Aker Solutions ASA

OSE:AKSO

Earnings Call Transcript 2019-Q2

[Tove Røskaft, Head of Communications & Investor Relations]

Good morning and welcome to Aker Solutions Presentation of the Second Quarter Results for 2019. My name is Tove Røskaft, and I'm Head of Communications and Investor Relations at Aker Solutions. With me here today is our Chief Executive Officer, Luis Araujo; and our Chief Financial Officer, Svein Stoknes. They will go through the main developments of the quarter. We will also have some time for questions and one-on-one interviews with the press after their presentations. Please note that we have no fire drills planned for today. So in case of an alarm, escape is through the doors behind you and to your left. Thank you. And Luis, I will now hand over to you.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Thank you, Tove, and good morning, and thank you for joining us here today on this beautiful sunny day in Oslo. I'm happy to say that the second quarter of 2019 was another period of strong execution, solid financial performance and high tendering activity. As usual, let me start with the main developments in this quarter. Major project progressed well during the first quarter. We have completed installation of the Valhall Flank West platform for Aker BP ahead of schedule and under budget. This was the first delivery from the wellhead platform alliance between ABB; Aker Solutions; Kvaerner; and our client, Aker BP. In May, we reached mechanical completion of the Mariner project for Equinor in the U.K. This is one of the largest hookup and commissioning projects we have ever delivered. We're very proud of it. And moving forward, it will help our customers to reach first oil and then support ongoing operations through our U.K. brownfield frame agreement. Within the subsea business, our yard in Egersund delivered the subsea templates for Equinor for our field. Also, we delivered umbilicals for the Wintershall Nova project from our base in Moss, and we delivered the first SPS project for the -- from the Subsea Alliance with our alliance partners, Aker BP and Subsea 7, for this co-development. This was done on time and budget and with no reported HSE instance. After the quarter -- at the end of the quarter, we continue our investment in renewables, making a third acquisition and increasing our ownership in Principle Power from 11% to 23%. We've successfully completed a new NOK 1 billion bond issue, replacing the existing bond which expires in October. Svein will take you in more details later in his presentation. During the quarter, some important changes in the Aker Solutions active management team were announced. Maria Peralta, who came from the position as a Country Manager in Brazil, became Head of Products globally; Egil Boyum, who was previously Head of Projects took only the ship of the greenfield projects; and finally, we announced that Ole Martin Grimsrud will take on the position as Chief Financial Officer from August 1 as Svein takes the position as CFO at the Aker ASA. So I'd like to take this opportunity to publicly thank Svein for his leadership and support during the time he's been with Aker Solutions.We delivered another period of solid financial performance. In fact, it was the fifth consecutive quarter of revenue growth. This thanks to a relentless focus on time and delivery and efficiency improvements despite the challenging price environment we have seen in recent years. Now for the main numbers. These are the second quarter figures according to the new IFRS standards. Revenue of NOK 7.5 billion, EBITDA of NOK 623 million, an EBITDA margin of 8.3%. Excluding special items, the margin was 8.4% and earnings per share was NOK 0.56. We also won NOK 3.8 billion in new orders and the backlog ended at a healthy NOK 29.5 billion. Afterwards, Svein will take you through the numbers in far more detail. In terms of order intake, I'm pleased to see that we are winning work from target customers and in the regions that -- where we want to grow. For Aker BP, we have signed a new exclusive frame agreements to provide subsea equipment over the next 5 years. And for Petronas in Malaysia, we have been awarded a frame agreement for engineering services. The frame agreement covers the full scope of engineering