense. Nonmonetary items that are measured at historical cost in a foreign currency are translated using the exchange rates applicable at the dates of the initial transactions.
Current assets and current liabilities include items that fall due for payment within one year after the reporting date. The short-term part of long-term debt is classified as short-term debt.
Tangible non-current assets such as vessels and other fixed assets are carried at historical cost less accumulated depreciation and impairment losses. Vessels under construction are carried at historical cost less impairment losses.
Costs of acquired vessels include expenditures that are directly attributable to the acquisition of the vessels. Cost of vessels under construction include all directly attributable costs incurred to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Examples of such costs include supervision costs, site team costs, yard installments, technical costs and borrowing costs. Borrowing costs are determined by applying an interest rate to the average amount of accumulated expenditures during the construction period, limited to the interest expense incurred during the reporting period. The interest rate used is the weighted average cost of borrowings in the Group.
Costs of vessels under construction are capitalised, classified as vessels under construction and presented as a tangible asset. The capitalised costs are reclassified from vessels under construction to vessels when the asset is available for its intended use.
In accordance with IAS 16 each component of the vessels with a cost that is significant in relation to the total cost of the item is separately identified and depreciated. Components with similar useful lives will be grouped into a single component. Dry-docking is identified as a separate component of cost of vessels and depreciated separately. Depreciable amount of an asset is calculated as cost less residual value and impairment charges. Residual value is based on estimated salvage value of the vessels. Depreciation is calculated on a straight-line basis over the useful life of the assets, and depreciation is commenced when the asset is available for its intended use. Expected useful lives and residual values are reviewed yearly. The following estimated useful lives are applied to the respective components of the asset:
| Vessels | 2 - 40 | years |
|---|---|---|
| Vessel dry-docking | 5 | years |
| Vessel engine overhauls | 4 | years |
| Other fixed assets | 3 - 5 | years |
Costs related to major inspections/classifications (dry-docking and engine overhauls) are recognised in the carrying amount of the vessels if certain recognition criteria are satisfied. The recognition is made as the dry-docking or overhaul is being performed, and depreciation is recognised from completion until estimated time to the next dry-docking or overhaul. Any remaining carrying amount of the cost of the previous dry-docking or overhaul is de-recognised upon initiation of the next dry-docking or overhaul. The remaining costs that do not meet the recognition criteria are expensed as repairs and maintenance. When vessels are acquired remaining dry-docking and overhaul is identified and depreciated as a separate component, based on estimated time to the next dry-docking or overhaul.
Ordinary repairs and maintenance expenses are recognised in the income statement as incurred. Upgrades and material replacement of parts and equipment are capitalised as costs of vessels and depreciated together with the respective component. Replaced parts and equipment are derecognised and presented as impairment losses in the income statement. If it is not practicable to determine the carrying amount of the replaced part, the cost of the replacement is used as an indication of what the cost of the replaced part was at the time it was acquired or constructed.
Vessels, vessels under construction and other fixed assets are assessed for impairment indicators each reporting period. If impairment indicators are identified the recoverable amount is estimated, and if the carrying amount of an asset or cash generating unit (CGU) exceeds its recoverable amount an impairment loss is recognised. Each vessel is assessed as a separate cash generating unit (CGU) by Awilco LNG.
The recoverable amount is the higher of an asset's fair value less cost to sell (net selling price) and value in use. The fair value is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount; the reversal is limited up until the carrying amount net of accumulated depreciation if no impairment loss had been recognised in prior periods. Such reversals are recognised in the income statement.
Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through sale rather than continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell, and presented separately as assets held for sale and liabilities held for sale in the statement of financial position.
The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the plan will be made or that the plan to sell will be withdrawn. In addition, the criteria also include management to be committed to the plan and the sale to be completed within a year. Once classified as held for sale assets are not depreciated or amortised.
Inventories consist of bunkers and luboil on board the vessels. Inventories are measured at the lower of cost and net realisable value. Cost is determined in accordance with the first-in-first-out principle (FIFO), and expenses related to inventory are presented as voyage related expenses in the income statement.
Provisions are recognised when the Group has a present obligation (legal or constructive) because of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is recognised through profit and loss net of any reimbursement.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, using assumptions that market participants would use when pricing the asset or liability. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level of input that is significant to the fair value measurement as a whole:
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For cash-settled share-based payments a provision is recorded for the rights granted reflecting the vested portion of the fair value of the rights at the reporting date. The provision is accrued over the period the beneficiaries are expected to perform the related service (vesting period). The cash-settled share-based payments are remeasured to fair value at each reporting date until the award is settled. Any changes in the fair value of the provision are recognised as administration expense in the income statement. The amount of unrecognised compensation expense related to non-vested share-based payment arrangements granted in the cash-settled plans is dependent on the final intrinsic value of the awards. Social security tax liability is recognised on the intrinsic value of the cash-settled share-based payments.
The Group is required to provide a pension plan towards its onshore employees, and the Group has implemented a defined contribution plan. The plan complies with the requirements in the Mandatory Occupational Pension act in Norway ("Lov om obligatorisk tjenestepensjon"). Contributions on salary up until 12G are funded in a life insurance company, whereas contributions on salary over 12G are funded by the Group. G refers to the Norwegian National Insurance basic amount.
Contributions to the funded plan are recognised as an employee benefit expense in the income statement when they fall due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is expected. The Group has no further payment obligations once the contributions have been paid.
The liability arising from the plan funded by the Group is classified as a non-current liability in the statement of financial position. Changes in the liability are recognised as employee benefit expenses in the income statement in the periods during which services are rendered by employees. The liability becomes payable to the employee upon termination, voluntary or involuntary, of the employment.
The income tax expense consists of current income tax and changes in deferred tax.
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilised. Deferred income tax is calculated on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities is determined using tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax liabilities and deferred tax assets are recognised at nominal values and classified as non-current liabilities and non-current assets in the statement of financial position. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Current income tax and deferred tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
For Group companies subject to tonnage tax regimes, the tonnage tax is recognised as an operating expense.
Financial assets and liabilities are recognised when the Group becomes part to the contractual obligations of the instrument. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when there is a legal right to offset the amounts and intention either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Cash represents cash on hand and deposits with banks that are repayable on demand. Cash includes restricted employee taxes withheld. Cash equivalents represent short term, highly-liquid investments which are readily convertible into known amounts of cash with original maturities of three months or less.
Non-derivative financial assets such as trade receivables and other short-term receivables are classified in the loans and receivables category. Such financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.
On each reporting date objective evidence that a financial asset or a group of financial assets is impaired is assessed. A financial asset or a group of financial assets is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data
indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Non-derivative financial liabilities such as trade payables and other current liabilities are classified in the other financial liabilities category. Such financial liabilities are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition the financial liabilities are measured at amortised cost using the effective interest method.
All borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing borrowings are subsequently measured at amortised cost using the effective interest method. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. Own equity instruments that are acquired (treasury shares) 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. Voting rights relating to treasury shares are nullified and no dividends are allocated to them.
Dividend payments are recognised as a liability in the Group's financial statements from the date when the dividend is approved by the General Meeting.
The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares.
The cash flow statement is presented using the indirect method.
The Group's current business is operating LNG transportation vessels. The potential market for the vessels is and will be the international global LNG transportation market, and the business will be exposed to the same risks and returns wherever the vessels are employed. The Group's internal reporting does not distinguish between different segments, and as the vessels are managed as one operating segment Awilco LNG has only one reportable segment.
The preparation of financial statements requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. This presents a substantial risk that actual conditions will vary from the estimates. The key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
GROUP
In general management has to apply judgement in the process of applying the Group's accounting policies, in addition to items involving estimates described below, in the process of preparing the financial statements.
Judgement has been applied regarding the sale-leaseback arrangements of the vessels WilForce and WilPride completed in 2013, based on the substance of the transaction and by applying criteria in IAS 17, IFRIC 4 and SIC-27. Based on an overall assessment of the agreements, including the right to sell the vessels or pledge the vessels as collateral, Management has assessed that the agreements represent finance lease agreements. If Management had concluded differently the overall effect on the financial statements would not be material.
Depreciation of vessels. Depreciation is based on Management's estimates of the vessels' components, useful lives of the components and the vessels' residual values less costs associated with scrapping at the end of the vessels' useful life. Estimates may change due to changes in scrap value, technological development, competition and environmental and legal requirements. Management reviews the future useful lives of each significant component and the residual values of the vessels annually, taking into consideration the abovementioned factors. Scrap values are estimated based on forward prices of steel. Any changes in estimated useful lives and/or residual values impact the depreciation of the vessels prospectively. As at 31 December 2017, the vessels had a carrying value of USD 363.9 million, and a total residual value was estimated at USD 24 million.
Impairment of vessels. Management assesses whether there are any indicators of impairment at each reporting date. The vessels are tested for impairment when there are indicators that the carrying amounts may not be recoverable. The recoverable amount is the higher of an asset's fair value less cost to sell (net selling price) and value in use. Fair value is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal, and is based on completed transactions of comparable assets in the market. Estimation of fair value is subject to an active transaction market.
Value in use calculations involve a high degree of estimation and a number of critical assumptions such as time charter rates, utilisation, operational expenses, dry-dockings, useful life, scrap values and discount rates. The key assumptions used in the impairment assessment are disclosed in note 11, together with sensitivity tables showing the effect on recoverable amount from changes in key assumptions.
Changes in circumstances and assumptions may significantly affect the estimated recoverable amounts, and a prolonged weak shipping market may result in future impairment losses.
As at 31 December 2017, the vessels had a carrying value of USD 363.9 million. Please see note 11 for further information on impairment of vessels.
| Freight income | 2017 | 2016 |
|---|---|---|
| WilForce | 10 973 | 28 714 |
| WilPride | 9 464 | 6 055 |
| Total freight income | 20 437 | 34 769 |
Freight income consists of revenues from time charter contracts, and includes timecharter hire, ballast bonuses, misc. income and bunkers compensation. MUSD 2.1 of freight income relates to bunkers compensation received from charterers' on single voyages, which is presented gross in the income statement (MUSD 0.2 in 2016). The vessels are owned by single purpose entities which are owned 100 % by the Company. The following specifies the contractual freight income assessed as operational lease agreements to be received from 1 January 2018 based on firm charter contracts:
| Contracted future freight income | < 6 mon. | 6 mon. - 1 yr | > 1 yr | Total |
|---|---|---|---|---|
| WilForce | 4 520 | - | - | 4 520 |
| WilPride | 3 851 | - | - | 3 851 |
| Total contracted future freight income | 8 371 | - | - | 8 371 |
The Group currently owns and operates two LNG vessels. For internal reporting and management purposes the Group's business is organised into one reporting segment, LNG transportation. Performance is not evaluated by geographical region as the vessels trade globally and revenue is not dependent on any specific country. Revenue from the Group's country of domicile, Norway, was NIL in 2017, same as in 2016.
In 2017 the Group had four major customers individually contributing with more than 10 % of the Group's revenues at 10, 18, 20 and 25 % of total revenue, compared to one in 2016 contributing 82 %.
| Voyage related expenses | 2017 | 2016 |
|---|---|---|
| Bunker consumption | 5 497 | 1 871 |
| Commissions | 155 | 416 |
| Other voyage expenses | 1 231 | 520 |
| Total voyage related expenses | 6 883 | 2 808 |
Bunker consumption relates to periods where the vessels have been idle or repositioning, and for single voyage charters where bunkers consumption has been reimbursed by the charterers (see note 4). When the vessels are on time charter contracts bunker consumption is for the charterer's expense. Commissions paid to related parties are disclosed in note 21.
| Operating expenses | 2017 | 2016 |
|---|---|---|
| Crew expenses | 4 804 | 5 223 |
| Other operating expenses | 2 634 | 2 490 |
| Insurance expenses | 478 | 912 |
| Tonnage tax | 33 | 33 |
| Total operating expenses | 7 949 | 8 658 |
In 2017 there were a total of 730 trading days (732 in 2016) and NIL lay-up days (458 in 2016).
| Number of seafarers | 2017 | 2016 |
|---|---|---|
| Seafarers year end | 56 | 56 |
| Salaries and other remuneration | 1 693 | 1 308 |
|---|---|---|
| Social security cost | 245 | 219 |
| Pension | 140 | 148 |
| Other employee related expenses | 22 | 19 |
| Total employee related expenses | 2 100 | 1 694 |
| Administration expenses | 2017 | 2016 |
|---|---|---|
| Salaries and other remuneration | 1 693 | 1 308 |
| Social security cost | 245 | 219 |
| Pension | 140 | 148 |
| Other employee related expenses | 22 | 19 |
| Total employee related expenses | 2 100 | 1 694 |
| Management fees | 982 | 979 |
| Consultant, legal and auditor's fees | 130 | 125 |
| Other administrative expenses | 703 | 676 |
| Total administration expenses | 3 915 | 3 474 |
Information regarding remuneration to key management, management fees to related parties, fees to the Board of Directors and auditor's fees is provided in note 21.
| Number of onshore employees | 2017 | 2016 |
|---|---|---|
| Onshore employees year end | 7 | 8 |
| Average number of onshore work years | 7.8 | 7.6 |
The Group has a defined contribution plan for onshore employees which complies with the requirements in the Mandatory Occupational Pension act in Norway ("Lov om obligatorisk tjenestepensjon"). The pension plan is a defined contribution plan whereby contributions towards salary up until 12G is funded in a life insurance company. Defined contributions towards salary over 12G is funded by the Group. As at 31 December 2017 the Group's pension liability was KUSD 263 (31 December 2016 KUSD 301).
