Philly Shipyard

Annual

Report

2023

PHILLY SHIPYARD - ANNUAL REPORT 20232

Contents

Content 2

Company Overview 3

Our History 4

Key Events 6

Investment Highlights 7

Our Values 8

ESG Program 9

Our Safety 13

Letter from the President 14

Board of Directors’ Report 17

Directors’ Responsibility Statement 27

Consolidated Accounts 29

Parent Company Accounts 58

Auditor’s Report 66

Shares and Shareholder Matters 72

Corporate Governance 75

The Board of Directors 80

The Management Team 81

Company Information 85

CONTENT

New York

Norfolk

Jacksonville

Boston

Florida

California

Washington

Alaska

Hawaii

Purto Rico

FINANCIAL CALENDAR 2024

2023 annual report 20 March

Annual general meeting 15 April

Interim report Q1 2024 7 May

Interim report Q2 2024 15 July

Interim report Q3 2024 5 November

Dates are subject to change.

PHILLY SHIPYARD - ANNUAL REPORT 2023 3

Philly Shipyard is a leading U.S. shipbuilder

that is presently pursuing a mix of commer-

cial and government work. It possesses a

state-of-the-art shipbuilding facility and has

earned a reputation as a preferred provider

of ocean-going merchant vessels with a track

record of delivering quality ships, having

delivered around 50% of all large ocean-going

Jones Act commercial ships since 2000.

Philly Shipyard ASA is a holding company with

headquarters in Oslo, Norway, and an operat-

ing subsidiary in Philadelphia, PA, USA.

Philly Shipyard ASA is listed on the Euronext

Expand Oslo (formerly known as Oslo Axess)

with the ticker symbol “PHLY”. Aker Capital AS,

a wholly-owned subsidiary of Aker ASA, is the

majority shareholder, holding 57.6% of the

shares as of 31 December 2023.

ELEMENTS CONTRIBUTING TO SUCCESS:

State-of-the-art shipyard with modern

equipment and 2 of the largest dry docks

on the East Coast

Access to global shipbuilding and design

expertise through agreements with part-

ners in North America, Asia, and Europe

Solid track record demonstrated by the

delivery of 31 quality newbuild vessels

(6 containerships, 22 product tankers, 2

Aframax tankers, and 1 National Security

Multi-Mission Vessel)

Workforce consisting of direct and con-

tracted employees with a strong HSE

mindset and culture of improvement

Government resumé including 1 new

build program, 7 design studies and 3 ship

repair projects

This is Philly Shipyard

THE U.S. JONES ACT MARKET

U.S. coastwise law, commonly referred to as

the Jones Act, requires all commercial vessels

transporting merchandise between ports in

the United States to be built in the United

States, owned, operated and manned by

U.S. citizens and registered under the U.S.

flag. The Jones Act market encompasses all

water-borne transportation between U.S.

ports, including between the mainland U.S.

and non-contiguous areas of Alaska, Hawaii

and Puerto Rico, as well as certain vessels

involved in offshore wind development.

THE U.S. GOVERNMENT MARKET

The U.S. Government market for ship con-

struction and ship maintenance, repair, over-

haul, and conversion (MROC) work is expan-

sive and cuts across multiple government

agencies. Government customers include

the U.S. Navy, the Military Sealift Command

(MSC), the U.S. DOT Maritime Administration

(MARAD), the U.S. Coast Guard, the U.S. Army

Corps of Engineers and others. Philly Ship-

yard is well-positioned to build commercial

“like” and auxiliary ships in the government

market.

Commercial

Commercial “Like”

Auxiliary

Non-Combatants

Combatants

New York

Norfolk

Jacksonville

Boston

Florida

California

Washington

Alaska

Hawaii

Purto Rico

Going Gray: The term – coined because most U.S. Navy hulls

are painted gray – means Philly Shipyard is diversifying its

offerings by also pursuing work in the government market.

COMPANY OVERVIEW

PHILLY SHIPYARD - ANNUAL REPORT 20234

Founded by public-

private partnership

between U.S. Govern-

ment agencies and the

Kvaerner Shipbuilding

Division

2000: Construction

began on first two

container vessels

Delivered four

container vessels to

Matson (Hulls 001-004)

2005: Aker American

Shipping formed and

publicly listed on Oslo

Børs

2005: Initiated con-

struction program of

10 product tankers

Delivered 12 product

tankers to AMSC and

OSG (Hulls 005-016)

2007: Two additional

product tankers ordered

for conversion to shuttle

tankers

2007: Aker American

Shipping split into ship

owning and shipbuilding

companies and Aker

Philadelphia Shipyard

listed on Oslo Axess

2011: Signed contracts

with SeaRiver Maritime

for two Aframax tankers

2014 -

2016

1997-

2002

2012 -

2013

2003 -

2006

2007 -

2011

Delivered two product

tankers to Crowley

(Hulls 017-018)

2013: Signed contracts

with Matson for two

CV3600 container

vessels

2013: Signed joint

venture agreement with

Crowley for four product

tankers

Philly Shipyard:

Our History 1997 - 2023

VESSELS BUILT AND REPAIRED BY PHILLY SHIPYARD FROM INCEPTION THROUGH TODAY

OUR HISTORY

Container

Vessels

Product

Tankers

Aframax

Tankers

Repair

Vessels

National Security

Multi-Mission Vessel

Delivered two Aframax

tankers to SeaRiver

Maritime (Hulls 019-020),

four product tankers to

Crowley (Hulls 021-024),

and one product tanker

to Kinder Morgan

(Hull 025)

2014: Established Philly

Tankers as pure-play

Jones Act shipping

company

2014-2015: Signed con-

tracts with Philly Tankers

for product tankers

2015: Philly Tankers

agreed to sell product

tanker contracts to

Kinder Morgan

2015: Signed agreement

with Marathon Petroleum

to sell Crowley joint ven-

ture interests

2015: Rebranded as

Philly Shipyard

PHILLY SHIPYARD - ANNUAL REPORT 2023 5

Received an order for

two additional NSMVs

(3 and 4) with a total con-

tract value of approxi-

mately USD 600 million

Awarded and completed

a repair & maintenance

contract for the USNS

Charlton from Patriot

Contract Services on

behalf of the U.S. Navy

Military Sealift Command

Awarded an industry

study contract for the

development and design

of U.S. Navy Cable Ship

T-ARC(X) program

Won a contract from

Great Lakes Dredge &

Dock Company, LLC to

construct one Jones

Act-compliant Subsea

Rock Installation Vessel

Celebrated the NSMV 1

keel laying and cut steel

to mark the start of pro-

duction for NSMV 2

Awarded a contract by

TOTE Services for the

construction of up to

five National Security

Multi-Mission Vessels

(NSMVs) for the U.S.

Department of Transpor-

tation’s Maritime Admin-

istration (MARAD)

Received an order for

the first two NSMVs (1

and 2) with a total con-

tract value of approxi-

mately USD 630 million

Completed ship repair &

maintenance work on a

U.S. Government vessel,

the FSS Pollux

Awarded contracts to

participate in industry

studies for the U.S. Coast

Guard’s Offshore Patrol

Cutter (OPC) program

and the U.S. Navy’s

Auxiliary General Ocean

Surveillance (T-AGOS(X))

program

Received an order for

fifth and final NSMV,

bringing the total project

value to approximately

USD 1.5 billion

Won a contract from

return customer Matson

Navigation Company to

build three LNG-powered

containerships valued at

approximately USD 1.0

billion

Honored with the 2022

Shipbuilders Council of

America (SCA) “Excel-

lence in Safety” award

and surpassed 2 million

consecutive work hours

without a lost time inci-

dent (LTI)

Celebrated building

milestones with NSMV

1 launch, NSMV 2 keel

laying, and NSMV 3 start

of production

Delivered NSMV 1, the

Empire State, to MARAD

for service at SUNY

Maritime College

Celebrated building

milestones with NSMV

2 launch, NSMV 3 keel

laying, and NSMV 4 steel

cutting and keel laying

Celebrated the steel cut-

ting for the Subsea Rock

Installation Vessel (SRIV)

Awarded an industry

study contract to con-

duct the T-AH(X) Hospital

Ship feasibility study

Delivered three prod-

uct tankers to Kinder

Morgan (Hulls 026-

028) and two CV3600

container vessels to

Matson (Hulls 029-030)

2019: Awarded first two

repair & maintenance

contracts for the FSS

Antares and the FSS

Pollux, large MARAD

sister-ships managed by

TOTE Services

2019: Awarded prime

contract for design stud-

ies for the U.S. Navy’s

Common Hull Auxiliary

Multi-Mission Platform

(CHAMP) program

2019: Completed ship

repair & maintenance

work on a U.S. Govern-

ment vessel, the FSS

Antares

2017 -

2019 20212020 2022 2023

OUR HISTORY

PHILLY SHIPYARD - ANNUAL REPORT 20236

2023 Key Events

and Highlights

KEY EVENTS

A new four-year collective bargaining

agreement was ratified by the Phila-

delphia Metal Trades Council (PMTC),

which represents nine unions at the

shipyard. The new labor contract will

extend until 31 January 2027.

Celebrated the steel cutting for

NSMV 4 in January and its keel laying

in December.

Delivered NSMV 1, the Empire State,

to MARAD in September, marking

the first government ship built using

the Vessel Construction Manager

(VCM) model.

SRIV steel cutting commenced in

July, marked by a visit from President

Biden.

NSMV 2 was launched in May and

successfully moved from the build-

ing dock to the outfitting dock.

Celebrated the keel laying of NSMV

3 in May with officials from MARAD,

TOTE Services, and Maine Maritime

Academy.

PHILLY SHIPYARD - ANNUAL REPORT 2023 7

A leading

U.S. shipyard

State-of-the-art facility with

more than USD 675 million

invested since founding,

including new logistics center

and cabin factory

Major builder of large,

ocean-going Jones Act com-

mercial ships since 2000

Strong union-management

relationship with integrated,

fully flexible subcontracting

under single union contract

Reinvigorated apprenticeship

program and modern train-

ing facility

Strong backlog and high

pipeline visibility

Over USD 1.7 billion in order

backlog with last contractual

delivery in 2027

NSMV program supports a

new and innovative approach

to federal shipbuilding by

leveraging commercial best

practices

Mix of commercial and gov-

ernment projects provides

diverse orderbook

Series production with famil-

iar ships offers operational

benefits

Combination of commercial

and government work

Delivered first government

newbuild vessel (NSMV 1) in

2023

Completed six government

design studies and currently

working on one more

Opportunities within specialty

and high-end segments of

the Jones Act market includ-

ing offshore wind vessels

Very promising outlook for

high activity in the govern-

ment sector in the next 5-10

years

Well positioned for

future growth

Total workforce of 1,679

personnel including 125

apprentices

Next available building slots

align with promising pros-

pects in both commercial

and government markets

Leader in building govern-

ment ships utilizing vessel

construction manager (VCM)

model

NSMV variant opportunities

include hospital ships and

auxiliary vessels

Investment

Highlights

PHILLY SHIPYARD RECENT DELIVERIES AND ORDER BACKLOG

Customer Vessel Delivery 2023 2024 2025 2026 2027

NSMV 1 8 Sept. 2023

NSMV 2 1st half 2024

MARAD/TOTE Services NSMV 3 2nd half 2024

NSMV 4 1st half 2025

NSMV 5 1st half 2026

Great Lakes Dredge &

SRIV 2nd half 2025

Dock Company

CV 1 2nd half 2026

Matson Navigation

CV 2 1st half 2027

Company

CV 3 2nd half 2027

PHILLY SHIPYARD RECENT SHIP REPAIRS

Customer Vessel Redelivery 2019 2020 2021

MARAD/TOTE Services

FSS Antares Q4 2019

FSS Pollux Q3 2020

Military Sealift Command/Patriot Contract Services USNS Charlton Q3 2021

INVESTMENT HIGHLIGHTS

PHILLY SHIPYARD - ANNUAL REPORT 20238

Philly Shipyard’s CORE values were designed

as a reflection of who we are, and who we

aspire to be, as a shipyard, as an organization

and as individuals.

They capture the pride, passion, and commit-

ment behind each action we take and deci-

sion we make. They are not words on a page,

but our stand – a united commitment to con-

quer all challenges and build long lasting rela-

tionships. For years to come we will be united

by these values, that give us the platform to

deliver on our commitments, every time.

CARING

We make safety

personal and

take ownership

for protecting

each other

We are united

to ensure our

coworkers, our

company and

our communities

succeed

ONE SHIPYARD

We are proud

to be part of an

inclusive work

environment

where all feel

welcome

We build lasting

cooperation

based on respect

and candid com-

munication

RESPONSIBLE

We are environ-

mental stewards

and take care

to protect future

generations

We do what’s

right simply

because it’s the

right thing to do

EVOLVING

We challenge

ourselves and

each other to

be better than

yesterday

We support

change that

moves the

organization into

diverse markets

The purpose of the Norwegian Transparency

Act is to promote enterprises’ respect for fun-

damental human rights and decent working

conditions in their operations and their supply

chains.

Philly Shipyard will not tolerate any form of

human rights violations in our operations or

supply chains, including service providers and

suppliers. Our existing Philly Shipyard poli-

cies and employment practices include free-

dom of association and respect for human

and labor rights. We forbid forced, coerced,

bonded, indentured, involuntary or enslaved

labor; child labor; and all forms of human

trafficking. We are committed to providing a

safe and healthy work environment devoid of

discrimination.

In compliance with the requirements of the

Act, Philly Shipyard filed the first required

statement on the Sustainability page of our

website on 30 June 2023. This statement

describes the decent working conditions

within the Shipyard’s operations, our policies

and practices, our supplier risk assessment

process and findings, and our engagement

with our supply chain regarding human rights

and modern slavery.

As part of our compliance activities related to

the Norwegian Transparency Act, Philly Ship-

yard has undertaken a number of actions to

ensure no form of human rights violation is

occurring in or in relation to the Shipyard or

its supply chain. We have implemented a risk-

based approach for assessing and addressing

the Shipyard’s supply chain risks, including

mapping our supplier base and conducting an

annual risk assessment process that reviews

our supplier base with regard to country risk

and sector risk related to human rights and

decent working conditions. In this analysis, we

did not identify any actual or potential adverse

human rights impacts with our key suppliers,

or any red flags requiring further follow-up.

We recognize that there may be potential

for human rights risks in the supply chains of

our suppliers, so we will continue to include

human rights risks in our supplier due dili-

gence processes and update this risk analysis

on a regular basis.

During 2023, Philly Shipyard established a

Supplier Code of Conduct. This code was

provided to all suppliers via direct communi-

cation and was added to the Supplier page of

our website. We also updated our Employee

Code of Conduct to include policies related to

human rights and decent working conditions.

The Norwegian Transparency Act requires

that covered companies respond to requests

from the public on how the company is man-

aging actual or potential human rights impacts

across its organization and supply chain.

Philly Shipyard has established a process for

receiving and managing such requests, which

should be submitted through communica-

tions@phillyshipyard.com.

Our CORE Values

Norwegian Transparency Act

OUR VALUES

PHILLY SHIPYARD - ANNUAL REPORT 2023 9

SUSTAINABILITY/ESG PROGRAM

STRATEGY AND HIGHLIGHTS

The Shipyard is committed to operating sus-

tainably and responsibly. Our CORE values

describe our commitment to working safely,

acting as environmental stewards, creating

an inclusive work environment, and ensuring

our communities succeed. We are commit-

ted to our stakeholders and environment

because it is right for the company, right for

our people, and right for the planet.

During 2023, we continued to strengthen our

sustainability and environmental, social, and

Sustainability and

ESG Program

ESG PROGRAM

SUSTAINABILITY/ESG STRATEGY

Launch

sustainability/

ESG program

UN SDG

mapping

Materiality

analysis

Establish

baselines

Supplier

responsibility

program

Set sust/ESG

targets

Publish first

sust/ESG report

2022 2023 2024

governance (ESG) program. Kelly Whitaker

was named Vice President, Sustainability and

Communications, thereby elevating the lead-

ership of this growing and important area for

the Shipyard.

A major area of focus this year was estab-

lishing baseline metrics for sustainability and

ESG, including calculating our Greenhouse

Gas Scope 1 and 2 emissions.

Other highlights during 2023 included: con-

ducting a human rights risk assessment with

suppliers, publishing our Norwegian Trans-

parency Act statement, issuing a compre-

hensive Code of Conduct to all employees,

establishing a Supplier Code of Conduct, and

holding in-person DEI training for all senior

leadership, supervisors, and managers.

Key priorities for Philly Shipyard’s sustainabil-

ity/ESG program in 2024 will include: setting

targets for selected sustainability/ESG metrics,

publishing a sustainability report, and estab-

lishing additional channels for stakeholder

engagement. We also continue to prepare

for upcoming regulatory requirements for

ESG disclosure to investors and other stake-

holders in the future, including the European

Sustainability Reporting Standards (ESRS).

PHILLY SHIPYARD - ANNUAL REPORT 202310

UNITED NATIONS SUSTAINABLE

DEVELOPMENT GOALS (UNSDG)

The United Nations Sustainable Development

Goals (UN SDGs) are the blueprint to achieve

a better and more sustainable future for all.

Philly Shipyard has mapped the UN SDGs

to our operations. This approach helps us

understand which UN SDGs the Shipyard can

most contribute to, as well as where further

action may be needed. This mapping pro-

cess, conducted by an external sustainability

consultant and reviewed annually, is based

on a review of Shipyard business activities

and value chain, as well as non-governmen-

tal organization (NGO) and industry associa-

tion perspectives. The mapping process also

is informed by guidance from the American

Bureau of Shipping’s “Guide for Sustainability

Notations.”

The Shipyard has identified six of the 17 UN

SDGs as most directly relevant to the Ship-

yard’s mission, value chain and stakeholders.

