Good morning. Welcome to Aker Solutions presentation of Q4 and annual results for 2019. As you have noticed, we will do our presentation today as an audio cast. My name is Tove Røskaft, and I'm head of communications at Aker Solutions. With me here today is our Chief Executive Officer, Luis Araujo, and our Chief Financial Officer, Ole Martin Grimsrud. They will go through the main developments of the quarter and the full year. We will also have time for some questions after their presentations. Luis, I will now hand over to you.
Thank you, Tove. Good morning and thank you for joining us on this call today. Let me start as usual with the main developments in the quarter. Our execution remains strong. The Johan Sverdrup went on stream in early October, and the production rate is now ramped up to more than 300,000 barrels per day, with the lowest emissions of CO2 in the industry. These fields generates about 10 million NOK in profits every hour according to Equinor. It's a good example of the kind of value we are creating for our clients. On the 17th of December, Aker BP celebrated 1st oil on the Valhall Flank West field in the North Sea.
In this project, the wellhead platform alliance between Aker BP, Kvaerner, ABB, and Aker Solutions delivered ahead of schedule and within budget, and very importantly, with the best safety record to date. This is truly a best-in-class project, proving that our alliance model is creating value for our clients. Our Subsea alliance with Subsea 7 and Aker BP also created a lot of value in the phase I of the Ærfugl project. This was the main reason why the license holders decide to move forward phase II of the project by 3 years. Our front-end capability remains one of our key differentiators, as we achieved another record year with 151 study awards in the period. I will come back with more details about the trends later in the presentation.
Last October, we launched our 20, 25 and 30 strategy, which states our ambition to generate 20% of revenue from renewables and 25% from low carbon solutions by the year 2030. The feedback from our stakeholders has been very positive, as I am pleased to see that we have secured new wins that show that we are on the right track. A great example is the FEED project we won from Equinor this month for electrification of the Troll B and C platforms. As Equinor stated yesterday, electrification of offshore assets will be a major enabler for their low carbon energy transition. We are thrilled to play a major part in this journey. We also strengthened our position in offshore floating wind, where we see great potential. We increased our stake in Principle Power to 25%.
Let me remind you, this is one of the 2 companies with a field-proven technology concept for offshore floating wind. In December, the installation of the world's biggest float ing wind turbine, an impressive 8.4 megawatts, was completed offshore by Principle Power. The wind farm is already generating renewable, clean energy for the Portuguese grid. When all 3 turbines are in place, the farm can supply energy to 60,000 users. These are our Q4 figures. Revenue of NOK 7.3 billion. EBITDA of NOK 434 million, which means an EBITDA margin of 5.9%. Excluding special items, the margin was 6.5%. We won NOK 5.6 billion in new orders and the backlog ended at NOK 25.4 billion. Here are the numbers for the full year 2019. Revenue was very strong at NOK 29.3 billion.
This is up 16% from 2018 and up 30% over the last 2 years. EBITDA was NOK 2.2 billion, an EBITDA margin of 7.7%. Excluding special items, the margin was 7.9% and EPS was NOK 1.54. We had an order intake of NOK 19.6 billion. Our finances were solid at the end of the year, with a liquidity buffer of NOK 6.3 billion. Despite our positive results, the board has proposed no dividend payment for 2019. It's still deemed prudent to exercise caution and to position Aker Solutions for the energy transition. Afterwards, Ole Martin will take you through the numbers in more detail. Our order intake in the Q4 was NOK 5.6 billion. The highest number in more than 1 year, indicating increasing market activity.
A key win included the Ærfugl phase II for Aker BP, which I already mentioned came as a result of a strong performance in phase I. This subsea delivery will include wellheads, vertical subsea trees, satellite structures, control systems, and about 30 kilometers of umbilicals. Our deliveries to Ærfugl highlight the power of intelligent subsea as we utilize our integrated field design capabilities to accelerate field development and maximize performance. We also won a 3-year frame agreement for Vår Energi for maintenance and modification services on the Norwegian continental shelf. Aker Solutions has delivered brownfield services for Vår Energi's assets, Jotun, Balder, and Ringhorn for 19 years, and we look forward to continue this partnership. On the NCS, we secure a 6-year contract with Equinor for inspection services on more than 15 assets.
In Trinidad and Tobago, a new region for us, we won a FEED for an unmanned platform for BP. The contract includes an option for an EPC project and could be the 1st in a series of unmanned facilities for this client. Together with our partner, Jana Marine, we won a big frame agreement for Saudi Aramco. The scope of the agreement covers offshore brownfield work on a range of Saudi Aramco assets. Far, we have not booked any order intake for this agreement, but we expect to do so when the 1st call-offs take place during the course of this year. I'm pleased to have secured new contracts with key clients in new markets. This is in line with our strategic goal to grow internationally together with target customers. 2020 started very strongly for our company with 2 important contract awards.
The first one, in January, we announced a renewal of a major brownfield contract for an undisclosed client. The value is about NOK 3.5 billion for a 5-year contract, and we expect to have more information to share soon. Finally, we secure a FEED contract with Equinor for the electrification of the Troll B and C platforms. The contract comes with a sizable EPC option, which we hope will be executed when the FEED is completed later this year. We continue to see strong demand for our early phase front-end work, not only here in Norway, but also globally. Out of the 40 new studies this quarter, more than 1/3 are for international projects, and several studies included a low carbon solution. We won 151 front-end orders, another record year and 1 more than in 2018.
I would like to remind you that 2018 was also a record year for our front-end team. These numbers are a good indication that operators are willing to develop new projects. We see this is a clear sign of a potential increase in sanctioning activity. As you can see on the slide, 29 studies turned into more detailed FEED projects last year compared with 19 in the previous year. Some of these included options for EPC contracts, which put us in an excellent position for further work in the next phases of development. As I already mentioned, we launched our updated strategy last quarter. We set out some ambitious targets for our business over the coming decade. Our goal is to generate 20% of our revenue for renewables by 2030.