At the Company's General Meeting held 22 August 2011 a synthetic option program for the employees of the Company was adopted. The program is limited to 2 % of the total amount of outstanding shares in the Company, amounting to 1 355 777 shares. The synthetic options are cash settled, and vest three years after grant date. Vesting is contingent upon employment on the vesting date. The option programme was implemented in December 2011, and further options were awarded in April 2012, August 2012 and August 2013. All options have been awarded as of August 2013. An amendment of the exercise period was made in 2013, whereby all vested options have to be declared within two years from the vesting date.
| Awards | Aug 2013 | Aug 2012 | April 2012 | Dec 2011 |
|---|---|---|---|---|
| Date of grant | 26.08.13 | 22.08.12 | 01.04.12 | 04.12.11 |
| Options granted | 394 712 | 359 713 | 143 427 | 457 925 |
| Vesting date | 26.08.16 | 22.08.15 | 22.08.14 | 22.08.14 |
| Expiry date | 27.08.18 | 23.08.17 | 23.08.16 | 23.08.16 |
| Exercise price (NOK) | 16.00 | 20.20 / 24.00 | 20.20 | 20.20 |
| Weighted exercise price (NOK) | 16.00 | 20.62 | 20.20 | 20.20 |
The 457 925 options granted in December 2011 and 143 427 options granted in April 2012 expired in August 2016, and the 359 713 options granted in August 2012 expired in August 2017. In 2017 a further 100 000 options were forfeited.
As at 31 December 2017 a total of 274 712 granted options were outstanding in the synthetic option programme (31 December 2016 734 425 options).
| Outstanding as of year end | 2017 | 2016 |
|---|---|---|
| Range of exercise price (NOK) | 16.00 | 16.00 - 24.00 |
| Weighted exercise price (NOK) | 16.00 | 18.26 |
| Number of options | 274 712 | 734 425 |
| Weighted average remaining contractual life (years) | 0.65 | 1.16 |
Fair value of the synthetic share options is calculated using the Black & Scholes option pricing model. Expected volatility is based on historical volatilities of a peer entity. Interest rates used are quoted Norwegian government bonds and bills retrieved from Norges Bank. The weighted average inputs to Black & Scholes model and fair values on the reporting dates are listed below:
| Key assumptions | 2017 | 2016 |
|---|---|---|
| Share price (NOK) | 5.05 | 6.85 |
| Expected life (years) | 0.65 | 1.16 |
| Volatility | 60 % | 60 % |
| Risk free interest rate | 0.52 % | 0.61 - 0.72 % |
| Weighted fair value per option (NOK) | 0.01 | 0.29 |
| Option liability and expense | 2017 | 2016 |
|---|---|---|
| Carrying value liability | - | 24 |
| Option expense | (24) | 15 |
| Intrinsic value of vested options | - | - |
Basic earnings per share are calculated by dividing profit/(loss) for the year attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share are calculated by dividing the profit/(loss) for the year attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all potentially dilutive ordinary shares to ordinary shares. The Company did not have any potentially dilutive ordinary shares as per 31 December 2017 or 31 December 2016.
| Earnings per share | 2017 | 2016 |
|---|---|---|
| Profit/(loss) for year attributable to ordinary equity holders (KUSD) | (31 803) | (22 798) |
| Weighted average number of shares outstanding, basic and diluted | 102 902 938 | 67 788 874 |
| Basic/diluted earnings per share (USD) | (0.31) | (0.34) |
The Company's subsidiaries in which the vessels are held are subject to Norwegian tonnage tax (NTT). Companies subject to NTT are exempt from ordinary tax on income derived from operations in international waters. The subsidiaries subject to NTT are taxed on a notional basis based on the net tonnage of the companies' vessels. Income and expenses not derived from the operation of vessels in international waters, such as finance income and expenses, are taxed according to ordinary corporate tax in Norway based on the relative composition of financial assets to total assets of the subsidiaries' balance sheets.
The Parent Company and the remaining subsidiaries Awilco LNG Technical Management AS, Awilco LNG 1 AS, Awilco LNG 2 AS and Awilco LNG 3 AS are subject to ordinary corporation tax in Norway.
| Income tax expense | 2017 | 2016 |
|---|---|---|
| Current income tax | - | - |
| Changes in deferred tax | - | - |
| Total income tax expense / (income) | - | - |
| Specification of basis for deferred tax | 31.12.2017 | 31.12.2016 |
| Other fixed assets | 7 | (15) |
| Provisions and accruals | - | 24 |
| Gain/loss account | 4 479 | 4 241 |
| Pension liabilities | 264 | 301 |
| Currency effects on long term debt | 4 203 | 5 557 |
| Tax loss carry forward | 14 729 | 8 861 |
| Basis for deferred tax asset / (liability) | 23 682 | 18 969 |
| Not recognised deferred tax assets (basis) | (23 682) | (18 969) |
| Basis for deferred tax asset / (liability) | - | - |
| Tax rate * | 23 % | 24 % |
| Deferred tax asset / (liability) | - | - |
| Income tax expense | 2017 | 2016 |
|---|---|---|
| Current income tax | - | - |
| Changes in deferred tax | - | - |
| Total income tax expense / (income) | - | - |
| Specification of basis for deferred tax | 31.12.2017 | 31.12.2016 |
| Other fixed assets | 7 | (15) |
| Provisions and accruals | - | 24 |
| Gain/loss account | 4 479 | 4 241 |
| Pension liabilities | 264 | 301 |
| Currency effects on long term debt | 4 203 | 5 557 |
| Tax loss carry forward | 14 729 | 8 861 |
| Basis for deferred tax asset / (liability) | 23 682 | 18 969 |
| Not recognised deferred tax assets (basis) | (23 682) | (18 969) |
| Basis for deferred tax asset / (liability) | - | - |
| Tax rate * | 23 % | 24 % |
* As of 1 January 2018 the tax rate in Norway was reduced from 24 % to 23 %.
Recognition of deferred income tax assets is subject to strict requirements in respect of the ability to substantiate that sufficient taxable profit will be available against which the unutilised tax losses can be used. Based on these requirements and an assessment by the Group, deferred tax assets arising from tax loss carry forward has not been recognised. Utilisation of the tax loss carry forward is not limited in time.
| Reconciliation of effective tax rate | 2017 | 2016 |
|---|---|---|
| Profit/(loss) before taxes | (31 803) | (22 798) |
| Tax based on ordinary tax rate (24 % in 2017, 25 % in 2016) | (7 633) | (5 700) |
| Effects from: | ||
| Loss subject to tonnage tax | 3 237 | 335 |
| Permanent differences | (796) | (898) |
| Not recognised deferred tax asset | 1 015 | 1 186 |
| Currency effects | 4 178 | 5 078 |
| Effect of change in tax rate | - | - |
| Total income tax expense / (income) | - | - |
| Income tax payable | 2017 | 2016 |
| Current tax payable recognised in income statement | - | - |
| Current tax payable recognised directly in equity | - | - |
| Total income tax payable | - | - |
| Vessels | 2017 | 2016 |
|---|---|---|
| Cost at beginning of period | 414 385 | 474 739 |
| +Capitalised upgrades, spare parts and replacements | 4 327 | 99 |
| -Disposals | - | (60 454) |
| Cost as of 31 December | 418 711 | 414 385 |
| Accumulated depreciation and impairment at beginning of period | 42 538 | 52 233 |
| -Depreciation | 12 257 | 12 873 |
| -Disposals | - | (22 568) |
| -Impairment | - | - |
| Accumulated depreciation and impairment as of 31 December | 54 795 | 42 538 |
| Carrying amount as of 31 December | 363 917 | 371 847 |
| Estimated useful lifes | ||
| Vessel main components | 20-40 years | 20-40 years |
| Vessel indirect leasing expenses | 2 - 5 years | 5 years |
| Dry-dock and engine overhauls | 4 - 5 years | 2.5-5 years |
| Multi-period spares | 10 years | 10 years |
| Estimated remaining useful life | 1-36 years | 1-38 years |
| Depreciation method | Straight line | Straight line |
Both WilForce and WilPride are financed by sale/leaseback agreements, and as described in note 3 the agreements are assessed by Management as finance lease agreements.
Disposal of vessels: The 1984-built LNG carrier WilGas and the 1983-built LNG carrier WilEnergy were sold in 2016. A loss of MUSD 6.6 was recognised upon the sale of the vessels.
Depreciation: Depreciable amount is calculated as cost less residual value. Residual values are calculated based on the vessels' lightweight tonnage and an estimated scrap rate per ton, less related scrapping costs. Estimated residual value per TFDE vessel is MUSD 12.
Vessels pledged as collateral: The vessels WilForce and WilPride are pledged by the lessor as security for lessor's financing. Awilco LNG has quiet enjoyment agreements in place for both vessels, covering both the bareboat agreements and the repurchase agreements.
Impairment: The Group has performed an impairment assessment year end 2017, without identifying the need for any impairment charges. In 2016 an impairment loss of MUSD 6.6 was recognised, which was related to the sale of WilGas and WilEnergy.
Each vessel is regarded as a separate cash generating unit. The Group considers market charter rates and the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 31 December 2017, the market capitalisation of the Group was below the book value of its equity, and this indicated a potential impairment of vessels. Year end 2017 recoverable amount of the vessels has been estimated based on a calculation of value in use.
The value in use calculations are based on a discounted cash flow model. The cash flows include contracted cash in-flows of time charter revenue from firm charter parties, and best estimates of non-contracted revenue for the remaining useful lives of each vessel adjusted for estimated utilisation. TC rates of USD 62,000 pd and USD 78,000 pd at utilisation of 78 % and 81 % are estimated in 2019 and 2020, respectively, as non-contracted revenue. Cash outflows of estimated operating expenses, commissions and dry-dockings are deducted. A residual value from scrapping at the end of the asset's useful life is estimated and included in the cash inflows, based on forward prices of steel less estimated costs of scrapping. Estimated non-contracted revenue and utilisation is benchmarked against independent market analyst sector reports and historical data. Budgets and historical data are used in estimating operating expenses. Inflation forecasts from IMF are used to adjust cash flows to nominal values. Changes in circumstances and assumptions may significantly affect the estimated recoverable amounts.
The cash flows are discounted using a weighted average cost of capital (WACC) applicable to the asset, estimated at 7.86 % considering the applicable Norwegian tonnage tax regime. The following key assumptions are made in estimating the WACC:
Cost of equity is estimated using the capital asset pricing model (CAPM), and is based on a peer group equity beta adjusted for peer specific leverage, and leveraged according to Awilco LNG's target long term capital structure, which is in line with the industry. The U.S. 10 year treasury yield is estimated as the risk free rate and added to the equity risk premium.
Cost of debt is based on adding the U.S. 10 year swap rate to an estimated debt margin corresponding to the cost of long term funding given the current market conditions, industry outlook and specific credit risk.
