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Marine Log

March 25, 2008

Russia takes majority stake in three Aker yards

Aker Yards ASA says it is to sell 70 percent of the ownership of three of its shipyards to FLC West, a Russian investment company, for EUR 291.9 million.

The yards are the Nikolaev facility in Ukraine and the Wismar and Warnemünde yards in Germany, all currently part of Aker Yards merchant vessels business area. The merchant vessels business area also include the Florø yard in Norway, but it is not part of the deal.

The transaction will see FLC West buy 70 percent ownership in the Norwegian based company Aker Yards Ukraine Holding AS, which in turn will own 100 percent of the Nikolaev, Wismar and Warnemünde yards. Aker Yards will retain ownership of 30 percent of Aker Yards Ukraine Holding AS.

Currently, Aker Yards Ukraine Holding AS owns 100 percent of the Ukraine facility. Before the transaction with FLC West, Aker Yards will transfer its 100 percent ownership of the Wismar and Warnemünde yards to Aker Yards Ukraine Holding AS.

According to Aker Yards, FLC is a Russian state controlled investment company with a $1.5 billion portfolio. The company has been established to invest in industries of strategic importance. In the interest of the Russian Federation, FLC has recently also become heavily involved in developing of the Russian shipbuilding and shipping industry. FLC West is located in Luxembourg, and is owned 50 percent by FLC. The remaining 50 percent is owned by the private Cyprus investment company Almiar Investment Ltd, which in turn is owned by FLC private shareholders.

It is expected that the new jointly owned unit will deliver modern vessels to meet the growing demand by Russian companies involved in hydrocarbons exploration, production and transportation.

Increased international trade between Russia and international markets, combined with extensive offshore oil and gas development plans in arctic regions with harsh environments, has created a growing need for more specialized vessels. The three shipyards in Aker Yards Ukraine Holding AS will be in a strong position to compete for contracts for building merchant vessels for Russian operators.

Aker Yards has long experience in developing and delivering solutions and ships for use in Russia, and says it sees the new agreement as "an interesting opportunity to further develop this business relation. The new ownership and business model supports the existing strategy of increased focus on specialized tonnage, in particular for arctic regions."

Aker Yards Ukraine Holding AS will continue to be based in Norway with headquarters in Oslo, and the company will later be renamed.

Tom Einertsen, currently President of Aker Yards' business area Merchant Vessels will become CEO of the company. There are no planned changes in management, organization, number of employees, pensions or benefits at the three yards involved as a result of the sale. Also, there will be no changes to the execution of ongoing contracts and order backlog as a result of the new ownership model.

FLC West buys 70 percent ownership of Aker Yards Ukraine Holding AS and the involved yards for EUR 291.9 million. This implies a total value for 100 percent ownership at EUR 417 million, based on zero debt and zero working capital.

In Aker Yards' accounts for 2008, the transaction will have effect from 1 January 2008. As a result of the divestment of Aker Yards Ukraine Holding AS and the involved yards, Aker Yards ASA's annual revenues for 2008 will be reduced with approximately NOK 6 billion. Aker Yards' net gain from the transaction compared to book value is approximately NOK 1.2 billion. Possible further effects, including possible influence on Aker Yards ASA's EBITDA margins for 2008 and earnings per share, will be communicated when the group presents its financial results for the first quarter on May 7, 2008.

The transaction is expected to be completed within the summer of 2008.

The agreement is pending on approval from relevant authorities, including competition authorities in Germany and Ukraine.


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