We are positioning our company for growth in this segment by investing in offshore floating wind. As I mentioned, we have further increased our stake in Principle Power to 25%. Within this sector, we see a similar trend for development of new projects as we are used to see in the oil and gas industry. Projects move from concept and feasibility studies through FEED and finally full execution. Through our ownership of Principle Power, we are already involved in early dialogues that could lead to more than 20 new studies for offshore floating wind. As we know from our front-end business, studies can be a good leading indicator of the future market activity. When we looked at our portfolio of low carbon solutions, we see more near-term opportunities.
We already work on several projects for our customers that can reduce CO2 emissions significantly, at the same time, generates revenue for Aker Solutions already in 2020. Within carbon capture, utilization and storage, we are working on the first delivery of our 1st Just Catch™ unit. The unit is designed in modules and is a perfect fit for small to medium-sized industrial plants. This delivery to the Twence waste-to-energy plant in the Netherlands will carry on through 2020 and be completed next year. Together with HeidelbergCement, we plan to build the 1st full-scale carbon capture plant in the cement industry, we expect this important project to be sanctioned later this year. Another major low-carbon project is the electrification of oil and gas platforms. We have already been part of electrification projects in Ula as well as Orang Valhall.
Early in the presentation, I mentioned the Troll B and C FEED, which could lead to an EPC project this year. This project, as an example, has the potential to reduce CO2 emissions by 450,000 tons per year. This is the same as taking more than 200,000 cars off the road. We are currently working on several brownfield electrification studies, and we see a great potential for some of these to be materialized into projects in the near future. The FEED for the Jansz subsea gas compression project, in Australia, is progressing well. Our client, Chevron, with partners Shell and Exxon, should be in a position to move forward to the EPC phase later this year. Subsea gas compression requires less energy than a conventional platform solution, resulting in a lower CO2 footprint for the field.
The Jansz project also includes an unmanned platform, which is part of our low-carbon portfolio. Demand for low or unmanned facilities is growing, as shown by the recent award from BP in Trinidad and Tobago. As you can see from these concrete examples, low-carbon solutions will generate a meaningful share of our revenue mix already in 2020. To the outlook. The offshore market remains active. This is supported by increased cost efficiency that are generating lower break-even levels for offshore fields. Markets remain very competitive. We continue to deliver strong execution. We also enjoy repeat and new orders from key customers, especially in the brownfield segments and in international markets. Tendering and front-end activity remains high in our target markets, with current bid activity totaling about NOK 60 billion. Due to market volatility, contracts are taking longer to be awarded.
We see a high probability for several of our ongoing FEEDs and tenders to be converted into projects over the next 6 to 9 months. We have, during the year, strengthened our focus on the energy transition, and we have a firm commitment to grow our business in that area. I believe that Aker Solutions is well-positioned to capture opportunities in both new and existing markets. In summary, we close another year with strong execution on our projects and services, solid financials and high tendering activity. Thank you for listening, and Ole Martin will now take you through the numbers in more detail.
Thank you, Luis. Good morning. I will now take you through the key financial highlights of the Q4 , our segment performance, and run through our financial guidance before we move to Q&A. As always, all numbers mentioned are in Norwegian kroner. Let's start with the income statement. For the Q4 , our operating revenue was NOK 7.3 billion, up 6% year-on-year, reflecting a continued high activity level in both projects and, in particular, services. For 2019 overall, we delivered our highest revenue in 4 years at NOK 29.3 billion, exceeding our previous guidance. This was a solid increase of 16% from the previous year and 30% over the 2 last years.
Our reported Q4 EBITDA was NOK 434 million, excluding special items, EBITDA was NOK 480 million, a slight decrease from NOK 495 million a year earlier. This was equal to an underlying margin of 6.5% compared to 7.1% in the same period last year. Excluding the effects of IFRS 16, our underlying margins were down compared to the same period last year, mainly reflecting solid progress on our new backlog, won in a very competitive market, as well as the effects of the revenue mix with the continued high activity level within lower margin brownfield business. For 2019 overall, the underlying EBITDA increased to NOK 2.3 billion, with a margin of 7.9%, up from 7.2% a year earlier.
Q4 depreciation, including impairments, was up year-on-year at 396 million NOK. Excluding the effects of IFRS 16 and impairments, the depreciation was 200 million NOK, in line with our previous guidance. We continue to expect underlying depreciation, including the effects of IFRS 16, to be around 1.2 billion NOK per year. We have, in the Q4 , reorganized some of our office and manufacturing sites, which have resulted in an impairment charge on leased and fixed assets of 81 million NOK, with no cash impact. This is related to our improvement efforts to optimize our footprint and competitive position. Our reported Q4 EBIT, or operating profit, decreased year-on-year to 37 million NOK from 287 million NOK. Excluding special items, EBIT was 165 million NOK, and the margin was 2.2% versus 4.4% in the previous year.
Net financial items were negative NOK 215 million in the quarter, which included NOK 106 million of currency losses related to the significant devaluation of the Angolan kwanza from mid-October. The devaluation was related to the central bank's efforts to overhaul the country's currency regime, we do not have the ability to hedge this exposure. We are in dialogue regarding a potential compensation of the currency loss with a possible recovery in Q1 of 2020. We continue to see our net financial items around NOK 100 million per quarter going forward, excluding the effect of currency and non-qualifying hedges. Our tax charge was a equal to rate of 16% in the Q4 , related to the negative income before tax. 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 -NOK 148 million. Excluding special items and currency losses, the net income was NOK 32 million, and the earnings per share NOK 0.08, down from NOK 0.63 last year. Net income for the year, excluding special items, was NOK 460 million, and earnings per share ended at NOK 1.54, down from NOK 2.01 a year earlier. Now moving to our balance sheet and cash flow performance. Our working capital or net current operating assets improved in the Q4 to NOK 781 million, below our previous guidance. Going forward, working capital is now expected to trend around 3%-4% of group revenue, as we have implemented measures to improve working capital performance.