services, upstream, midstream, downstream, onshore and offshore. And Aker solutions is one of the only 2 frame agreement holders that have received the full scope. Let me clarify that no volume from these frame agreements have been booked in the second quarter, and this will be included when the call-offs are made. In Subsea, we had a strong quarter for our umbilical business, winning awards that included the following: the Herschel project in the Gulf of Mexico, which is another contract for our key customer BP; umbilicals for the second phase of Chevron Gorgon Project in Australia; E&I Cabaça project in Angola; and at the end of the quarter, we signed a new umbilical contract for Johan Sversdrup Phase II development with Equinor; and also, we won a large contract with an undisclosed key customer in a new important region. Together, these contracts are worth more than NOK 1 billion, and will be delivered from our 2 plants in Moss, Norway and in Mobile, Alabama. We also won a carbon capture utilization contract from Twence for a waste management project in the Netherlands using our modular system named Just Catch. This is another important step in the low carbon journey and the further validation of this important technology. Once the CO2 is captured and liquefied, it will be used by nearby greenhouses where it will increase the growth of plants and vegetables. We continue to see strong demand for early-phase, front-end work. And as I mentioned several times previously, the earlier we get involved in a field development, the greater the potential to significantly optimize overall project development. In the first half, we won 74 front-end orders, around similar levels to last year. But we'd like to remind you that last year was a record year. So this is a good indication that operators are willing to develop new projects, and we see this as a clear sign of potential increase on sanctioning activity. As you can see on this slide, a large number of studies have turned into more detailed FEED projects, the next phase, putting us in an excellent position for further work in the next phases of these developments. A number of these studies are strategically very important for us, and this includes the Åsgard Phase 2 compressor study for Equinor, a study for Equinor carrying the lessons learned from Johan Castberg into the Rosebank developed in U.K. and the BP Clair South pre-FEED study with a clear focus on how digitalization and low carbon solutions can help to develop the producer facility of the future. As well as ongoing demand for front-end studies, tendering activity remains high. With that in mind, I want to share some more insight to our order activity -- to our tendering activity that we normally do. Globally, we are currently tendering around NOK 55 billion. With this high tendering activity volume and the front-end activity mentioned previously, I believe we are well positioned for projects to be awarded in the second half of this year. As you can see on the map behind me, right, the geographical spread is good and located in areas where we have a very strong position.Okay. And now to the outlook. Despite the competitive and volatile market, the outlook is promising. We continued to deliver strong execution and enjoy repeat orders from customers, which I have to agree is very important. Tendering and front-end activity remains high in our target markets with current bidding activity totaling about NOK 55 billion with a good balance between regions and segments. We anticipate some key projects to be awarded this year. We have strength and focus on low carbon activities, as you probably saw in the presentation, and have shown our firm commitment to grow our business in that area. We also see great interest in our offerings within the gas segment. An example is the increased interest in gas compression studies across all regions. All in all, I believe that Aker Solutions is well positioned to capture opportunities in both new and existing markets. So in summary, we closed second quarter with continued revenue growth, strong execution on projects and services and high tendering activity as well as a healthy order backlog. These elements are supporting stable and healthy financial performance. Thank you for listening. And Svein will go through the numbers in more details.