The most critical assumptions affecting the estimated value in use is 1) utilisation 2) non-contracted time charter rates and 3) WACC. The headroom on the vessels is 9 - 12 % above book values, on average USD 19 million. Minor changes in the assumptions applied in the value in use calculations may cause future impairment losses, as shown in the following table to illustrate the sensitivities, which relates to both vessels:
Effect on recoverable amount per vessel 1 %-point change in utilisation MUSD 3.8
1 % change in non-contracted time charter rates MUSD 3.1 10 bps change in WACC MUSD 2.8
| 31.12.17 | 31.12.16 |
|---|---|
| 652 | 1 2 9 4 |
| 106 | ÷ |
| 2 1 1 6 | ٠ |
| 591 | 305 |
| 3464 | 1598 |
| Trade receivables | 31.12.17 | 31.12.16 |
|---|---|---|
| Trade receivables | 1 611 | 552 |
| Allowance for doubtful debts | - | - |
| Trade receivables carrying value | 1 611 | 552 |
According to contract terms freight income is generally paid in advance, and thus the Group has limited amounts of trade receivables. No impairment has been required on trade receivables in 2017 or 2016. See note 20 regarding management of credit risk.
| Other fixed assets | 2017 | 2016 |
|---|---|---|
| Cost at beginning of period | 271 | 271 |
| +Acquisitions | - | - |
| -Disposals | (142) | - |
| Cost as of 31 December | 129 | 271 |
| Accumulated depreciation at beginning of period | 177 | 147 |
| -Depreciation | 12 | 30 |
| -Disposals | (71) | - |
| Accumulated depreciation as of 31 December | 117 | 177 |
| Carrying amount as of 31 December | 12 | 94 |
| Estimated useful life | 3-5 years | 3-5 years |
| Depreciation method | Straight line | Straight line |
Other fixed assets as at 31 December 2017 consists of fixtures and IT equipment.
| Inventory | 31.12.17 | 31.12.16 |
|---|---|---|
| Bunkers and luboils | 2 335 | 1 847 |
| Total inventory | 2 335 | 1 847 |
| Neither past | Past due but not impaired | |||||
|---|---|---|---|---|---|---|
| Total | due / impaired | <30 days | 30-60 days | 61-90 days | >90 days | |
| 31.12.2017 | 1 611 | 1 611 | - | - | - | - |
| 31.12.2016 | 552 | 552 | - | - | - | - |
| Other short term assets | 31.12.2017 | 31.12.2016 |
|---|---|---|
| Prepaid expenses | 141 | 100 |
| Prepaid lease liability | 1 767 | 3 044 |
| VAT-receivable | 66 | 96 |
| Accrued revenue | 676 | 614 |
| Other short term receivables | 81 | 129 |
| Total other short term assets | 2 730 | 3 983 |
| 31.12.2017 | 31.12.2016 | ||||
|---|---|---|---|---|---|
| Currency | Code | FX rate | Carrying value | FX rate | Carrying value |
| US dollars | USD | 1 | 26 589 | 1 | 28 333 |
| Norwegian kroner | NOK | 8.2050 | 2 389 | 8.6200 | 1 714 |
| Total cash and cash equivalents | 28 979 | 30 047 |
As of 31 December 2017 and 31 December 2016 KUSD 96 is restricted cash related to employee withholding tax and KUSD 75 is restricted cash related to requirements from operating the vessels
| Provisions and accruals | 31.12.17 | 31.12.16 |
|---|---|---|
| Accrued expenses, invoice not received | 652 | 1 294 |
| Accrued interest | 106 | - |
| Deferred revenue | 2 116 | - |
| Salary related provisions, incl. synthetic options | 591 | 305 |
| Total provisions and accruals | 3 464 | 1 598 |
Deferred revenue relates to time charter hire for January invoiced in December.
| Finance income | 2017 | 2016 |
|---|---|---|
| Interest income | 259 | 81 |
| Currency gains | 784 | 23 |
| Other finance income | 2 | - |
| Total finance income | 1 045 | 105 |
| Finance expenses | 2017 | 2016 |
|---|---|---|
| Interest expenses finance lease liabilities | 22 152 | 23 189 |
| Currency losses | 96 | 47 |
| Other finance expenses | 21 | 24 |
| Total finance expenses | 22 269 | 23 260 |
| Other financial liabilities at amortised cost | Carrying amount | Fair value | ||
|---|---|---|---|---|
| 31.12.17 | 31.12.16 | 31.12.17 | 31.12.16 | |
| Finance lease liabilities | 266 589 | 272 804 | 266 589 | 272 804 |
| Other non-current liabilities | 2 000 | - | 2 000 | - |
| Trade payables | 240 | 904 | 240 | 904 |
| Total | 268 829 | 273 708 | 268 829 | 273 708 |
| Loans and receivables at amortised cost | Carrying amount | Fair value | ||
|---|---|---|---|---|
| 31.12.17 | 31.12.16 | 31.12.17 | 31.12.16 | |
| Trade receivables | 1 611 | 552 | 1 611 | 552 |
| Other short term assets | 2 589 | 3 883 | 2 589 | 3 883 |
| Cash and cash equivalents | 28 979 | 30 047 | 28 979 | 30 047 |
| Total | 33 178 | 34 482 | 33 178 | 34 482 |
For further information on finance lease liabilities please see note 22.
Fair value of trade receivables, other short term assets, cash and cash equivalents and trade payables approximate their carrying amounts due to the short-term maturities of these instruments, all categorised in fair value level 2.
The fair value of finance lease liabilities and other non-current liabilities is estimated by discounting future cash flows using rates for debt on similar terms, credit risk and remaining maturities, categorised in fair value level 3. The fair value of the these approximates the carrying amounts as there have been no significant changes in the market rates for similar debt financing between the date of securing the debt financing and the reporting date.
| Share capital | No. of shares | Par value NOK Share capital USD | |
|---|---|---|---|
| Share capital as of 31 December 2015 | 67 788 874 | 4.00 | 48 420 |
| Issued shares 2016 | - | - | - |
| Share capital as of 31 December 2016 | 67 788 874 | 4.00 | 48 420 |
| Share capital as of 31 December 2016 | 67 788 874 | 4.00 | 48 420 |
| Share capital reduction | - | (1.50) | (18 157) |
| Issued shares 2017 | 64 759 737 | - | 19 145 |
| Share capital as of 31 December 2017 | 132 548 611 | 2.50 | 49 407 |
As part of the comprehensive refinancing completed in 2017, a private placement was undertaken in May 2017 resulting in the issue of 61,400,000 new shares, and subsequently a repair offering was carried out in July 2017 resulting in the issue of 3,359,737 new shares. Combined gross proceeds from the two issues were MUSD 26.8, and net of MUSD 0.7 in transaction costs MUSD 26.1 was raised. In conjunction with the refinancing a share capital reduction by means of a reduction of the nominal value from NOK 4.00 to NOK 2.50 per share was carried out. The share capital is denominated in NOK, and the nominal value per share is NOK 2.50. All issued shares are of equal rights.
| Shareholder | No. of shares | In % |
|---|---|---|
| AWILCO AS | 51 114 080 | 38.6% |
| STRAWBERRY CAPITAL AS | 11 216 756 | 8.5% |
| UTHALDEN A/S | 10 600 930 | 8.0% |
| ASTRUP FEARNLEY A/S | 8 692 270 | 6.6% |
| INVESCO PERPETUAL EU | 4 549 614 | 3.4% |
| GLAAMENE INDUSTRIER | 3 114 387 | 2.3% |
| INVESCO FUNDS | 2 664 703 | 2.0% |
| SONGA TRADING INC | 2 663 700 | 2.0% |
| ODIN ENERGI | 2 500 000 | 1.9% |
| INVESCO PERP EURAN S | 2 500 000 | 1.9% |
| CREDIT SUISSE SECURI | 2 035 000 | 1.5% |
| EIKA NORGE | 1 906 433 | 1.4% |
| SES AS | 1 550 000 | 1.2% |
| HOLMEN SPESIALFOND | 1 478 000 | 1.1% |
| CAMACA AS | 1 378 623 | 1.0% |
| HELMER AS | 1 373 433 | 1.0% |
| Other shareholders | 23 210 682 | 17.5% |
| Total | 132 548 611 | 100 % |
| Shareholder | No. of shares | In % |
|---|---|---|
| AWILCO AS | 51 114 080 | 38.6% |
| STRAWBERRY CAPITAL AS | 11 216 756 | 8.5% |
| UTHALDEN A/S | 10 600 930 | 8.0% |
| ASTRUP FEARNLEY A/S | 8 692 270 | 6.6% |
| INVESCO PERPETUAL EU | 4 549 614 | 3.4% |
| GLAAMENE INDUSTRIER | 3 114 387 | 2.3% |
| INVESCO FUNDS | 2 664 703 | 2.0% |
| SONGA TRADING INC | 2 663 700 | 2.0% |
| ODIN ENERGI | 2 500 000 | 1.9% |
| INVESCO PERP EURAN S | 2 500 000 | 1.9% |
| CREDIT SUISSE SECURI | 2 035 000 | 1.5% |
| EIKA NORGE | 1 906 433 | 1.4% |
| SES AS | 1 550 000 | 1.2% |
| HOLMEN SPESIALFOND | 1 478 000 | 1.1% |
| CAMACA AS | 1 378 623 | 1.0% |
| HELMER AS | 1 373 433 | 1.0% |
| Other shareholders | 23 210 682 | 17.5% |
| Total | 132 548 611 | 100 % |
A key objective in Awilco LNG's capital management is to ensure that the Group maintains a capital structure in order to support its business, maintain investor and creditor confidence and maximise shareholder value. The Group evaluates its capital structure in light of current and projected cash flow, the relative strength of the shipping markets, new business opportunities and the Group's financial commitments. As part of the Group's long term capital management strategy, the Company is listed on Oslo Axess. Capital is managed on the Group level, although each vessel owning company has a capital structure adressing company specific financial and operational requirements and risks.
The Group monitors its capital using the book equity ratio, which stands at 32 % as at 31 December 2017 (33 % 31 December 2016).
| Equity ratio | 31.12.17 | 31.12.16 |
|---|---|---|
| Book equity | 127 028 | 132 764 |
| Total assets | 399 584 | 408 371 |
| Book equity ratio | 32 % | 33 % |
Following the renegotiation of the sale/leaseback agreements with Teekay LNG Partners L.P. for WilForce and WilPride in 2017, the Group is restricted from paying dividends to its shareholders for as long as parts of bareboat hire is deferred. The Group's intention is to pay regular dividends in support of the Group's main objective of maximising returns to shareholders. Any future dividends proposed will be at the discretion of the Board of Directors and will depend upon the Group's financial position, earnings, debt covenants, capital requirements and other factors. There are no current estimates regarding the potential future dividend level or timing of dividend payments.
The Group is in its business exposed to financial risks such as market risk, credit risk and liquidity risk. The Group's management identifies, evaluates and implements necessary actions to manage and mitigate these risks. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.
Market risk from financial instruments is the risk that future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprise three types of risk: interest rate risk, foreign currency risk and price risk. Financial instruments held by the Group are affected by market risk. The Group does not enter into any financial instruments, including financial derivatives, for trading purposes.
Interest rate risk: At the balance sheet date the Group has oustanding deferred bareboat hire and fees totalling MUSD 9.6 that is subject to a floating interest charge (USD LIBOR). A 100 bps change in USD libor would have an effect on the profit/(loss) for the reporting period of KUSD 32 and no direct effect on equity. The original lease liabilities are repaid with fixed and predetermined monthly payments, and thus subject to a fixed interest rate element. The Group also has bank deposits subject to floating NIBOR and LIBOR rates. No interest rate derivatives have been entered into to mitigate the floating interest rate risk. The Group will in the future evaluate the need for hedging of interest rate risk.
Foreign currency risk:. The functional currency of all the entities in the Group is USD, and the Group has only minor currency risk from its operations since all income and all major vessel costs are in USD. However the Group has exposure to NOK as administration expenses and parts of cash and cash equivalents, other short term assets, trade payables and provisions and accruals are denominated in NOK. Financial instruments denominated in currencies other than USD at 31 December 2017 include trade payables, other short term assets and bank deposits in NOK which represents a net long exposure to NOK. Based on these financial instruments denominated in NOK at 31 December 2017, a 10 % change in the USD/NOK rate would have an effect on the profit/(loss) for the reporting period of KUSD 200 and no direct effect on equity (KUSD 138 in profit/(loss) effect in 2016).
Price risk: The Group will normally have limited exposure to risks associated with bunkers price fluctuations as the bunkers is for the charterers account when the vessels are on contract. The Group has currently not entered into any bunkers derivatives, however this is subject to continuous assessments.
The Group is also subject to price risk related to the spot/short term charter market for chartering LNG carriers which is uncertain and volatile and will depend upon, among other things, the natural gas prices and energy markets which the Group cannot predict. Currently, no financial instruments has been entered into to reduce this risk.
Credit risk refers to the risk that a counterparty defaults on its contractual obligations resulting in financial loss to the Group. The Group is exposed to credit risk from its operating activities through trade receivables and from its financing activities, including deposits with banks.
The Group aims to do business with creditworthy counterparties only. Prior to entering into a charterparty the Group evaluates the credit quality of the customer, assessing its financial position, past experience and other factors. If the counterparty is not assessed as of adequate credit quality the Group may demand guarantees to reduce credit risk to an acceptable level. Charter hire is generally paid in advance, effectively reducing the potential exposure to credit risk. The credit quality of outstanding trade receivables as at 31 December 2017 is assessed to be good. Furthermore, as disclosed in note 12, none of the trade receivables outstanding as at 31 December 2017 are past due. Bank deposits are only deposited with internationally recognised financial institutions with a high credit rating. Currently bank deposits are with banks rated Aa2 to Aa3 (based on Moody's), hence the assessed credit risk is minimal.
Awilco LNG has not provided any material guarantees for third parties' labilities, and the maximum exposure to credit risk is represented by the carrying amount of financial assets in the statement of financial position."
The Group's approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity and/or undrawn commited credit facilities at all times to meet its obligations without incurring unacceptable losses or risking damage to the Group's reputation. To ensure this, the Group continuously monitors the maturity of the financial assets and liabilities and projected cash flows from operations. Please see the liquidity risk section in the Board of Directors' report for further information.