Our cash flow from operations in the Q4 was NOK 740 million, reflecting good progress on our backlog and strong cash collection. Our investing cash flow totaled a net negative NOK 370 million in the quarter. We continue to expect overall CapEx and R&D at around 3% of annual revenue with flexibility. Excluding IFRS 16, we have the net interest-bearing debt of NOK 1.6 billion at the end of the Q4, down from NOK 1.9 billion at the end of the Q3 . Our net interest-bearing debt to EBITDA ended at a solid 0.9 times. During the quarter, we repaid the outstanding amount of the 2019 bond of about NOK 750 million. We have drawn NOK 600 million on our revolving credit facility.
We continued to have a strong financial position at the end of the Q4 , with a total liquidity buffer at a healthy NOK 6.3 billion. This includes our revolving credit facility with leverage covenant at 3.5 times net debt to EBITDA pre IFRS 16. Our solid financial position continues to give us flexibility and good financial headroom moving forward. Now on to projects, where our Q4 revenue was up 1% year-on-year, with a continued high activity level in field design as well as higher revenues within the Subsea subsegment. This resulted in an underlying project EBITDA of NOK 372 million, with a margin of 6.6% for the quarter, up from 6.2% last year.
EBIT, excluding special items, was NOK 159 million, with a margin of 2.8%, down from 3.9% last year. The margin in the Q4 reflect solid progress on our new backlog, 1 in a very competitive market, as well as continued high share of lower margin brownfield activity. Q4 order intake in projects was NOK 4.4 billion, with a book-to-bill at 0.8 times. Some further details for subsea and field design within the projects reporting segment. Revenue from subsea projects was up 13% from the same period last year, driven by increased activity globally. Revenue from field design projects decreased 5% year-on-year, but still with a high brownfield activity in the Q4 .
The field design revenue has increased about 50% over the 2 last years, driven in particular by large modification and hookup jobs in the North Sea. However, this activity is expected to normalize in 2020. Q4 order intake in projects overall was NOK 4.4 billion, with NOK 1.7 billion in subsea and NOK 2.7 billion in field design. The backlog in projects ended the quarter at NOK 15.9 billion. Despite a competitive market, tendering activity remains very healthy, and we are now tendering for about NOK 50 billion of work overall in projects. As Luis mentioned, we currently have a high FEED activity level, which should be a leading indicator for projects moving forward. The services segment delivered solid growth and was up 24% year-on-year, reflecting our strategy to grow our services business.
This was the strongest quarterly revenue in services in 4 years. During 2019, in particular, the production asset services sub-segment experienced significant international growth and accounted for about 60% of services revenue for the year. Underlying EBITDA was NOK 169 million, with a margin of 10.3%, down from 14.6% in the same quarter last year, driven primarily by an unusually high installation and commissioning activity in the Q4 of 2018, and the continued effect of rev mix on our margin. EBIT was NOK 107 million, with a margin of 6.5% versus 11.6% a year ago. Q4 order intake in services was NOK 1.1 billion, mainly related to awards within production asset services. The backlog in services ended the quarter at NOK 9.6 billion.
As a reminder, in addition, a part of the service order intake is short cycled or book and turn in nature. Despite a competitive market, tendering activity within services is healthy, and we are currently tendering for around NOK 10 billion of service work globally. Now over to the order intake and backlog performance for the group overall. The Q4 order intake totaled NOK 5.6 billion, equal to a book-to-bill of 0.8 times in the quarter, and 0.7 times for 2019 overall. Our backlog was at NOK 25.4 billion at the end of the Q4 , and the backlog for 2020 execution is NOK 15.1 billion, up from NOK 12 billion at the Q3 . Order intake continues to be somewhat uneven, caused by large contracts and timing of sanctioning. As mentioned by Luis, during 2019, we have experienced delays in project sanctioning.
Tender activity remains very high, and we see a high probability of several of our ongoing FEEDs and tenders to be concluded over the next 6 to 9 months. We are now engaged in tenders with an estimated sales value of, in total, NOK 60 billion, and a strong start of order intake in the Q1 of 2020 further improves our visibility going forward. Finally, over to our guidance. We delivered a very strong top line growth of 16% last year and 30% over the 2 last years. At this stage, we see our overall 2020 revenue around 2018 levels, in particular driven by normalization of the record high activity levels within field design.
For EBITDA, we expect 2020 EBITDA margin to remain around underlying Q4 levels, likely paced towards the H2 of the year. This reflects the delayed project sanctioning, continued progress on our new backlog, 1 in a very competitive market, as well as revenue mix with a high share of lower margin brownfield activity. The current industry environment implies a relentless focus on quality execution and cost discipline in 2020. We currently expect to book around NOK 50 million-NOK 100 million in the Q1 related to restructuring measures to further improve our cost base and competitive position. In this market, our capital allocation priorities remain firm. We continue to prioritize a strong balance sheet with good liquidity. We also continue to invest in the business to further grow and position Aker Solutions for the future.
This includes our 2025-30 strategy, where we plan to increase our exposure within renewables and low carbon solutions. Overall, CapEx and R&D for 2020 are still expected at around 3% of annual revenue with flexibility. As mentioned earlier, the board has proposed no dividend payment for 2019 as we still are cautious and prioritizing a strong balance sheet. To sum up, we ended the Q4 by continuing to deliver on our projects and services, and we see high probability for increased order intake over the next 6 to 9 months. We have a solid financial position, which continues to give us flexibility and financial headroom to position Aker Solutions for the future, both within our traditional markets and within renewables and low carbon solutions. Thank you for listening. That was the end of our presentation, and we will now open for Q&A.
Thank you, Ole Martin. Operator, we will start with the questions for the people who have called in.
Thank you. If you would like to ask a question, please signal by pressing * 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that's * 1 to ask a question. We will now take our 1st question from Michael Alsford from Citi. Please go ahead.
