Update: Aker Solutions merges with Kvaerner, cuts 200 UK jobs

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Aker Solutions has announced its intention to merge with its Norwegian colleague Kvaerner and to appoint a new managing director.The company will also “spin off” its wind development and carbon capture and storage (CCS) activities, thereby creating two separate entities listed in Oslo.

Additionally, Aker Solutions has revealed that it has laid off around 200 employees in the UK as a direct result of Covid-19 and falling commodity prices.

The merger will take the form of a “statutory merger” whereby Aker Solutions will “absorb” Kvaerner, with whom it has a vibrant decades-long history.

Both companies are partly owned by Aker, an industrial investment firm controlled by Norwegian billionaire Kjell Inge Rokke.

Kvaerner shareholders are expected to receive stakes in the range of 43% to 53% in the combined company.

Audun Martinsen, head of energy services at Rystad, said the merger was a “natural step” and would allow companies to create more focused business units that can compete for green energy contracts.

The enlarged Aker Solutions company will have around 15,000 employees at 50 locations and a turnover of £ 3.3 billion based on last year’s performance.

The companies employed a total of 18,800 people at the start of 2020.

Aker Solutions said it began cutting capacity and costs before the merger in response to falling raw material prices.

He said most of the ongoing staff cuts would be completed before the reconciliation is implemented.

The cost-cutting campaign is expected to deliver annual savings of £ 130million per year from 2019-21.

Earlier this month, Aker Solutions confirmed it was cutting 44 offshore positions after client Equinor put a UK project in the North Sea on hold amid the rout in oil prices and the Covid outbreak -19.

In October 2019, the company announced 95 job cuts in Aberdeen, saying the change was in line with its global goal of delivering greater efficiency as UK businesses evolve to provide ‘digital services’.

At the time, it was understood that Aker Solutions employed around 750 people ashore in Aberdeen, with a total of 1,750 across the UK.

Kjetel Digre, most recently senior vice president of operations and asset development at Aker BP, will replace Luis Araujo as managing director of Aker Solutions on August 1.

Mr. Digre said: “The combined company will be a dedicated delivery partner for the delivery of complete projects for new power generation facilities, such as oil and gas production platforms or subsea systems, or offshore wind installations. ”

Commenting on the rationale for the fallout, Aker Solutions said it has taken “strong positions” in the wind and CCS markets, which have the potential to generate value in a world in transition to low carbon emissions to great speed.

But the two companies have better prospects as stand-alone companies than as members of an integrated oil services group.

Oyvind Eriksen, President of Aker Solutions, said: “Aker Solutions has developed technology and established strong positions in the offshore wind and carbon capture, use and storage markets.

“However, it has become increasingly clear that these companies represent opportunities for value creation in a world in transition to green solutions at an accelerated speed and have more potential as stand-alone businesses than as part of an oil service business. ”

Martinsen de Rystad added: “With a second downturn in the oil and gas market since 2014, consolidation in the oil and gas supply chain is necessary to further reduce costs and strengthen competitiveness in internationally.

“With a tough oil and gas services market, which will drop 25% in 2020 and not return to 2019 levels until 2023, suppliers have found ways to compete and retain market share.

“With a renewable sector expected to grow 50% by 2025, suppliers will have to make strategic choices.

“Offshore wind investment will exceed that of oil and gas in Europe by 2022, and with this decision, Aker Solutions and Kvaerner appear to be well equipped to manage the transition in the right way.

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