The following tables show the contractual maturities of financial liabilities on an undiscounted basis, assuming deferred bareboat hire and renegotiation fees towards the two finance leases is paid at maturity of the leases (see note 22):
| Per 31 December 2017 | ‹ 3 mon. | 3-12 mon. | 1-5 yrs | › 5 yrs | Total |
|---|---|---|---|---|---|
| Trade payables | 240 | - | - | - | 240 |
| Finance lease liabilities | - | 2 815 | 263 775 | - | 266 589 |
| Interest on finance leases | 5 130 | 15 610 | 19 570 | - | 40 311 |
| Other non-current liabilities | - | - | 2 000 | - | 2 000 |
| Total | 5 370 | 18 425 | 285 345 | - | 309 140 |
| Per 31 December 2016 | ‹ 3 mon. | 3-12 mon. | 1-5 yrs | › 5 yrs | Total |
| Trade payables | 904 | - | - | - | 904 |
| Finance lease liabilities | 3 302 | 140 728 | 128 775 | - | 272 804 |
| Interest on finance leases | 5 536 | 15 479 | 7 383 | - | 28 398 |
| Total | 9 742 | 156 206 | 136 158 | - | 302 106 |
| Per 31 December 2017 | ‹ 3 mon. | 3-12 mon. | 1-5 yrs | › 5 yrs | Total |
|---|---|---|---|---|---|
| Trade payables | 240 | - | - | - | 240 |
| Finance lease liabilities | - | 2 815 | 263 775 | - | 266 589 |
| Interest on finance leases | 5 130 | 15 610 | 19 570 | - | 40 311 |
| Other non-current liabilities | - | - | 2 000 | - | 2 000 |
| Total | 5 370 | 18 425 | 285 345 | - | 309 140 |
| Per 31 December 2016 | ‹ 3 mon. | 3-12 mon. | 1-5 yrs | › 5 yrs | Total |
| Trade payables | 904 | - | - | - | 904 |
| Finance lease liabilities | 3 302 | 140 728 | 128 775 | - | 272 804 |
| Interest on finance leases | 5 536 | 15 479 | 7 383 | - | 28 398 |
| Total | 9 742 | 156 206 | 136 158 | - | 302 106 |
To provide the Group with access to important and required knowledge and services, the Group has entered into the following agreements and transactions with related parties:
| Related party | Description of service | No. |
|---|---|---|
| Awilco Technical Services AS (ATS) | Technical Sub-management Services | 1 |
| Awilhelmsen Management AS (AWM) | Administrative Services | 2 |
| Astrup Fearnley Group | Ship Brokering Services | 3 |
(1) The Group's in-house technical manager, Awilco LNG Technical Management AS (ALNG TM), has entered into a sub-management agreement with ATS, whereby ATS assists ALNG TM in management of the Group's fleet. The sub-management services also include management for hire of the managing director in ALNG TM. ALNG TM pays ATS a management fee based on ATS' costs plus a margin of 7 %, cost being time accrued for the sub-manager's employees involved. The fee is subject to quarterly evaluation, and is regulated according to the consumer price index in Norway. The agreement can be terminated by both parties with three months notice. ATS is 100 % owned by Awilco AS.
(2) AWM provides the Group with administrative and general services including accounting and payroll, legal, secretary function and IT. The Group pays AWM MNOK 2.6 in yearly management fee (approx. MUSD 0.3) based on AWM's costs plus a margin of 5 %. The fee is subject to semi-annual evaluation, and is regulated according to the consumer price index in Norway. The agreement can be terminated by both parties with three months notice. AWM is 100 % owned by Awilhelmsen AS, which owns 100 % of Awilco AS.
(3) One of the Company's Board Members is the General Manager of the Astrup Fearnley Group. The Astrup Fearnley Group delivers ship brokering services on a competitive basis to the Group.
| Purchases from related parties | 2017 | 2016 |
|---|---|---|
| Awilco Technical Services AS | 680 | 669 |
| Awilhelmsen Management AS | 302 | 311 |
| Astrup Fearnley Group | 10 | 320 |
Purchases from related parties are included as part of Administration expenses in the income statement, except from commissions paid to the Astrup Fearnley Group, which were included in Voyage related expenses (KUSD 10 in 2017 and KUSD 4 in 2016) and Impairment of vessels KUSD 316 in 2016.
| Balances with related parties (liabilities) | 31.12.17 | 31.12.16 |
|---|---|---|
| Awilco Technical Services AS | 14 | 160 |
| Awilhelmsen Management AS | - | 54 |
| Astrup Fearnley Group | 10 | - |
Balances with related parties (liabilities) are presented as Trade payables or Provisions and accruals in the statement of financial position.
| Balances with related parties (assets) | 31.12.17 | 31.12.16 |
|---|---|---|
| Awilco Technical Services AS | 26 | 16 |
Balances with related parties (assets) are presented as Trade receivables in the statement of financial position.
| 2017 Remuneration | Salary | Bonus | Share options | Pensions | Other | Total |
|---|---|---|---|---|---|---|
| CEO Jon Skule Storheill | 386 | 89 | - | 56 | 6 | 537 |
| CFO Øyvind Ryssdal | 148 | 46 | - | 12 | 4 | 209 |
| Prev. CFO Snorre S. Krogstad* 247 | - | - | 27 | 18 | 292 | |
| Total | 780 | 135 | - | 95 | 28 | 1 038 |
* Up until 30 September 2017
| 2016 Remuneration | Salary | Bonus | Share options | Pensions | Other | Total |
|---|---|---|---|---|---|---|
| CEO Jon Skule Storheill | 380 | - | 7 | 52 | 6 | 446 |
| CFO Snorre S. Krogstad | 242 | - | 4 | 33 | 25 | 304 |
| Total | 622 | - | 11 | 86 | 31 | 750 |
The Company has established a bonus scheme for key management which is partly based on set goals and partly on a discretionary evaluation of the Group's and the employee's performance. The potential bonus payment to the CEO is discretionary and not limited, while the potential bonus payment to the CFO is limited to 12 months salary.
Awilco LNG has not provided any loans, advances or guarantees to key management.
The CEO of the Company has an agreement of 18 month severance payment including a six month period of notice in case of involuntary resignment or by redundancy.
A synthetic option program for employees of the Company was established in 2011. Further information regarding the terms and calculations is provided in note 8. Figures in the tables above represent the option expense in the period, if positive.
The statement regarding compensation to key management has been prepared in accordance with section 6-16 a of the Norwegian Public Limited Liability Companies Act and is adopted by the Board of Directors.
The principles set out for determination of salaries and other remuneration applies to the CEO and the CFO of the Company. The following guidelines were applied in 2017:
General policy: The Company shall offer competitive terms of compensation for senior executives to enable the Company to recruit, motivate and retain senior executives. Competitive terms are defined as terms at the same level as those offered by comparable businesses. The total remuneration shall reflect the responsibility and obligations of senior executives, and promote added value to the Company and its shareholders. The remuneration should not be of such a nature or extent that it may negatively impact the Company's reputation.
Salary and remuneration other than synthetic share options: Remuneration to senior executives consists of fixed and variable compensation. The fixed compensation consists of a base salary and also includes insurance and pension schemes, company car or car allowance, parking, telephone, newspaper and broadband connection to the extent deemed appropriate. The fixed compensation will normally constitute the main part of the remuneration to senior executives.
The Company has a defined contribution plan whereby pension contributions on salary up until 12G are funded in a life insurance company. Contributions on salary above 12G are funded by the Company. The plan complies with the requirements in the Mandatory Occupational Pension Act in Norway.
The variable compensation consists of variable bonus. Bonus to senior executives shall be related to collective and individual goals, partly based on defined parameters (KPIs) and partly a discretionary evaluation of the Company's and employee's performance. Bonus payments shall reflect the values brought to the Company and its shareholders, as well as individual achievements. The potential bonus to the CEO is not limited, while the potential bonus to the CFO is limited to 12 months salary.
The Company's CEO has an agreement of 18 month severance payment including a six month period of notice in case of involuntary resignment or by redundancy.
Synthetic share options program: At the Company's General Meeting held 22 August 2011, a synthetic option programme for the key management and other employees of the Company was adopted, limited to 2 % of the total number of outstanding shares. The options are cash settled and have a vesting period of three years. Vested options have to be declared within two years from the vesting date. The synthetic option program was adopted in 2011 and 457 925 shares were granted. In 2012 a total of 503 140 options were granted, and in 2013 the remaining 394 712 options were granted.
Beyond what appears above, the Company has no current plans to offer senior executives warrants, options or other forms of remuneration related to shares or the development of the share price in the Company or other companies within the Awilco LNG Group. Issue of shares or granting of share-based payments to senior executives shall only take place upon the General Meeting's approval. This shall not prevent senior executives from taking part in issues on the same terms as other investors.
Evaluation of compensation to key management in the previous year: The compensation to key management in the previous year was in accordance with the same principles described above. Further details regarding remuneration to key management is specified above.
Remuneration to the Board of Directors consists of a Director's fee which is fixed for the year depending on the role on the Board as well as compensation for other Board elected committees. The Board's fees are approved by the Annual General Meeting.
| 2017 Remuneration | Director's fee | Audit committee fee |
Remuneration committee fee |
Total |
|---|---|---|---|---|
| Sigurd E. Thorvildsen | 42 | - | 6 | 48 |
| Jon-Aksel Torgersen | 24 | - | 6 | 30 |
| Henrik Fougner | 24 | 6 | - | 30 |
| Annette Malm Justad | 24 | - | - | 24 |
| Synne Syrrist | 24 | 6 | - | 30 |
| Total compensation for the period | 138 | 12 | 12 | 162 |
| 2016 Remuneration | Director's fee | Audit committee fee |
Remuneration committee fee |
Total |
|---|---|---|---|---|
| Sigurd E. Thorvildsen | 42 | - | 6 | 48 |
| Jon-Aksel Torgersen | 24 | - | 6 | 30 |
| Henrik Fougner | 24 | 6 | - | 30 |
| Annette Malm Justad | 24 | - | - | 24 |
| Synne Syrrist | 24 | 6 | - | 30 |
| Total compensation for the period | 138 | 12 | 12 | 163 |
| Board of Directors | Common shares Synthetic options | |
|---|---|---|
| Sigurd E. Thorvildsen | - | - |
| Jon-Aksel Torgersen | 427 564 | - |
| Henrik Fougner | - | - |
| Annette Malm Justad | - | - |
| Synne Syrrist | - | - |
| Total | 427 564 | - |
| Key management | |
|---|---|
| CEO Jon Skule Storheill | |
| CFO Øyvind Ryssdal | |
| Total | |
| Key management | Common shares Synthetic options | |
|---|---|---|
| CEO Jon Skule Storheill | 140 000 | 169 712 |
| CFO Øyvind Ryssdal | - | 30 000 |
| Total | 140 000 | 199 712 |
| For further information about synthetic options see note 8. Auditor's fee |
2017 | 2016 |
| Statutory audit | 79 | 62 |
| mpanies in the Teekay LNG Partners L.P. Group (Teekay) for MUSD |
|---|
| Awilco LNG on bareboat basis with repurchase obligations at the |
| as financial lease arrangements by Management, and MUSD 155 |
Other assurance services 2 4 Tax advisory 4 1 Total fees to auditor, excl. VAT 85 67
Subsequent to delivery in 2013, WilForce and WilPride were sold to companies in the Teekay LNG Partners L.P. Group (Teekay) for MUSD 205 less MUSD 50 in pre-paid charter hire each, and chartered back by Awilco LNG on bareboat basis with repurchase obligations at the end of the lease period. The sale-leaseback agreements are assessed as financial lease arrangements by Management, and MUSD 155 per vessel was recognised as a lease liability at commencement in 2013.
In May 2017 the bareboat agreements for both vessels were renegotiated. The leases were extended to 31 December 2019, and flexibility through rolling repurchase options was introduced. Furthermore, the amended agreements also include a front-loaded reduction in the bareboat hire payable to the lessor through the deferral of up to MUSD 29 in charter hire.
The contractual bareboat hire per day is USD 49,100 per vessel. From July 2017 to March 2018, the bareboat hire payable is USD 28,500 per day, from April 2018 to March 2019 USD 33,500 per day, and from April 2019 to December 2019 USD 38,500 per day. The deferred bareboat hire will become payable at maturity of the contracts, or by way of a cash sweep mechanism measured on a quarterly basis. Net earnings in excess of cash break even is to be sweeped towards the outstanding deferred charter hire, subject to the Group retaining a minimum cash position after sweeping of approx. MUSD 31 prior to the scheduled 2018 dry-dockings and MUSD 23.5 thereafter.
The purchase obligations at maturity of the lease agreements end December 2019 are MUSD 113.3 and MUSD 114.5 for WilForce and WilPride, respectively, in addition to the deferred hire.
According to the amended lease agreements a fee of MUSD 2 is payable to the lessor. The fee is payable either following voluntary prepayment of all, or parts, of the deferred amounts or on repurchase of the vessels. The fee has been capitalised as cost price of the vessels and depreciated over the term of the lease, and presented as other non-current liabilities until paid.
Deferred bareboat hire and outstanding fees are subject to an interest charge of LIBOR + 200 bps.
Until the lessor and the Group agrees to not defer any bareboat hire, the Company is not entitled to pay dividends to its shareholders. The lease agreements impose no other financial covenants or commercial restrictions on the Group.