Good morning. Thanks for taking my questions. I've got a couple if I could, please. Just firstly on the new energy strategy, clearly, you know, big ambitions to grow revenue to around 45% from low carbon and renewables by 2030. I just think if you could quantify how much from these areas would be in revenue for 2020 and perhaps if you could give some progression. You know, do you think that's a linear progression from there to 2030, or do you think it's sort of a quicker progression or slower progression from 2020 levels? Secondly, I just wondered if you could talk a little bit about, you know, where the NOK 5 billion of extra tendering activity is coming from, what type of projects, you know, what regions would be really helpful.
Finally, just on the restructuring, could you maybe talk a little bit about exactly what you're doing there and how you're changing the business going forward into 2020? Thank you.
Well, thank you for the questions. I guess I will start with the first one. Again, we see actually as described a huge opportunity and quite frankly, things are changing and I guess changing in some locations faster than others. We don't report our yet our company to the renewables and low energy yet, as I said, but we probably will do in the future. All I can say is that when it comes to renewables, we are focusing on shore flow to wind, so that's a new market. As I mentioned in the presentation, most of projects are moving from studies into FEED, and then we expect to take a couple of years until we can see significant revenues in our books.
When it comes to the low energy, that's progressing faster. You can see that we have 4 or 5 projects already in our backlog or in studies that will generate revenues larger for us. Without going too many sums, we have about 10% I would expect in 2020 of renewables or low carbon. Of course, that's excludes the revenues from Principle Power since we do not consolidate those numbers in ours, because we are 25% owner. That's the 1st question I hope I have answered. In terms of speed, you said how long it's gonna take longer if it's linear. It's very hard to predict linearity when in a new market like that.
I think in the same way that it will be hard to predict the social pressure over CO2 reductions from last year to this year to year before and so forth. Certainly, things are speeding up. On the carbon capture, we see a lot of interest, but, you know, I think the CO2 taxes have to make sure that people are forced to do that. The combination of all. I think that it will accelerate, but it's very hard to predict. When we've done the strategies last year, we had to base the information we had, and quite frankly, our projections are actually more aggressive than what the market or IEA and others were predicting. As we know, nobody get it right, so things can be faster.
I think if it goes faster, it probably good for us 'cause we have been investing for a long time. I guess the 2nd question, it was related to.
Risk.
Let me see. Tenant activity. Okay, good. I think the NOK 60 billion is pretty much still related to the, to the standard, what you call a traditional business, but includes everything from brownfield, from subsea as described by Ole Martin. It's a big spread. We have projects in Africa, and as you know, in some places in Africa moving in different directions. We see countries like Angola. We see good moves in Ghana, excellent changes in regulation so forth. We see the opposite in other countries as you know. In Africa, there's activity and things are improving. We see activities in Brazil, we're well-placed there, both in brownfield and in greenfield.
We see of course our local market as a home market in Norway, always some opportunities, especially in brownfield with less opportunities in greenfield. It's a good spread, has also mentioned some of the FEEDs that will lead to some projects who are related to decarbonizing assets like electrifications and so forth. New regions, I think, as you probably, I hope the audience has noted that we have landed 2 new regions with 2 basically new clients, Trinidad and Tobago, and also Saudi Aramco, Saudi Arabia. That's important. It shows that our front end was behind all those awards, we can see that the clients are taking us into our key clients, are taking us in different regions.
Very pleased to see that. It's global activity on that sense. The last 1 was about restructuring.
Yes. As we said in the presentation, we now see a period with somewhat lower margins going forward on the back of the new backlogged 1 in a very competitive market. For us, this implies a continued focus on cost and capital discipline as we now move into 2020. We have a cost reduction program ongoing. For the Q1 , we estimate NOK 50-100 million in one-off charges where of restructuring of our subsea operation is one of the components.
Yeah, just put some more color on this. There is spare capacity I would say. There's overcapacity in subsea. We know some of our competitors took capacity out, so do we still have 3 plans. As we move forward, we are concentrating the large amount of subsea fabrication in our lower cost plants in Brazil, the larger plants as well, in Brazil and Malaysia Port Klang. We are transforming our facility in Norway more into a technology center, new products and also focus on pumps as well as work over some high technical stuff and of course, maintaining our project execution capability, which is unique here in Norway.
Basically we are changing our delivery model as we explained before, and becoming more efficient and more competitive.
That's great. Thanks very much for the color.
We will now take our next question from James Evans from Exane BNP Paribas. Please go ahead.
Morning. Thanks for taking my questions. My first one is around margins. I mean, I think this is at least the 4th margin downgrade in a row. Now look, you've stated all along that the market is competitive or very competitive. I'm kind of really what has surprised you so much? I guess more importantly, what do we need to see to see kind of stable guidance going forward?
Okay. I can start. Ole-Martin puts more colors on the numbers. I think we have been guiding in the, where we are now for a while. There's no question that the market is competitive, as I just mentioned, especially in subsea, we have very strong competition there. I think that we have worked quite well in terms of guidance and stability for the last 5 years. We're very proud of what we have been achieving, but the market has changed. What's gonna happen to in the market to improve and change is basically more activity. We are seeing more activity now. Of course there are uncertainty and there are quite a lot of volatility.
As we know, our clients are also under pressure with the volatility of the oil price for all sort of reasons. I think that what we need in this is more activity, with certainly delivering far more volume now than it used to, due to the prices being 30%-40%, probably lower to several reasons, including efficiency. On the other hand, making offshore projects, more competitive. As you can see, the offshore activity is increasing and over shale and as well as other areas. I think that we need more volume. In terms of margins, Ole-Martin, you want to add anything else on the guidance?
I would say 3 drivers now for margins in 2020. Number 1, we see a higher share of the new backlog, which I say is 1 in a very competitive market. 2nd driver is still the revenue mix effect of a continued high share of lower margin brownfield activity. The 3rd driver in 2020 will also be, as we said, we have seen some major prospect being somewhat delayed, which then also impact the margin profile for the year. Hence we then guide on a margin for 2020 around the current underlying level.