[Svein Oskar Stoknes, Chief Financial Officer]

Thank you, Luis, and good morning. So as usual, I will now take you through the key financial highlights of the second quarter, our divisional performance and run through our financial guidance before we move on to Q&A. As always, all numbers mentioned are in Norwegian kroner. Again, I would like to remind you that as of January 1, 2019, we have adopted the new IFRS 16 accounting standard related to leasing. And to state the obvious, this is purely a change in accounting method of leases and it has no cash impact. Comparative figures have not been restated, and we have included additional information related to this change of accounting principle in the half year report. So as usual, let's start with the income statement.Overall operating revenue for the second quarter was NOK 7.5 billion, up 20% year-on-year, reflecting a very high activity level in field design and increased activity in subsea on the back of work won over the last 18 months. As a result, our projects reporting segment was up 24% year-on-year. The Services segment also delivered solid growth and was up 12% year-on-year, primarily driven by the production asset services subsegment. Reported second quarter EBITDA was NOK 623 million, and this included net NOK 6 million of special items while the new IFRS 16 leasing standard increased our reported EBITDA by NOK 146 million. And for your reference, we have set out a table in the half year report that further specifies the special items and the effects of IFRS 16 leasing.Excluding special items, EBITDA was NOK 629 million, an increase from NOK 441 million a year earlier, and this was equal to an underlying margin of 8.4% compared to 7.1% in the same period last year. Excluding the effects of IFRS 16, our underlying margins were marginally down compared to the same period last year, and this should be viewed as a solid achievement as we are currently progressing on our newly awarded work just won in a very competitive market, an evidence of continued strong execution and good momentum on efficiency-improvement programs. Compared to the same period last year, we also see the effects of a different revenue mix on our margins with a higher share of lower-margin field design and production asset services activity. As mentioned at our Q1 earnings call, we have in the second quarter taken an impairment charge of our right-of-use assets related to IFRS 16 of NOK 216 million with no cash impact. This comes as a consequence of our continuous improvement efforts as we're looking for ways to optimize our footprint, and we have been successful in subleasing a good share of our excess office capacity. Second quarter underlying depreciation was up year-on-year at NOK 304 million. Excluding the effects of IFRS 16, the depreciation was NOK 187 million, in line with our previous guidance. We continue to expect underlying depreciation, including the effects of IFRS 16, to be around NOK 1.2 billion per year. Our reported second quarter EBIT or operating profit decreased year-on-year to NOK 98 million from NOK 254 million. Excluding special items, EBIT was NOK 325 million and the margin was 4.3% versus 4.1% in the previous year. Net financial items were minus NOK 112 million in the quarter, excluding a minor unrealized hedging loss of NOK 5 million. We continue to see our net financial items around this level per quarter going forward, excluding the effect of currency and nonqualifying hedges. Our tax charge was equivalent to a rate of 33% in the first half of the year. And going forward, we continue to expect average P&L tax rates to be in the low to mid-30% range. We ended the quarter with a net income of minus NOK 11 million or earnings per share of minus NOK 0.11. Excluding special items, the earnings per share were NOK 0.56, up from NOK 0.48 last year.Now moving to our balance sheet and cash flow performance. Our net current operating assets or working capital continued to normalize and ended the second quarter at NOK 731 million. Excluding the effects of IFRS 16, it ended at NOK 231 million. As previously guided, working capital is likely to fluctuate with large project work, and we continue to expect the level to gradually trend toward about 4% of group revenue over the next 2 to 3 quarters. Excluding IFRS 16, we had net interest-bearing debt of NOK 1.2 billion at the end of the second quarter, up from NOK 940 million at Q1, reflecting the working capital outflow. Our net debt to EBITDA ended the quarter at a solid 0.8x. And as previously announced, we successfully issued a NOK 1 billion senior NOK-denominated bond in the quarter secured at very favorable terms. This will primarily be used to settle the remaining 2019 bond maturing in October. At the end of Q2, we continued to have a strong financial position with a total liquidity buffer at a healthy NOK 7.2 billion. This includes our revolving credit facility with leverage covenant at 3.5x net debt to EBITDA. And as a reminder, our RCF and latest bond covenants are both based on frozen GAAP, i.e., pre-IFRS 16. Our solid financial position continues to give us flexibility and good financial headroom going forward. Our cash flow from operations in the second quarter was NOK 55 million, even as the working capital continued to normalize. Our investing cash flows total a net negative NOK 192 million in the quarter, and we continue to expect overall CapEx and R&D at around 3% of 2019 annual revenue with flexibility. Cash flow from financing was NOK 561 million in the quarter, reflecting the change in our external borrowings following the successful bond issue. Now on to projects, where second quarter revenue was up 24% year-on-year, mainly driven by high activity level in the field design subsegment compared to the same period last year. This resulted in an underlying projects EBITDA of NOK 475 million with a margin of 7.9% for the quarter, up from 6.7% last year. EBIT, excluding