Changes to the renegotiated lease agreements are recognised prospectively over the remaining part of the lease as the cash flows are modified but material rights such as the contractual bareboat rate and the Group's obligation to repurchase the vessel at maturity of the lease period remains unchanged.
The net carrying amount of the finance lease liabilities is classified into long-term and short-term portions:
| 31.12.17 | 31.12.16 | |
|---|---|---|
| Long-term interest bearing debt | 263 907 | 258 984 |
| Short-term interest bearing debt | 2 682 | 13 820 |
| Total | 266 589 | 272 804 |
The MUSD 2 fee described above is presented as a non-current liability.
| 2017 | |||
|---|---|---|---|
| Principal | Interest | Total | |
| Lease payments WilForce | 2 813 | 10 680 | 13 493 |
| Lease payments WilPride | 2 767 | 10 725 | 13 493 |
| Total | 5 580 | 21 405 | 26 985 |
| 2016 | |||
| Principal | Interest | Total | |
|---|---|---|---|
| Lease payments WilForce | 6 428 | 11 542 | 17 971 |
| Lease payments WilPride | 6 324 | 11 647 | 17 971 |
| Total | 12 752 | 23 189 | 35 941 |
Per 31 December 2017
| ‹ 1 year | 1-5 yrs | › 5 yrs | Total | |
|---|---|---|---|---|
| Minimum lease payments | 23 555 | 283 477 | - | 307 032 |
| Present value of min. lease payments | 22 649 | 243 939 | - | 266 589 |
Deferred bareboat hire is included in the 1-5 yrs bracket.
Per 31 December 2016
| ‹ 1 year | 1-5 yrs | › 5 yrs | Total | |
|---|---|---|---|---|
| Minimum lease payments | 165 044 | 136 158 | - | 301 202 |
| Present value of min. lease payments | 154 255 | 118 550 | - | 272 804 |
The consolidated financial statements include the financial statements of Awilco LNG ASA and its subsidiaries listed in the table below:
| Liabilities | |||||
|---|---|---|---|---|---|
| Interest | Other non | Long-term interest | Short-term interest | ||
| payable | current liabilities | bearing debt | bearing debt | Total | |
| Balance as at 1 January 2017 | - | - | 258 984 | 13 820 | 272 804 |
| Repayment of borrowings | - | - | - | (5 580) | (5 580) |
| Interest and borrowing costs paid | (21 405) | - | - | - | (21 405) |
| Total changes from financing cash flows | (21 405) | - | - | (5 580) | (26 985) |
| Liability related changes | |||||
| Finance lease renegotiation costs | 2 000 | - | - | 2 000 | |
| Non-cash movements | - | 4 922 | (5 558) | (636) | |
| Balance as at 31 December 2017 | 2 000 | 263 907 | 2 682 | 247 183 |
| Company name | Country Principial activity | Date incorporated | Ownership/ voting share |
|---|---|---|---|
| Awilco LNG 1 AS | Norway Former vessel SPC | 2 February 2011 | 100 % |
| Awilco LNG 2 AS | Norway Former vessel SPC | 2 February 2011 | 100 % |
| Awilco LNG 3 AS | Norway Former vessel SPC | 2 February 2011 | 100 % |
| Awilco LNG 4 AS | Norway Owner of LNG/C WilForce | 6 May 2011 | 100 % |
| Awilco LNG 5 AS | Norway Owner of LNG/C WilPride | 6 May 2011 | 100 % |
| Awilco LNG Technical Management AS | Norway Technical management | 17 September 2012 | 100 % |
The subsidiaries' registered office is Beddingen 8, 0250 Oslo. All subsidiaries are included in the consolidated financial statement from their respective dates of incorporation.
The Group has operating lease commitments related to office rental. The contractual amounts fall due as follows:
| 31.12.2017 | 31.12.2016 | |
|---|---|---|
| Within 1 year | 60 | 73 |
| 1 to 5 years | - | - |
| After 5 years | - | - |
| Total | 60 | 73 |
In 2016 Awilco LNG was awarded a total of MUSD 8.4 in an arbitration verdict against a buyer who in 2015 purchased WilPower and WilEnergy, but subsequently failed to honour the MOA and settle the purchase price. The arbitration award is final and the claim is enforceable. Awilco LNG will continue to vigorously enforce the claim in order to protect its rights under the MOA. The claim will not be reflected in Awilco LNG's financial statements until the awarded compensation is collected, as it is considered a contingent asset.
There are no material events after the reporting date.
No new standards, amendments and interpretations with a significant impact on Awilco LNG were implemented in 2017.
Standards and interpretations that are issued up to the date of issuance of the consolidated financial statements, but not yet effective are disclosed below. Only standards and interpretations that are applicable to the Group have been included. The Group's intention is to adopt the relevant new and amended standards and interpretations when they become effective, subject to EU approval before the consolidated financial statements are issued.
IFRS 9 Financial Instruments will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 was approved by EU in November 2016 and is effective for annual periods beginning on or after 1 January 2018. The Group plans to adopt the new standard on the required effective date and will not restate comparative information. During 2017, the Group has performed a detailed impact assessment of all three aspects of IFRS 9. This assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the Group in 2018 when the Group will adopt IFRS 9. Overall, the Group expects no significant impact on its statement of financial position and equity. The Group will implement changes in classification of certain financial instruments.
IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. IFRS 15 was approved by EU in September 2016 and is effective for annual periods beginning on or after 1 January 2018. The standard will supersede all current revenue recognition requirements under IFRS. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The standard applies to all revenue contracts. The Group's revenue is generated by time charter contracts which contain both a lease element and a vessel management element. Accounting of the vessel management element will be governed by IFRS 15. The vessel management element is assessed as a performance obligation that is satisfied over time, given that the customer simultaneously receives and consumes the benefits provided by the Group. This is analogue to the Group's current accounting policy for revenue, and the Group's revenue recognition will not be significantly impacted by implementation of IFRS 15. Awilco LNG plans to adopt the new standard on the required effective date using the modified retrospective method.
The presentation and disclosure requirements in IFRS 15 are more detailed than under current IFRS. Many of the disclosure requirements in IFRS 15 are new and the Group has assessed that the impact of some of these disclosures requirements will be significant. The Group expects that the notes to the financial statements will be expanded because of the disclosure of significant judgements made: how the transaction price has been allocated to the performance obligations, and the assumptions made to estimate the stand-alone selling prices of each performance obligation.
IFRS 16 Leases replaces existing IFRS leases requirements, IAS 17 Leases, IFRIC 4, SIC-15 and SIC-27. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, ie the customer ('lessee') and the supplier ('lessor'). The new leases standard requires lessees to recognise assets and liabilities for most leases, which is a significant change from current requirements. For lessors, IFRS 16 substantially carries forward the accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. The Group has made a preliminary assessment of the effects of replacing IAS 17 with IFRS 16, and has not identified any material impact on the Group's financial position or performance.
Parent Company Financial Statements and Notes
In NOK thousands
| Note | 31.12.2017 | 31.12.2016 | |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Other fixed assets | 10 | 46 | 520 |
| Shares in subsidiaries | 6 | 1 028 365 | 1 022 865 |
| Total non-current assets | 1 028 411 | 1 023 385 | |
| Current assets | |||
| Short term receivables subsidiaries | 6 | 1 767 | 6 701 |
| Other short term assets | 1 076 | 952 | |
| Cash and cash equivalents | 7 | 138 152 | 61 549 |
| Total current assets | 140 995 | 69 202 | |
| TOTAL ASSETS | 1 169 406 | 1 092 588 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 8 | 331 372 | 271 155 |
| Share premium | 748 849 | 690 357 | |
| Other paid-in capital | 8 | 101 683 | - |
| Retained earnings | (20 903) | 124 163 | |
| Total equity | 1 161 000 | 1 085 675 | |
| Non-current liabilities | |||
| Pension liabilities | 3 | 2 162 | 2 590 |
| Total non-current liabilities | 2 162 | 2 590 | |
| Current liabilities | |||
| Short term payables subsidiaries | 6 | 1 281 | 1 544 |
| Trade payables | 82 | 69 | |
| Provisions and accruals | 9 | 4 881 | 2 708 |
| Total current liabilities | 6 244 | 4 322 | |
| Note | 2017 | 2016 | |
|---|---|---|---|
| Operating income | 6 | 3 191 | 6 369 |
| Administration expenses | 3 | 23 024 | 20 415 |
| Earnings before interest, taxes, depr. and amort. (EBITDA) | (19 833) | (14 046) | |
| Depreciation and amortisation | 10 | 68 | 166 |
| Impairment (reversals) of shares in subsidiaries | 6 | 126 500 | (36 600) |
| Earnings before interest and taxes | (146 401) | 22 387 | |
| Finance income | 4 | 5 810 | 35 522 |
| Finance expenses | 4 | 4 475 | 2 177 |
| Net finance income/(expense) | 1 335 | 33 346 | |
| Profit/(loss) before taxes | (145 066) | 55 733 | |
| Income tax expense | 5 | - | - |
| Profit/(loss) for the period | (145 066) | 55 733 | |
| Allocations/transfers of profit/(loss) for the period: | |||
| Allocated to/(transferred from) retained earnings | (145 066) | 55 733 | |
| Total allocations and transfers | (145 066) | 55 733 |
Jon-Aksel Torgersen Board member
Jon Skule Storheill CEO
Synne Syrrist Board member
Annette Malm Justad Board member
| In NOK thousands | Other | ||||
|---|---|---|---|---|---|
| Share capital | Share premium | paid-in capital Retained earnings | Total equity | ||
| Equity at 1 January 2017 | 271 155 | 690 357 | - | 124 163 | 1 085 675 |
| Profit/(loss) for the period | - | - | - | (145 066) | (145 066) |
| Share capital reduction | (101 683) | - | 101 683 | - | - |
| Equity issue | 161 899 | 64 760 | - | - | 226 659 |
| Transaction costs equity issue | - | (6 268) | - | - | (6 268) |
| Balance as at 31 December 2017 | 331 372 | 748 849 | 101 683 | (20 903) | 1 161 000 |
| In NOK thousands | Other | |||||
|---|---|---|---|---|---|---|
| Share capital | Share premium | paid-in capital Retained earnings | Total equity | |||
| Equity at 1 January 2016 | 271 155 | 690 357 | - | 68 430 | 1 029 942 | |
| Profit/(loss) for the period | - | - | - | 55 733 | 55 733 | |
| Balance as at 31 December 2016 | 271 155 | 690 357 | - | 124 163 | 1 085 675 |
| Note | 2017 | 2016 | |
|---|---|---|---|
| Cash Flows from Operating Activities: | |||
| Profit/(loss) before taxes | (145 066) | 55 733 | |
| Items included in profit/(loss) not affecting cash flows: | |||
| Depreciation and amortisation | 10 | 68 | 166 |
| Impairment of shares in subsidiaries | 6 | 126 500 | (36 600) |
| Changes in operating assets and liabilities: | |||
| Other short term assets | (124) | (371) | |
| Short term receivables/payables subsidiaries | 4 671 | 8 140 | |
| Trade payables, provisions and accruals | 1 757 | 662 | |
| i) Net cash provided by / (used in) operating activities | (12 195) | 27 730 | |
| Cash Flows from Investing Activities: | |||
| Investment in subsidiaries | 6 | (132 000) | (87 500) |
| Loans to/from subsidiaries | 6 | - | 107 900 |
| ii) Net cash provided by / (used in) investing activities | (132 000) | 20 400 | |
| Cash Flows from Financing Activities: | |||
| Issuance of shares, net of transaction costs | 8 | 220 391 | - |
| iii) Net cash provided by / (used in) financing activities | 220 391 | - | |
| Net change in cash and cash equivalents (i+ii+iii) | 76 196 | 48 131 | |
| Cash and cash equivalents at start of period | 7 | 61 549 | 13 419 |
| Cash and cash equivalents at end of period | 7 | 138 152 | 61 549 |
| Interest paid | 1 108 | 653 | |
| Interest received | 2 900 | 3 979 |
Awilco LNG ASA (the Company) is a public limited liability company incorporated and domiciled in Norway. Its registered office is Beddingen 8, 0250 Oslo, Norway. The Company was incorporated 2 February 2011, and is listed on Oslo Axess with the ticker ALNG. Awilco LNG ASA is through its subsidiaries engaged in the operations of and investments in LNG transportation vessels.
The financial statements of Awilco LNG ASA have been prepared in accordance with the Norwegian accounting act and generally accepted accounting principles in Norway. The financial statements are presented in Norwegian kroner (NOK) rounded off to the nearest thousands, except as otherwise indicated. The financial statements are prepared in English, as approved by the Norwegian Directorate of Taxes.
The principal accounting policies applied in the preparation of these financial statements are set out below.
