Philly Shipyard — Capital/Financing Update 2011

Jan 2, 2011

Aker Philadelphia Shipyard signs tentative agreement to help fund construction of two vessels

As reported by Aker Philadelphia Shipyard ASA (Oslo: AKPS) in its third quarter

2010 report issued on October 26, 2010, the future of its wholly-owned

subsidiary, Aker Philadelphia Shipyard, Inc. (APSI), is uncertain.  AKPS

indicated in that report that APSI continues to actively seek new orders and

capital to finance the construction of newbuild product tankers 017 and 018

("Ships 17 and 18") and that progress is being made in those efforts.  Since

then, APSI has signed a tentative agreement with Philadelphia Shipyard

Development Corporation (PSDC), which provides a basis to fund the construction

of Ships 17 and 18 without buyers and thereby an opportunity to secure the long

term future of the shipyard.

Pursuant to the agreement, PSDC will purchase certain fixed assets, such as

buildings and equipment, from APSI for a purchase price of USD 42 million and

APSI will lease-back those same assets from PSDC for a nominal rent of USD 1 per

year.  APSI will use the proceeds from the asset sales, together with a

combination of construction period financing to be arranged with private lenders

and its own available funds, to finance the construction of Ships 17 and 18.

The USD 42 million will be provided to PSDC by the Commonwealth of Pennsylvania

out of certain capital budget funds which previously had been authorized for use

to improve port facilities located in Philadelphia, Pennsylvania.

As part of the deal, APSI is obligated to construct Ships 17 and 18 in

accordance with their current production schedules.  Under the agreement, if

those ships are not completed before certain agreed-upon deadlines, as extended

for events of force majeure, then PSDC may require APSI to pay liquidated

damages of up to USD 70 million (reduced to USD 35 million if Ship 17 is

completed).  The agreement also contemplates that APSI's obligation to pay the

liquidated damages will be guaranteed to PSDC by Aker ASA, which indirectly owns

approximately 67.1% of the shares of AKPS.

The closing of the transactions contemplated by the agreement is subject to

numerous conditions precedent outside of APSI's control, including, without

limitation, the arrangement of satisfactory construction financing for Ships 17

and 18, the receipt of various third party consents, and the issuance by Aker

ASA of a payment guaranty for said liquidated damages.  Additionally, while the

agreement has been signed by APSI and PSDC, it will not become effective until

the arrangements between the Commonwealth of Pennsylvania and PSDC for funding

the USD 42 million have been approved by all necessary governmental parties.

In connection with the agreement, APSI is seeking to ratify a new four-year

collective bargaining agreement with the Philadelphia Metal Trades Council,

which represents 11 unions at the shipyard.  The current labor contract expires

on January 31, 2011.  It will not be possible to close the transactions

contemplated by the agreement without a new labor contract which provides

certainty regarding overall cost and performance.

As previously disclosed in the company's Q3 2010 report, if APSI is unable to

commence construction of Ships 17 and 18, then it would be challenging for APSI

to continue as a going concern after delivery of newbuild product tanker 016,

which is scheduled to be delivered in May 2011 to a subsidiary of American

Shipping Company ASA.  In addition, APSI has reduced and will continue to adjust

its workforce in line with its current backlog.

This information is subject of the disclosure requirements acc. to §5-12 vphl

(Norwegian Securities Trading Act)

[HUG#1476569]