Okay. Understood. Okay, a bit more positively, you sound a bit more optimistic on awards. Just how confident are you of returning to backlog growth in 2020?
Well, it's was quite, I think symptomatic last year that some of the awards slipped. There's a fact, and I mentioned that, taking longer to be sanctioned. Actually, one of the awards was actually award on the 6th of January, just after the year-end. Very important for us. It was a renewal of existing large brownfield international project. That just arrived. We also seen awards of front-end studies who have EPC as options. I will mention 1 from BP, we mentioned 1 from Equinor. Several of those studies have options there. We are confident that if those projects are economical, as we think they are, due to all this we've been talking about in terms of improved efficiency and so on, they're gonna be sanctioned this year.
We also saw some important changes in, as I mentioned in the previous question, on, for example, new legislation, more competitive in Ghana. We have a pretty large project there that can become a prospect later this year. We also see projects like Jansz in Australia, who are going to the FEEDs and concluding FEEDs mid-year. All those indications shows that market activity will increase. Of course, you know, we are not iso-insulated, and there are international factors. As I always say, nothing is guaranteed, but our view from where we are, and especially because some of those projects are with key clients, and we have some key differentiating position there, we expect that to happen in 2020, in the next 6 to 9 months.
As we know, market is volatile and there are, things that might change that. Right now, we are confident it will happen.
Okay, thank you.
I will now take our next question from David Farrell from Credit Suisse. Please go ahead.
Hi. Thanks for taking my question. It's a bit of a follow-up to Michael's original question. Could you give us a bit of a breakdown in terms of the $60 billion currently being tendered? What proportion of that fit into the renewables and low carbon parts of the business, please?
Okay. Thank you for your question, David, and good to hear from you. I think that we're not dividing into, at least reporting and guidance into low carbon yet. You just mentioned the projects that are involved in that area, and I mentioned quite a few. So the breakdown, I actually don't have it in my hand, but we can have a breakdown from subsea and brownfield, and I think we might have that right now. It's probably, as you'd be 2/3 there, and 50/50 . So I think it's, it's, as I said, it's spread. We do see that, at least for the last few years, brownfield projects are progressing faster than new greenfield and apart from the tiebacks.
We have a mix of that, and we also see that clients are more prompt to get production from existing facilities than to start new ones, for obvious reasons. Certainly, this trend about moving to straight from FEED into essentially, it does reduce the project execution by about a year. The alliance model that we have, for example, with Aker BP, now with potentially Aker Energy in Ghana, it shows that we go from FEED straight to execution. We kind of maturity the project already, which should take at least a year or more that people take into tendering and so forth. We do believe that that's gonna start to increase going forward. It's widespread and we should support both sides of the business.
Thank you. Just as a follow-up, in kind of this new world that you're heading in 2030, is there anything in terms of the projects you're gonna be executing which would suggest that you don't, you have a structurally lower margin inherent within the business or potentially structurally higher?
We, we don't, we don't expect that actually, 'cause some of these new technologies we're talking about, new areas, we are differentiated there. There's not many people with the, with the evolved technology, for example, in carbon capture as we do. That's the same with what we've seen offshore wind. We are focused on that area because we believe that there's more differentiation and hence should be better margins. On that particular market, we have to do is reduce the overall cost, and I think it will happen. I just mentioned this 8 megawatt turbine, so as you know, the larger the turbine, the more energy and the lower the cost. We are working very hard on that.
Also working very hard to industrialize the projects, the floaters and so on, to make sure that we can produce in larger scale, because right now, most of the projects are pilots. We believe it can be better margins there. What Ole Martin said previously, that we are phasing out 1 brownfield work, which traditionally has lower margins than greenfield and tiebacks and so forth. Some of this work was won under very high strong competition back 2, 3. Those are long cycle projects 2, 3 years ago. That's our view on that part.
I mean, just to kind of as a final follow-up, please. You obviously talked about the strength of the competition. You know, some of your peers have replenished their backlogs somewhat since, I guess 2016, 2017. Is the level of competition less, severe now, than it was back then, and therefore, you know, the margins are potentially better in anything that you win now relative to what you're executing now?
I think the competition has all been tough for the last few years, and I think it will remain tough. That's the nature of the business. What I, what we note, of course, you should note, is that those projects are lumpy and also we have to see who are our key clients and some of our key clients. For example, Petrobras and Total have been quite, and Equinor, after the big spread of projects back 2, 3 years ago, they have been quite slow with putting orders 'cause they're executing the existing projects, but they're about to get back into more projects. We see that Total in Angola and so forth. We see Equinor coming with more projects like the Breidablikk, in, you know, some of the tie-backs in Norway.
I think we should have our share of the awards now. Always been like that, if you look back, that's why, folks, less on market share than some of other people 'cause it always lumpy, and then you can be a hero today and be a 0 tomorrow. I kind of look into overall thing, and I think we will replenish our backlog in 2020.
Okay, great. Thank you very much.
We will now take our next question from Frederik Lunde from Carnegie. Please go ahead.
Yes, good morning. You have a lot of sort of positive long-term outlook statements in your presentation, which is in contrast to share price, which hits an all-time low today, and you're trading at a big discount to book value as well. Frankly, I mean, there seems to be a lack of sense of urgency here, and a big disconnect between your expectations and what the equity market is saying. I was wondering if you could comment sort of on the targets for return on capital employed, return on equity, if you're looking to do more dramatic changes to your cap base going forward. You're currently investing in growth while you haven't delivered any return on equity, at least not above cost of capital in recent years.
This is, you know, what's your plan for shareholder value generation? You talked about creating value for clients, but at the end of the day, when is it pay time for shareholders the way you see it?
Okay. Let me start there. Thank you, Frederik. Good to hear from you, and thank you for your question. First of all, I will not comment on share price 'cause, you know, you know that I am a shareholder, so I have my own view on the share price. The question here is that, I think, I don't think the future is canceled, and I think this company has started well before the oil and gas. We will be make this transition better than most. That's my personal view. We have to invest in the future. In terms of returning, putting more value to the clients and to us, that's a fact.