Shares in subsidiaries are measured at cost less accumulated impairment losses. Such assets are impaired to fair value when the decrease in value is for reasons not considered being of a temporary nature and must be deemed necessary based on generally accepted accounting principles. Impairment losses are reversed when the rationale for the recognised impairment loss no longer applies. Dividends, group contributions and other distributions from subsidiaries are recognised in the same period as they are recognised in the financial statement of the subsidiary. If dividends and group contributions exceed withheld profits after the acquisition date, the excess amount represents repayment of invested capital and will be deducted from the carrying value of the subsidiary in the balance sheet of the Company.
The functional currency of the Company is USD whereas the presentation currency is NOK. Transactions in foreign currencies are recorded at the rate of exchange on the date of the transaction. Monetary assets and liabilities denominated in other currencies are translated at the exchange rate applicable at the balance sheet date. Realised and unrealised foreign currency gains or losses on monetary items are presented as finance income or finance expense.
Revenues from the sale of services are recognised in the income statement once services have been rendered.
Other fixed assets are capitalised and depreciated linearly over the estimated useful life. Costs for maintenance are expensed as incurred. If carrying value of other fixed assets exceeds the estimated recoverable amount, the asset is written down to the recoverable amount. The recoverable amount is the greater of the net realisable value and value in use. In assessing value in use, the discounted estimated future cash flows from the asset are used.
Current assets and current liabilities include items that fall due for payment within one year after the reporting date. The short-term part of long-term debt is classified as short-term debt.
Loans and receivables are initially recognised at fair value net of any transaction costs. The assets are subsequently carried at amortised cost using the effective interest method, if the amortisation effect is material, and the carrying amount is subsequently reduced by any impairment losses.
| Administration expenses | 2017 | 2016 |
|---|---|---|
| Salaries and other remuneration | 12 206 | 9 689 |
| Social security cost | 1 914 | 1 732 |
| Pension | 1 056 | 1 193 |
| Other employee related expenses | 167 | 149 |
| Total employee related expenses | 15 344 | 12 762 |
| Management fees | 1 787 | 2 669 |
| Consultant, legal and auditor's fees | 545 | 485 |
| Other administration expenses | 5 348 | 4 499 |
| Total administration expenses | 23 024 | 20 415 |
Information regarding management fees to related parties is provided in note 6.
| Number of employees | 2017 | 2016 |
|---|---|---|
| Employees year end | 5 | 6 |
| Average number of work years | 5.8 | 6 |
The Company has a defined contribution plan for its employees which complies with the requirements in the Mandatory Occupational Pension act in Norway ("Lov om obligatorisk tjenestepensjon"). The pension plan is a defined contribution plan whereby contributions towards salary up until 12G is funded in a life insurance company. Defined contributions towards salary over 12G is funded by the Company. As at 31 December 2017 the Company's pension liability was TNOK 2 162 (31 December 2016 TNOK 2 590).
Please see note 8 in the consolidated financial statements for disclosures regarding the synthetic option programme. The following amounts were recognised in the Company's accounts:
| Option liability and expense | 2017 | 2016 |
|---|---|---|
| Carrying value liability | 3 | 211 |
| Option expense | (208) | 126 |
| Intrinsic value of vested options | - | - |
Please see note 21 in the consolidated financial statements for disclosures regarding remuneration to key management.
Please see note 21 in the consolidated financial statements for disclosures regarding remuneration to Board of Directors.
| Auditor's fee | 2017 | 2016 |
|---|---|---|
| Statutory audit | 422 | 271 |
| Other assurance services | 20 | 15 |
| Tax advisory | 18 | 15 |
| Total fees to auditor, excl. VAT | 460 | 300 |
Taxes
The income tax expense consists of current income tax and changes in deferred tax.
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year.
Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statement.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilised. Deferred income tax is calculated on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Company.
Current income tax and deferred tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity.
For cash-settled share-based payments a provision is recorded for the rights granted reflecting the vested portion of the fair value of the rights at the reporting date. Administration expense is accrued over the period the beneficiaries are expected to perform the related service (vesting period), with a corresponding increase in provisions. The cash-settled share-based payments are remeasured to fair value at each reporting date until the award is settled. Any changes in the fair value of the provision are recognised as administration expense in the income statement. The amount of unrecognised compensation expense related to non-vested share-based payment arrangements granted in the cash-settled plans is dependent on the final intrinsic value of the awards. Social security tax liability is calculated based on the intrinsic value of the cash-settled share-based payments.
The Company is required to provide a pension plan towards its onshore employees, and the Group has implemented a defined contribution plan The plan complies with the requirements in the Mandatory Occupational Pension act in Norway ("Lov om obligatorisk tjenestepensjon"). Contributions on salary up until 12G are funded in a life insurance company, whereas contributions on salary over 12G are funded by the Group. G refers to the Norwegian National Insurance basic amount.
Contributions to the funded plan are recognised as an employee benefit expense in the income statement when they fall due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. The Company has no further payment obligations once the contributions have been paid.
The liability arising from the plan funded by the Group is classified as a non-current liability in the balance sheet. Changes in the liability are recognised as employee benefit expenses in the income statement in the periods during which services are rendered by employees. The liability becomes payable to the employee upon termination, voluntary or involuntary, of the employment.
Cash represents cash on hand and deposits with banks that are repayable on demand. Cash includes restricted employee taxes withheld. Cash equivalents represent short-term, highly-liquid investments which are readily convertible into known amounts of cash with original maturities of three months or less.
Proposed dividend payments from the Company are recognised as a liability in the Group's financial statements on the reporting date 31 December current year.
The cash flow statement is presented using the indirect method.
| Reconciliation of effective tax rate | 2017 | 2016 |
|---|---|---|
| Profit/(loss) before taxes | (145 066) | 55 733 |
| Tax based on ordinary tax rate (24 % in 2017, 25 % in 2016) | (34 816) | 13 933 |
| Effects from: | ||
| Permanent differences | 29 161 | 14 427 |
| Not recognised deferred tax assets | 5 655 | (493) |
| Total income tax expense / (income) | - | - |
| Reconciliation of effective tax rate | 2017 | 2016 |
|---|---|---|
| Profit/(loss) before taxes | (145 066) | 55 733 |
| Tax based on ordinary tax rate (24 % in 2017, 25 % in 2016) | (34 816) | 13 933 |
| Effects from: | ||
| Permanent differences | 29 161 | 14 427 |
| Not recognised deferred tax assets | 5 655 | (493) |
| Total income tax expense / (income) | - | - |
| Income tax payable | 2017 | 2016 |
| Current tax payable recognised in income statement | - | - |
| Current tax payable recognised directly in equity | - | - |
| Total income tax payable | - | - |
To provide the Company with access to important and required knowledge and services, the Company has entered into various agreements with related parties. Information regarding these contracts and the transactions and balances with related parties, except for transactions and balances with subsidiaries, is provided in note 21 in the consolidated financial statement. Transactions with subsidiaries are disclosed below.
As of 31 December 2017 the Company has the following subsidiaries:
| Company name | Country | Principial activity | Date incorporated |
|---|---|---|---|
| Awilco LNG 1 AS | Norway | Former vessel SPC | 2 February 2011 |
| Awilco LNG 2 AS | Norway | Former vessel SPC | 2 February 2011 |
| Awilco LNG 3 AS | Norway | Former vessel SPC | 2 February 2011 |
| Awilco LNG 4 AS | Norway | Owner of LNG/C WilForce | 6 May 2011 |
| Awilco LNG 5 AS | Norway | Owner of LNG/C WilPride | 6 May 2011 |
| Awilco LNG Technical Management AS | Norway | Technical management | 17 September 2012 |
The subsidiaries' registered office is Beddingen 8, 0250 Oslo, Norway.
| Ownership/ | Carrying amount Carrying amount | ||
|---|---|---|---|
| Company name | voting share | 31.12.17 | 31.12.16 |
| Awilco LNG 1 AS | 100 % | 8 692 | 8 992 |
| Awilco LNG 2 AS | 100 % | 1 146 | 1 146 |
| Awilco LNG 3 AS | 100 % | 10 008 | 10 008 |
| Awilco LNG 4 AS | 100 % | 373 800 | 373 800 |
| Awilco LNG 5 AS | 100 % | 624 600 | 618 800 |
| Awilco LNG Technical Management AS | 100 % | 10 120 | 10 120 |
| Total carrying amount 31 December | 1 028 365 | 1 022 865 |
Based on an assessment of the recoverable amount of shares in subsidiaries Awilco LNG 1 AS and Awilco LNG 5 AS, impairment charges of NOK 0.3 million and NOK 126.2 million respectively were recognised in 2017 (reversal of impairment charges on shares in Awilco LNG 1 AS of NOK 1.6 million and Awilco LNG 2 AS of NOK 35.0 million in 2016).
A capital increase of NOK 132 million in Awilco LNG 5 AS was concluded in 2017 (NOK 180.7 million in 2016).
| 2017 | Finance income |
|---|---|
| 2 121 | Interest income |
| 779 | Interest income group companies |
| 21 | Currency gain |
| 146 | Dividends and group contributions from subsidiaries |
| 2 743 | Other finance income group companies |
| Total finance income | |
| 5 810 |
| Finance expenses | 2017 | 2016 |
|---|---|---|
| Interest expense | 16 | 11 |
| Interest expense group companies | 1 108 | 2 082 |
| Currency loss | 3 294 | - |
| Other finance expenses | 58 | 84 |
| Total finance expenses | 4 475 | 2 177 |
Currency gains and losses mainly relate to translation effects from bank accounts and balances with subsidiaries denominated in USD and translated into NOK at the balance sheet date. See note 6 for a specification of finance income and expense group companies.
The Company is subject to ordinary corporation tax in Norway at a current tax rate of 24 %.
| Income tax expense | 2017 | 2016 |
|---|---|---|
| Current income tax | - | - |
| Changes in deferred tax | - | - |
| Total income tax expense / (income) | - | - |
| Specification of basis for deferred tax | 31.12.2017 | 31.12.2016 |
|---|---|---|
| Other fixed assets | 53 | (126) |
| Provisions and accruals | 3 | 211 |
| Pension liabilities | 2 162 | 2 590 |
| Tax loss carry forward | 30 038 | 6 021 |
| Basis for deferred tax asset / (liability) | 32 256 | 8 696 |
| Not recognised deferred tax assets (basis) | (32 256) | (8 696) |
| Basis for deferred tax asset / (liability) | - | - |
| Tax rate * | 23 % | 24 % |
| Deferred tax asset / (liability) | - | - |
* As of 1 January 2018 the tax rate in Norway was reduced from 24 % to 23 %.
Recognition of deferred income tax assets is subject to strict requirements in respect of the ability to substantiate that sufficient taxable profit will be available against which the unutilised tax losses can be used. Based on these requirements and an assessment by the Company deferred tax assets arising from tax loss carry forward has not been recognised. Utilisation of the tax loss carry forward is not limited in time.
The Company provides financing to its subsidiaries through both long term and short term loans. Interest on both long term loans and short term receivables/payables is agreed to LIBOR + 3 % for USD denominated loans and NIBOR + 3 % for NOK denominated loans. See below for interest income from subsidiaries.
Short term receivable TNOK 146 towards Awilco LNG Technical Management AS relates to group contribution.
Short term receivable NOK 3.0 million towards Awilco LNG Technical Management AS relates to group contribution.
Awilco LNG ASA provides commercial management services to the vessel owning subsidiaries:
| Subsidiary | 2017 | 2016 |
|---|---|---|
| Awilco LNG 1 AS | - | 546 |
| Awilco LNG 2 AS | - | - |
| Awilco LNG 3 AS | - | 546 |
| Awilco LNG 4 AS | 1 645 | 3 922 |
| Awilco LNG 5 AS | 1 522 | 1 346 |
| Total | 3 167 | 6 360 |
The commercial management fees are based on a fixed fee of USD 100 000 per vessel per year and a fixed percentage of gross freight income of 1.25 %.