special items, was NOK 270 million with a margin of 4.5%, up from 4.2% last year. We have yet another quarter of solid operational performance in our projects portfolio. As we're still in early stages of execution on newly awarded work won in a very competitive market, it is important that we continue to realize significant benefits from improvement programs in order to expand the margins on this new backlog. Order intake in projects was NOK 2.9 billion in the quarter, down from a solid NOK 5 billion in the year-earlier period, with book-to-bill at 0.5x. The backlog in projects ended the quarter at NOK 19.3 billion.Now some further details for subsea and field design within the Projects reporting segment. Revenue from subsea projects was up by 12% from the same period last year, driven by recently awarded work globally. Revenue from field design projects increased 31% year-on-year, driven by strong activity on several modification and hookup jobs versus the same period last year. In the second quarter, field design accounted for 61% of Projects revenues, up from 58% in the same period last year. Second quarter order intake in Projects ended at 0.5x with NOK 1.8 billion in subsea and NOK 1 billion in field design. Despite a competitive market, tendering activity remains very healthy, and we're still tendering for about NOK 45 billion of work overall in projects with the majority in subsea. There's a high probability for several of these ongoing tenders to be concluded during the second half of 2019. Our services revenue increased 12% year-on-year, mainly driven by international growth in our production asset services subsegment, which accounted for 58% of services revenues, up from 53% in the same period last year. Underlying EBITDA was NOK 210 million with a margin of 14%, an increase from 13% in the same quarter last year. EBIT was NOK 147 million with a margin of 9.8% versus 9.9% a year ago. The margins reflect good performance and increased activity level versus last year as well as the mentioned effects of IFRS 16. Second quarter order intake and Services was NOK 0.9 billion and resulted in a second quarter book-to-bill of 0.6x, mainly related to international awards. Despite the competitive market, tendering activity is healthy, and we are currently tendering for around NOK 10 billion of service work globally. And as a reminder, in addition, a part of services order intake is short-cycled or book and turn in nature. Now over to the order intake and backlog performance for the group overall. The second quarter order intake was NOK 3.8 billion with a healthy level of unannounced awards in several key regions globally, in particular within the subsea subsegment. The order intake was equivalent to book-to-bill of 0.5x in the quarter and was 0.7x for the last 12 months. Our backlog totaled NOK 29.5 billion at the end of the second quarter, which is equivalent to around 1.2x our 2018 revenue. The backlog for 2020 execution is about NOK 10 billion versus NOK 14 billion at the same time last year. This, combined with several ongoing significant FEEDs, high tender activity and a good level of unannounced and book and turn, gives us reasonable visibility moving forward. During the quarter, we continued to increase our international order intake, and our backlog is now considerably more geographically balanced despite phasing out major projects in Africa. Order intake continues to be somewhat uneven caused by large contracts and timing of sanctioning. But as mentioned earlier, tendering activity remains high with some key projects likely to be sanctioned during the second half of this year, and we're still engaged in tenders with an estimated sales value of about NOK 55 billion. As already highlighted, our backlog does not include part of our Services business or potential growth or options on existing contracts and call-offs on the frame agreements as well as the full expected project value of some of the ongoing FEEDs. And finally, over to our guidance. We delivered a solid top line growth of 12% last year, and we see our overall 2019 revenue up around the same level this year, in particular, driven by the high activity levels in field design in the first half of 2019. This implies revenues in the second half of 2019 in line with the second half of last year. For 2019 overall, we still see our underlying EBITDA margin up year-on-year, including the effects of IFRS 16. Excluding the effects of IFRS 16, we expect the full year margin around the current levels. The phasing of our secured backlog, combined with a very healthy level of unannounced FEED and tendering activity at this stage, indicates a top line for 2020 in line with this year, pending successful outcome of some of the key tenders. As previously stated, the current industry challenge of phasing in new work awarded in a very competitive market means that a continued relentless focus on quality execution, supply chain and operational efficiency improvements are needed in order to lift underlying margins into 2020. We will also continue to leverage our differentiating front-end capabilities to capture opportunities and engage with our customers at an early stage. And as activity levels pick up further, it will be important to harvest scale effects from our very fit and streamlined organization and asset base. So to sum up, we have a healthy backlog, and we have a solid financial position, which continues to give us increased flexibility and financial headroom to position Aker Solutions to fully take advantage of the recovery. We ended the second quarter by continuing to deliver strong project execution with good underlying financial performance and by continuing to build a geographically more balanced order backlog, and we see good opportunities for increased order intake during the second half of this year. Thank you for listening. That was the end of our presentation here today, and we will then move on to Q&A.