As a significant energy pur-

chaser, Philly Shipyard has the

opportunity to support the

energy transition to Affordable

and Clean Energy through electrification of

various operations and shipbuilding activities,

and to contribute to the demand for renew-

able energy. In addition, the Shipyard has

expanded its capabilities to build vessels with

lower air emissions and lower carbon fuels,

which are increasingly being specified by ship

owners and designers.

Philly Shipyard supports Decent

Work and Economic Growth by

creating high-quality jobs that

offer a living wage for our work-

ers, with a strong focus on diversifying our

workforce, providing equal pay for equal work,

respecting labor rights, and providing exten-

sive training including our apprenticeships.

As a leading U.S. shipyard, we

align closely with Industry,

Innovation and Infrastructure,

through our participation in the

redevelopment of the Philadelphia Navy Yard

and continuously upgrading the capabilities

and digital technologies of the Shipyard to

meet modern standards.

We are active in recycling mate-

rials and packaging to reduce

waste and encourage reuse

and are working to expand our

recycling programs. Our strong commitment

to Responsible Consumption and Produc-

tion is part of our CORE values and is evident

in our strong track record of environmental

compliance.

Shipbuilding is an energy-inten-

sive industrial manufacturing

activity, so our energy use and

greenhouse gas production is

material. We are committed to Climate Action

by quantifying our climate footprint and iden-

tifying ways to reduce it, including through

more energy efficient technology and pro-

cesses.

With operations on the Dela-

ware and Schuylkill Rivers and

building vessels that operate in

U.S. and international water-

ways, it is critical that the Shipyard focus on

protecting Life Below Water and our marine

ecosystems every day.

ESG PROGRAM

GOVERNANCE OF SUSTAINABILITY/ESG

The Audit Committee of the Board of Direc-

tors of Philly Shipyard has oversight of the

sustainability/ESG program and reviews it

regularly at Board meetings. Kelly Whitaker,

Vice President, Sustainability and Communi-

cations, has direct leadership responsibility

for sustainability/ESG and is a member of

the senior leadership team, reporting to the

CEO. Senior leaders across the organization

are actively engaged in leading sustainability/

ESG activities related to their areas of respon-

sibility. The Shipyard’s sustainability/ESG pro-

gram is organized in 12 tracks, each of which

has a senior leader assigned as accountable

for that track. Track leaders meet regularly

with the program leadership team to share

updates and mark progress. An external sus-

tainability/ESG consultant provides expertise

and program management.

PHILLY SHIPYARD - ANNUAL REPORT 2023 11

STAKEHOLDER ENGAGEMENT AND

MATERIAL TOPICS

The Shipyard recognizes that stakeholders

have increasingly high expectations for com-

panies, including those in the marine trans-

portation sector. In 2023, we reconfirmed

our 10 stakeholder groups, which include

our shareholders, workforce, suppliers and

vendors, customers, and the communities in

which we operate. Our stakeholders’ inter-

ests regarding Philly Shipyard continue to

vary by stakeholder, with key topics of inter-

est including jobs, workplace environment,

safety, quality, compliance, and communica-

tion with the public. Our sustainability/ESG

program is designed with stakeholder per-

spectives in mind.

As part of our annual sustainability/ESG pro-

gram review, we reconfirmed our material

topics related to Environmental, Social and

Governance. The materiality assessment

was conducted using internal and external

inputs that included: assessment of macro

trends and industry/sector trends; analysis

of sustainability material topics of peer com-

panies (shipyards), customers (ship owners),

and partners in the value chain; stakeholder

interviews and research; resource materials

from industry organizations including the

International Maritime Organization (IMO)

and the American Bureau of Shipping (ABS),

among others.

Taken together, the stakeholder analysis, UN

SDG mapping, and materiality assessment

form the foundation for Philly Shipyard’s sus-

tainability/ESG strategy and program.

ESG PROGRAM

MATERIAL TOPICS

Environmental

Energy use and energy efficiency

Climate and greenhouse gases

Water impacts

Air emissions

Waste reduction and recycling

Product impact: building sustain-

able ships as specified by owners

Social

Employee safety and health

Workforce recruitment, retention,

and development

Diversity, equity and inclusion

Labor relations

Human rights

External communications

Community relations and

charitable donations

Governance

Ethics, compliance and

governance

Quality

Sustainable procurement/

supplier responsibility

Transparency and disclosure

Emergency preparedness and

resilience

Risk management

Financial performance

Physical asset and infrastructure

security

Data privacy and data security

PHILLY SHIPYARD - ANNUAL REPORT 202312

PHILLY SHIPYARD - ANNUAL REPORT 2023 13

9000

8000

7000

6000

5000

4000

3000

2000

1000

6414

3005

4178

5793

7920

4371

4464

1592

2493

2096

1301

1000

2000

3000

4000

5000

6000

7000

8000

9000

2013 21 2214 15 16 17 18 19 20

2023

HSE 2023:

Health and Safety in a Post-Pandemic Shipyard

ALL INCIDENT FREQUENCY (2002 - 2023)

OBSERVATIONS (2013 - 2023)

2002 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 2221 2023

LTIR only Other RIR (LTI excluded) All RIR (LTI & Other Rec)

OUR SAFETY

At Philly Shipyard, Inc. (PSI), safety is personal

and our credo is clear: We fundamentally

believe that all incidents are preventable and

safety is everyone’s responsibility; and we

promise to be relentless in our pursuit of an

injury-free workforce by creating and maintain-

ing safe working conditions and never compro-

mising safety for anyone, anywhere, at any time.

And yet, in 2023, PSI experienced its first fatal-

ity in the history of the organization. There

remains a void in our hearts and our yard, and

we will never be the same as we were before

that day. We carry on with our unwavering

commitment to the above credo. We are still

united by our pledge to protect one another,

and to be allies, in our pursuit of an injury-free

workforce.

Throughout the year, PSI dealt with challenges

big and small; however, along with those chal-

lenges came many rewards. From increased

challenges with subcontractors to addressing

increased regulatory requirements, the Health,

Safety and Environmental (HSE) department

helped guide the organization toward contin-

uous improvement by utilizing industry proven

best practices.

In July, the shipyard had five vessels under

construction at various stages throughout the

yard. This is the highest amount of activity the

shipyard has ever had, and in correlation, the

highest recorded number of man-hours and

a record number of workers. In the post-pan-

demic era of labor shortages, the workforce mix

was made up of more subcontractors and less

PSI employees than we have seen in the past.

One of the biggest safety challenges with this

type of workforce mix is contractor safety

management. To address this challenge, PSI’s

HSE team worked closely with the contractors

providing assistance to ensure all workers

have the knowledge and tools necessary to

work safe on a daily basis.

To further support the workforce, the HSE

Department added a bilingual trainer to our staff

to conduct a variety of classes for our non-En-

glish speaking employees and subcontractors.

This included courses in general shipyard safety,

forklift operation, fire watch, mobile elevated

work platform operation, and more. The HSE

team conducted a record number of trainings in

2023, leading approximately 70 classes.

The Emergency Response Team (ERT) contin-

ues to play an important role in the shipyard.

In 2023, the total number of ERTs increased

to over 30. This is an all-volunteer force with

members comprised of production supervi-

sors, material control specialists, outfitters,

and apprentices. ERT drills were planned and

conducted on a monthly basis to give team

members practice on techniques including

high angle and confined space tank rescue, fire

and medical emergencies and chemical spills.

PSI also underwent safety and environmental

audits performed by regulatory and insurance

agencies. As with any audit, there is always

room for improvement, but no significant

findings were noted. PSI also witnessed a sig-

nificant uptick in safety observations in 2023

as more users were added to the reporting

system. This is a positive sign as the HSE team

uses these leading indicators to prevent inci-

dents at the shipyard.

As the company’s formal ESG program devel-

oped last year, the HSE department was

proud to be track leaders supporting the var-

ious environmental material topics, including

water impacts, air emissions, and climate and

greenhouse gases (GHG). Elevating the “E” in

HSE is something we are honored to team up

for, and we are looking forward to the journey.

As we move forward in 2024, I look forward

to working with management, employees and

subcontractors on finding ways to continu-

ously improve worker safety to ensure every-

one goes home safely.

Carl W. Danley

Health, Safety and Environment Director

PHILLY SHIPYARD - ANNUAL REPORT 202314

Philly Shipyard made shipbuilding history in

2023. We delivered the Empire State (NSMV 1)

to the U.S. Maritime Administration (MARAD),

the first government-owned ship built in

Philadelphia in fifty years. Our extraordi-

nary effort ensured timely delivery of an

important national security asset despite

the unprecedented COVID-19 environment.

As of the date of this letter, we have four

remaining National Security Multi-Mission

Vessels (NSMVs) (siblings to the Empire State),

plus one Subsea Rock Installation Vessel

(SRIV), under construction, and three 3600

TEU Aloha Class LNG-fueled containership

vessels (CVs) for Matson Navigation Com-

pany in pre-production. We are keeping a

sharp focus on completion of the orders in

our vessel backlog and are confident that we

will continue to attract new opportunities.

There is much to discuss in this year’s letter,

but before I continue, I have to pause and

reflect on a moment of significant loss for the

shipyard. In March 2023, the shipyard experi-

enced its first fatality. It was the first fatality ever

in the history of our shipyard, and the loss has

left a profound impact across the entire orga-

nization. No one, and I repeat, no one, should

come to work and not return home safely at

the end of each workday. HSE needs to be in

our hearts and minds, always, and we need to

be looking out for each other. We can engineer

state-of-the-art safety systems, implement

robust policies and procedures, and assemble

a highly skilled HSE team, but at the end of the

day, safety is everyone’s role. As everyone in

the shipyard knows, one injury or incident is

one too many, and our goal is to eliminate all

of them. In 2023, we achieved improvement in

terms of lost time incidents, maintaining a lost

time incident rate (LTIR) that was significantly

lower than the U.S. shipbuilding average, but

it’s hard to celebrate that knowing one of our

colleagues suffered a fatal incident. Nonethe-

less, a shared safety mindset will allow us to

keep driving toward a safer workplace.

Relative to our current backlog, we are actively

working on three classes of vessels at the same

time. We cut steel for the SRIV, the Acadia, for

Great Lakes Dredge & Dock Company (GLDD),

and most of the major equipment has been

ordered. We are engaged in pre-production

activities with Matson Navigation Company for

three CVs and accomplished a multitude of

milestones for the NSMV series. We delivered

NSMV 1, for SUNY Maritime College, in Septem-

ber, which was a remarkable accomplishment

considering the unprecedented COVID-19

related impacts on our workforce and supply

chain. NSMV 2, for Massachusetts Maritime

Academy, is in the outfitting dock, with accom-

modation work proceeding as well as machinery

and systems completion, and testing & commis-

sioning. NSMV 3, destined for Maine Maritime

Academy, is growing before our eyes and will be

ready for launching into the Delaware River in

April. NSMV 4, being built for Texas A&M, has

begun to take form behind NSMV 3 in the build-

ing dock. It is quite remarkable to walk through

the yard and see this much activity.

Our 2023 financial performance is very disap-

pointing. We continued to sustain substantial

losses on NSMV 1 and the five-ship NSMV

series taken as a whole is now a loss-mak-

ing contract. These losses are mainly due

to COVID-19 related impacts on our work-

force and supply chain, which have resulted

in schedule impacts, productivity loss and

increased costs. The unforecasted costs in

2023 mostly consist of increased labor costs,

turnkey costs and overhead costs driven by

the ongoing lack of skilled workers, resulting

in schedule delays and compression. Despite

mitigating actions, the lingering effects of the

COVID-19 pandemic, including skilled labor

shortages and supply chain disruptions, have

taken a heavy toll on our bottom line.

Post-delivery of NSMV 1, there is an increased

focus on the ongoing implementation of

Philly Shipyard’s “V-5” continuous improve-

ment program. Since initiating this program,

we have received over 300 improvement

proposals and are combing through each

one of them to uncover opportunities to

reduce costs, improve productivity and har-

ness the benefits of series construction on

the next four NSMVs in our backlog. In addi-

tion, our team is working diligently with exter-

nal experts to take actions in an attempt to

recover COVID-19 related cost impacts. While

we continue to explore avenues to obtain

cost relief, we recently received four months

of schedule relief across the NSMV series on

account of excusable delay, which is positive

for the shipyard.

Recruiting a “local” workforce post-pandemic

remains extremely difficult and we continue

to rely more heavily on contract labor than

ever before. No one could have foreseen

the long-lasting negative effects of COVID-

19 on workforce recruitment and retention,

as well as the supply chain, which are con-

tinuing challenges across the shipbuilding

and manufacturing industries in the United

States and worldwide. In response, we are

working closely with local technical schools

and colleges, workforce development agen-

cies, and community organizations all around

Philadelphia, and will continue to push hard

to identify and recruit both apprentices and

skilled labor to the shipyard. It is a long and

intentional journey to re-build our own tal-

ent, but a worthwhile one, and we are seeing

progress. And, yet, despite these headwinds,

we delivered NSMV I within one month of

the contract date, as adjusted for excusable

delay, and our client and greater industry has

recognized our extraordinary efforts. Once

again, we have shown the country that we

build some of the best ships anywhere even

in the face of enormous challenges.

At year end, we had nearly 1,700 workers in

the shipyard, including 125 apprentices at

various stages in our three-year program.

2023:

Full Speed Ahead

Dear Shareholders,

LETTER FROM THE PRESIDENT

PHILLY SHIPYARD - ANNUAL REPORT 2023 15

We have enhanced our efforts to expand the

apprentice program and see it as the clear

way forward to build a long-term, local, safe,

and productive workforce in the shipyard.

Many previous apprentices have developed

beyond welders and shipbuilders into Team

Leaders, Supervisors, Planners, Engineers

and even Apprentice Training Instructors

– coming full circle to serve the next gener-

ations of apprentices. We anticipate seeing

the first classes graduate this year since we

resumed the program in 2021. We have initi-

ated efforts to identify and win grant support

for the apprentice program in the future as

well as support for strategic infrastructure

capex projects.

As mentioned, we have also initiated pre-pro-

duction activities on the three CVs for Mat-

son Navigation Company. These vessels will

be the seventh, eighth and ninth CVs Matson

has received from Philly Shipyard, but the first

that are LNG-fueled. We will always appreci-

ate that Matson was our first customer, and

the fact Matson has returned to us again,

and again, is the highest compliment. We

are also in the early stages of production on

the SRIV and look forward to working closely

with GLDD to deliver this unique ship that will

serve the U.S. offshore wind industry.

Following the Empire State delivery, and our

increased outreach efforts, we have seen an

increased level of interest from potential U.S.

government customers. In 2023, we hosted

visitors from the U.S. Navy, U.S. Transpor-

tation Command, National Oceanographic

and Atmospheric Administration (NOAA)

and other government agencies interested

in learning more about our capabilities and

whether we would be interested in competing

for government newbuild contracts. We are

building very positive relationships with these

agencies, particularly the Naval Sea Systems

Command (NAVSEA), which is responsible for

all Navy shipbuilding programs, and we are

taking concrete steps to put us in the posi-

tion to compete – and win – contracts to build

auxiliary and support vessels. We have been

very clear with government agencies that the

vessel construction manager (VCM) model has

the potential to achieve savings and greater

schedule integrity in government programs,

and there appears to be growing support

for this concept in the U.S. Congress. Based

on the increasing frequency of contacts and

questions from NAVSEA and other agencies,

it is clear that Philly Shipyard is being seen

as an essential part of the national defense

industrial base, and we are optimistic that we

will build more ships for the U.S. government

in the years to come. We continue to follow

potential solicitations for vessels that would be

compatible with our shipyard and processes.

We are also continuing implementation of

our environmental, social and governance

(ESG) program that we unveiled in our 2022

annual report. During 2023, we formally

established governance for the program by

naming a Vice President of Sustainability and

Communications. We instituted meaningful

key performance metrics to track progress in

the program, including establishing our first

greenhouse gas (GHG) baseline for Scopes 1

and 2. We are now preparing to set targets

and publish our initial sustainability report

in the coming year which will ultimately be

made available to our stakeholders on a reg-

ular basis in the future.

Our order book at year-end is a solid $1.7

billion, and the work takes us through 2027,

which gives us stability and enables us to

execute productivity improvements and cost

reductions. We are beginning 2024 as a more

resilient shipyard, focused on successful

completion of the vessels in our backlog and

confident that our performance will attract

more orders in the future.

I remain ever grateful for the dedication

demonstrated by our workforce, union lead-

ers, suppliers, and stakeholders, and the

steadfast support we receive from federal

and state representatives. We all know that

there will be challenges in the coming year,

that is the nature of shipbuilding. What gives

me great confidence that those challenges

will be met is the strength of this shipyard,

our proven record of resilience, and the fiery

passion for shipbuilding amongst our entire

team that keeps the sun shining on Philly

Shipyard.

Yours truly,

Steinar Nerbøvik

President and CEO

Philadelphia, PA

12 March 2024

LETTER FROM THE PRESIDENT

PHILLY SHIPYARD - ANNUAL REPORT 202316

PHILLY SHIPYARD - ANNUAL REPORT 2023 17

As of 31 December 2023, PSI’s workforce

consisted of 1,679 people, with a breakdown

of 504 direct employees and 1,175 subcon

tracted personnel.

Philly Shipyard’s business strategy for PSI is to

build vessels for operation in the U.S. Jones Act

and U.S. Government markets while opportu

nistically performing ship maintenance, repair,

overhaul, and conversion (MROC) work to fully

utilize the shipyard’s capacity. As of 31 Decem

ber 2023, Philly Shipyard has eight remaining

vessels in its order book with an order backlog

in excess of USD 1.7 billion and a final contrac

tual delivery in 2027.