A subsidiary of the Company, Awilco LNG Technical Management AS, provides project management services to the Company. In 2017 the Company paid a fee of TNOK 912 for these services (TNOK 851 in 2016).
| Long term loans(+) | Short term | Short term | |
|---|---|---|---|
| Subsidiary | /borrowings(-) | receivables | payables |
| Awilco LNG 1 AS | - | - | 2 |
| Awilco LNG 2 AS | - | - | 2 |
| Awilco LNG 3 AS | - | - | 2 |
| Awilco LNG 4 AS | - | 809 | 6 |
| Awilco LNG 5 AS | - | 811 | - |
| Awilco LNG Technical Management AS | - | 146 | 1 270 |
| Total | - | 1 767 | 1 281 |
The Company has issued guarantees towards the lessor of WilForce and WilPride on behalf of lessees' Awilco LNG 4 AS and Awilco LNG 5 AS respectively, see note 12. A guarantee commission of TNOK 1 546 and TNOK 1 197, respectively, was charged the two subsidiaries in 2017 (TNOK 1 956 and 1 261 in 2016).
| Long term loans(+) | Short term | Short term | |
|---|---|---|---|
| Subsidiary | /borrowings(-) | receivables | payables |
| Awilco LNG 1 AS | - | - | 31 |
| Awilco LNG 2 AS | - | - | 2 |
| Awilco LNG 3 AS | - | - | 5 |
| Awilco LNG 4 AS | - | 3 072 | 9 |
| Awilco LNG 5 AS | - | 659 | - |
| Awilco LNG Technical Management AS | - | 2 969 | 1 498 |
| Total | - | 6 701 | 1 544 |
| Interest income from subsidiaries | ||
|---|---|---|
| Subsidiary | 2017 | 2016 |
| Awilco LNG 1 AS | - | 1 738 |
| Awilco LNG 2 AS | - | - |
| Awilco LNG 3 AS | - | 1 187 |
| Awilco LNG 4 AS | 7 | - |
| Awilco LNG 5 AS | 753 | 540 |
| Awilco LNG Technical Management AS | 19 | 8 |
| Total | 779 | 3 473 |
| Subsidiary | 2017 | 2016 |
|---|---|---|
| Awilco LNG 1 AS | 85 | 27 |
| Awilco LNG 2 AS | 15 | 1 447 |
| Awilco LNG 3 AS | 222 | 67 |
| Awilco LNG 4 AS | 611 | 476 |
| Awilco LNG 5 AS | 48 | 9 |
| Awilco LNG Technical Management AS | 126 | 56 |
| Total | 1 108 | 2 082 |
31 December 2017 TNOK 745 is restricted cash related to employee withholding tax (31 December 2016 TNOK 787), and TNOK 615 is restricted cash related to requirements from operating Awilco LNG's vessels (31 December 2016 TNOK 647).
Awilco LNG's liquidity is organised in a cash pool arrangement in which cash in the subsidiaries formally represents receivables or payables towards the parent company Awilco LNG ASA. The Group companies are jointly and severally liable for the total outstanding amount under the arrangement.
| 31.12.2017 | 31.12.2016 | |
|---|---|---|
Information about the Company's share capital is provided in note 19 to the consolidated accounts.
| Provisions and accruals | 31.12.17 | 31.12.16 |
|---|---|---|
| Accrued expenses, invoice not received | 178 | 226 |
| Salary related provisions, incl. synthetic options | 4 703 | 2 482 |
| Total provisions and accruals | 4 881 | 2 708 |
| Other fixed assets | 2017 | 2016 |
|---|---|---|
| Cost at beginning of period | 1 511 | 1 511 |
| +Acquisitions | - | - |
| -Disposals | (1 465) | - |
| Cost as of 31 December | 46 | 1 511 |
| Accumulated depreciation at beginning of period | 991 | 824 |
| -Depreciation | 68 | 166 |
| -Disposals | (1 059) | - |
| Accumulated depreciation as of 31 December | - | 991 |
| Carrying amount as of 31 December | 46 | 520 |
| Estimated useful life | 3-5 years | 3-5 years |
| Depreciation method | Straight line | Straight line |
Other fixed assets consists of fixtures and IT equipment.
General information regarding capital and financial risk management is provided in note 20 in the consolidated accounts. Awilco LNG ASA presents its financial statement in NOK, and is thus exposed to foreign exchange translation risk on monetary items denominated in foreign currencies.
Please see note 24 in the consolidated accounts. In addition, Awilco LNG ASA has issued certain guarantees on behalf of companies in the Awilco LNG Group:
The Company has issued a guarantee towards the Teekay LNG Partners L.P. Group on behalf of the Company's subsidiaries Awilco LNG 4 AS and Awilco LNG 5 AS, guaranteeing for the performance of the bareboat charter agreements described in note 22 in the consolidated accounts.
Information on events after the reporting date is disclosed in note 25 in the consolidated accounts.
Corporate governance
The main strategy for Awilco LNG ASA (the Company or Awilco LNG) is to create shareholder value through the provision of a quality, reliable and customer oriented service to the market, in the best manner for its shareholders, employees and business connections. Awilco LNG strives to protect and enhance shareholder equity through openness, integrity and equal shareholder treatment, and sound corporate governance is a key element in the basis of the Awilco LNG strategy.
The corporate governance principles of the Company are adopted by the Board of Directors of Awilco LNG ASA (the Board). The principles are based on the Norwegian Code of Practice for Corporate Governance, dated 30 October 2014 (the «Code of Practice»). Below follows a description of the basis that Awilco LNG has implemented the Code of Practice. This description follows the same structure as the Code of Practice and covers all sections thereof. Deviations, if any, from the Code of Practice are discussed under the relevant section.
The Board of Directors shall ensure that appropriate goals and strategies are adopted, that the adopted strategies are implemented in practice, and that the results achieved are subject to measurement and follow-up. The principles shall also contribute to ensure that the activities of the Company are subject to adequate controls. An appropriate distribution of roles and adequate controls shall contribute to the largest possible value creation over time, for the benefit of the owners and other stakeholders.
The Company has defined a mission statement "Marine Transportation through Safety and Environmental Excellence", and identified a set of core objectives that describes the focus and continuous improvement process based on the mission statement. The objectives include policies regarding; safeguarding of people, ships and cargoes, focus on limitation of any negative impact on the environment from our vessels and a separate statement regarding Safety Management & Environmental Protection Policy. This policy document, which is available on the Company's website www.awilcolng.no, describes the basic principles of the corporate values.
Awilco LNG's code of conduct – values and ethics forms an important foundation for Awilco LNG's corporate governance and demands high ethical standards, in which focus on safety and integrity are key factors. The Company has continuous
focus on making sure that the corporate values are practiced in the Company's everyday life. The Company's code of conduct – values and ethics can be found on the Company's website.
According to the Company's articles of association, its purpose is to carry out "shipping and other business related hereto". The objectives clause of the Company also includes "acquisitions, management, borrowings and sale of capital assets in the shipping business in addition to investments in shares, bonds and partnership contributions of any type connected with shipping, as well as participation, including ownership stakes in other shipping companies and other business naturally connected hereto.
The principal strategies of the Company are presented in the annual report.
The Company's equity is assessed as appropriate based on its goals, strategies and risk profile. The book equity of the Awilco LNG Group as per 31 December 2017 was USD 127.0 million, which represents an equity ratio of 32 %.
The Company's long-term objective is to pay a regular dividend in support of the Company's main objective to maximise return on invested capital. Following the renegotiating of the sale/ leaseback agreements for WilForce and WilPride with Teekay LNG Partners L.P. in 2017, the Group is restricted from paying dividends to its shareholders for as long as parts of bareboat hire is deferred. Any future potential dividends declared will be at the discretion of the Board of Directors and will depend upon the Group's financial position, earnings, debt covenants, capital requirements and other factors. Dividends will be proposed by the Board for approval by the General Meeting. Any proposal to confer to the Board of Directors the mandate to distribute dividends is explained.
To the extent it is considered desirable, the Company may raise new equity in the capital market.
The Board is currently not authorised to purchase own shares in the market.
The Company has one class of shares, and each share has one
In the case of assignment of shares, the other shareholders do not have pre-emptive rights. Assignment of shares in the Company is not conditional upon approval by the Board of Directors.
In the event of any material transactions between the Company and shareholders, Directors or close associates thereof, the Board of Directors shall consider arranging for an independent assessment of the transaction.
Awilco LNG has entered into a sub-management agreement with Awilco Technical Services AS (ATS) for technical management of the fleet. Furthermore, Awilco LNG has entered into an agreement with Awilhelmsen Management AS (AWM) for administrative services. Both ATS and AWM are related companies to Awilco AS, which owns 38.6 % of the shares in Awilco LNG. The management fees are, in the Company's opinion, made at market terms. Information regarding transactions with related parties is described in note 21 to the consolidated financial statements.
The shares of Awilco LNG are listed on the Oslo Axess stock exchange. All issued shares carry equal shareholder rights in all respects, and there are no restrictions on transfer of shares. The articles of association place no restrictions on voting rights.
The Annual General Meeting will normally take place in April to June each year, but at latest by 30 June. Notice of the meeting will normally be published through the Oslo Stock Exchange distribution channel and the Company's website at least 21 days in advance. Documentation containing the information necessary for the shareholders to make decisions on all the items on the agenda will simultaneously be made available on the Company's website, and will only be sent to shareholders that request the documentation on paper. The Board may decide by the notice of the meeting that shareholders who intend to attend the General Meeting shall give notice to the Company within five days prior to the General Meeting.
Registration is made in writing, per telefax or by e-mail. The Board wishes to make efforts to enable as many shareholders as possible to attend. Shareholders who are not able to attend are invited to meet by proxy, and efforts will be made for the proxies to relate to each individual item on the agenda.
The General Meeting will be chaired by the Chairman of the
Board unless otherwise agreed by a majority of those shares represented at the meeting.
According to the articles of association the Company shall have a Nomination committee which has the responsibility of proposing members to the Board of Directors and members of the Nomination committee. The Nomination committee shall also propose fee payable to the members of the Board and the members of the Nomination committee.
The members of the Nomination committee shall be shareholders or representatives of shareholders. The members of the Nomination committee, including its Chairman, are elected by the General Meeting. The members of the Nomination committee's period of service shall be two years unless the General Meeting decides otherwise.
The Nomination committee is to maintain contact with shareholder groups, members of the Board of Directors and the Company's executive personnel in its works with proposing members to the Board of Directors.
The Annual General Meeting held on 3 May 2016 elected the current Nomination committee consisting of Tom Furulund and Henrik Christensen.
The Company's Board of Directors shall comprise 3 to 6 directors pursuant to the decision of the General Meeting. The Directors are elected for a period of two years unless otherwise determined by the General Meeting. The Board appoints the Chairman amongst the elected Board members.
The composition of the Board of Directors aims to ensure that the interests of all shareholders are represented. Currently three of the five directors are independent from the principal shareholder of the Company. The Board consists of the following members: Sigurd E. Thorvildsen (Chairman), Henrik Fougner, Jon-Aksel Torgersen, Synne Syrrist and Annette Malm Justad.
The Board's statutory duties include the overall administration and management of the Company. The Board adopts a meeting schedule for the following year in November. The directors shall normally meet in person, but if so allowed by the Chairman, directors may participate in any meeting of the Board by means of telephone. The internal allocation of responsibilities and
tasks is regularly discussed and monitored in light of current legislation and employment contracts. The Board is regularly briefed on the Company's financial situation, the vessels' charter/market situation, liquidity situation and cash flow forecast, as well as any changes in the competition situation. The Board performs a yearly evaluation of its work.
The Board has established an Audit committee consisting of Synne Syrrist (Chairman) and Henrik Fougner, and has implemented an Audit committee charter. The Company's CFO is the secretary of the committee. The auditor shall participate in discussions of relevant agenda items in meetings of the Audit committee. The committee shall hold separate meetings with the auditor and the CEO at least once a year.
Furthermore, the Company has established a Remuneration committee consisting of Sigurd E. Thorvildsen and Jon-Aksel Torgersen. The Remuneration committee prepares guidelines and proposals regarding remuneration of executive personnel, which are reviewed and resolved by the Board of Directors.
The Board ensures that the Company has satisfactory internal control procedures to manage its exposure to risks related to the conduct of the Company's business, including environmental conditions, to support the quality of its financial reporting and to ensure compliance with laws and regulations. The Board performs an annual review of the Company's key risks and the internal controls implemented to address these risks. The Board has identified and stated the various risks of Awilco LNG in the Company's annual report. Additionally, the Board is regularly briefed on the Company as described under section 9 above.
The Company has established an Audit committee that regularly evaluates and discusses the various risk elements of Awilco LNG, and potential for improvement. The Audit committee reports to the Board.
Awilco LNG's main goal is safe and efficient ship operation with no accidents, personal injury, environmental damage, or damage to equipment. In order to achieve these goals Awilco LNG has identified some core objectives that describe our focus and our continuous improvement process. The operation of technical management and newbuildings is closely monitored through dedicated supervision and safety reporting systems. Furthermore, the Company has established contingency plans and executes drills and training in order to improve emergency preparedness.
In addition to its own controlling bodies and external audit, the Company is subject to external supervision by Det Norske Veritas (DNV) for classification in accordance with ISO.
The remuneration of the Board shall reflect the Board's responsibilities, knowhow, time commitment and the complexity of the business activities. The directors do not receive profit related remuneration, share options or retirement benefits from the Company. The remuneration is proposed by the Nomination committee. More information about the remuneration of the individual directors is provided in note 21 in the consolidated accounts.
Directors or their related companies shall normally not undertake special tasks for the Company in addition to the directorship. However, the Company utilises outsourcing of technical sub-management, accounting and administrative services to ATS and AWM which are related companies. In addition, ship brokering services are purchased on a competitive basis from a group of companies related to one of the Board members. All agreements and fees with related parties are approved by the Board. Furthermore, the members of the Audit committee and Remuneration committee receive a fee for serving on the committees.
The Board has drawn up guidelines for determining the remuneration to executive personnel. The remuneration is based on a base salary, bonus and synthetic share options. The Board of Directors' yearly statement regarding compensation to key management is enclosed as a separate appendix to the agenda of the General Meeting. The General Meeting is to vote separately on advisory and binding aspects of the remuneration to executive personnel.