It is today, has been the last few years, a buyer's market. That, that should change in the future 'cause otherwise there won't be suppliers here to supply those clients. That's for me, I share that thought with you. In terms of returning to shareholders, I think our board has been focused on what we can achieve going forward, and as I said, the future is not canceled, not for us, and we will continue to invest on that. For the existing business, we still need some investment in services and so forth. I can guarantee you that our company has probably demand for 3 times more CapEx than we have indicated, and we've been focused on that. There is a sense of urgency.
The same way we have shown a sense of urgency to cut costs for the last 5 years, proved that by maintaining our margin stable and actually growing 30% in 2 years, that I have not seen anybody doing it. In terms of the market recognizing us, I guess we're telling the story. In Norway, as I do, some negative sentiments towards offshore and towards oil and gas, especially in Europe and Scandinavia. I think we are showing that we can change, and I think in terms of contractor, we are the ones that showing more action and not only words. That's it. I don't know if Ole Martin want to add anything else on.
Well.
on the return on capital.
Let me add on the CapEx side, Frederik. You know, we are a technology company, and we need to continue to invest in R&D, in digitalization to stay competitive. As we said, you know, at the previous quarterly presentation, around 2% of revenues is needed as a minimum going forward. The additional 1% that we currently invest would be then needed in some periods in order to deliver on specific project-related investments or to then facilitate growth within specific areas such as renewables and low carbon solutions. At the moment, we invest in project-related rental tools to further grow our services business. As said, we grew our services business now 24% a year over year.
We also then invest in offshore floating wind and carbon capture. As I said, we also increased our ownership in Principle Power during the quarter.
Really even technology companies need to return, or generate returns on the capital. Do you have any quantifiable target for your return on equity or return on capital employed and also sort of a timeframe for that?
I think that, it's pretty clear that the policy for dividends and so forth is still in place, and we hope to get back there. We are focused in the, what we think is important for us right now.
I mean, when you're ramping up CapEx this year and also last year, you must do some sort of return also cost of capital and returns on those investments. Is there any sort of a tangible timeframe for when we can expect to see returns on those investments? Not cash back to shareholders, but, return on equity in your P&L.
Well, we'd only guide as far as 2020. I think we have provided guidance already.
Great. 1 last question before I let you go. just on your investment in carbon capture and in offshore wind. Private equity markets are not really, you know, rewarding those investments in sort of legacy companies, while pure play companies are getting fantastic valuations. Have you given any thoughts to spin off? I realize it's probably a bit early from an industrial point of view, but from a valuation point of view, should be quite sort of easy reward for shareholders if you were to do something on the structural side.
Okay, now good question. That's a positive question, and I like that one.
Apologies for the bad ones before.
Yes. That's what we're working for. I think that I would say we split the business now. That's not in the plans. You're right. You actually hit on the spot that it's too early for industrial point of view. Certainly I hope the market recognize going forward what we're doing because we're very bullish about this, as we've been saying. We are a company that we tend to deliver and then talk about it, like we just mentioned some of the projects in Sverdrup and so forth, and new clients, international growth. Here we are leaning forward because we do believe we have a differentiated position here as an industrial company. We actually. A lot of the competence that we're using to develop this is coming out of our we call core business.
We have to split a couple engineers, a couple technicians and so forth in half, and that's not very, very possible. But certainly, in the future, yes. I think you'll probably hear more about us on that, on that front in the future, because certainly the market recognize some companies who does not have the same competence for renewals as we do. Going forward, I think we're gonna be telling that story better.
As the examples are being concrete, I just mentioned the invest we made in Principle Power and how much we help with that company as well to industrialize their concept because they are a small company, and it's a kind of two-way street where they are bringing us into a, very fast into a, into a growing market and with track record. For me, it was quite impressive to go to Portugal and Spain in December to step on those floats and see how complex and how well-designed they are and how much ahead of everybody else we are. We know that offshore floating wind, especially deep waters, is the future due to wind intensity and so forth. I think we are, we're moving quite well there.
In the future you might hear something about it. Right now, this is part of Aker Solutions, and there are benefits of being part of Aker Solutions. As I said, I hope the market recognize the strength of our story, but some people want to see it before it's done, so we're progressing and investing on it.
Thank you.
We will now take our next question from Lillian Starke from Morgan Stanley. Please go ahead.
Hi. Good morning, and thank you for taking my question. The 1st question I had was a little bit of, if you could provide a bit more color again on the pipeline. I was just wondering to what extent the project delays that you have seen within that pipeline have been maybe related to idiosyncrasies for the project or a tough market condition versus maybe these projects were falling lower within the pecking order of clients. The 2nd question I had related to the pipeline is, if you could state out of that NOK 60 billion, how much of that relates to FEED work with a conversion into EPCI?
Okay. Taking the first part, I think the usually the reasons to delay projects, there are several, and I think I mentioned that some countries had pretty difficult commercial conditions, so they've been in and out recently. I would say in general lines, I think the slowing down is the fact that people are uncertain and as you know any virus would drop your oil price by 10, and people get very uncertain about all this all these facts and so forth. Even though we see because we work very closely with clients on the front end, we actually see what the break-even of projects are.
We help them to lower those break-even costs, like it happened on, even on Sverdrup and Kashagan, which we actually sanctioned at break-evens that were 3 times higher than they are, they're coming to on stream now. The projects are solid, the people are more cautious, and I think the uncertainty is making people take a step back. It's important to also realize that some of our clients are also putting, like ourselves, putting some investment into the energy transition. There's all kinds of reasons. In general terms, it has to do a lot with uncertainty, people trying to make absolutely sure that those projects will be, you know, eco-economical.