Safe, cost efficient and quality construction of

new vessels is critical for the success of Philly

Shipyard’s business model. There are several

factors that position Philly Shipyard to capital

ize on this market: a state-of-the-art shipyard

with modern equipment and two of the largest

dry docks on the East Coast; access to global

shipbuilding and design expertise with part

ners in North America, Asia and Europe; a solid

track record demonstrated by the delivery of

31 quality vessels (6 containerships, 22 prod

uct tankers, 2 Aframax tankers and 1 National

Security Multi-Mission Vessel); and a workforce

consisting of direct and contracted employees

with a strong Health, Safety and Environment

(HSE) mindset and culture of improvement.

THE JONES ACT MARKET

The U.S. Jones Act generally restricts the

marine transportation of cargo and passen

gers between points in the United States to

vessels built in the United States, registered

under the U.S. flag, manned by predominately

U.S. crews, and 75% owned and controlled by

ACTIVITIES

Philly Shipyard is comprised of the Norwegian

holding company, Philly Shipyard ASA (referred

to herein as “PHLY”), and its U.S. operating sub

sidiary, Philly Shipyard, Inc. (referred to herein

as “PSI” or the “Shipyard”). PSI is a leading U.S.

commercial shipyard that is presently pursu

ing a mix of commercial and government work.

PHLY is located in Oslo, Norway, while PSI is

located in Philadelphia, Pennsylvania, USA.

U.S. citizens. The ability of the Company to win

contracts is in part dependent on its unique

ability to construct vessels that are eligible

for U.S. Jones Act trades, and the Jones Act

requirement for construction of the vessels in

the United States limits competition for future

contracts by excluding foreign shipyards.

THE U.S. GOVERNMENT MARKET

The U.S. Government market for ship construc

tion and ship maintenance, repair, overhaul,

and conversion (MROC) work is expansive and

cuts across multiple government agencies. Gov

ernment customers include the U.S. Navy, the

Military Sealift Command (MSC), the U.S. Depart

ment of Transportation Maritime Administration

(MARAD), the U.S. Coast Guard, the U.S. Army

Corps of Engineers and others. The U.S. Navy’s

fiscal year 2024 shipbuilding plan would require

annual spending of approximately USD 34-36

billion for the next 30 years. The spending avail

able for auxiliary ship programs, which is Philly

Shipyard’s main area of focus, continues to be

dominated by the huge quantitative impact

of the submarine program and the qualitative

debates about what the service needs to do ‘to

reconstitute the sealift capability.’

THE MASTER AGREEMENT, SHIPYARD

LEASE AND AUTHORIZATION AGREEMENT

WITH PSDC

PSI currently operates its shipyard under

a 99-year lease with Philadelphia Shipyard

Development Corporation (PSDC), a gov

ernment-sponsored non-profit corporation.

Historically a Master Agreement, a Shipyard

Lease and an Authorization Agreement have

governed PSI’s relationship with PSDC and the

various governmental parties that have con

tributed to the establishment of the Shipyard.

Board of Directors’

Report 2023

Philly Shipyard ASA and its operating subsidiary, Philly Shipyard, Inc. (referred to herein

as a group as the “Group”, the “Company” or “Philly Shipyard”) is a leading commercial

shipbuilder in the U.S. Jones Act market that is presently pursuing newbuild opportuni

ties in the commercial and government markets. Aker Capital AS, a wholly-owned subsid-

iary of Aker ASA, is the majority shareholder in Philly Shipyard ASA.

BOARD OF DIRECTORS’ REPORT

KEY EVENTS AND HIGHLIGHTS

In February 2023, a new 4-year

collective bargaining agreement

was ratified by the Philadelphia

Metal Trades Council (PMTC)

In September 2023, Philly Ship-

yard successfully delivered the

first NSMV, the Empire State

Strong order backlog of USD

1,719.1 million on 31 December

2023 with last contractual delivery

in 2027

2023 operating revenues and

other income of USD 441.8 mil-

lion compared to USD 393.8 mil-

lion in 2022

2023 net loss of USD 67.9 million

compared to 2022 net loss of

USD 11.7 million

Total cash and cash equivalents

of USD 79.5 million at 31 Decem-

ber 2023, excluding USD 44.2 mil-

lion of restricted cash

PHILLY SHIPYARD - ANNUAL REPORT 202318

Under the Master Agreement, the govern-

mental parties have provided approximately

USD 438 million for the renovation and mod

ernization of the facility and training of the

workforce. PSI was required to make certain

qualified infrastructure investments totaling

USD 135 million, which have been fully satis

fied. PSI was also required to match govern-

ment funding for certain training costs total-

ing USD 50 million, which has been fulfilled.

Pursuant to the Shipyard Lease, if PSI fails to

maintain an average of at least 200 full-time

employees at the shipyard for 90 consecu

tive days, then the lease term (i.e., a 99-year

lease with approximately 74 years remaining

including options) is automatically converted

to month-to-month and PSDC has the right to

terminate the lease, subject to the right of PSI

to complete work-in-process projects and a

one-time, limited cure right which allows PSI to

restore the lease to a five-year term under cer

tain circumstances. PSI was in compliance with

this lease condition as of 31 December 2023.

Pursuant to the Authorization Agreement,

PSDC purchased certain shipyard assets from

PSI in 2011 for a purchase price of USD 42.0

million, with funds provided by the Common

wealth of Pennsylvania. PSI is leasing back

those same assets from PSDC subject to the

terms of the Shipyard Lease and the Authori

zation Agreement.

STRATEGY

Philly Shipyard will, through its unique part

nerships and experience obtained during

construction of tankers and containerships,

strive to be the most efficient shipyard in the

U.S. Jones Act and U.S. Government markets

for production of ocean-going vessels. Over

the past several years, Philly Shipyard has

taken steps to diversify its business beyond

the traditional vessels it has built for the

commercial market. The National Security

Multi-Mission Vessel (NSMV) program for the

U.S. Department of Transportation’s Mari

time Administration (MARAD) is a critical step

forward in the shipyard’s transformation to

serve both commercial and government cus

tomers. Going forward, PSI’s main focus is to

pursue major shipbuilding programs in both

markets. PSI will also opportunistically pur

sue maintenance, repair, overhaul, and con-

version (MROC) work for government ships.

However, Philly Shipyard does not expect

excess capacity in its drydocks or fabrication

shops for MROC projects in the foresee

able future. A substantial capital investment

would be required in order for the Company

to opportunistically pursue future MROC

projects before the Matson contract is com

pleted.

Philly Shipyard’s research and development

activities are primarily related to two areas.

The first area is the development of PSI’s

building methodology and working methods

to ensure that PSI takes maximum benefit of

the learning curve and produces each grand

block and each vessel more efficiently than the

previous one. The second area is work related

to the development of new vessels. Ordinarily,

PSI will attempt to identify and license existing

best-in-class designs and cooperate with the

owners of such designs to make such mod

ifications as are necessary. However, when

existing designs are unavailable or unsuit

able, PSI will develop new designs to meet the

needs of the markets it serves.

KEY EVENTS 2023

In February 2023, a new four-year collective

bargaining agreement was ratified by the Phil

adelphia Metal Trades Council (PMTC), which

represents the nine unions at the shipyard.

This new labor contract will extend until 31

January 2027.

In September 2023, Philly Shipyard success

fully delivered the first NSMV, the Empire

State. Philly Shipyard delivered NSMV 1 within

one month of the contract delivery date, as

extended for excusable delay.

REVIEW OF THE ANNUAL ACCOUNTS

Philly Shipyard prepares and presents its

consolidated accounts according to Interna

tional Financial Reporting Standards (IFRS) as

adopted by the European Union.

PHLY was formed on 16 October 2007 to be

the holding company of PSI which operates

the shipyard located in Philadelphia, Pennsyl

vania, USA.

As of 31 December 2023, Philly Shipyard has

three separate awards under one shipbuilding

contract in place with TOTE Services LLC (TOTE

Services) for the NSMV program. NSMVs 1-2

were awarded at contract signing in April 2020,

NSMVs 3-4 were awarded upon the exercise

of an option in January 2021, and NSMV 5 was

awarded upon the exercise of an option in April

2022. Therefore, the three awards under the

NSMV contract are treated as three separate

performance obligations that are reported as

three separate projects for revenue recogni

tion. Each of these projects is being accounted

for using the percentage-of-completion

method per IFRS 15 Revenue from Contracts

with Customers. PSI is building four NSMVs

(NSMVs 2-5) for TOTE Services, with NSMV 2

scheduled for delivery in 2024, the next two

vessels (NSMVs 3-4) scheduled for deliveries in

2024 and 2025, respectively, and the final ves

sel (NSMV 5) scheduled for delivery in 2026. As

of 31 December 2023, the NSMV projects for

NSMVs 1-2, NSMVs 3-4 and NSMV 5 are 93.4%,

61.7% and 9.9% complete, respectively.

Philly Shipyard also has a shipbuilding con

tract in place with Great Lakes Dredge & Dock

Company (Great Lakes) for the Subsea Rock

Installation Vessel (SRIV) program, which was

awarded in November 2021. PSI is building

one SRIV for Great Lakes, scheduled for deliv

ery in 2025. As of 31 December 2023, the SRIV

project is 19.4% complete.

Philly Shipyard also has a shipbuilding con

tract in place with Matson Navigation Com-

pany, Inc. (Matson) for the container vessel

(CV) program, which was awarded in Novem

ber 2022. PSI is building three CVs (CVs 1-3)

for Matson, scheduled for deliveries in 2026

and 2027. As of 31 December 2023, the CVs

1-3 project is 0.8% complete.

Philly Shipyard’s accounting policy is to not

recognize profit on projects until they are

BOARD OF DIRECTORS’ REPORT

PHILLY SHIPYARD - ANNUAL REPORT 2023 19

5.0% complete or such later time when the

cost to complete can be measured with rea

sonable certainty. No profit on NSMV 5, the

SRIV or CVs 1-3 has been recognized as of 31

December 2023.

Order backlog

As of 31 December 2023, Philly Shipyard’s

order backlog was USD 1,719.1 million and

represents a contractual shipbuilding obli

gation to deliver newly built vessels (NSMVs

2-5, the SRIV and CVs 1-3) that have not yet

been produced for the Company’s custom

ers (TOTE Services, Great Lakes and Matson,

respectively). Order backlog consists of future

construction contract revenues and is subject

to adjustment based on change orders as

defined in the construction contracts. Order

intake for 2023 of USD 16.9 million at 31

December 2023 represents change orders

on NSMVs 1-5, the SRIV and CVs 1-3.

Profit and loss accounts

Operating revenues and other income in 2023

ended at USD 441.8 million compared to oper

ating revenues and other income of USD 393.8

million in 2022. Operating revenues and other

income in 2023 were primarily driven by reve

nues from progress on NSMVs 1-5, the SRIV,

CVs 1-3 and a government design study. Oper

ating revenues and other income in 2022 were

primarily driven by revenues from progress on

NSMVs 1-5, the SRIV, CVs 1-3, two government

design studies and the profit in equity-ac

counted investment for Philly Shipyard’s pro-

portionate share of the final distribution from

the Philly Tankers escrow account.

In addition to the IFRS financial measures

reported above, EBITDA (earnings before

interest, taxes, depreciation and amortization)

and EBIT (earnings before interest and taxes)

are considered relevant earnings indicators

for the Company as they measure the oper

ational performance of the shipyard. These

non-IFRS measures are included as items in

the consolidated income statement.

EBITDA was negative USD 63.9 million in 2023,

compared to EBITDA of negative USD 18.1

million in 2022. These figures correspond to

EBITDA margins of -14.5% and -4.6%, respec

tively.

Depreciation expense in 2023 and 2022 was

USD 7.7 million and USD 6.2 million, respectively.

EBIT was negative USD 71.6 million in 2023

compared to EBIT of negative USD 24.3 million

in 2022. Negative EBIT in 2023 was primarily

driven by increased costs on the NSMV pro

gram and consisted of a gross loss of USD 63.8

million recognized on shipbuilding projects

(compared to a gross loss of USD 17.2 million

recognized on shipbuilding projects in 2022),

and SG&A costs of USD 8.0 million (compared

to SG&A costs of USD 8.8 million including USD

1.7 million of under-recovered overhead costs

in 2022), partially offset by profit of USD 0.2

million in government design study work (com

pared to profit of USD 0.2 million in government

design study work and profit of USD 1.1 million

in equity-accounted investment in 2022).

Net financial items in 2023 and 2022 were

income of USD 6.8 million and USD 2.0 mil

lion, respectively. Net financial items in both

years were primarily driven by interest income

from bank deposits partially offset by interest

expense and bank fees.

Income tax in 2023 was an expense of USD

3.1 million and in 2022 was a benefit of USD

10.6 million. In 2022, the deferred income

tax benefit of USD 13.1 million was primarily

driven by temporary differences regarding

stranded overhead and the newly enacted

research and development (R&D) expense

capitalization rules.

In 2023, Philly Shipyard’s net loss was USD

67.9 million and its basic and diluted loss

per share was negative USD 5.61. The cor

responding figures for 2022 were net loss of

USD 11.7 million and a basic and diluted loss

per share of negative USD 0.97.

Cash flows

The Company’s cash flow from operations

depends on payment terms for construction

and delivery settlement for vessels sold to

external customers.

Net cash flow used in operating activities in

2023 and 2022 were USD 50.8 million and

USD 105.0 million, respectively. There are sig

nificant changes year-to-year caused by the

level of completion of vessels and customer

and vendor contract payment schedules.

Net cash flow used in investing activities in

2023 and 2022 were USD 6.6 million and USD

12.1 million, respectively. In both 2023 and

2022, investment activities were due to capital

improvements and enhancements to support

the NSMV and SRIV programs.

Net cash flow used in financing activities in

2023 and 2022 were USD 0.7 million and

USD 0.3 million, respectively. In both 2023

and 2022, financing activities were for lease

liabilities.

Statement of financial position

and liquidity

As of 31 December 2023, Philly Shipyard

has cash and cash equivalents (excluding

restricted cash) of USD 79.5 million. The

corresponding figure for 2022 is USD 137.6

million. The decrease of USD 58.1 million in

2023 (compared to decrease of USD 117.4

million in 2022) was primarily due to spending

on goods and services related to the vessel

projects underway (net of customer milestone

payments), investments in property, plant and

equipment and SG&A costs, partially offset by

favorable working capital and net financial

income items. Philly Shipyard’s net working

capital (current assets less current liabilities)

is negative USD 106.7 million at 31 December

2023 compared to negative USD 64.2 million

at 31 December 2022.

As of 31 December 2023, Philly Shipyard has

restricted cash of USD 44.2 million, of which

USD 34.2 million (long-term) represents the

total cash deposited in an escrow account for

the bonds required for NSMVs 2-5, and USD

10.0 million (short-term) pertains to reserve

accounts required for NSMVs 2-3. The cor

BOARD OF DIRECTORS’ REPORT

PHILLY SHIPYARD - ANNUAL REPORT 202320

responding figure for 2022 was USD 55.4

million. The decrease of USD 11.2 million in

restricted cash is primarily due to the release

of the reserve account required for NSMV 1

(USD 5.0 million) and a portion of the cash

collateral for the bonds (USD 8.0 million) fol

lowing the delivery of NSMV 1, partially offset

by interest income earned on restricted cash

balances. It is anticipated that the remaining

cash collateral for the bonds and the remain

ing reserve account funds will be released in

tranches following the delivery of each subse

quent NSMV vessel.

Total assets were USD 294.5 million at 31

December 2023 compared to USD 350.5 mil

lion at 31 December 2022, with the decrease

in total assets mainly resulting from a decrease

in cash and cash equivalents as noted above.

Current assets as of 31 December 2023 of

USD 173.9 million consists of prepayments

and other receivables, restricted cash (short-

term), income tax receivable (short-term) and

cash and cash equivalents. The corresponding

figure for 31 December 2022 is USD 209.0

million and consists of prepayments and

other receivables, restricted cash (short-term),

income tax receivable (short-term), vessels-un

der-construction receivable and cash and cash

equivalents. The decrease of USD 35.1 million

in current assets is primarily due to decreases

in cash and cash equivalents and vessels-un

der-construction receivable partially offset by

increases in prepayments and other receiv

ables and income tax receivable (short-term).

Non-current assets of USD 120.6 million as

of 31 December 2023 and USD 141.5 million

as of 31 December 2022 consists of property,

plant and equipment, right-of-use assets,

restricted cash (long-term), deferred tax asset,

income tax receivable (long-term), and other

non-current assets. The decrease of USD

20.9 million in non-current assets is primarily

driven by decreases in restricted cash (long-

term) and income tax receivable (long-term).

Current liabilities of USD 280.6 million as of 31

December 2023 and USD 273.2 million as of

31 December 2022 consists of trade payables

and accrued liabilities, warranties, customer

advances (net), other contract liabilities and

lease liability (short-term). The increase of

USD 7.4 million in current liabilities is primar

ily due to an increase in trade payables and

accrued liabilities partially offset by a reduc

tion in customer advances (net).

Non-current liabilities of USD 8.0 million as

of 31 December 2023 and USD 3.5 million

as of 31 December 2022 consists of income

tax payable (long-term) and lease liability

(long-term). The increase of USD 4.5 million

in non-current liabilities is primarily due to an

increase in lease liability (long-term).

Total equity at 31 December 2023 amounts

to USD 5.9 million and the equity ratio (total

equity divided by total assets) was 2%. Corre

sponding figures for 31 December 2022 are

USD 73.8 million and 21%, respectively. The

USD 67.9 million decrease in equity is the

result of the current year’s net loss.

The Board deems that the Company as of 31

December 2023 is financially viable and has a

satisfactory financing structure subject to the

risks discussed in the Risks section below.

RISKS

Market risks

While Philly Shipyard now has an order back

log for ship newbuilds with contractual deliv-

ery dates into 2027, it faces future risks if it is

unable to secure new orders and/or financing

for major commercial or government ship

building programs to follow its existing backlog.

The overall market risk for construction of

commercial vessels is related to the Jones Act.

