
execution are also sensitive to energy prices.
9. Risk
The Company is exposed to market, commercial,
operational, regulatory, tax, and financial risks including
refinancing risk, that affect the assets, liabilities, available
liquidity, and future cash flows.
One of the key commercial risks for Solstad is the cyclical
oil and gas markets that the Company operates in, with high
volatility in charter rates, vessel values, and consequently
profitability. Charter rates have increased throughout 2022
and 2023, after a long period of suppressed rates due to
market imbalance. Factors affecting this are partly outside
Solstad’s control and influence.
Operational risks such as technical breakdown, grounding,
and malfunction of equipment are partly mitigated by
insurance.
Procurement and logistic risk relate to pressure on the
global supply chain. The lead time on a certain number of
critical spares has increased significantly. Planning and
evaluation of critical spares will therefore be an important
factor to avoid down-time.
Solstad is exposed to interest rate and currency risk,
primarily through financing and contracts. Interest rate risk
is mainly due to long-term debt with floating interest. With a
substantial portion of the mortgaged debt in USD, currency
exchange fluctuations can have a significant effect on the
Company’s profit and loss, debt, and consolidated booked
equity.
A risk mitigation framework has been established based on
identifying, assessing, and managing risks that affect the
Company. The Board of Solstad monitors the overall risk
factors for the Company.
Cyber security risk in general has increased, partly driven
by the war in Ukraine. Recent events in the Red Sea
mainly implies risk to shipping costs and price of goods.
Market Risk
Market and operational risks are changes in the demand
and prices of the services provided by the Company, and
potential adverse effects of the provision of such services.
In addition, the supply side can be negatively affected if
too many newbuilt vessels are introduced to the market.
The market demand has steadily improved during 2023
and very few newbuild vessels have been announced.
Safety and Environmental risks
There are inherent safety and security risks related
to operations at sea. As one of Solstad’s core values,
safety is always in front of mind for all employees. This is
materialized through the Solstad Incident Free Operations
(SIFO) program. The Company focuses on evaluation,
facilitation, planning and preventive work to avoid all type
of personnel related injuries and incidents that have an
adverse effect on the environment.
The environmental risks mainly relates to the vessels and
includes risks such as oil spillage.
Key performance indicators are monitored, and cause
analysis performed with mitigating responses if possible
undesired events are identified.
For further information, reference is made to the
Sustainability Report.
Climate Risk
The Company’s business and results of operations could
be adversely affected by climate change and the adoption
of new climate change laws, policies, and regulations.
Growing concerns about climate change and greenhouse
gas emissions have led to the adoption of various
regulations and policies, including the Paris Agreement
negotiated at the 2015 United Nations Conference on
Climate Change (COP 21).
Climate risk is part of the Company’s risk universe, and
the Company is exposed to a variety of climate risks.
These risks vary from regulatory, transitional, market,
technology to reputational risk. Short and medium-term
climate change issues are not expected to have any
significant effect on Solstad’s OPEX. Higher fuel price
due to CO2 levies or the cost of green fuels will for the
most part be forwarded to the Company’s clients. Solstad
focus mainly on reduction of carbon emissions from the
fleet and to grow and pursue new business opportunities
within the renewable segments. Risks and opportunities
are classified as short, medium or long term based on
how effects of climate change affect the Company, and
required actions consequently planned. The Company’s
own initiatives to improve energy efficiency and installation
of battery hybrid and shore power systems are important
steps towards a net zero target in 2050. At the same
time, the Company must acknowledge that the targets
require access to technology still under development, and
extensive investments in both existing vessels and in fleet
renewal. A fast decrease in the market demand for the
existing type of vessels may pose a risk to Solstad, but
as there are very limited newbuilds or other alternatives
available globally in the short and medium term, this risk is
considered to be limited.
The Company aims to be transparent in its sustainability
reporting and work continuously on public ESG
communication to ensure that all stakeholders understand
that the ongoing transition is under control and to mitigate
the risk for any negative publicity and/or liability issues.
For further information, reference is made to the
Sustainability Report.