Again, we are offshore company, which is showing actually good progress now by all indicators. Those are long-term, long cycle projects, so people tend to be more cautious to sanction. As I said, I see more brown field and type X being sanctioned quicker than actually those large green fields. I think 2nd question was about how much of the projects are coming from straight from FEED into sanctioning. Well, I don't have the data actually. I know that there's a big share I think we mentioned. I think the table that we have on the presentation actually shows that we do have, we have increased the number of projects that move from became full FEEDs. That's indicated that things are progressing, as I said, faster.
There is more optimism, I guess, on the client side. If I had to make a guess, because the projects are actually at FEED that we know, we wanna win, probably, anywhere between 30%-50% of the current tendering.
Okay. Perfect. Thank you very much, Luis.
Thank you. Welcome.
We will now take our next question from Håkon Amundsen from ABG. Please go ahead.
Good morning, guys. Just a follow-up on the margin question. When we look at kind of the new level that you expect for 2020, how does actually these components that have negatively impacted you in 2020, how do you expect them to evolve going forward? What I'm trying to think about is if this is kind of a new level as we go into 2021 and 2022 with respect to as the pricing environment appears to have not improved, and how does, for example, the mix and your cost base look when we look a little bit further ahead, please?
Okay. I'll let Martin take that one, but I hope the margins will improve. They will not be as 2020 is not the 2021 to 2022. Otherwise, if that's the case, I will have to agree with Frederik with his return on capital. We need to improve that business, there's no question about it. Martin?
Okay. I would, you know, we're not guiding on 2021 yet. You know, pending successful order intake in 2020, if we are able then to grow backlog and grow revenues into 2021, we should expect more scale and effects also impacting margins then into 2021.
Okay. That's pretty clear. Then just a question on your 2020 revenue guidance. You know, you have now lowered it to be similar to 2018. If you look at the coverage you have with the NOK 15 billion, you're still a bit short compared to what you traditionally add on top of your Q4 backlog. I'm just wondered why we kind of should believe that you will reach this guidance given the backlog in place. Is there any particular issues regarding the near term contracts or the service markets that makes you more optimistic than what we have seen in the past?
I think we, 1, we landed some contracts very early on the year. You know, this, that should add to the backlog. We are, we actually were the incumbent on that particular. We are the incumbent for many years on that particular project. That was already included in our provision, but now the numbers are gonna be there. We also see that some of the projects that we are, as I said, in FEED, they are about to be sanctioned, and there is also a service component. We are, to a certain extent, of course, we always have to win.
There's no question about that, and I'll be very clear on that, but we are confident that we will win these contracts that we need for 2020 and 2021. As I said, we hope to recover the backlog this year. There are several large orders there that I would say they're mature or ripe.
All right. Pretty clear. Thank you very much.
We will now take our next question from Mick Pickup from Barclays. Please go ahead.
Good morning, everyone. A couple of questions, if I may. Just firstly, on the FEED side, you keep referring to it, and obviously a number of projects are going through on convertible side. Are there any pressures on your FEED capabilities at this stage, or any indications that pricing on that work is going in the right direction?
I think, as we all know that, the front end and the FEED, it's mostly a tool to win more work, they are doing the job that we expect them to do. We have the resources. We have, lately, this is to be, you know, just to highlight the importance, strategic importance of this. This was mainly, in the old days, almost, a Norwegian business. Now we have front end in almost all the regions have a strong front end in London, who just helped us immensely to win the BP Trinidad Tobago project. We are doing FEEDs there for Wintershall and so forth. Very strong front end there.
Have front end in KL, Kuala Lumpur, have front end in Brazil, in Houston. It's become international business and we have very good capabilities and good people there. There's no pressures on in terms of resources, if you'd ask your question. We do have high utilization, which is always good.
Okay. Next question. Obviously, another year on, and we look at the subsea market, that integrated model that others are harping on about seems to be taking increasing amounts of market share, and you're still, I'd say, some way behind the pack. What are your thoughts at this point in time?
I think there are several reasons for that. We're tendering, we have quite a lot of tenders out there together with Saipem. Of course, when it comes to the NCS, we do work with Subsea 7, and we have quite a few projects to show in the alliance. There's another 1 in Africa that we are working together. In terms of global projects, we have quite a few with Saipem. We have shown to clients that this is a very capable, especially in terms of technology and execution, group. I think it's just a matter of time.
We have not prioritized to win contracts, integrated contracts with negative margins and poor cash flow just for the sake of it, just to put a track record, and we won't do that since we have not done that either on the subsea scope. That's both Saipem and our direction. I think it's a matter of time, and the companies work very well together. There are quite a few out there. As I said, we're continuing to move forward.
Okay. I'm sorry. Finally, just, and I should know the answer to this one. On your 2025 30 program, what sort of scale of business are you thinking about as an overall company?
That's actually a good question because some people, a lot of people I spoke to in the road show last time when we announced this strategy was thinking that they're gonna take, for example, that. Some people are thinking that the traditional business is gonna shrink. And then this is going to increase. No, I believe the company as a whole is going to increase. This is a new area. This is a new revenue, incomes in a way. We don't, as I said, we don't make predictions for the future, but we expect to grow. That's what I can say. It's very tough to guide you on something we don't know.
Okay. Thank you very much.
Cheers.
Yeah.
We will now take our next question from Amy Wong from UBS. Please go ahead.
Hi, good morning. A couple of questions from me. I'll start with the first one. Right now, it seems like, you know, we've heard from some of your international peers are now actually talking about margin improvement in their capital equipment supply businesses. It's a reflection of, you know, their cost savings coming through and the mix of their products improving as well. Whereas this is a time that, you know, we saw you guys had a lot of success a couple of years ago, but then we're seeing margins somewhat go backwards and as you're guiding too. Help us understand how much of this is down to maybe Aker Solutions. Do you guys need to rightsize yourself again?
You know, take another root-and-branch look as you did with the journey back then to look at structural change, more structural changes needed to your business to restore kind of a more, you know, to improve the, the margins or how much of this is down to maybe geographical exposure? That's my 1st question.