Repeal of or significant changes to the Jones

Act could, among other things, increase com

petition from foreign (non-U.S.) shipbuilders

with lower costs or require increased use

of higher priced domestic content, and as a

result reduce the demand for U.S.-built ves

sels. In order to address this risk, the Com-

pany has continuous engagement with local,

state and federal government officials.

Philly Shipyard is also exposed to market risk

related to imbalance between supply and

demand for vessels in the Jones Act and U.S.

Government markets, which may result in a

reduction of vessel prices and/or a delay in

new projects. PSI faces risks related to the

contracts for its vessels, including the risk that

those contracts are cancelled and the under

lying vessels are ultimately sold to third par-

ties for less favorable terms.

Philly Shipyard’s revenue is derived primarily

from contracts awarded on a project-by-proj

ect basis. It is difficult to predict whether or

when Philly Shipyard will be awarded a new

contract due to, among other things, changes

in existing or forecast market or political

conditions, uncertainty regarding the timing

and amount of budget appropriations, the

complex bidding and selection processes,

potential for contract award protests and

challenges, and governmental regulations.

Because Philly Shipyard’s revenue is derived

from contract awards, the Company’s reve

nues, results of operations and cash flows

can fluctuate materially from period to period.

Operational risks

Philly Shipyard faces risks related to construc

tion of vessels. Philly Shipyard’s ability to meet

budgets and schedules may be adversely

affected by many factors, including changes

in productivity, shortages of materials, equip

ment and labor, and changes in the cost of

goods and services, both Philly Shipyard’s

own and those charged by its suppliers. Philly

Shipyard’s operations also depend on stable

supplier networks and the availability of key

vendors for design and procurement services.

Philly Shipyard has entered into fixed-price

subcontracts for a significant portion of its

scope of work on its active shipbuilding pro

grams, including the design and major equip-

ment for the NSMV and SRIV programs and

the design and certain long lead items for the

CV program.

As is common in the shipbuilding industry,

Philly Shipyard’s projects are typically per

formed on a fixed-price basis. Under fixed-

BOARD OF DIRECTORS’ REPORT

PHILLY SHIPYARD - ANNUAL REPORT 2023 21

price contracts, Philly Shipyard receives

the price fixed in the contract, subject to

adjustment only for change-orders. In many

cases, these vessels involve complex design

and engineering, significant procurement of

equipment and supplies and extensive con

struction management. Management uses

its best efforts to accurately estimate the

costs to complete Philly Shipyard’s project

awards; however, Philly Shipyard’s actual costs

incurred to complete these projects could

exceed its estimates. The NSMV, SRIV and CV

vessel contracts are fixed-price contracts.

Philly Shipyard’s productivity and profitability

depends substantially on its ability to attract

and retain skilled workers at forecasted

rates. COVID driven labor shortages have

adversely impacted, and are expected to

continue to adversely impact, the Company’s

ability to attract and retain skilled workers at

forecasted rates. Due to COVID driven labor

shortages, the Shipyard has experienced

schedule impacts, productivity loss and

increased costs.

There is a higher technical design risk and a

higher project execution risk for prototype

vessels, such as the NSMV and SRIV, com

pared to the construction of vessels based on

a proven design, such as the product tankers

and container vessels previously built by Philly

Shipyard. These risks increase the current

construction cost estimation uncertainty and

the likelihood of occurrence of contract con

tingencies. Following the delivery of NSMV 1,

these risks have been reduced for the remain

ing vessels in the NSMV series.

Failure to meet Philly Shipyard’s performance

obligations to deliver vessels on time and

within the contract specifications can poten

tially lead to penalties and ultimately contract

termination. The NSMV, SRIV and CV vessel

contracts include liquidated damage clauses

for late delivery exclusive of excusable delays.

The CV vessel contract includes performance

guarantee clauses similar to those included

in the vessel contracts for the prior series of

Aloha Class container vessels.

U.S. Government projects generally are sub

ject to suspension, termination or a reduc-

tion in scope at the option of the customer,

although the customer is typically required to

pay for work performed and materials pur

chased through the date of termination. The

NSMV contract has a termination for conve

nience clause at the option of the U.S. Gov-

ernment.

The Company faces challenges related to the

construction of new classes of vessels, as well

as managing multiple projects at the same

time. These challenges sometimes tend to

impact quality, timely delivery and cost effi

ciencies. In order to reduce these risks, the

Shipyard enters into contracts with design

and procurement partners.

The Shipyard depends on unionized labor for

construction of vessels. Work stoppages or

other labor disturbances could have a mate

rial adverse effect on the Company’s business,

results of operations and financial condition.

In order to mitigate this risk, the Shipyard has

negotiated a four-year collective bargaining

agreement with the Unions which has been

ratified and is effective through January 2027.

The collective bargaining agreement includes

a no-strike clause.

PSI’s success also depends to a great degree

on the abilities of its key management person

nel, particularly its executives and other key

employees who have significant experience

within PSI’s industry. The loss of the services

of one or more of these individuals could

adversely affect PSI.

PSI’s ability to perform under its contracts

depends to some degree on the perfor

mance of third parties under subcontracts.

PSI depends upon subcontractors for a vari

ety of reasons, including: to perform work as

a result of scheduling demands or capacity

constraints that PSI would otherwise per

form with its employees; to supervise and/

or perform certain aspects of the contract

more efficiently considering the conditions of

the contract; and to perform certain types of

skilled work. PSI works closely with these sub

contractors to monitor progress and address

its customer requirements. PSI generally has

the ability to pursue back charges for costs it

incurs or liabilities it assumes as a result of

a subcontractor’s lack of performance. How

ever, the inability of PSI’s subcontractors to

perform under the terms of their contracts

could cause PSI to incur additional costs that

reduce profitability or create losses on proj

ects.

The Shipyard further depends upon a 99-year

lease agreement for the shipyard facility and

the future operations of the yard will accord

ingly be dependent upon PSI fulfilling its

obligations under this lease agreement. Fail

ure to maintain certain employment levels

may result in early termination of this lease.

For more details regarding this lease, please

see “The Master Agreement, Shipyard Lease

and Authorization Agreement with PSDC” on

pages 17-18.

The Shipyard’s operations are subject to the

usual hazards inherent in shipbuilding, such

as the risk of equipment failure and work acci

dents. Despite the Shipyard’s best efforts to

eliminate these hazards, they can sometimes

cause personal injury, business interruption,

construction delays, property and equipment

damage, pollution and environmental dam

age. PSI continues to implement its Health,

Safety and Environment (HSE) management

system and provide training to its workforce

to mitigate these risks. The Shipyard’s policy

of covering these risks through contractual

limitations of liability and indemnities and

through insurance may not always be effec

tive, and customers and subcontractors may

not have adequate financial resources to

meet their indemnity obligations to PSI.

PSI relies heavily on computer information

and communications technology and related

systems in order to properly operate its busi

ness. From time to time, PSI experiences sys-

tem interruptions and delays. In the event PSI

is unable to regularly deploy software and

hardware, effectively upgrade its systems and

BOARD OF DIRECTORS’ REPORT

PHILLY SHIPYARD - ANNUAL REPORT 202322

network infrastructure, and take other steps

to maintain or improve the efficiency and effi

cacy of its systems, the operation of such sys-

tems could be interrupted or result in the loss,

corruption or release of data, and the cost

associated with responding to such events

and restoring compliance could be significant.

The Company faces risk of significant finan

cial, business and intelligence loss if there

are cyber security breaches. Philly Shipyard

has invested significant resources to provide

a more secure computing environment over

the last several years, resulting in improved

security and business resiliency. Philly Ship

yard maintains a continued high awareness

of its risk profile regarding cyber security

because new threats can emerge quickly. PSI

was not aware of any cyber attacks or security

breaches in 2023.

The Shipyard’s operations are subject to

numerous international, national, state and

local environmental, health and safety laws,

regulations, treaties and conventions, includ

ing, inter alia, those controlling the permit-

ted and unpermitted discharge of materials

into the environment, requiring removal and

clean-up of environmental contamination,

establishing certification, licensing, health and

safety, labor and training standards or other

wise relating to the protection of human health

and the environment. Sanctions for failure to

comply with these requirements, which may

be applied retroactively, may include: admin

istrative, civil and criminal liabilities, revocation

of permits to conduct business and corrective

action orders, including orders to investigate

and clean up contamination.

In addition, the Shipyard could be affected

by future laws or regulations, including those

imposed in response to concerns over climate

change, other aspects of the environment,

or natural resources. For example, because

carbon dioxide, methane and certain other

greenhouse gases produce climate changes

that have significant impacts on public health

and the environment, various governmental

authorities have considered and are continu

ing to consider the adoption of regulatory

strategies and controls designed to reduce

the emission of greenhouse gases resulting

from regulated activities, which if adopted in

areas where the Shipyard conducts business,

could require PSI or its customers to incur

additional compliance costs, result in delays,

or adversely affect demand for PSI’s services.

Philly Shipyard is located on a tidal riverfront

and is exposed to climate risks related to

extreme weather and coastal hazards. These

risks can include storms, flooding, high tides,

wave erosion, air quality, and extreme tem

perature highs and lows, which could affect

shipyard operations directly or indirectly

through infrastructure impacts (roads, utili

ties) or supply chain disruption. Philly Ship-

yard’s property is not considered at high risk

of rising sea levels due to its distance from the

ocean and the elevated level of the Shipyard’s

infrastructure compared to nearby riverfront

areas. Contingency plans are developed for

each project to mitigate risks of disruptions,

project delays and financial and reputational

impact. To ensure the safety of its people and

operations in the event of climate-related dis

ruptions, such as extreme weather, the Com-

pany as a best practice will shut down opera-

tions and safely store materials.

Financial risks

Philly Shipyard’s activities expose it to a vari

ety of financial risks: market risk (including

commodity pricing risk, currency risk and

price risk), credit risk and cash flow interest

rate risk. Philly Shipyard’s overall risk manage

ment program focuses on the unpredictabil-

ity of financial markets and seeks to minimize

potential adverse effects on Philly Shipyard’s

financial performance. Philly Shipyard uses

derivative financial instruments to hedge cer

tain risk exposures.

Risk management is carried out under policies

and protocols approved by the Board of Direc

tors. The Board of Directors provides princi-

ples for overall financial risk management as

well as policies covering specific areas such as

foreign exchange risk, interest rate risk, credit

risk and use of derivative financial instruments

and non-derivative financial instruments.

Philly Shipyard is dependent upon having

access to construction financing facilities and

other loans and debt facilities to the extent its

own cash flow from operations and milestone

payments from customers are insufficient to

fund its operations and capital expenditures.

In turn, Philly Shipyard must secure and main

tain sufficient equity capital to support debt

facilities. As Philly Shipyard has no current

debt facilities, delays in achieving milestones

could result in the need for external interim

financing. Additionally, Philly Shipyard may be

required to obtain bonding capacity in case

there is need for payment or performance

bonds, or to furnish letters of credit, refund

guarantees or other forms of security, to sup

port major commercial or government ship-

building programs. Philly Shipyard may not be

able to obtain sufficient debt facilities or bond

ing capacity or furnish sufficient security if and

when needed with favorable terms, if at all. As

of 31 December 2023, Philly Shipyard has fur

nished all bonds and security that are required

to support its active shipbuilding programs.

The Company is exposed to changes in prices

of materials and duties, tariffs and other

taxes imposed on goods imported from

foreign (non-U.S.) countries. Philly Shipyard

attempts to mitigate its exposure with respect

to steel cost escalation and increased taxes

on imported goods by passing these risks on

to its end customers. The NSMV, SRIV and

CV vessel contracts include price adjustment

clauses for steel as defined in the respective

contracts.

The Company is subject to exchange rate risk

for purchases made in currencies other than

the U.S. dollar. In order to mitigate exposure

to this risk, Philly Shipyard will look to pass

this risk on to its end customers or suppli

ers or secure foreign exchange forward con-

tracts for its known requirements for foreign

currency. The subcontracts for the detailed

design and major equipment for the NSMV

and SRIV programs and the design and cer

BOARD OF DIRECTORS’ REPORT

PHILLY SHIPYARD - ANNUAL REPORT 2023 23

tain long lead items for the CV program are

payable in U.S. dollars. The SRIV contract

includes an exchange rate adjustment clause

for goods and services purchased in certain

foreign currencies.

Philly Shipyard regularly monitors the financial

health of its construction financing lenders

(if any) as well as the financial health of the

financial institutions, which it uses for cash

management services and in which it makes

deposits and other investments.

Through construction financing (if any), the

Company is exposed to fluctuations in inter

est rates. Philly Shipyard currently has no con-

struction financing facility.

The credit risk of ship owners is evaluated upon

contract signing. Typically, ship owners have

financing approvals in place before they enter

into contracts with PSI. During the construction

period, Philly Shipyard continually evaluates the

credit risk associated with ship owners and,

except in cases where PSI arranges construc

tion financing, manages this risk by requiring

payment for substantially the entire contractual

amount prior to delivering a vessel, including

milestone payments upon completion of spec

ified milestones. At the completion of a vessel,

transfer of ownership takes place upon settle

ment. Should a ship owner fail to pay, PSI may

attempt to dispose of the vessel in the open

market to recover its construction costs.

PSI accrues an estimate for future warranty

claims on its delivered vessels. This estimate

is examined during the warranty period and

adjusted as necessary. In order to mitigate

the risk of warranty claims exceeding warranty

provisions, PSI has secured back-to-back war

ranties for most major components on the

vessels.

Other risks

The lingering effects of the COVID-19 pan

demic (including skilled labor shortages and

supply chain disruptions) continue to impact

the Company’s shipbuilding projects. Ongo

ing global military conflicts increase the risk

of rising commodity prices, material short-

ages and transportation delays that could

adversely impact Philly Shipyard’s business.

Although improved from prior years, Philly

Shipyard continues to see uncertainty in the

global macroeconomic environment as well

as continuing inflation, high interest rates and

market volatility.

SUBSEQUENT EVENTS AFTER

31 DECEMBER 2023

There are no events after 31 December 2023

that require disclosure.

THE GOING CONCERN ASSUMPTION

The consolidated financial statements have

been prepared on a going concern basis

which contemplates continuity of normal

business activities and realization of assets

and settlement of liabilities in the normal

course of business.

PARENT COMPANY ACCOUNTS AND

ALLOCATION OF LOSS FOR THE YEAR

The income/(loss) account of Philly Shipyard

ASA for the year 2023 shows a loss of USD 1.8

million. The Board of Directors proposes that

the loss for the year be allocated as shown

below:

Dividend payment USD 0

Other equity USD (1.8) million

Total allocated USD (1.8) million

Philly Shipyard’s goal is that its shareholders

will, over time, receive competitive returns

on their investments through a combination

of dividends and share price growth. The

PHLY Board does not foresee payment of

shareholder distributions, including dividends

and share buybacks, until the Company has

returned to sustained profitability.

The parent company’s only significant asset is

the investment in subsidiary, PSI.

ENVIRONMENTAL,

SOCIAL, & GOVERNANCE (ESG)

Philly Shipyard is committed to operating

sustainably and responsibly. During 2023, PSI

continued to strengthen its sustainability and

environmental, social, and governance (ESG)

program. Kelly Whitaker was named Vice

President, Sustainability and Communica

tions, thereby elevating the leadership of this

important area for the Shipyard. Ms. Whitaker

reports to the CEO and is a member of the

senior leadership team. As an enhancement

to the Company’s governance framework, the

Audit Committee of the Board of Directors

established oversight of the sustainability/ESG

program and reviews it regularly at meetings.

Philly Shipyard’s sustainability/ESG strategy

continues to be focused on those material

topics that were identified through its stake

holder analysis and materiality assessment,

which are reviewed annually. A major area

of focus this year was establishing baseline

metrics for sustainability and ESG, including

calculating the shipyard’s Greenhouse Gas

Scope 1 and 2 emissions. Other highlights

during 2023 included: conducting a human

rights risk assessment with suppliers, pub

lishing the Company’s Norwegian Transpar-

ency Act statement, issuing a comprehensive

Code of Conduct to all employees, establish

ing a Supplier Code of Conduct, and holding

in-person Diversity, Equity and Inclusion (DEI)

training for all senior leadership, supervisors,

and managers.

Key priorities for Philly Shipyard’s sustainabil

ity/ESG program in 2024 will include: setting

targets for selected sustainability/ESG metrics,

publishing a sustainability report, and estab

lishing additional channels for stakeholder

engagement. PSI also continues to prepare

for upcoming regulatory requirements for

ESG disclosure to investors and other stake

holders in the future, including the European

Sustainability Reporting Standards (ESRS).

As Philly Shipyard collaborates with ship own

ers and designers, the Company embraces

the opportunity to build ships that meet evolv

ing needs for sustainable designs and green

ship technology. The Shipyard uses the latest

International Maritime Organization require

ments as guidance for environmental pro-

BOARD OF DIRECTORS’ REPORT

PHILLY SHIPYARD - ANNUAL REPORT 202324

BOARD OF DIRECTORS’ REPORT

tection and efficiency during the design and

production process. In its role as a supplier

to ship designers and owners, Philly Shipyard

has expanded its capabilities and know-how

in technologies that reduce ship emissions

through cleaner-running engines, alternative

fuels such as LNG, battery storage and more.

In alignment with the clean energy transition

underway in the maritime sector, Philly Ship

yard is currently contracted to build LNG-pow-

ered containerships as well as a Subsea Rock

Installation Vessel that will support the instal

lation of offshore wind farms.

Environmental reporting is an integral part of

the Shipyard’s reporting system, on par with

reporting on financial matters and operations.

This commitment extends to evaluating and

adopting environmentally beneficial improve

ments in production processes, alternative

materials and services. PSI promotes open

communication on environmental issues with

employees, neighbors, public authorities, and

other interested parties and has implemented

a system through which employees can make

observations and suggestions about the Ship

yard’s environmental performance.

The industrial nature of the Shipyard’s activi

ties requires the use of significant amounts of

energy, both electrical and gas, as well as the

generation of waste and release of particulate

and volatile organic compound (VOC) emissions.