[Tove Røskaft, Head of Communications & Investor Relations]

Thank you. It will be good if you could state your name and where you come from before asking the questions for the online audience.

[Glenn Lodden, Analyst]

Glenn Lodden with Nordea. You mentioned you thought that the market is showing increasing signs of recovery. Can you elaborate a little bit on what these signs are?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Okay. As you probably noticed, we have more FIDs this year than we had last year, so you can see, especially in the second quarter, FID increasing in several regions. Also, an indication from front end, I showed last year that we had a record year. This year, we're actually replicating that record in the first half -- in this quarter, 74 studies. So clients are making us busy looking for ways of sanctioning more projects. So those are the signs we see. As usual, there's no guarantees if I follow this balance between supply and demand. So I won't elaborate on that, but we believe that the offshore costs have been reduced a lot, and the projects will be sanctioned. We see a large activity also in the gas, I mentioned that. And also, tiebacks through existing facilities as we have seen actually during the whole downturn. So we see more activity, I think, with the exception of, I think, the Gulf of Mexico. The rig numbers have increased offshore almost everywhere. So I think that's the sign I'm referring to.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Next question. Yes?

[Tommy Johannessen, Research Analyst]

Tommy Johannessen, Sparebank 1 Markets. You lowered your EBITDA margin guidance from 8.8% to 8.4%, and this is mainly due to field design activity in 2019, whereas you said that subsea will be the main driver in 2020 based on tenders. So just to get a feeling about the margin for 2020, should we expect the normalizations are up into 2020? Or will -- yes.

[Svein Oskar Stoknes, Chief Financial Officer]

Okay. We're not going to comment specific on margins for 2020. But as you point out, you see 2 factors going on at the moment. So one is that we have delivered 12% growth in the top line last year. We deliver -- we are about to deliver another 12% this year. We're phasing in a lot of new work. Of course, a lot of new work that has been tendered in a much more competitive landscape than the outgoing backlog, and some of this new vintage backlog is still in early phases of execution and we don't see this -- potential of this backlog yet. We have to continue to drive through efficiency improvements, and we see a very good momentum to drive the margin and the backlog in the right direction. Then as you point out, we have a record-high activity level in field design in the first half of '19, which traditionally is driving somewhat of a lower margin in the subsea side of the business, particularly on the brownfield side where we see very high activity levels. So all in all, that is sort of leading us to indicate that we see 2019 overall ending up roughly around the current levels margin-wise.

[Tommy Johannessen, Research Analyst]

Okay. On 2020, backlog coverage is relatively weak when you look at consensus revenue estimates. So how much of potential awards such as [indiscernible] could have revenue execution already in 2020?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Okay. I won't comment specifically on projects, but I touched on a few projects that we believe will be sanctioned. But yes, I think we've been there before. If you look back to the same time in '17 and then '18, we need to win work, and that's also going to be the norm. We have to win more work, but what we see in terms of positioning heavy clients in the front end, and as you saw in the presentation, there are more FEEDs study becoming FEEDs. And then the next state, of course, is FEEDs become projects, and we see people moving faster and faster now from FEED to execution. So that's the way to compress delivery schedule. So we believe that we're going to win the work necessary to deliver 2020, that's why we said that but we have to win and -- but we are confident that we have won the execution muscles. And also delivering so well to clients, people come back to you. That's usually the norm, right? So we see repeat orders and so on. And as we mentioned, there are some frame agreements that we signed. There's no volume yet, but they will come, and that's the way to further call-offs. So I think that we have to work, but we are confident we're going to get there.

[Svein Oskar Stoknes, Chief Financial Officer]

It's very important, this element of the FEED activity, which is, as you've seen and Luis pointed out, record high. It gives us a very good sort of visibility into where our clients are sanctioning, why some are and what we are sort of getting ourselves into also from a risk point of view. So visibility is on a completely different level than what it used to be, so that gives us reason to believe that we're going to be able to deliver top line in line with this year and also next year.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

And I guess the project you mentioned, the Alliance project, so it should help.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Should we take a few online questions before we move on? The first one is from Terje Fatnes at SEB. How do you see revenue development in 2020 with backlog for execution next year, NOK 4 billion lower than at the same time last year?

[Svein Oskar Stoknes, Chief Financial Officer]

I think I addressed that in the presentation. We just answered that...

[Luis Antonio Gomes Araujo, Chief Executive Officer]

I think it's the same question basically.

[Tove Røskaft, Head of Communications & Investor Relations]

So you also answered the next one from Sahar Islam from Goldman Sachs on the margins. Yes. And then the next one from Lillian Starke at Morgan Stanley. Within the list of projects you are tendering for, could you share in how many of these you have participated at the FEED level or what gives you the conviction of a stronger level of order intake in the second half of the year?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Yes. As usual, we don't comment on specific projects, but several of those we are tendering now, we have done the FEED or we are doing the FEED now or pre-FEED -- and pre-FEED. So yes, it's a good proportion, but we don't specify the numbers in the projects at the moment.