Refinancing Risk and Update
Since the restructuring in 2020, the Group has
communicated that there was a significant refinancing
risk related to the Group’s secured debt and the residual
claim related to the leasing arrangements for “Normand
Maximus”. The Company Refinancing (refer to note 2
and 5) means that the Company has succeeded in partly
mitigating this risk. By securing the required financing,
the Company is released from all guarantee liabilities
from the 2020 fleet loan agreement, and the maturity for
the Normand Maximus claim has been postponed by a
minimum of three years.
Standalone Financing Structures
The Company is in the process of refinancing the
mortgage debt towards “Normand Superior”. The maturity
under the current financing has been extended to 30 June
2024.
Normand Tonjer IS exercised its option under current BB
agreement to purchase the CSV “Normand Tonjer” from
Norwegian Mpsv AS at a net amount of USD 4 million,
whereof 56% of this was contributed by Solstad Offshore,
equal to Solstad Offshore’s ownership share in the owning
company of the vessel. The purchase of the vessel was
concluded 20 December 2023. Refer to the Company’s
stock exchange announcement the same day.
Further details refer to note 2, 3, 5 and 8.
The Maximus Residual Claim
In connection with the Refinancing, agreements were
entered into between i.a the Company and Maximus
Limited, amending the agreement regarding the residual
claim relating to the former leasing agreement for the CSV
“Normand Maximus”. Firstly, the agreement governing
the terms of the Residual Claim originally entered into on
12 May 2022, between Maximus Limited, subsidiaries of
the Company and the Company was amended so that
the maturity of the Residual Claim was postponed from
31 March 2024 to the date corresponding to the maturity
date of the new facility agreement which was entered into
between Solstad Maritime AS and a bank syndicate as
part of the Refinancing. This means that the maturity of the
Residual Claim is postponed until 16 January 2027, with
possible 1+ 1 year extensions if the financing to Solstad
Maritime AS is extended (at the discretion of the bank
syndicate). The latest maturity date of the Residual Claim
is 16 January 2029. The Residual Claim is guaranteed by
the Company, and needs to be refinanced within the new
maturity date. In addition, an agreement was entered into
between Solstad Shipholding AS, the Company, Maximus
Limited and the lenders to Maximus Limited. Pursuant
to this agreement, the parties have agreed that Solstad
Shipholding AS at certain conditions, is granted a right and
obligation to purchase the Residual Claim against payment
of NOK 200 million.
This right and obligation come into force in the event
that the lenders to Maximus Limited prevail in litigation in
Norway and Cayman Island on the right to ownership to
the shares in Maximus Limited. The Company does not
have a view on the likely outcome of the litigation and
the chances of the option becoming exercisable and no
assurances can be given in that regard. The Residual
Claim remains guaranteed by the Company and carries
interest at 9.5% payable in kind at the maturity date in
accordance with the original agreement entered into on 12
May 2022.
Company Refinancing
The major part of the Refinancing of Solstad, which was
announced on 23 October 2023, was completed on 16
January 2024. For further information on the details of
the Refinancing, please refer to the stock exchange
announcements 23 and 25 October 2023, the 3Q and
4Q 2023 reports, and the stock exchange notice dated
16 January 2024 with attachments. The Refinancing
involved repayment of the outstanding BNOK 11.2 under
the secured loan agreement that was entered into in
connection with the 2020 restructuring of the group. The
Company is thus released of all guarantee obligations for
the 2020 facility agreement. After the Refinancing Solstad
Offshore ASA will have 27% direct ownership of Solstad
Maritime. The Refinancing implements a new group and
ownership structure presented on page 94 and 95.
The Outstanding Part of the Refinancing:
As of 16 January 2024, Aker Capital AS owns 47.4%,
AMSC ASA owns 21%, and the Company owns 31.6%
of Solstad Maritime Holding AS. The outstanding part
of the Refinancing is the implementation of an offering
that the board of Solstad Maritime Holding AS has been
24
SOLSTAD OFFSHORE ASA ANNUAL REPORT 2023
25