Philly Shipyard recognizes that climate change

has and will continue to have significant impacts

on the environment and society, which has

prompted regulations limiting the emission of

greenhouse gases (GHG) and driving the tran

sition towards a low-carbon economy. Action is

expected from all companies, and Philly Ship

yard is committed to doing its part. The mar-

itime industry, like other sectors in the global

economy, is working to reduce greenhouse gas

emissions and transform away from fossil fuels

and transition toward a low-carbon economy.

During 2023, Philly Shipyard determined its

GHG footprint including Scope 1 and 2 emis

sions: 5,011 and 8,609 MT CO2 equivalents,

respectively. The Company plans to continue

disclosing its Scope 1 and 2 emissions annu

ally and intends to develop a set of sustain-

ability targets including a target related to

GHG Scope 1 and 2 in the coming year.

The Company also initiated a program to

improve energy efficiency and reduce emis

sions. Philly Shipyard began exploring oppor-

tunities to electrify its operations, including

evaluation of battery-powered fork trucks and

utility vehicles. A substantial portion of the

lighting at the Shipyard has been switched to

LED, to further improve energy efficiency.

Aligned with the shift toward a circular econ

omy, PSI uses modern waste management

practices to ensure as much material as pos

sible is diverted from landfills and sent for

recycling. During 2023, the Shipyard recycled

100% of its wood and metal waste and up to

80% of its industrial debris. In 2023, PSI recy

cled approximately 1,769 tons of wood scrap

and 1,729 tons of steel.

A program has been launched to detect and

reduce leaks from equipment in the Shipyard

and to convert to ozone-friendly refrigerants.

For the reporting period ending in 2023, VOC

emissions to air were approximately 17.8

tons. PSI generated approximately 61 tons of

hazardous waste. There were no reportable

discharges into the surrounding waterways.

Philly Shipyard has a comprehensive set of

policies to address environmental, social and

governance concerns, and to comply with or

exceed all federal, state, and local require

ments. During 2023, Philly Shipyard updated

its Employee Handbook and delivered a com

prehensive Code of Conduct to all employees.

Training on the Code of Conduct was provided

to all employees. Every employee is responsible

for reading and familiarizing themselves with

the Code of Conduct and living by its standards.

The Shipyard is committed to maintaining a

work environment that is free of discrimina

tion, harassment and hostilities. In keeping

with this commitment, PSI maintains a strict

Harassment Free Environment Policy and

does not tolerate unlawful harassment of

employees by anyone.

Philly Shipyard is committed to providing

equal employment opportunity to all employ

ees and applicants for employment, regard-

less of race, color, ethnic background, gender,

religion, age, marital status, sexual orientation,

national origin, citizenship status, disability,

veteran status, or any other legally protected

status. Diversity strengthens the Shipyard’s

overall capacity and skills.

During 2023, in-person Diversity, Equity and

Inclusion (DEI) training was held with all senior

leadership, supervisors and managers attend

ing. Additional DEI initiatives and activities are

planned for 2024.

The maritime industry has traditionally been

male-dominated. The entire industry faces

the challenge of increasing the proportion of

female employees. PSI has taken some affir

mative steps to address this challenge. For

example, the Shipyard encourages female

applicants and has seen increased interest

among potential female employees to pursue

a career with PSI. To further this goal, PSI par

ticipates in available government programs

that encourage women in manufacturing and

has recruited at schools and training pro

grams with more women.

At 31 December 2023, approximately 10% of

PSI’s employees were women. There is one

woman on PSI’s senior management team

and two female members on PHLY’s Board of

Directors. In addition, women hold key posi

tions such as Controller, Director of Project

Estimating and Cost Control, Accounts Pay

able Supervisor, Payroll Benefits Supervisor,

Purchasing Manager, Training Manager, Pro

duction Supervisor, Talent Acquisition Super-

visor and HSE Manager.

At 31 December 2023, approximately 37% of

PSI’s employees were minorities. There has been

a 15% increase in minority hires from 2022 to

PHILLY SHIPYARD - ANNUAL REPORT 2023 25

BOARD OF DIRECTORS’ REPORT

2023. Philly Shipyard has put focus on recruiting

from areas with a diverse population by hosting

career events at Pennsylvania CareerLink loca

tions, presenting about its Apprentice program

to local high school students, and participating

in Corners to Connections events.

Philly Shipyard is strongly committed to work

force development and provides extensive

training in support of upskilling and devel

oping its employees’ capabilities, as well as

ensuring a safe work environment. During

2023, the Shipyard offered a variety of train

ing courses including Supervisor Leadership,

DEI and Belonging, Code of Conduct, over

60 safety classes, union annual refresher

training, and up to two full days of new hire

orientation. Employees receive annual perfor

mance reviews, which are used as opportuni-

ties to discuss training requests and general

growth and development.

Approximately 49% of PSI’s employees are

members of the Philadelphia Metal Trades

Council (PMTC) union and are covered under

the collective bargaining agreement between

the PMTC and the Shipyard. This agreement is

effective until 31 January 2027. Under this col

lective bargaining agreement, union employ-

ees are granted vacation and personal time,

and most union employees receive shutdown

pay during the week of the Fourth of July hol

iday and in between the Christmas and New

Year’s holidays. In addition, union employ

ees may take up to 6 unpaid days within a

12-month period. Traditional sick days are

not part of the collective bargaining agree

ment and, therefore, union employees do

not accrue sick time. Non-union employees

accrue sick time on a monthly basis and may

maintain a balance of up to 200 hours. During

2023, 230 non-union employees used 8,513

hours of total sick time (8,245 hours of sick

time and 268 hours of COVID-19 time), repre

senting 1.76% of total non-union work hours.

At the Shipyard, health, safety and the environ

ment (HSE) are not just a priority, but a mind-

set embedded in all decisions and actions. The

Union-Management Safety and Environmen

tal Board reviews the various HSE programs,

and makes recommendations on policies

and procedures. The HSE system includes

safety training of employees and subcontrac

tors, safety inspections, industrial health and

wellness programs, drug testing, emergency

response and environmental programs. PSI is

implementing new initiatives to continuously

improve its HSE mindset during 2024.

n March 2023, a production worker tragically

suffered a fall-related fatality at the shipyard.

This is the first fatality in PSI’s history. PSI

maintains a culture of continuous improve-

ment and will continue to work proactively to

establish an injury-free workforce.

PSI also had 3 lost time injuries (LTI) and 48

recordable injuries reported in 2023. The inci

dents came from a total of 3,540,213 hours

worked by PSI employees and subcontractors

in 2023. The Other Recordable Incident Fre

quency Rate (ORIFR) was 2.49 in 2023. ORIFR

is based on recordable incidents other than

LTIs per 200,000 hours as defined by the

Occupational Safety and Health Administra

tion (OSHA). PSI continues to work proactively

to further improve safety, with a goal of elimi

nating incidents.

Philly Shipyard believes all people share the

same fundamental human rights. The Com

pany follows legal and responsible sourcing

practices and expects its suppliers to uphold

the same standards. In 2023, the Company

added human rights and modern slavery to

its policies, including the Employee Code of

Conduct and Supplier Code of Conduct. Philly

Shipyard conducted a human rights due dili

gence process to assess modern slavery risks

related to the Company’s supplier base, and

issued its first Norwegian Transparency Act

Statement summarizing this process, findings

and action plan. No potential human rights

impacts were found.

PSI is committed to responsible procurement

and expects its suppliers to operate with

integrity and ethical behavior, as well as a

commitment to safety, environmental respon

sibility, sustainability, and respect for people.

During 2023, Philly Shipyard established a

Supplier Code of Conduct that outlines the

specific requirements and expectations for

suppliers. This Supplier Code of Conduct was

communicated to all suppliers along with PSI’s

expectation that they be familiar with it and

align their activities with it.

The Company has zero tolerance for cor

ruption and has adopted an Anti-Corruption

Policy that is in line with the anti-corruption

policies at other Aker ASA-related compa

nies. The Company also maintains a strict

Conflict of Interest policy, which is reflected

in the Employee Code of Conduct and PSI’s

non-union employee handbook, as well as its

Terms and Conditions to outside suppliers.

In support of the above initiatives and policies,

the Shipyard maintains a formal policy for the

disclosure of wrongful conduct and protection

from retaliation. This whistleblower policy is

available to all employees and is administered

by the Vice President of Human Resources.

The Company has implemented a process that

allows anonymous reports of violations through

a third-party administrator. In 2023, there were

seven cases reported using this process.

As part of its commitment to be a good neigh

bor, PSI continues to support a number of

organizations that make its communities

stronger. In 2023, Philly Shipyard supported

the Seamen’s Church Institute of Philadel

phia, which provides materials and services

to international seafarers who serve as crews

on international ships entering Philadelphia’s

port. Philly Shipyard also continued its multi-

year donations to a local non-profit organiza

tion that delivers community-based human

services to residents of a nearby Philadelphia

neighborhood. In support of the fight against

childhood cancer, Philly Shipyard donated to

the Andrew McDonough B+ Foundation, the

largest provider of financial assistance to fam

ilies of kids with cancer in the U.S.

In 2024, Philly Shipyard will be launching a

Community Giving Program and a Volunteer

PHILLY SHIPYARD - ANNUAL REPORT 202326

BOARD OF DIRECTORS’ REPORT

Recognition Program to strengthen the con-

nection between the Philly Shipyard team and

its local communities.

ORGANIZATION

On 31 December 2023, Philly Shipyard’s work

force consisted of 504 direct employees and

1,175 subcontracted personnel. The Ship

yard experiences higher turnover amongst

its union and production subcontractor

employees compared to other employees.

Philly Shipyard continues to increase the size

and breadth of its apprenticeship program as

more cohorts are added to this program, with

the most recent cohort starting in January

2024. As of 31 December 2023, 125 appren

tices are active in this program.

CORPORATE GOVERNANCE

Philly Shipyard’s corporate governance policy

exists to ensure an appropriate division of roles

among the Company’s owners, Board of Direc

tors and Management Team. Such a separation

of roles ensures that goals and strategies are

prepared, that adopted corporate strategies

are implemented, and that the results achieved

are subject to verification and follow-up. Apply

ing these principles also contributes to satisfac-

tory group-wide monitoring and verification of

activities. An appropriate division of responsi

bilities and satisfactory controls will contribute

to the greatest possible value creation over

time, to the benefit of shareholders and other

interest groups. Philly Shipyard’s corporate gov

ernance guidelines are presented in greater

detail on pages 75-79 of this annual report.

The directors and officers of Philly Shipyard

are covered under an Aker group Directors

and Officers liability insurance policy (D&O).

The insurance covers personal legal liabilities

including defense and legal costs. The officers

and directors of the parent company and all

subsidiaries globally (owned more than 50%)

are covered by the insurance. The cover also

includes employees in managerial positions

or employees who become named in a claim

or investigation.

OUTLOOK

At 31 December 2023, Philly Shipyard contin

ues to maintain a strong order backlog of USD

1,719.1 million. Philly Shipyard has eight ves

sels, consisting of four NSMVs, one SRIV and

three CVs, in its order book. Philly Shipyard’s

current order book provides pipeline visibility

and stability into 2027.

Philly Shipyard delivered NSMV 1 within one

month of the contract delivery date, as extended

for excusable delay. This nearly on-time delivery

is a rare feat for a government shipbuilding pro

gram, and is especially remarkable for a first-in-

class vessel that was built largely in the midst of

a public health emergency.

Following the delivery of NSMV 1, there is an

increased focus on the ongoing implementa

tion of Philly Shipyard’s continuous improve-

ment program. The lessons learned and expe-

rience gained from construction of NSMV 1 is

expected to result in improved performance

on subsequent vessels in the NSMV series.

Philly Shipyard continues to pursue prospects

in the government and commercial newbuild

markets and is presently targeting shipbuilding

programs with building slots following the third

CV. In the government sector, Philly Shipyard

remains focused on opportunities for commer

cial-like and auxiliary ships. In the commercial

sector, Philly Shipyard is exploring a variety of

potential new construction projects for U.S.-

built vessels. Philly Shipyard continues to pro

mote variants based on existing ship designs

as potential cost-effective solutions for both

government and commercial customers.

Additionally, Philly Shipyard continues to seek

opportunities to replicate the NSMV contract

model for other government shipbuilding

programs. This innovative approach enables

Philly Shipyard to apply commercial best prac

tices for design and construction to govern-

ment vessels. There is growing interest in the

U.S. Congress in the NSMV contract model

and its potential applicability to government

shipbuilding programs, such as the sealift

recapitalization, to reduce costs, accelerate

delivery times, and build more vessels.

Philly Shipyard continues to forecast the five-

ship NSMV series to be a loss-making contract.

As of 31 December 2023, Philly Shipyard has

recognized more loss on the NSMV contract

to date than it anticipates to recognize when

the five-ship contract is completed. Therefore,

in accordance with IFRS, no loss provision has

been recorded to date for an onerous contract.

As previously reported, the forecast has and

continues to be impacted by increased costs

of labor, turnkey suppliers and overhead

driven by schedule delays and compression.

While, as previously noted, Philly Shipyard has

obtained four months of schedule relief for

the NSMVs, Philly Shipyard continues to pur

sue all options available to obtain cost relief

for COVID-19 related impacts. The current

forecast excludes any potential recoveries as

well as claims for back charges against cer

tain underperforming subcontractors and

suppliers.

Kristian Røkke

Board Chairman

Elin Karfjell

Board Member

Steinar Nerbøvik

President and CEO

Oslo, Norway - 12 March 2024

Board of Directors Philly Shipyard ASA

Jan Petter Hagen

Board Member

Susan Hayman

Board Member

PHILLY SHIPYARD - ANNUAL REPORT 2023 27

DIRECTORS’ RESPONSIBILITY STATEMENT

Today, the Board of Directors and the Chief

Executive Officer reviewed and approved the

Board of Directors’ report and the consoli-

dated and separate annual financial state-

ments for Philly Shipyard ASA, as of and for

the year ending 31 December 2023 (annual

report 2023).

The Philly Shipyard ASA consolidated financial

statements have been prepared in accor-

dance with IFRS, as adopted by the European

Union, and additional disclosure requirements

in the Norwegian Accounting Act, and that

should be used as of 31 December 2023. The

separate financial statements for Philly Ship-

yard ASA have been prepared in accordance

with the Norwegian Accounting Act and Nor-

wegian Accounting Standards as of 31 Decem-

ber 2023. The Board of Directors’ report for

the group and the parent company is in accor-

dance with the requirements in the Norwegian

Accounting Act and Norwegian accounting

standard no. 16, as of 31 December 2023.

To the best of our knowledge:

The consolidated and separate annual

financial statements for 2023 have been

prepared in accordance with applicable

accounting standards

The consolidated and separate annual

financial statements give a true and fair

view of the assets, liabilities, financial posi-

tion and income/(loss) as a whole as of

31 December 2023 for the group and the

parent company

The Board of Directors’ report for the

group and the parent company includes

a true and fair review of:

- The development and performance of

the business and the position of the

group and the parent company

- The principal risks and uncertainties

the group and the parent company

face

Directors’ Responsibility

Statement

Kristian Røkke

Board Chairman

Elin Karfjell

Board Member

Steinar Nerbøvik

President and CEO

Oslo, Norway - 12 March 2024

Board of Directors Philly Shipyard ASA

Jan Petter Hagen

Board Member

Susan Hayman

Board Member

PHILLY SHIPYARD - ANNUAL REPORT 202328

PHILLY SHIPYARD - ANNUAL REPORT 2023 29

Consolidated

Income Statement

Consolidated Statement of

Comprehensive Income

Amounts in USD thousands (except share amounts and earnings per share) Note 2023 2022

Operating revenues 2 441 845 392 706

Other income 2 - 1 112

Operating revenues and other income 441 845 393 818

Costs of vessel construction 2 (497 732) (403 113)

Wages and other personnel expenses (SG&A) 3 (3 461) (3 162)

Other operating expenses 4 (4 542) (5 659)

Operating loss before depreciation (EBITDA) (63 890) (18 116)

Depreciation 7 (7 720) (6 190)

Operating loss before interest and taxes (EBIT) (71 610) (24 306)

Financial income 5 7 170 2 557

Financial expense 5 (416) (570)

Loss before tax (64 856) (22 319)

Income tax (expense)/benefit 6 (3 081) 10 628

Loss after tax (67 937) (11 691)

Weighted average number of ordinary shares in issue 11 12 107 901 12 107 901

Basic loss per share (USD) 11 (5.61) (0.97)

Diluted loss per share (USD) 11 (5.61) (0.97)

Amounts in USD thousands 2023 2022

Loss after tax for the year (67 937) (11 691)

Other comprehensive income, net of income tax - -

Total comprehensive loss for the year * (67 937) (11 691)

* All attributable to equity holders of the parent company.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202330