Okay. Thanks, Amy. Good to hear from you. I think your question has several questions inside your question. Let me start by saying that we also expect the margins to go up. I've been saying that all along. What's happening right now, we are phasing out, just like our competitors, some of the projects we won. This is a long cycle business, as we know, the Subsea, the same way that helped us in the other direction when we started back in 2014. We do that. I'm actually very pleased to see that some of my competitors who are also heavily exposed to shale, are start to talk about offshore now. We made the decision back then to divest all the surface stuff and focus on offshore.
We do believe that where we're gonna win. That's positive for us. In terms of rightsizing, I mean, we have been rightsizing the company and its management and everything else, footprint since 2014. To be honest, that's not something we stopped doing. The Journey is still on. As I said, the project that we call the Journey is still ongoing, and we're still looking for ways of cutting costs. I mentioned a few. One of them, myself and Martin just mentioned 1, which is to how we're gonna deliver projects for where, for which plants. The manufacturing footprint is something that we'll be looking at, and we have changed it recently. W e need to continue looking for ways of being competitive.
I hope I have answered your question. We're gonna continue doing that. We do expect with more activity, with more volume that and also with the capacity being reduced by a whole industry, that things are gonna improve in terms of margins. It has to.
Okay. thanks for that. Then actually 1 question on the near term, which is just on the disruptions that we're seeing in China at the moment. I mean, you're executing on a couple of projects that are in China, and also you had previously talked about how that was 1 growth area for you guys with some of your customers there as well. If you guys appreciate the situation is changing quite quickly, but just to give us your thoughts on kind of your assessments of the situation and, you know, what do we think about, is there any risk to delays and pushing out projects and also the pipeline as well?
Okay, good. That is a good question, and you're right. It's, it's too early. We are working very close with our client, CNOOC at the moment. We have limited work in country when it comes to China. We are, of course, building a manifold there in COOEC, but that's progressing. We have not seen any stoppage yet. Things are slowing down, as we know, because of people trying to stay home, and they stay in their home and so forth. Our country manager has direct line to AMTs. We've been talking to him all the time. We had very few people in country. Right now we have 1 expert there who should be coming home in the next week or so at base COOEC.
In terms of Singapore, that's where more activity there, especially on the hull of Johan Castberg. We have actually stopped sending people there. We at the moment, it's too early to see if it will be any effect on the delivery date, especially for those projects who were, in a way, on track. That's where we are right now. We are monitoring. Nobody knows what's the next, but we stop, of course, trips of our employees there for obvious reasons. We are quite connected with CNOOC.
All right. Good luck. Thank you.
Thank you.
We will now take our final question from James Thompson from JP Morgan. Please go ahead.
Hi. Good morning, Luis. Good morning, Ole. A couple of questions from me. Firstly, just following up there on Amy's question. In terms of the cost reduction program, obviously, previously, that was NOK 9 billion, so 30% cost reduction, and then you had a further 20% target. I just wonder whether that 20% target has been hit and whether you're gonna come up with a new one now that we have the situation you outlined in 2020.
We are, as I said, we are progressing in the same direction. I think we are, last time we report was about 40%. The 1st initial 30 was obtained in 2017, and we've got another 10% for the last 2 years. We're on target. I guess, of course, we have to continue working very hard. I think we mentioned a few things we're doing in terms of footprint, as well as in terms of a reorganization that should continue driving us in the right direction. Anything you want to add to that, Martin?
Yes. It covers the questions.
Okay, thanks. Then just on the outlook actually, I mean, you signed this electrification project on Troll, and obviously we've seen the surge at 0 high being electrified. Are there any kind of feasibility studies outside of Norway at all? Are you getting any incoming on electrification on a more global basis?
Of course, Norway is a particular place, and there's a huge drive here, which is good 'cause that's, for us, as I say, home market, and we are the ones who started some of that, and we have a lot of good ideas. It'd be included in the new fields, by the way. There's some new studies on new fields we're taking renewables or electrification, not only from shore, but also from floating wind farms and so forth that I think you'll be present in the future. Now, we see some projects outside of NCS. We also see projects in U.K., pretty large ones that we've been considering there.
When it comes to the low carbon solutions, we just mentioned projects in Netherlands, and we talk about projects in Germany or other places for carbon capture that can become interesting. When it comes to subsea compression, I mean, who would guess 4 years, a few years ago that we'd be doing a subsea gas compression in Australia, at 1,000 meters water depth and pretty clear, pretty close to sanctuary. Manned facility. We see those solutions are We are a company who embrace that because I think that's the right thing to do, and there's no way back in my view. The quicker you embrace that, and there's an opportunity to make good returns there.
We are absolutely committed to this.
Okay, fair enough. Obviously, we've been talking about Jansz for a long time now. Hopefully, that does hit, if you see in the middle of this year. Is there another one in the pipeline after that? It feels like you're ahead of the pack when it comes to subsea gas compression. What follows Jansz?
Basically, as you know, we live in such a conservative industry, right? I think the success of Åsgard in Norway with has been producing for almost 4 years now with amazing uptime, you know, close to 100% in a way, you know, 98 or whatever it is. Fantastic return for the clients there, which we're economic partnering ExxonMobil. That's making people have more faith, and that's what was the main driver for Jansz. There are other projects, and we've done a few studies in different places. One of those projects, for example, shows that you need basically 60% less energy to operate the system subsea than we need in a platform.
Considering the CO2 and the pressure that are over the clients right now, this is amazing. Plus, of course, you stop flying those unmanned facilities and subsea compression. You stop flying people back and forth. It's proven that if you have no access to it, you have less maintenance. It also plays to our electrification as well as our automation and digitalization strategy. That will be invested on. I think that's is only positive, I would say. We see more activity outside the NCS. As I said, people are conservative, and that's a fact.
Okay. Thanks very much. Appreciate it.
Okay, thank you. That was the last call. I believe all the answers on the written questions have been answered. If not, we're gonna reply an email, and we will end the call now. Thank you.
Thank you.