Second quarter 2021: Leveraging our collaborative advantage
Over the course of my more than 12 years at Aker, I have seen countless examples of the shared competitive advantage of companies across our portfolio – leveraging a 180-year track-record of building on the shoulders of existing capabilities, access to excellent industrial competence, financial strength, and a willingness to seize opportunities for value creation and long-term growth. In recent years, another advantage has become increasingly important as we build and grow as a group: the Aker collaborate advantage. Whether in financial transactions, strategic partnerships, or joint efforts for more sustainable growth, Aker’s ability to attract and sustain fruitful collaborative partnerships has never been more important, nor have the results been more apparent.
The first half of the year stands in stark contrast to the same period in 2020. Oil prices have surged more than 45 percent, closing in on USD 80 per barrel for the first time in more than two and a half years. Global economies are rebounding, and the demand-led recovery in oil prices is expected to pick up even more speed in the second half of 2021. For Aker, the impact is clearly visible. Aker BP, Aker’s largest industrial investment, has seen its share price rebound 27 percent since December and the Aker share is up more than 15 percent year-to-date, including paid dividend. In the second quarter, Aker’s Net Asset Value increased to NOK 66.9 billion, the highest quarterly NAV on record and a near doubling of where the NAV stood this time last year.
While Brent and E&P stocks have seen a sharp rebound, it has been a more volatile period for ‘green shares.’ This summer marks one year since Aker’s entry into the renewable energy space with the establishment of Aker Offshore Wind, Aker Carbon Capture and Aker Horizons. This was followed by entry into hydrogen with Aker Clean Hydrogen and the acquisition of Mainstream Renewable Power with a global portfolio of solar and wind projects earlier this year. During the same period, EU has firmed up its regulatory push with the Green Deal in Europe including the ‘Fit for 55’ package, the Biden-Harris administration has announced a USD 2 trillion climate plan, China has introduced its 2060 carbon-neutrality ambition, and the IEA’s released its ‘Net Zero by 2050’ report stating that annual clean energy investment worldwide will need to more than triple by 2030 to around USD 4 trillion. We welcome such global regulatory developments and data that pushes us in a greener direction. It offers support to a growing market, but also highlights that the renewable energy market is still in a period of maturing. We are thus not surprised, nor jarred, by the green market volatility in recent months. Our success in the energy transition is not measured by today’s harvest, but by the seeds planted. Our priority is therefore to continue to utilize our extensive industrial track record and learnings to withstand turbulent times. This means ensuring that our portfolio companies have robust capital structures and liquidity reserves, building solid and competent organizations, and maintaining the overall ability to seize value accretive investment opportunities when they arise.
The work thus continues to build strong companies under the Aker Horizons umbrella and to drive organic growth and financial robustness that can weather uncertain market conditions. Another key priority, which is becoming increasingly important to our general ownership agenda, is to secure and build solid, long-term partnerships for growth. In the renewable energy space, it has become the name of the game. The surge of partnerships competing for bids on renewable projects highlights both the joint efforts for more sustainable development, as well as the fierce competition shaping up globally. With partners such as Yara, Statkraft, Shell, Microsoft and BP, Aker Horizons’ companies are positioned to succeed in the race. Of course, one swallow does not make a summer, but Aker’s collaborative advantage has afforded us unique key learnings over the years on which we can build as we form new alliances in a new, competitive industrial landscape. This includes knowing that partnerships should build on complementary capabilities and shared drivers for success. The roles should be clearly defined with an underlying resource and skill interdependence that allow us to adapt to rapidly changing market conditions for optimal competitiveness. As owners, we are very pleased to see that these principles not only stand firm in the new partnerships formed but are guiding the way in the ongoing work.
Partner investments and strategic partnerships can also serve as a testament to the growth potential and significant value creation taking place across Aker’s portfolio. During the quarter, this was perhaps best exemplified by the USD 150 million Series B investment in Cognite by TCV, a leading technology-focused growth equity firm with an impressive track record of building and scaling software companies globally. In the software world, finding partners with specialized areas of expertise, global networks and access to talent pools have become vital to global growth. While the specific skills that make a strong partner for software companies differ from those of our partners in other industrial segments, the partnership success factors are largely recurring. Fruitful collaborations still hinge on shared drivers for success, joint and unrelentless focus on quality, interdependence based on complementary skills and competence, and a clear division of roles. In both TCV and Accel, we identified partners with a shared ambition to digitalize global industries. Their quality as investors and partners is unparalleled, and their experience in scaling enterprise software companies globally marries perfectly with Aker’s industrial expertise to accelerate Cognite’s growth.
Despite a year of forming strong partnerships across the portfolio, we are reminded that Rome wasn’t built in a day. Our proven alliance model and external collaborations with world-class companies is the result of years of both trying – and failing. We have had our fair share of partner mismatches, roadblocks and collaborations that have proven challenging. Yet, the principles for collaboration stand firm. The Aker Alliance Model was formed in 2016 under the idea “one for all, all for one.” Partners align around common goals with a single integrated central team to drive continuous improvement and create greater value for all. This approach has resulted in faster and more efficient project development from concept selection to completion, with improved interface management, resolution of technical issues, information flow and risk management. Strategic alliance relationships are an integral part of this strategy, which again have formed the basis for an ambitious digitalization agenda and rapid implementation of industrial software. Today, the Alliance Model is forming the basis for new areas of collaboration across the portfolio, which again opens for new business opportunities. The NOAKA project, one of the largest remaining field development opportunities on the Norwegian continental shelf, will be an example of identifying such opportunities as Aker BP and its partners work to have low emissions through power from shore and offshore wind, and make extensive use of digital solutions in both the development and operational phases.
I would be amiss if I did not mention that Aker’s great journey as shareholder in Aker BP has been alongside our fellow owner and partner, BP. The collaboration with BP has served as the best example for how we can leverage a combination of transactions and strategic, collaborative efforts to grow and create value. As we diversify and grow new segments of our portfolio, our proven experience in building and sustaining such fruitful partnerships has afforded us both a competitive and collaborative advantage as we seize new opportunities for long-term value creation. Looking ahead, Aker will continue to use a combination of M&A activity, strategic partnerships, and an active ownership agenda to drive growth. Furthermore, our experience tells us that every success story is a tale of constant adaptation, revision, and change. With that, I look forward to a busy year ahead and wish you all a great summer.
Øyvind Eriksen, President and CEO