Consolidated Statement

of Financial Position

as of 31 December

Amounts in USD thousands Note 2023 2022

ASSETS

Property, plant and equipment 7 42 653 42 136

Right-of-use assets 7 17 835 13 500

Restricted cash long-term 10 34 158 45 420

Deferred tax asset 6 25 333 26 208

Income tax receivable long-term 6 82 13 700

Other non-current assets 552 548

Total non-current assets 120 613 141 512

Prepayments and other receivables 8 68 389 52 357

Restricted cash short-term 10 10 022 10 011

Income tax receivable short-term 6 15 978 4 107

Vessels-under-construction receivable 2 - 4 925

Cash and cash equivalents 9 79 463 137 586

Total current assets 173 852 208 986

TOTAL ASSETS 294 465 350 498

EQUITY AND LIABILITIES

Paid in capital 12 35 206 35 206

Other equity (29 371) 38 566

Total equity attributable to equity holders of the parent company 5 835 73 772

Total equity 5 835 73 772

Income tax payable long-term 6 1 200 1 200

Lease liability long-term 13 6 788 2 354

Total non-current liabilities 7 988 3 554

Trade payables and accrued liabilities 16 65 037 41 730

Other provisions - warranties 15 2 131 250

Customer advances (net) 2 212 196 230 558

Other contract liabilities 2 221 348

Lease liability short-term 13 1 057 286

Total current liabilities 280 642 273 172

Total liabilities 288 630 276 726

TOTAL EQUITY AND LIABILITIES 294 465 350 498

CONSOLIDATED ACCOUNTS

Kristian Røkke

Board Chairman

Elin Karfjell

Board Member

Steinar Nerbøvik

President and CEO

Oslo, Norway - 12 March 2024 - Board of Directors Philly Shipyard ASA

Jan Petter Hagen

Board Member

Susan Hayman

Board Member

PHILLY SHIPYARD - ANNUAL REPORT 2023 31

Consolidated Statement

of Changes in Equity

Share Share Treasury Other Total

Amounts in USD thousands capital premium shares equity equity

Balance at 31 December 2021 22 664 22 511 (9 969) 50 257 85 463

Total comprehensive loss for the year 2022 - - - (11 691) (11 691)

Balance at 31 December 2022 22 664 22 511 (9 969) 38 566 73 772

Total comprehensive loss for the year 2023 - - - (67 937) (67 937)

Balance at 31 December 2023 22 664 22 511 (9 969) (29 371) 5 835

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202332

Consolidated

Cash Flow Statement

Amounts in USD thousands Note 2023 2022

Loss before tax (64 856) (22 319)

Depreciation 7 7 720 6 190

Right-of-use assets reassessment 7 144

Net financial income 5 (6 734) (1 951)

(Increase)/decrease in:

Vessels-under-construction receivable 2 4 925 (4 925)

Contract assets 2 - 345

Restricted cash 10 11 251 (10 939)

Prepayments materials deposits 8 (8 435) 6 404

Prepayments other and other receivables 8 (7 597) 2 362

Other non-current assets (4) (53)

Increase/(decrease) in:

Trade payables and accrued liabilities 15,16 25 188 (9 872)

Customer advances (net) 2 (18 362) (65 840)

Other contract liabilities 2 (127) 348

Income taxes paid 6 (459) (6 799)

Interest paid 5 (416) (570)

Interest received 5 7 150 2 521

Net cash flow used in operating activities (50 749) (104 954)

Investment in property, plant & equipment 7 (6 635) (12 094)

Net cash flow used in investing activities (6 635) (12 094)

Repayment of lease liability 13 (1 068) (452)

Interest expense on lease liability 13 329 83

Net cash flow used in financing activities (739) (369)

Net change in cash and cash equivalents (58 123) (117 417)

Cash and cash equivalents as of 1 January 137 586 255 003

Cash and cash equivalents as of 31 December 9 79 463 137 586

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 33

STATEMENT OF COMPLIANCE

The consolidated financial statements of

Philly Shipyard ASA and its subsidiaries

(referred to herein as a group as Philly Ship-

yard, the Group or the Company) have been

prepared in accordance with IFRS Accounting

Standards as adopted by the EU in effect at

each financial reporting period.

These accounts have been approved for

issue by the Board of Directors on 12 March

2024. The annual accounts will be submitted

to Philly Shipyard’s annual general meeting

on 15 April 2024 for final approval.

BACKGROUND AND BASIS FOR

PREPARATION

Philly Shipyard ASA (referred to herein as

PHLY) was formed on 16 October 2007 to be

the holding company of Philly Shipyard, Inc.

(referred to herein as PSI or the Shipyard)

which operates a shipyard located in Philadel-

phia, Pennsylvania, USA. PSI owned certain

dormant subsidiaries in connection with its

former investments in shipping assets, which

were liquidated in 2023.

PHLY is domiciled in Oslo, Norway. PSI is domi-

ciled in the Commonwealth of Pennsylvania,

USA. The subsidiaries of PSI were domiciled in

the State of Delaware, USA. These consolidated

financial statements have been prepared on a

historical cost basis. The consolidated financial

statements are presented in USD (thousands),

except when indicated other wise.

ESTIMATES, ASSUMPTIONS AND

SIGNIFICANT JUDGMENTS

The preparation of the consolidated financial

statements in conformity with IFRS requires

the use of estimates and assumptions that

affect the reported amounts in the consoli-

dated financial statements. Although these

estimates are based on management’s best

knowledge of current events and actions,

actual results may ultimately differ from

those estimates.

In addition, the preparation of consolidated

financial statements in conformity with IFRS

requires management to make judgments

that affect the application of accounting poli-

cies and the reported amounts of assets and

liabilities, income and expense.

Estimates, underlying assumptions and sig-

nificant judgments are reviewed on an ongo-

ing basis. Revisions to accounting estimates

are recognized in the period in which the esti-

mates are revised if the revision affects that

period or in the period of revision and future

periods if the revision affects both current

and future periods.

Critical accounting estimates, assumptions

and significant judgments are as follows:

Revenue Recognition

Philly Shipyard recognizes revenue over time

in accordance with IFRS 15 Revenue from Con-

tracts with Customers (IFRS 15). This approach

requires Philly Shipyard to measure the

progress of contract activity at each state-

ment of financial position date and estimate

the ultimate outcome of costs and profit on

contracts. Progress towards satisfying per-

formance obligations is measured based

on project costs incurred compared to the

total forecasted project costs. In case of a

loss-making project, a loss provision will be

made when total contract cost will exceed

total contract revenue (onerous contract).

Revenue and cost estimates from shipbuild-

ing activities depend, amongst others, on

variables such as steel prices, supplier and

subcontractor costs, labor costs and avail-

ability, and other production inputs. Philly

Shipyard must also evaluate and estimate

the outcome of variation orders, liquidated

damages, contract claims and requests from

customers to modify contractual terms which

can involve complex negotiations with cus-

tomers. Generally, estimates are subject to

a greater level of uncertainty when a vessel

design is new to the Shipyard than if a vessel

is being constructed later in a series (see note

2 for further discussion).

Philly Shipyard has three separate awards

under one shipbuilding contract in place

for the NSMV program. NSMVs 1-2 were

awarded at contract signing in April 2020;

NSMVs 3-4 were awarded upon the exercise

of an option in January 2021, and NSMV 5 was

awarded upon the exercise of an option in

April 2022. Therefore, the three awards are

treated as three separate performance obli-

gations that are reported as three separate

projects for revenue recognition. Each of

these projects is being accounted for using

the percentage-of-completion method per

IFRS 15. The principle of a series of distinct

goods has been applied where NSMVs 1-2,

NSMVs 3-4 and NSMV 5 are each treated sep-

arate of one another.

Cost Forecast of Shipbuilding Contracts

The cost forecast of shipbuilding contracts

can be judgmental and sensitive to changes.

The cost estimates can significantly impact

revenue recognition for contracts using cost

progress, particularly in lump sum construc-

tion contracts. Forecasting the total con-

tract cost depends on the ability to properly

execute the engineering and design phase,

availability of skilled resources, manufactur-

ing capacity, productivity and quality factors,

steel prices and performance of subcon-

tractors. Experience, systematic use of the

project execution model and focus on core

competencies reduce, but do not eliminate,

the risk that cost estimates may change sig-

nificantly.

Tax Uncertainty

Tax positions subject to uncertainty are iden-

tified and assessed either individually or in

groups based on an estimate of the probability

that the tax authorities will accept or reject a

certain treatment. Where it is assessed that it

is not probable the tax authorities will accept

an uncertain tax treatment, the effect of the

Notes to the

Consolidated Accounts

NOTE 1: ACCOUNTING PRINCIPLES

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202334

uncertainty is reflected in the calculation of the

taxable profit, tax bases, unused tax losses or

credits, or tax rates. The effect of the uncer-

tainty is calculated by applying the most appro-

priate method (most likely amount or expected

value). Changes in circumstances are assessed

and reflected at each reporting date.

Deferred Income Taxes

Deferred income tax assets are recognized

when it is probable that they will be realized.

Determining probability requires Philly Ship-

yard to estimate the sources of future taxable

income from operations, including reversing

taxable temporary differences. Determining

these amounts is subject to uncertainty and

is based primarily upon historical earnings,

reversals of taxable temporary differences

and expected earnings due to contracts in

progress and contract order backlog. The

recognition of deferred tax assets is primarily

applicable to U.S. taxes where Philly Shipyard

has a net deferred tax asset position (see

note 6 for further discussion).

R&D Tax Credit

Since 2015, PSI has qualified for the research

and development (R&D) tax credit for both

federal and Pennsylvania state tax purposes.

The Shipyard qualified for the credit because

of the research it undertook to discover infor-

mation that is technological in nature and

intended to be useful in the development

of a new or improved business component.

The Company recognizes the R&D tax credit

estimate as part of the income tax benefit

based on a calculation of qualifying research

expenses using available guidance and the

applicable rules and regulations.

The Going Concern Assumption

The 2022 and 2023 consolidated financial

statements have been prepared on a going

concern basis which contemplates continuity

of normal business activities and realization of

assets and settlement of liabilities in the nor-

mal course of business due to the firm order

backlog which takes operations into 2027.

Climate Risk - Consideration of Climate

Change

Climate-related risk could include both tran-

sition impacts, for example additional costs

incurred by the Company as a result of tran-

sitioning to a low-carbon economy, the need

for different types of vessel construction, or

physical impacts such as damage to assets as

a result of storms or flooding.

In preparing these financial statements the

Board of Directors has considered the poten-

tial impact of climate change and has con-

cluded that there is no material impact from

climate change on financial reporting judge-

ments and estimates. The Board of Directors

considered the impact of climate change with

regards to contract judgments, carrying value

and useful life of PP&E and right-of-use assets

and going concern. The working capital of the

Company as per 31 December 2023 would

be realized by 2027 indicating very little risk

of being impacted by climate changes. The

remaining useful lives of PP&E and right-of-use

assets are not likely to be affected by climate

changes due to the number of remaining use-

ful lives being between 5 to 10 years. Therefore,

the Company is of the opinion that there is no

immediate or medium-term impact expected.

While there is no immediate or medium-term

impact expected from climate change, the

Board of Directors is aware of the ever chang-

ing risks attached to climate change and will

regularly assess these risks against judg-

ments and estimates used in preparing the

financial statements.

Other Risks

The lingering effects of the COVID-19 pan-

demic (including skilled labor shortages and

supply chain disruptions) continue to impact

the Company’s shipbuilding projects. Ongo-

ing global military conflicts increase the risk

of rising commodity prices, material short-

ages and transportation delays that could

adversely impact Philly Shipyard’s business.

Although improved from prior years, Philly

Shipyard continues to see uncertainty in the

global macroeconomic environment as well

as continuing inflation, high interest rates and

market volatility.

PHILLY SHIPYARD ACCOUNTING

AND CONSOLIDATION PRINCIPLES

Subsidiaries

The consolidated financial statements include

the financial statements of the parent com-

pany, Philly Shipyard ASA, and its subsidiar-

ies. Subsidiaries are entities controlled by the

Group. The Group controls an entity when it is

exposed to, or has rights to, variable returns

from its involvement with the entity and has

the ability to affect those returns through its

power over the entity.

FOREIGN CURRENCY TRANSLATION

AND TRANSACTIONS

Functional Currency

The consolidated financial statements are

presented in United States dollars (USD),

rounded to the nearest thousand, which is

the reporting currency for the consolidated

accounts and the functional currencies for all

the entities within Philly Shipyard.

INCOME STATEMENT PRESENTATION

Operating related expenses in the consoli-

dated income statement are presented as a

combination of function and nature in confor-

mity with industry practice. Depreciation is pre-

sented on a separate line based on its nature,

while cost of vessel construction, wages and

other personnel expenses (SG&A), non-payroll

expenses (SG&A), and under-recovered over-

head costs are presented on a functional basis.

Significant expenses such as salaries, pensions,

etc. are presented by their nature in the notes

to the consolidated financial statements.

PROPERTY, PLANT AND EQUIPMENT

General

Property, plant and equipment and right-

of-use assets acquired by the Shipyard are

stated at cost at the date of acquisition.

Depreciation is calculated on a straight-line

basis and adjusted for impairment charges,

if any. The carrying values of the property,

plant and equipment and right-of-use assets

on the consolidated statement of finan-

cial position represent the cost net of gov-

ernment grants and subsidies received (if

applicable) less accumulated depreciation

and any impairment charges. Cost includes

expenditures that are directly attributable to

the asset. The cost of self-constructed assets

includes the costs of material and direct

labor, and any other costs directly attribut-

able to bringing the asset to working condi-

tion for its intended use.

IMPAIRMENT OF LONG-LIVED ASSETS

Property, plant and equipment, right-of-use

assets and other non-current assets are

reviewed for potential impairment whenever

events or changes in circumstances indicate

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 35

that the carrying amount of an asset may not

be recoverable.

A previously recognized impairment loss is

reversed only if there has been a change in

the estimates used to determine the recov-

erable amount, however not to an extent

higher than the carrying amount that would

have been determined had no impairment

loss been recognized in prior years.

FAIR VALUE OF ITS CASH

GENERATING UNIT

Philly Shipyard has concluded that it has

only one primary cash generating unit and

must determine the recoverable amount of

its cash generating unit in order to perform

impairment tests of its long-lived assets

when impairment indicators are present. The

Company reviewed certain indicators and

determined that there were no indicators of

impairment. As such the Company has not

performed an impairment test (see note 7

for further discussion).

REVENUE FROM CONTRACTS WITH

CUSTOMERS

Philly Shipyard principally generates reve-

nues from activities relating to long-term

shipbuilding construction contracts, and also

generated revenue from the performance of

industry studies for the U.S. Navy and U.S.

Coast Guard. A detailed review of customer

contracts occurred for contracts which were

open from 1 January 2023 to 31 December

2023 (see note 2 for further discussion).

Construction Contracts

The vessel construction contracts were

assessed according to IFRS 15 to evaluate

whether the revenue from such contracts

shall be recognized over time or at a point

in time. As a result of the assessment, the

Company concluded that the principle of

revenue recognition over time method was

appropriate for these contracts based on the

fact that the vessels under construction do

not create an asset with an alternative use to

the entity, and the entity has an enforceable

right to payment from the customer for the

work completed to date.

Performance Obligations

Philly Shipyard has three separate awards

under one shipbuilding contract in place

for the NSMV program (NSMVs 1-2, NSMVs

3-4 and NSMV 5), one separate shipbuilding

contract in place for the SRIV program (SRIV)

and one separate shipbuilding contract in

place for the CV program (CVs 1-3). Per IFRS

15, the NSMV projects are being treated as

three separate performance obligations that

are reported as three separate projects for

revenue recognition. Each of these projects

is being accounted for using the percent-

age-of-completion method based on project

costs incurred compared to the total proj-

ect costs. This is considered to be a faithful

depiction of the transfer of goods as it accu-

rately reflects the underlying transactions

and progress.

Philly Shipyard’s accounting policy is to not

recognize profits on projects until they are

5% complete or such later time when the cost

to complete can be measured with reason-

able certainty.

Constraint of Variable Consideration

Variable considerations are included in esti-

mated contract revenue to the extent that it

is highly probable that a significant reversal of

revenue in a subsequent period will not occur

when the uncertainties are resolved.

Onerous Contracts

Onerous revenue contracts are accounted

for under IAS 37 Provisions, Contingent Lia-

bilities and Contingent Assets. A provision is

recognized when the unavoidable shipbuild-

ing costs of meeting the obligations under

a contract exceed the economic benefits to

be received. As of 31 December 2023, Philly

Shipyard has recognized more loss on the

NSMV contract to date than it anticipates to

recognize when the five-ship contract is com-

pleted. Therefore, in accordance with IFRS, no

loss liability has been recorded to date for an

onerous contract.

Project revenue is classified as operating

revenues in the consolidated income state-

ment. Vessels-under-construction are pre-

sented net of advances from customers as

vessels-under-construction receivable or

customer advances (net) on a contract by

contract basis.

Other operating revenues such as design

studies are classified as contract assets and/

or other contract liabilities and are classi-

fied as current or non-current based on the

expected timing of recognition of revenue.

GOVERNMENT GRANTS AND SUPPORT

Government grants and support are rec-

ognized at their fair value where there is

reasonable assurance that amounts will be

received and conditions have been met. In

some cases, recognition occurs over a period

of time as restrictions lapse or as conditions

are met. Grants and support related to capi-

tal expenditures or construction of assets for

the Shipyard’s account are recognized as a

reduction of the related asset cost. For assets

held for use, this results in a lower deprecia-

tion charge over the useful life of the asset.

Grants related to specific programs or proj-

ects are recognized as reductions in expense

over the period in which work that relates to

the grant or support is performed.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash on

hand, demand deposits with banks and other

short-term highly liquid investments with

original maturities of three months or less.

INCOME TAXES

Current Income Taxes

Income taxes receivable and payable for the

current period are measured at the amount

expected to be recovered or paid to the taxa-

tion authorities. The tax rates and tax laws as

used to compute the amount are those that

are enacted or substantively enacted by the

statement of financial position date.

Deferred Income Taxes

Deferred income taxes are recognized using

the asset/liability method on all temporary

differences at the statement of financial posi-

tion date between the tax bases of assets

and liabilities and their carrying amounts for

financial reporting purposes, except upon ini-

tial recognition of an asset or a liability that

does not impact income.

Deferred income tax assets are recognized

for all deductible temporary differences,

and carry-forward of unused tax losses and

credits, to the extent that it is probable that

taxable income will be available against which

the deductible temporary differences, and

the carry-forward of unused tax losses and

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202336

credits can be utilized. The carrying amount

of deferred income tax assets is reviewed at

each statement of financial position date and

reduced to the extent that it is not probable

that sufficient taxable income will be available

to allow all or part of the deferred income tax

asset to be utilized. The expected utilization

of tax losses is not discounted when calculat-

ing the deferred tax asset.