[Tove Røskaft, Head of Communications & Investor Relations]

Yes. There's a question from Amy Wong at UBS as well. Can you comment on how or if customer behavior have changed in response to the oil price volatility in the first half of the year?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Okay. A good question by Amy. Thank you. I think that there are several nuances, as I call it, in the market, and customers behave in a different way. There are some customers who do not take any notice of the oil price, and they continue moving or the volatility of the price, which you have to admit, is much better than it used to be. And the cash flow and the outcomes are quite healthy. So we believe that the right clients in the right project will move forward. So I think behavior, I don't think we've seen a lot of change in behavior. I think people continue moving forward. Like everything else, people start to get used to the volatility and then life moves on like for all of us. We just continue focusing on what's important in our side, which is to deliver as we deliver now and also to continue pushing our cost base down or efficiency up. And I think the clients are the same, they're looking for the right projects and they continue moving. So not a large change in behavior. The same -- I would say the same cautiousness that we've seen to last year's.

[Tove Røskaft, Head of Communications & Investor Relations]

Yes. Thank you. And then we have a question from Kristoffer Pedersen at Nordea. You expect EBITDA margin, excluding IFRS 16, for 2019 around current levels. Does this refer to the 6.4% in Q2 or the year-to-date of 6.8%?

[Svein Oskar Stoknes, Chief Financial Officer]

It was meant to refer to the most recent quarter.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Anymore questions in the audience? There's quite a lot more online, but we can take some more in the audience. Okay. Then I'll move on with the online audience. There's another one from Amy. Svein, congratulations, and good luck in your new position. It wasn't the easiest period to be a CFO of an oil service company. My question is related to the dividend. How should we think about the cash flow profile of the organization going forward and specifically about the timing of when the investors could expect the dividend to be reinstated?

[Svein Oskar Stoknes, Chief Financial Officer]

Yes. As we have talked about previously, I mean we -- our dividend policy remains. We want to pay between 30% and 50% of our net profit either through share buybacks or through cash dividends. During 2019, you have seen and you will continue to see a significant cash outflow related to this normalization of our working capital. Some of that normalization will also move into first half of 2020. In terms of CapEx levels, you have seen a period of very sort of modest CapEx needs. This year, we're moving into a period where we are positioning ourselves for some new business models. But as I've said, about 3% of revenue this year, and we have a lot of flexibility on it. So flexibility on the CapEx side also remains for 2020. But of course, we are optimistic about the future and activity levels picking up. And hence, we want to continue to invest, but it's very easy for us to tune that investment during 2020. So towards the back-end of 2020, we should return to free cash flow generation. And hence, we have sort of opened up for this potential dividend to return in 2020 for 2019, but it's still too early to say. But there will be a indication...

[Luis Antonio Gomes Araujo, Chief Executive Officer]

It's also up to the Board to decide. So...

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Then we continue with our question from Michael Alsford at Citi. The weaker order intake in the second quarter, what do you see as the reason for this? Was it due to type of project awards, more integrated awards, geography or more aggressive pricing?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Okay. I think that a combination in all -- those orders, as you know, they are lumpy. So as you've seen in -- at the end of '17 and '18 -- beginning of '18, very large order intake for Aker Solutions. So it also depends which clients are awarding. Some of the awards that you might have seen announced are from clients who have frame agreements with our competitors, so we are not -- because you're not losing a lot, you're not losing many projects. It's just some of those projects are being awarded directly because maybe there are tiebacks to existing fields. And we had ours last year with Dalia and so on, and provide the first phase or second phase then you keep getting more work because it makes sense. So that's what it is. In terms of integrated, also the integrated offers, if you look with a very few exceptions, they're actually on fields that keep awarding incumbents and they have bundled or they have bundled afterwards. But certainly, I think it's still below 20% of the projects be awarded under the combined bundle, as you call it, surface subsea. So yes, I think it's a combination. I think it's just a matter of time and the clients we're sanctioning at the moment.

[Tove Røskaft, Head of Communications & Investor Relations]

Luis, there is a follow-up question from Sahar Islam to the last one. How many of the NOK 55 billion of tenders are integrated bids? And are you seeing a change in pricing as tendering activity picks up?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Okay. I'll take the first one. I will not give you specific percentage of intake, but quite a few of those are being tendered together with our global partner, Saipem. And the second part was?