The General Meeting has given the Board of Directors the authority to implement a synthetic option program for leading employees of the Company limited to 2 % of the total amount of outstanding shares in the Company.
For information about the salary, options, pension and social security cost of the executive personnel, see note 21 in the consolidated accounts.
The Company aims to keep shareholders, analysts, investors and other stakeholders updated on the Company's operations in a timely fashion. The Company provides information to the market through quarterly and annual reports; investorand analyst presentations open to the media and by making operational and financial information available on the Compa¬ny's website. Events of importance are made available to the stock market through notifica¬tion to the Oslo Stock
Exchange in accordance with the Stock Exchange regulations. Information is provided in English.
All stock exchange announcements and press releases, including the financial calendar, are made available on the Company's website.
The Company's Articles of Association contains no defense mechanism against the acquisition of shares, and no other actions have been taken to limit the opportunity of acquiring shares in the Company.
In the event of a takeover bid the Board will seek to comply with the recommendations outlined in item 14 of the Code of Practice. If a bid has been received, the Board will seek to issue a statement evaluating the offer and make recommendations as to whether the shareholders should accept the offer or not. Normally it will be required to arrange a valuation from an independent expert. If the Board finds that it is unable to give a recommendation, the Board will explain the reason for not giving a recommendation. The statement should show whether the decision was unanimous, and if not, the background for why certain Board members did not adhere to the statement.
If a situation occurs where the Board proposes to dispose of all or a substantial part of the activities of the Company such a proposal will be placed before the General Meeting.
The auditor is appointed by the General Meeting, which also determines the auditor's fee. The auditor shall annually present an audit plan to the Audit committee. The auditor attends the Audit committee's review and discussion of the annual accounts. The Board of Directors minimum holds one annual meeting with the auditor without the CEO or other members of the executive group being in attendance.
The Company's management regularly holds meetings with the auditor, in which accounting principles and internal control routines are reviewed and discussed.
The auditor shall annually confirm compliance with the applicable independence rules and regulations in legislation and the audit firm's internal independence standards. The Audit committee has issued guidelines stipulating the management's possibility to undertake consulting services by the auditor. Auditor's fees are disclosed in note 21 in the consolidated accounts.
The Awilco LNG Group (Awilco LNG or the Company) has implemented a set of objectives, principles and procedures concerning our social responsibility to enable the Company to achieve and maintain its mission statement and objectives. Awilco LNG has implemented the highest standard of safe operation to meet all environmental protection requirements, ensuring safe custody of our vessels, crew, customers' cargoes and owner's interests. Our commitment to our social responsibility ensures that Awilco LNG is a preferable LNG shipping company.
Awilco LNG is engaged in the global marine transportation of LNG. Marine transportation is generally considered the most efficient form of transporting natural gas over long distances. Natural gas is widely accepted as the least pollutive fossil fuel, and emits up to 60 % less CO2 than coal when used for electricity generation. Natural gas is widespread, abundantly available and cheap when comparing to other fossil fuels. The increased use of natural gas is expected to reduce the use of more pollutive fossil fuels such as coal and oil. According to ExxonMobil's 2018 Energy Outlook natural gas is projected to be the fastest growing major fuel towards 2040. Awilco LNG's contribution to sustainable economic growth mainly relates to the potential for increased use of natural gas in the global energy mix.
Awilco LNG aims to provide positive impact on the communities we operate in, our employees, clients and suppliers through the Code of Ethics and Conduct (available at our webpage www. awilcolng.no), such as opposing corruption and facilitation payments in any form.
In general, global marine transportation has a significant effect on the environment. Awilco LNG takes this impact seriously, working continuously to reduce our environmental footprint through improving fuel efficiency, optimising trade routes and improving waste management.
This report constitutes Awilco LNG's reporting according to the requirements of the Norwegian accounting act § 3-3c on social responsibility reporting.
A materiality assessment forms the basis for how we prioritise our social responsibility efforts, and thereby also impacts our internal and external reporting on social responsibility. The following issues have been assessed as the most material based on both their importance to Awilco LNG's business and to Awilco LNG's stakeholders such as employees, customers, suppliers, regulators and investors:
The Company's strategy is to integrate sustainability on these matters systematically into all material business processes to ensure Awilco LNG is assessed as a responsible enterprise.
Awilco LNG's mission statement is "Marine transportation through safety and environmental excellence".
Company policies and objectives
The safety and well-being of Awilco LNG's employees and seafarers has the highest priority, as set out in the mission statement above and detailed in the Company's Safety Management & Environmental Protection Policy. Our objectives are zero accidents and no personal injuries. The Group shall adhere to national and international laws and regulations and constantly promote best practices identified within its own operations and the industry to improve the competence of individual crewmembers and vessel safety performance.
How we achieve our objectives
Our objectives are operationalised in the Company's Safety Management & Environmental Protection Policy. The objective
priority to the safety of human life and health through the following measures:
Avoid safety hazards through preventive safety measures
Establish contingency plans and execute drills and training to improve emergency preparedness to meet situations which represent dangers to life, health, environment, ship and cargo
To accomplish the objectives Awilco LNG will plan, organise, perform, document and verify performance. Awilco LNG has a comprehensive Risk Management Program which includes detailed step by step risk assessment procedures.
The Company's senior management is actively engaged in monitoring Awilco LNG's performance in order to further encourage and promote positive trends, to provide advice and to take corrective action where negative trends are detected. Performance and results are measured using certain Key Performance Indicators (KPIs). KPI targets are resolved by senior management on an annual basis, and results are reported to senior management on a quarterly basis. Procedures and any new initiatives shall be part of the management review and include monitoring and measurements, adjustment of targets, and recording of achieved improvements. The procedures and activities shall be audited on a routine basis. The following main KPIs are the focus of Awilco LNG with regards to health and safety:
| KPI | DEFINITION | RESULT 2017 | RESULT 2016 |
|---|---|---|---|
| LTIF (Lost time injury frequency) | Number of accidents per one-million man hours | 0.0 | 0.0 |
| worked | |||
| TRCF (Total recordable case frequency) The sum of all work related, lost time injuries, re | 0.0 | 2.0 | |
| stricted work injuries and medical treatment injuries | |||
| Number of fatalities due to injuries | Number of deaths among the crew resulting from a | NIL | NIL |
| work injury |
| KPI | DEFINITION | RESULT 2017 | RESULT 2016 |
|---|---|---|---|
| Number of releases of substances to the environment |
The number of releases of substances covered by MARPOL Annex 1-6 to the environment |
NIL | NIL |
| CO2 efficiency | The total mass of emitted CO2 in grams per cargounit-mile |
6.4 | 9.5 |
| NOx efficiency | The total mass of emitted NOx in grams per cargounit-mile |
0.06 | 0.11 |
| SOx efficiency | The total mass of emitted SOx in grams per cargounit-mile |
0.01 | 0.03 |
In 2018 Awilco LNG will continue efforts to improve and strengthen the safety culture. The Company's objectives are zero accidents and no personal injuries.
Awilco LNG's potential environmental impact can be divided in three:
Although the shipping industry contributes with 3 to 4 % of the global annual CO2 emissions to the atmosphere, marine transportation is generally considered as the most efficient form of transporting natural gas over long distances.
Awilco LNG's fleet consists of vessels with tri-fuel propulsion systems, which can run on boil-off gas from the LNG cargo. When natural gas is cooled down to liquefied state at minus 160 degrees Celsius, a certain amount of the LNG will naturally condensate and regasify into its gaseous state (boil off gas). The boil off gas is produced at a rate dependent on the outside temperature and the level of filling of the tanks, and can either be reliquified into LNG or used as fuel for propulsion of the vessels. Due to the cost and energy needed to power a reliquefaction process plant on a LNG carrier very few vessels are outfitted with such plants. The boil off gas is thus used for propulsion, which makes sense both economically, as natural gas is usually cheaper than the alternatives, and environmentally, as natural gas is a considerably cleaner fuel than heavy fuel oil and gasoil. Natural gas emits less CO2 than regular fuels, relatively low levels of NOx and almost no SOx and particulates. Based on both environmental and economic factors LNG fueled vessels are considered by many as the future in shipping; LNG carriers have used LNG as a fuel since the start of the business in the 1970s. The fleet is well prepared for future environmental regulations, such as Emission Control Areas (ECAs) and global IMO regulations on sulphur content in fuel coming into effect in 2020.
On ballast voyages the vessels run on ordinary heavy fuel oil or gasoil, or potential LNG heel. As the vessels carry regular bunkers the potential for major environmental accidents mainly relate to the risk of a ship suffering a breach and subsequently leak substantial amounts of bunkers oil into the environment.
The last potential impact is waste produced by the vessels, discharge of untreated ballast water and potential spills of chemicals, bilge water and sludge etc. into the environment. Discharge of untreated ballast water may potentially introduce non-native organisms into marine environments worldwide.
Based on the long-term goal of environmental excellence, and as set out in the Company's Safety Management & Environmental Protection Policy, Awilco LNG works toward minimising the environmental impact from its vessels with the goal of zero spills. The Company has adapted a zero-tolerance policy towards:
Additionally, Awilco LNG aims to minimise as far as practically possible the emission of CO2, NOx and SOx from diesel combustion engines, boilers, incinerators and emission cargo and fuel oil tanks and systems through evaporation.
Awilco LNG shall adhere to national and international environmental laws and regulations, and constantly promote best practices identified within its own operations and the industry in order to improve the impact on the environment.
How we achieve our objectives
Our objectives are operationalised in the Company's Safety Management & Environmental Protection Policy. The objective of this policy is to ensure that the Company gives the highest priority to the environment through the following measures:
• Provide support to ships' operation by implementation of a well-structured Safety Management System (SMS) based on a well-defined management organisation. The SMS is an integral part of all our activities, and includes instructions and procedures which contribute to the highest safety standards onboard our ships, ensuring that cargo is handled correctly and preventing situations which threaten the environment. The SMS is based on national and international requirements and standards for quality and safety, including the ISM code and the TMSA issued by OCIMF
Implement a policy of environmentally friendly purchasing, where procurement and purchasing activities shall address environmental aspects, such as:
o Reducing packaging volumes;
The same risk assessment procedures and continuous improvement tools and initiatives as described under Health and Safety above is utilised in Awilco LNG's work to reduce its environmental impact.
The Company's senior management is actively engaged in monitoring Awilco LNG's performance, in order to further encourage and promote positive trends, to provide advice and to take corrective action where negative trends are detected. Performance and results are measured using certain Key Performance Indicators (KPIs). KPI targets are resolved by senior management on an annual basis, and results are reported to senior management on a quarterly basis. Procedures and any new initiatives shall be part of the management review and include monitoring and measurements, adjustment of targets, and recording of achieved improvements. The procedures and activities shall be audited on a routine basis. The following main KPIs are the focus of Awilco LNG with regards to environmental impact:
Compared to 2016 emission KPIs were reduced due to changes in the reporting system whereby only laden voyages are included. This principle represents actual emissions per cargounit-mile, and provides for better comparison between periods.
In 2018 Awilco LNG will continue efforts to reduce the Company's environmental footprint.
Company policies and objectives
Corruption is generally estimated to cost approx. 5 % of global GDP each year. Reduced corruption would increase safety for seafarers, reduce costs of operations and reduce complexity. Awilco LNG is a firm opponent of corruption in any form, and is committed to the highest ethical standard in business conduct worldwide. Awilco LNG desires fair and open competition in all markets, both nationally and internationally. Awilco LNG's policy is to comply with all applicable laws and governmental rules and regulations in the country in which it is operating.
The Company's anti-corruption policies are described in our Code of Ethics and Conduct document. The following policies to address the objectives have been implemented in the Company:
Implementation of the Company's policies takes place through emphasis on awareness and the use of risk assessments on a Group level.
Management has not become aware of any breaches of the Company's Code of Ethics and Conduct throughout the year
Going forward Awilco LNG will continue work to ensure that our standards of behavior are according to the Code of Ethics and Conduct, and the Company expects that the positive results from 2017 are upheld.
Alternative performance measures (APMs), defined as financial performance measures not within the applicable financial reporting framework, are used by Awilco LNG to provide supplemental information. Financial APMs are intended to enhance comparability of the results and cash flows from period to period, and it is Awilco LNG's experience that these are frequently used by analysts and investors.
These measures are adjusted IFRS measures defined, calculated and used consistently. Operational measures such as, but not limited to, volumes, utilisation and prices per MMBTU are not defined as financial APMs. Financial APMs should not be considered as a substitute for measures of performance in accordance with IFRS. Disclosures of APMs are subject to established internal control procedures.
Awilco LNG's financial APMs:
*When vessels operate in the spot market, freight income includes bunkers compensation and the fuel element of ballast bonuses, whereas voyage related expenses include the corresponding costs of bunkers compensation, and unless the vessels are fixed back to back also repositioning costs. The APM net freight income adjusts for this grossing up, and provides for improved comparability of the Group's performance between periods.
Awilco LNG ASA PO Box 1583 Vika 0118 Oslo Norway
Tel +47 22 01 42 00 Org no. 996 564 894
awilcolng.no
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