Deferred income tax assets and liabilities are

measured at the tax rates that are expected

to apply to the year when the asset is real-

ized or the liability is settled, based on tax

rates (and tax laws) that have been enacted

or substantively enacted at the statement of

financial position date.

PENSION OBLIGATIONS

The Shipyard has a pension plan that covers

its non-union employees whereby contribu-

tions are paid to a qualifying pension plan.

The Shipyard’s union employees are partic-

ipants in a multi-employer union selected

pension plan (Union Plan). Although the

Union Plan is a defined benefit pension plan,

because the union does not provide informa-

tion on the Shipyard’s employees and their

share of the pension assets and obligations,

the Union Plan is accounted for in accor-

dance with the requirements of a defined

contribution plan under IAS 19 Employee Ben-

efits revised. Under defined contribution pen-

sion plans, contributions are charged to the

consolidated income statement in the period

to which the contributions relate.

PROVISIONS

A warranty provision is recognized when

Philly Shipyard has a present obligation (legal

or constructive) as a result of a past event

and it is probable (i.e. more likely than not)

that an outflow of resources embodying eco-

nomic benefits will be required to settle the

obligation, and a reliable estimate can be

made of the amount of the obligation. War-

ranty provisions are reviewed at each state-

ment of financial position date and adjusted

to reflect the current estimate.

LEASES AND RIGHT-OF-USE ASSETS

At the lease commencement date, the Group

recognizes a lease liability and corresponding

right-of-use asset for all lease agreements in

which it is the lessee, except for short-term

leases (defined as twelve months or less) and

low-value assets, for which the Group recog-

nizes the lease payments as other operating

expenses in the consolidated income state-

ment when they are incurred.

The Group measures the lease liability at

the present value of the lease payments for

the right to use the underlying asset during

the lease term that are not paid at the com-

mencement date, by using the Group’s

incremental borrowing rate. The lease term

represents the non-cancellable period of the

lease, together with periods covered by an

option either to extend or to terminate the

lease when the Group is reasonably certain

to exercise this option. The lease payments

included in the measurement comprise:

Fixed lease payments (including in-sub-

stance fixed payments), less any lease

incentives receivable;

Variable lease payments that depend on

an index or a rate, initially measured using

the index or rate as at the commence-

ment date;

The exercise price of a purchase option,

if the Group is reasonably certain to exer-

cise that option;

Payments of penalties for terminating the

lease, if the lease term reflects the Group

exercising an option to terminate the

lease.

The Group does not include variable lease

payments in the lease liability. Instead,

the Group recognizes these variable lease

expenses in the consolidated income state-

ment when they are incurred.

The lease liability is subsequently measured

by increasing the carrying amount to reflect

interest on the lease liability, reducing the

carrying amount to reflect the lease pay-

ments made and remeasuring the carrying

amount to reflect any reassessment or lease

modifications, or to reflect adjustments in

lease payments due to an adjustment in an

index or rate. The Group presents its lease

liabilities as separate line items in the consol-

idated statement of financial position.

The Group measures the right-of-use asset at

cost, less any accumulated depreciation and

impairment losses, adjusted for any remea-

surement of lease liabilities. The cost of the

right-of-use asset comprises the amount of

the initial measurement of the lease liability

recognized, any lease payments made at or

before the commencement date, less any

incentives received, and any initial direct

costs incurred by the Group.

The Group applies the depreciation require-

ments in IAS 16 Property, Plant and Equipment

in depreciating the right-of-use asset, except

that the right-of-use asset is depreciated

from the commencement date to the earlier

of the lease term and the remaining use-

ful life of the right-of-use asset. The Group

assesses at the lease commencement date

whether it is reasonably certain to exercise

the extension options. The Group reassesses

whether it is reasonably certain to exercise

the options if there is a significant event or

significant change in circumstances within its

control.

As part of the 2011 Authorization Agreement,

PSI’s landlord, Philadelphia Shipyard Develop-

ment Corporation (PSDC), purchased certain

shipyard assets from PSI for a purchase price

of USD 42.0 million with funds provided by

the Commonwealth of Pennsylvania. PSI

leases back those same assets from PSDC

subject to the terms of its Shipyard Lease and

the Authorization Agreement. For accounting

purposes, the transaction was accounted for

as a sale/leaseback, and no adjustments were

made to the accounting value of the assets

at closing.

The net book value of assets under leasing

agreements recorded in the consolidated

statement of financial position at 31 Decem-

ber 2023 amounts to USD 17.8 million.

Included in this are the assets PSDC pur-

chased from PSI in 2011, which at 31 Decem-

ber 2023 the net book value amounts to USD

9.5 million.

RELATED PARTY TRANSACTIONS

The Company’s policy is that all transactions,

agreements and business activities with

related parties are conducted on an arm’s

length basis according to ordinary business

terms and conditions.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 37

SEGMENT INFORMATION

Philly Shipyard currently has one business

segment which is building vessels for both

the U.S. Jones Act market and the U.S. Gov-

ernment.

BASIC AND DILUTED INCOME/(LOSS)

PER SHARE

The calculation of basic income/(loss) per

share is based on the income or loss attrib-

utable to ordinary shareholders using the

weighted average number of shares out-

standing during the year (not including the

treasury shares). The calculation of diluted

income/(loss) per share is consistent with the

calculation of basic income/(loss) per share

while giving effect to all potential dilutive

ordinary shares that were outstanding during

the period. Philly Shipyard currently has no

potentially dilutive shares outstanding.

SUBSEQUENT EVENTS AFTER

31 DECEMBER 2023

A distinction is made between events both

favorable and unfavorable that provide

evidence of conditions that existed at the

statement of financial position date (adjust-

ing events) and those that are indicative of

conditions that arose after the statement of

financial position date (non-adjusting events).

Financial statements will only be adjusted to

reflect adjusting events and not non-adjust-

ing events (although there are disclosure

requirements for such events).

NEW STANDARDS AND

INTERPRETATIONS ADOPTED

Except for the OECD Pillar Two amendments,

there were no changes to the financial report-

ing requirements this year. The Company has

not identified any significant exposure to Pil-

lar Two income taxes that require disclosure

in these financial statements.

While the IASB has made a few amendments

to standards that apply from 1 January 2023,

these are largely clarifications and none of

them required a change in Philly Shipyard

ASA’s accounting policies.

There has not been any recent IFRS Interpre-

tation Committee (IC) agenda decisions that

have required changes to any of the Group’s

accounting policies for 2023.

EARLY ADOPTION OF STANDARDS

Philly Shipyard ASA generally only adopts

standards early if they clarify existing practice,

but do not introduce substantive changes.

The Company has not early adopted new

or amended standards in preparing these

consolidated financial statements as of 31

December 2023. None of the new standards

not yet effective are expected to have a mate-

rial impact on the financial statements.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202338

NOTE 2: CONSTRUCTION CONTRACTS

Order backlog of USD 1,719.1 million at 31 December 2023 represents a contractual shipbuilding obligation to deliver newly built vessels (NSMVs

2-5, the SRIV and CVs 1-3) that have not yet been produced for the Company’s customers (TOTE Services, Great Lakes and Matson, respectively).

Order backlog consists of future construction contract revenues and is subject to adjustment based on change orders as defined in the construc-

tion contracts. Order intake of USD 16.9 million at 31 December 2023 represents combined change orders on NSMVs 1-5, the SRIV and CVs 1-3.

Order backlog and order intake on long-term construction contracts are as follows: Order backlog Order intake Order backlog Order intake Amounts in USD thousands 31 Dec 2023 2023 31 Dec 2022 2022 Total 1 719 054 16 893 2 143 763 1 332 094 Accumulated Remaining recognized performance Revenue Estimated revenue obligation recognition year of Amounts in USD thousands 31 Dec. 2023 31 Dec. 2023 principle completion NSMVs 1-2 601 119 42 295 Over time 2024 NSMVs 3-4 376 309 233 659 Over time 2025 NSMV 5 29 083 280 251 Over time 2026 SRIV 37 692 168 273 Over time 2025 CVs 1-3 7 374 994 576 Over time 2027 Total 1 051 577 1 719 054

As of 31 December 2023, Philly Shipyard has three separate awards under one shipbuilding contract in place for the NSMV program. NSMVs

1-2 were awarded at contract signing in April 2020; NSMVs 3-4 were awarded upon the exercise of an option in January 2021, and NSMV 5 was

awarded upon the exercise of an option in April 2022. Therefore, the three awards under the NSMV contract are treated as three separate perfor-

mance obligations that are reported as three separate projects for revenue recognition. Each of these projects is being accounted for using the

percentage-of-completion method per IFRS 15 Revenue from Contracts with Customers (IFRS 15). PSI is building four NSMVs (NSMVs 2-5) for TOTE

Services, with NSMV 2 scheduled for delivery in 2024, the next two vessels (NSMVs 3-4) scheduled for deliveries in 2024 and 2025, respectively,

and the final vessel (NSMV 5) scheduled for delivery in 2026. No profit was recognized in 2023 on any of the three performance obligations noted

above. As of 31 December 2023, the NSMV projects for NSMVs 1-2, NSMVs 3-4 and NSMV 5 are 93.4%, 61.7% and 9.9% complete, respectively.

Philly Shipyard continues to forecast the five-ship NSMV series to be a loss-making contract. As of 31 December 2023, Philly Shipyard has recog-

nized more loss on the NSMV contract to date than it anticipates to recognize when the five-ship contract is completed. Therefore, in accordance

with IFRS, no loss liability has been recorded to date for an onerous contract.

Philly Shipyard also has a shipbuilding contract in place for the Subsea Rock Installation Vessel (SRIV) program, which was awarded in November

2021. PSI is building one SRIV for Great Lakes, scheduled for delivery in 2025. As of 31 December 2023, the SRIV project is 19.4% complete.

Philly Shipyard also has a shipbuilding contract in place for the container vessel (CV) program, which was awarded in November 2022. PSI is build-

ing three CVs (CVs 1-3) for Matson, scheduled for deliveries in 2026 and 2027. As of 31 December 2023, the CVs 1-3 project is 0.8% complete.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 39

Progress towards completing the NSMV, SRIV and CV contract performance obligations are measured based on project costs incurred com-

pared to the total forecasted project costs. Construction contract revenue recognized in 2023 includes revenue for NSMVs 1-2, NSMVs 3-4,

NSMV 5, the SRIV and CVs 1-3 since the contract for these vessels was accounted for using the principle-over-time revenue recognition method

according to IFRS 15.

Philly Shipyard’s accounting policy is to not recognize profit on projects until they are 5.0% complete or such later time when the cost to com-

plete can be measured with reasonable certainty. No profit on NSMV 5, the SRIV or CVs 1-3 has been recognized as of 31 December 2023.

Operating revenues and other income are detailed below:Amounts in USD thousands 2023 2022Shipbuilding 441 603 391 575 Government design studies 242 1 131 Total operating revenue 441 845 392 706 Profit in equity-accounted investment - 1 112 Total other income - 1 112

The recognized accumulated combined loss on long-term construction contracts in process (NSMVs 1-5, the SRIV and CVs 1-3) as of 31 December

2023 is as follows:

Amounts in USD thousands 31 Dec 2023 Construction contracts revenue recognized to date 1 051 577 Construction contracts expenses recognized to date (1 121 755) Construction contracts loss recognized to date (70 178)

The recognized accumulated combined loss on long-term construction contracts in process (NSMVs 1-4) as of 31 December 2022 was as follows:

Amounts in USD thousands 31 Dec 2022 Construction contract revenue recognized to date 609 975 Construction contract expenses recognized to date (616 356) Construction contracts loss recognized to date (6 381)

Typical variable consideration elements identified in the Company’s construction contracts with customers include liquidated damages, perfor-

mance guarantees and warranties.

Customer milestone payments as of 31 December 2023 and 31 December 2022 totaled USD 1,263.8 million and USD 835.6 million, respectively.

Customer milestone payments received from TOTE Services for NSMVs 1-5, from Great Lakes for the SRIV and from Matson for CVs 1-3 were

made at intervals that were intended to be cash neutral and to not require any external financing.

The Company’s construction contract and parent company guarantee for the NSMV program prohibit the payment of dividends by PSI and PHLY

until the delivery of NSMV 3. Thereafter, the payment of dividends by PSI and PHLY is limited based on the Company’s earnings.

Profit in equity-accounted investment of USD 1.1 million in 2022 was for the Company’s 53.7% share of the final distribution from the Philly

Tankers (Hulls 025-028) escrow account which was released in November 2022.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202340

NOTE 3: WAGES AND OTHER PERSONNEL EXPENSES (SG&A)Wages and other personnel expenses (SG&A) consist of:Amounts in USD thousands (except number of employees) 2023 2022Wages 41 627 33 684 Social security contributions 3 576 2 853 Pension costs (note 14) 1 864 1 327 Other expenses (1) 5 888 5 124 Total gross expense 52 955 42 988 Expenses charged to vessel construction (30 462) (24 845) Expenses charged to indirect overhead (19 032) (14 981) Wages and other personnel expenses (SG&A) 3 461 3 162 Average number of employees 470 390 Number of employees at year-end 504 411 (1) Other expenses relate primarily to workers’ compensation and employee benefits.

CONSOLIDATED ACCOUNTS

Vessels-under-construction receivable

Vessels-under-construction receivable as of 31 December 2023 and 31 December 2022 totaled USD 0 million and USD 4.9 million, respectively.

Vessels-under-construction receivable represents the difference between (i) cash advances received from customers for vessels under construc-

tion and (ii) revenue recognized for those vessels.

Customer advances (net) and other contract liabilities

Customer advances (net) as of 31 December 2023 and 31 December 2022 totaled USD 212.2 million and USD 230.6 million, respectively.

Customer advances (net) represents the difference between (i) cash advances received from customers for vessels under construction and (ii)

revenue recognized for those vessels.

Other contract liabilities as of 31 December 2023 and 31 December 2022 totaled USD 221 thousand and USD 348 thousand, respectively. Other

contract liabilities represents the difference between (i) cash advances received from customers for government design studies and (ii) cost

incurred on those studies.

As of 31 December 2023, Philly Shipyard has USD 299.6 million in unpaid non-cancellable purchase commitments for materials, equipment and

design fees for vessels under construction.

PHILLY SHIPYARD - ANNUAL REPORT 2023 41

NOTE 4: OTHER OPERATING EXPENSES

Other operating expenses consist of:Amounts in USD thousands 2023 2022Non-payroll expenses (SG&A) 4 542 3 941 Under-recovered overhead costs - 1 718 Total other operating expenses 4 542 5 659

Non-payroll expenses (SG&A) primarily relate to non-payroll selling, general and administrative expenses and concept projects.

Under-recovered overhead costs (i.e., overhead costs incurred and not allocated to projects) were expensed in 2022 since PSI operated at

below normal operating levels for a portion of that year.

Amounts in USD thousands 2023 2022Audit fees 148 147 Other audit and attestation fees 23 32 Total 171 179

NOTE 5: FINANCIAL INCOME AND FINANCIAL EXPENSEAmounts in USD thousands Net financial items 6 754 1 9872023 2022Interest income 7 150 2 521 Foreign exchange gain 20 36 Financial income 7 170 2 557 Interest expenseFinancial expense (416) (570)

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202342

NOTE 6: TAXES

Income tax expense/(benefit)Recognized in the consolidated income statementAmounts in USD thousands 2023 2022Current income tax expense/(benefit): Current year - U.S. 2 206 2 499 Current year - Norway - - Total current income tax expense/(benefit) 2 206 2 499 Deferred tax (benefit)/expense: Origination and reversal of temporary differences - U.S. 875 (13 127) Origination and reversal of temporary differences - Norway - - Total deferred tax expense/(benefit) 875 (13 127) Total income tax expense/(benefit) in the consolidated income statement 3 081 (10 628)

Reconciliation of effective tax rate:

Amounts in USD thousands 2023 2022Loss before tax (64 856) (22 319) Nominal Norwegian tax rate 22.0% 22.0% Expected tax (benefit)/expense using nominal Norwegian tax rate (14 268) (4 910) Effect of differences between nominal Norwegian tax rate and U.S. federal, state and city tax rate (6 933) (2 607) Expenses not deductible for tax purposes 161 34 R&D tax credits (3 731) (8 695) R&D tax credits used in 2022 - 5 806 Other differences (1 908) (256) Valuation allowance 29 760 - Total income tax expense/(benefit) in the consolidated income statement 3 081 (10 628)

The effective tax rate differs from the expected tax rate primarily due to the difference between the nominal Norwegian tax rate and U.S. federal,

state and city tax rates, and income that was not taxable in Norway.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 43

Income tax receivable

Amounts in USD thousands 2023 2022Beginning of the period 17 807 13 507 Taxes (payable)/receivable (1 747) (2 499) Taxes paid/(refunded) - 6 799 End of the period 16 060 17 807

Income tax payable

Amounts in USD thousands 2023 2022Beginning of the period (1 200) (1 200) Taxes payable - - Taxes paid/(refunded) - - End of the period (1 200) (1 200)

Income tax receivable and income tax payable are offset when there is a legally enforceable right to offset the taxes; however, when the taxes

relate to different tax authorities, they cannot be offset. The Company’s income tax receivable/(income tax payable) at 31 December 2023 relates

to U.S. tax authorities.

Deferred tax asset/deferred tax liability

Deferred tax asset and deferred tax liability are offset when there is a legally enforceable right to offset current tax assets against current tax

liabilities, and when the deferred income taxes relate to the same fiscal authority, which through 31 December 2023 for the Company was

primarily Norway, the United States, the State of Delaware, the Commonwealth of Pennsylvania and the City of Philadelphia.