[Tove Røskaft, Head of Communications & Investor Relations]

The second part was are you seeing a change in pricing?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

In pricing, yes. Well, I think the market is too competitive. So I believe that as people get more occupied, the price will come up. But right now, I think we have to just focus. We want to be focused, which is maintaining our cost base down and also improving efficiency because we're waiting for the price to come up. So I think in some areas of our business, the rest, still quite a lot of capacity. Subsea is one of them. Of course, the activity is increasing. You can see by a number of 3 counts that things are moving in the right direction, but it's still capacity and it's still very competitive. People still want to fill that capacity in some segments. So I think the prices are still to be increased.

[Tove Røskaft, Head of Communications & Investor Relations]

There are still some questions from the online, but we have time if there's anyone in the audience who have thought of a good question to ask.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Just keep rolling.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Then we keep moving. Next question from David Farrell at Crédit Suisse. Are you confident that as the FEED activity recovers in West Africa, that the alliance with Saipem can secure its first award?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Yes. I think Saipem has strong positions in some of the African countries, for sure. And also, the asset base of Saipem is unique. They have a very good fleet. So I think that suits that deepwater market in Africa. Of course, when it comes to the Aker Energy, they have -- they want to follow an alliance, same model as Aker BP, so that will be probably 6 to 7. But apart from that, yes. I would like to make it clear that both Saipem and ourselves are not prepared to sacrifice margins to set the track record. We are established companies. We have very good technology, fantastic facilities and variable position to our front-end, our engineering. So the idea here is actually to find the right project. And when that happens, then you're going to execute it, but not sacrifice margins and also take more risks, sometimes very large risks, just to set track record. That's not our intention.

[Tove Røskaft, Head of Communications & Investor Relations]

Yes. Thank you. Svein, a question to you from James Evans at Exane BNP Paribas. Svein, you're moving on to the CFO role of Aker Solutions' largest shareholder. Will you be keen for the company to pay a dividend to its shareholders at the end of the year based upon what you can see now?

[Svein Oskar Stoknes, Chief Financial Officer]

As far as I know, the Aker plans, they haven't based their plans on a dividend from Aker Solutions in the short term, but they are aligned with our desire as we start generating free cash flow to get back to our dividend policy. So it's something that they will have to decide once we get them to AGM times next year.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Question to the both of you from James Thompson at JPMorgan. Of the NOK 55 billion tendering in 2019 and 2020, approximately what percentage are you seeing being awarded in 2019? And the second question is separately on revenues. Just to double check, you see potential for 2020 revenues to be flat on your new upgraded 2019 guidance?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

I can start with the orders. I think we believe that a large part of NOK 55 billion will be awarded in the second half. So this is the tendering pipeline. So those are tenders we've been -- most have been delivered to clients or they are in clarifications. A lot of them are in clarifications. And of course, some of them are waiting sanctioning, but I think we believe the large part of those NOK 55 billion will be awarded in the second half. And that's to be the case throughout the last 2 years. And then, of course, it's very encouraging to see that every quarter, we have 50 -- between NOK 50 billion and NOK 60 billion in orders even though the projects have been awarded. So it shows that the pipeline is being replenished, which is good.

[Svein Oskar Stoknes, Chief Financial Officer]

And the second part of the question was 2020?

[Tove Røskaft, Head of Communications & Investor Relations]

Yes, it was -- he wanted to double check that you see the potential for 2020 revenues to be flat on your new sort of upgraded guidance.

[Svein Oskar Stoknes, Chief Financial Officer]

So as we said, of course, it depends on successful outcome of some of the key tenders in the second half. But given where we are, FEED-wise, we are very sort of intimately familiar with where the clients are decision-making wise and what the economics are on some of these prospects. So it's in a much better position to be and related to visibility on where they are decision-making wise. And then we have been able to hold our tender volume up at NOK 55 billion. And despite projects having been sanctioned and awarded during the first half, the tender volume keeps up. So it looks -- at this time of the year, very good to keep that momentum into 2020. Obviously, remind you that 2019 or 2017 is going to be up 25% for Aker Solutions. So it's phenomenal growth on the top line over the last 2 years.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

I should challenge that nobody else is doing that, so we're very proud of that. It reflects our strong market position also in Norway. But again, nice to think about the fact that the revenues we have today in terms of volume, considering the prices that we had -- that reduced in prices, is probably above 2014 volumes. So that's why I say a much more healthy and fit organization delivering volumes far superior than we used to deliver in 2014. So I'm very proud of my team on that point.

[Svein Oskar Stoknes, Chief Financial Officer]

And then you see that year-to-date, we have booked 0.6x book to bill without any sort of major announcements. So there's a very healthy stream of unannounced book and turn activity, and so we give -- it's a very sort of solid foundation.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Yes. We should be in the norm going forward.

[Tove Røskaft, Head of Communications & Investor Relations]

Yes. There's a question from Michael Alsford at Citi. Could you talk about the rationale for the increased stake in Principle Power? Could you talk about the cost competitiveness of floating offshore wind now and how has it improved?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Okay. I think as I said before, there are only 2 companies in the world that has an existing track record in offshore float wind, which is, I think, an area in wind that we believe has more potential. So Principle Power is one of them. So we need find that back then. It's a great company with great knowledge and as I said, good track record and a lot of customer engagement through the knowledge of floaters. So that, associated with our floating knowledge, it's becoming quite powerful. And then you combine that with our project execution and so forth. So for Principle Power, it's also important that they are part of -- partially part of the Aker family. And then now we have our cable. So the whole offer fits very well our execution model. So taking more stake on Principle Power is a natural thing to do. And it was the plan. We got to know the company. We got what -- we even liked more. There was initial period, and now we increased our stake there. So in terms of competitiveness, this is a new industry that's being formed, and we believe being a far more high-tech and also almost a niche that there will be better margins to be captured, and not everyone can do it like you see in onshore wind or in some cases in offshore bottle supported wind. So I think it's very good, and we have 1 project right now already in progress in California. The studies and probably -- start to move execution quite soon, probably for next year. And then we have some others in the pipeline. So I think it's promising, and we like what we see.

[Svein Oskar Stoknes, Chief Financial Officer]

And with this most recent increase in shareholding, we're moving up to sort of equal footing with our partner and also shareholder in Principle Power, the Portuguese utility company AdP.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

That's a very good point. We just actually has developed a new entity together for offshore floater wind together with [indiscernible]. So very powerful partner and they also like what we see. So our execution arm is -- or muscle is quite interesting to them.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Then we have our last online question from Mick Pickup at Barclays. Green initiatives are increasingly becoming your focus and differentiator. Given that the market has a phenomenal appetite for this at present, how big do you think it could become in your vision of the future? And there's a follow-up question. And how has your interaction with investors been?

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Okay. That's a very good question for Mick, as usual. So I think we've been a big believer on, for example, carbon capture for decades to the -- for market clean carbon capture. So we're very pleased to see that people are really taking to that now. We saw actually an opportunity outside the oil and gas industry in Holland. So we see a lot of interest and a lot of studies, so we believe that can grow. Very hard, of course, to put number to it, but we do believe that's going to be a significant share of our business in the future. Also another point that we don't touch a lot is that we have to get that message out there, is that we are working very closely with clients to reduce the footprint, so the footprint of existing fields. I mentioned earlier today the BP Clair South that we are doing a pre-FEED for BP, and the focus there is to develop this platform of the future. With less people flying in, less carbon, CO2, it didn't have the subsea compression. Therefore, Johan Sverdrup and all those that they're bringing to the bottom of the ocean reduce a lot of energy consumption, hence the CO2 consumption. So we need to work very hard. Let's refine fields for onshore. So many things we are doing with clients to reduce the CO2 footprint of offshore development. So that's very important as well as developing new markets. So yes, I won't go give any numbers, disappointing of Mick there, but we're probably going to come up with that message, I would say, quite soon. We're finalizing our strategy with the Board now beginning in the second half of the year, and then we'll come up and tell you what we see. But we see that's going to be a big percentage of our revenues by 2030, that's -- make that very clear.

[Tove Røskaft, Head of Communications & Investor Relations]

Okay. Thank you to the online audience and the audience in the room. We can move on with some one-on-one interviews.

[Luis Antonio Gomes Araujo, Chief Executive Officer]

Thank you very much.

[Svein Oskar Stoknes, Chief Financial Officer]

Thank you.