The offset amounts for U.S. items are as follows:Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Deferred tax assets - U.S. tax jurisdictions 33 490 26 208 Deferred tax liabilities - U.S. tax jurisdictions (8 157) - Net deferred tax asset/(liability) 25 333 26 208 The gross movement in the deferred income tax account for U.S. tax jurisdictions is as follows:Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Beginning of the period 26 208 13 081 Deferred tax benefit (875) 13 127 Net deferred tax asset/(liability) 25 333 26 208

Based on its existing order backlog and estimated future taxable profits, the Company has included a deferred tax asset.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202344

The movement in deferred tax asset and deferred tax liability during the year for the U.S. tax jurisdictions is as follows:

Work-in-

Deferred tax asset - movements in the income statement and statement of financial position Other R&E Amounts in USD thousands assets expenses Total 31 December 2022 9 002 25 403 34 405 (Charged)/credited to the consolidated income statement 4 812 (5 727) (915) 31 December 2023 13 814 19 676 33 490 Deferred tax liability Amounts in USD thousands P,P&E process Total 31 December 2022 (8 197) - (8 197) (Charged)/credited to the consolidated income statement 40 - 40 31 December 2023 (8 157) - (8 157)

Deferred tax asset

The balance comprises temporary differences attributable to:Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Deferred tax assets Research & experimentation expenses 20 175 25 403 Work-in-process 444 1 984 Under-recovered overhead costs 884 3 184 State and city depreciation 2 798 3 166 Federal R&D tax credits 11 258 7 138 State R&D tax credits 1 168 1 430 Federal net operating losses 3 622 - State and city net operating losses 10 363 5 410 Valuation allowances (20 266) (14 489) Other items 3 044 1 179 Total deferred tax assets 33 490 34 405 Deferred tax liabilities Property, plant & equipment 8 157 8 197 Total deferred tax liabilities 8 157 8 197 Total net deferred tax assets 25 333 26 208

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 45

The movement in deferred tax asset and deferred tax liability during the year for the Norwegian tax jurisdiction is as follows:

Deferred tax liability OtherAmounts in USD thousands liabilities Total 31 December 2022 - - Change in deferred tax liability - - 31 December 2023 - -

PSI has USD 51.7 million of federal tax losses in carryforward at 31 December 2023. These losses do not expire. PSI had USD 5.0 million of

federal tax losses in carryforward at 31 December 2021. These losses were used in 2022. The 2018, 2019 and 2020 losses were carried back.

PSI has state and city tax losses in carryforwards as of 31 December 2023 of USD 110.2 million and USD 55.2 million, respectively. The state tax

losses expire in 20 years and the city tax losses expire in 3 years. At this time, the Company has not recognized USD 102.8 million of state NOLs

and USD 42.3 million of city NOLs due to uncertainty of the Company’s ability to utilize the losses.

Income tax benefit/(expense) is recognized on the best estimate of the expected annual income tax rates. The Coronavirus Aid, Relief, and Eco-

nomic Security (CARES) Act, enacted by the U.S. Congress on 27 March 2020, allows for the carryback of NOLs arising in taxable years beginning

after 31 December 2017, and before 1 January 2021, to the five taxable years preceding the loss year. This rule allows corporate taxpayers the

opportunity to carry back NOLs to tax years as far back as 2013. As the Company had qualifying taxable losses in 2018, 2019 and 2020, these

losses were carried back to previous tax years and resulted in an income tax refund of USD 22.1 million at 31 December 2020.

The 2018, 2019 and 2020 refund claims are currently under examination by the Internal Revenue Service (IRS). The 2018 refund of USD 6.5 million

has been received and, due to the backlog at the IRS, the 2019 and 2020 refunds are both expected in the third quarter of 2024.

The Company incurred prototype costs surrounding a research and development (R&D) project that generated a federal and state R&D tax credit.

Although the Company believes its methodology for determining the R&D tax credit is fully compliant with the tax law, the issue is whether the

nature of some portion of the prototype costs and activities engaged in giving rise to qualified research expenditures is acceptable to the IRS.

At 31 December 2020, the Company created a reserve related to this issue. In 2021 the Company had a reserve of USD 4.9 million. In 2022, the

Company reserved an additional USD 5.8 million, leaving a reserve amount at 31 December 2022 of USD 10.7 million. In 2023 the Company

added an additional USD 1.5 million to the reserve for a balance of USD 12.2 million.

The Norwegian deferred tax asset of USD 8.7 million has not been recorded because the Company does not believe that it will be able to use

them.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202346

CONSOLIDATED ACCOUNTS

NOTE 7: PROPERTY, PLANT AND EQUIPMENT AND RIGHT-OF-USE ASSETS

Movements in property, plant and equipment and right-of-use assets for 2023 are shown below: Machinery Land and Assets and land impro- under con- Amounts in USD thousands vehicles Buildings vements struction Total Cost at 1 January 2023 73 678 72 771 26 502 2 216 175 167 Additions - Property, plant & equipment - - - 6 635 6 635 Additions - Right-of-use assets (includes lease reassessment) - 5 937 - - 5 937 Transfers 7 642 144 582 (8 368) - Cost at 31 December 2023 81 320 78 852 27 084 483 187 739 Depreciation and impairment losses at 1 January 2023 66 395 39 501 13 635 - 119 531 Depreciation - Property, plant & equipment 4 901 383 834 - 6 118 Depreciation - Right-of-use assets 150 1 171 281 - 1 602 Depreciation and impairment losses at 31 December 2023 71 446 41 055 14 750 - 127 251 Net book value at 31 December 2023 (1) 9 874 37 797 12 334 483 60 488 (1) Net book value of right-of-use assets under lease agreements recorded in the statement of financial position at 31 December 2023 (see note 13): 253 11 732 5 850 - 17 835 Depreciation period 3-12 years 7-30 years 20 years Depreciation method Straight-line Straight-line Straight-line

Movements in property, plant and equipment and right-of-use assets for 2022 are shown below: Machinery Land and Assets and land impro- under con- Amounts in USD thousands vehicles Buildings vements struction Total Cost at 1 January 2022 64 373 63 958 20 583 13 198 162 112 Additions - Property, plant & equipment - - - 12 094 12 094 Additions - Right-of-use assets 294 667 - - 961 Transfers 9 011 8 146 5 919 (23 076) - Cost at 31 December 2022 73 678 72 771 26 502 2 216 175 167 Depreciation and impairment losses at 1 January 2022 62 416 38 481 12 444 - 113 341 Depreciation - Property, plant & equipment 3 853 326 840 - 5 019 Depreciation - Right-of-use assets 126 694 351 - 1 171 Depreciation and impairment losses at 31 December 2022 66 395 39 501 13 635 - 119 531 Net book value at 31 December 2022 (1) 7 283 33 270 12 867 2 216 55 636 (1) Net book value of right-of-use assets under lease agreements recorded in the statement of financial position at 31 December 2022 (see note 13): 403 6 966 6 131 - 13 500 Depreciation period 3-12 years 7-30 years 20 years Depreciation method Straight-line Straight-line Straight-line

PHILLY SHIPYARD - ANNUAL REPORT 2023 47

Leased plant and machinery

The Shipyard leases production equipment and land improvements under a number of lease agreements. At the end of each of the leases, the

Shipyard has the option to purchase the equipment at a beneficial price. The leased equipment secures lease obligations (see note 13).

Property, plant and equipment under construction

Assets-under-construction primarily relate to upgrades in facilities and equipment.

Depreciation

Philly Shipyard’s practice is to present its annual depreciation expense on a separate line item in its consolidated income statement when it is

building vessels under contract.

Sale leaseback

As part of the 2011 Authorization Agreement, PSDC purchased certain shipyard assets from PSI for a purchase price of USD 42.0 million with

funds provided by the Commonwealth of Pennsylvania. PSI leases back those same assets from PSDC subject to the terms of its Shipyard Lease

and the Authorization Agreement. For accounting purposes, the transaction was accounted for as a sale/leaseback, and no adjustments were

made to the accounting value of the assets at closing.

Right-of-use assets (assets under lease agreements)

The net book value of the assets PSDC purchased from Philly Shipyard in 2011, and subsequently leased to PSI, amounts to USD 9.5 million at

31 December 2023 (USD 10.2 million at 31 December 2022).

The right-of-use asset lease is treated as a government grant under IAS 20 Accounting for Government Grants and Disclosure of Government Assis-

tance (IAS 20). Upon transition to IFRS 16, the Shipyard will continue to use this policy to record the government grant under IAS 20 against the

investment. This gives a USD 1.2 million balance for the right-of-use asset and a USD 1.4 million balance for the lease liability at 31 December

2023, as the grant is deducted to arrive at the carrying amount of the right-of-use asset. For more details regarding the Shipyard Lease, see

note 20.

In 2023, two new facilities were recorded as a right-of-use asset. The combined net book value of these assets at 31 December 2023 amounts

to USD 5.4 million.

In 2022, the Shipyard and Prime Plate leases were adjusted based on a reassessment of the lease terms for both, and an additional right-of-use

asset of USD 0.6 million was recorded. The combined net book value of these right-of-use assets at 31 December 2023 is USD 1.9 million (USD

2.1 million at 31 December 2022).

In addition, office equipment and vehicles were recorded as a right-of-use asset in 2022 totaling USD 324 thousand. The combined net book

value of these right-of-use assets at 31 December 2023 is USD 220 thousand (USD 273 thousand at 31 December 2022).

Determination of recoverable amounts/fair values

Due to the market and company specific developments, including operating results, cash flows and backlog, no impairment indicators were

identified in 2023 for property, plant and equipment.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202348

CONSOLIDATED ACCOUNTS

NOTE 8: PREPAYMENTS AND OTHER RECEIVABLES

Prepayments and other receivables consist of the following items:Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Prepaid ship materials deposits 58 861 50 426 Inventory 1 327 1 118 Prepayments other 1 032 766 Trade receivables and other receivables 7 169 47 Total 68 389 52 357

As of 31 December 2023, the Company has USD 58.9 million as prepayments to suppliers for materials and equipment for the construction of

NSMVs 2-5, the SRIV and CVs 1-3.

The Company is required to make deposits on long-lead items as well as some progress payments made before the materials and equipment

are shipped and delivered. It is the Company’s policy to not include these materials and equipment as cost of vessels sold until they are received

at the shipyard.

NOTE 9: CASH AND CASH EQUIVALENTSCash and cash equivalents consist of the following items:Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Cash and bank deposits 79 463 137 586 Cash and cash equivalents in the statement of cash flows 79 463 137 586 Cash and bank deposits are invested in overnight deposits.

PHILLY SHIPYARD - ANNUAL REPORT 2023 49

NOTE 10: RESTRICTED CASH

Restricted cash consists of the following items:Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Restricted cash long-term 34 158 45 420 Restricted cash short-term 10 022 10 011 Total 44 180 55 431

Restricted cash long-term represents cash collateral as required for payment and performance (P&P) bonds to support the NSMV program.

Restricted cash short-term represents reserve accounts established for the NSMVs. It is anticipated that the cash collateral for the bonds and

the reserve account funds will be released in tranches following the delivery of each NSMV.

As of 31 December 2022, in conjunction with the awards of NSMVs 1-2, NSMVs 3-4 and NSMV 5, the Company secured P&P bonds in the aggre-

gate amount of USD 240.0 million. As a condition of issuing the P&P bonds, the Company was required to post cash collateral for each NSMV.

As of 31 December 2022, cash collateral in the aggregate amount of USD 40.4 million was posted for NSMVs 1-5. Upon the delivery of NSMV 1

in 2023, a portion (USD 8.0 million) of the cash collateral for the bonds was released. As of 31 December 2023, restricted cash long-term of USD

34.2 million pertains to cash collateral posted for NSMVs 2-5. It is anticipated that a portion of the total security will be released following the

delivery of each NSMV. Pursuant to the P&P bonds, PSI is not permitted to pay any dividends without the surety’s consent.

As of 31 December 2022, the Company deposited a total of USD 15.0 million into reserve funds as contractually required for NSMVs 1-3. Upon

the delivery of NSMV 1 in 2023, the USD 5.0 million reserve fund required for NSMV 1 was released. As of 31 December 2023, restricted cash

short-term of USD 10.0 million pertains to reserve funds required for NSMVs 2-3. It is anticipated that USD 5.0 million of the total security will be

released following the delivery of each NSMV.

NOTE 11: INCOME/(LOSS) PER SHARE

Basic and diluted

Basic and diluted income/(loss) per share is calculated by dividing the total comprehensive income/(loss) attributable to equity holders of PHLY

by the weighted average number of ordinary shares issued.

Amounts in USD thousands (except share amounts and earnings per share) 2023 2022Total comprehensive loss attributable to equity holders of PHLY (67 937) (11 691) Weighted average number of ordinary shares 12 107 901 12 107 901 Basic and diluted loss per share (USD) (5.61) (0.97)

At 31 December 2023 and 31 December 2022, PHLY had 12,107,901 ordinary shares (excluding 466,865 treasury shares) at a par value of NOK

10 per share. There were no share issuances or repurchases in 2023 or 2022.

There were no potentially dilutive securities outstanding as of 31 December 2023 and 31 December 2022.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202350

NOTE 13: LEASES

Lease liabilities are payable as follows as of 31 December:

2023 2022 Amounts in USD thousands Payments Interest Principal Payments Interest Principal Less than one year 1 652 595 1 057 472 186 286 More than one year 9 145 2 357 6 788 3 055 701 2 354 Total 10 797 2 952 7 845 3 527 887 2 640

PSI operates on land leased from PSDC through April 2038. At expiration of the initial 20-year lease period in 2018, the Shipyard lease was

renewed for the first of three 20-year option periods. PSI retains options to renew the Shipyard lease for two more consecutive periods of 20

years each and one final period of 19 years. PSI can acquire the land for USD 1 after the expiration of all renewal periods. Annual payments under

the Shipyard lease include rent, taxes and operating expenses (operating expenses are subject to an annual revision based on PSDC’s operating

expenses). Originally, lease payments for rent due under the Shipyard lease were USD 1 per year. Upon the award of the NSMV program in 2020,

the annual rent under the Shipyard lease increased to USD 200 thousand per annum.

The Shipyard lease is treated as a government grant under IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. This

gives a USD 1.2 million balance for the right-of-use asset and a USD 1.4 million balance for the lease liability at 31 December 2023, as the grant

is deducted to arrive at the carrying amount of the right-of-use asset. For more details regarding the Shipyard lease, please see note 20.

Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Current balance as of 1 January 2 640 1 904 New leases 5 911 961 Repayment of lease liability (1 068) (452) Interest expense on lease liability 329 83 Remeasurement of leases 33 144 Current balance as of 31 December 7 845 2 640

CONSOLIDATED ACCOUNTS

NOTE 12: PAID IN CAPITAL

The current share capital (excluding 466,865 treasury shares) is 12,107,901 shares issued and outstanding as of 31 December 2023, each with

a par value of NOK 10, fully paid. As of 31 December 2023, there are no additional authorized shares.

PHILLY SHIPYARD - ANNUAL REPORT 2023 51

NOTE 14: PENSION COSTS

Pension costs recognized in the consolidated income statement:

Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Contribution plans (employer’s contribution) 1 864 1 327 Total 1 864 1 327

PSI has a defined contribution plan for its non-union employees which provides for a PSI contribution based on a fixed percentage of certain

employee contributions plus a discretionary percentage of salaries. In addition, PSI’s union employees are participants in a multi-employer union

selected pension plan (Union Plan). PSI contributes a fixed amount per hour worked to the Union Plan. If PSI were to terminate its relationship

with the Union Plan, PSI could be statutorily liable for a termination liability calculated at the termination date. The termination liability at 31

December 2023 was USD 5.1 million. Currently, PSI has no plans to terminate this relationship. Thus, no termination liability has been recognized

in the consolidated financial statements. However, the termination liability will be incurred in the event the company permanently ceases its

operation. PSI estimates that it will contribute approximately USD 0.7 million to the Union Plan in 2024.

NOTE 15: OTHER PROVISIONS - WARRANTIES

Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Current balance as of 1 January 250 1 973 Provisions made during the period 2 000 - Provisions used during the period (119) (1 723) Current balance as of 31 December 2 131 250

The warranty provision made in 2023 of USD 2.0 million relates to NSMV 1. The normal warranty period for a new vessel is typically twelve months

after delivery, but can be extended in cases where there are specific issues that have not been fully resolved within the normal warranty period.

Warranty provisions used in 2022 of USD 1.7 million relates to close out settlement claims for the second containership vessel delivered to

Matson in 2019.

NOTE 16: TRADE PAYABLES AND ACCRUED LIABILITIES

Trade payables and accrued liabilities comprise the following items:

Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Ship material and subcontracting accruals 33 275 26 172 Trade payables 25 314 10 890 Employee-related cost accruals 4 288 3 984 Overhead and capital projects accruals 2 160 684 Total 65 037 41 730

For further details on onerous contracts, please refer to note 2.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202352

NOTE 17: FINANCIAL INSTRUMENTS

Philly Shipyard’s activities are exposed to a variety of financial risks: credit and investment risk, liquidity risk, foreign exchange risk, and capital

management risk. PSI’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential

adverse effects on Philly Shipyard’s financial performance. The Company may use derivative financial instruments to hedge certain risk expo-

sures. As of 31 December 2023, there were no foreign exchange contracts in place.

Risk management is carried out under policies approved by the Board of Directors. The Board of Directors provides principles for overall financial

risk management as as well as policies covering specific areas such as foreign exchange risk, credit risk and use of derivative financial instruments

and non-derivative financial instruments.

Credit and investment risk

Due to the nature of the Shipyard’s operations, revenues and related receivables are typically concentrated amongst a few customers. The

Company continually evaluates the credit risk associated with customers and their assignees and manages this risk by requiring payment for

substantially the entire contractual amount prior to delivering a vessel, including milestone payments upon completion of specified milestones.

Additionally, PSI monitors the financial condition of the financial institutions which it uses for cash management services and in which it makes

deposits and other investments. Philly Shipyard responds to changes in conditions affecting its deposit relationships as situations warrant.

The carrying amount of financial assets represents the maximum credit exposure. At 31 December 2023 and 31 December 2022, the maximum exposure to credit risk is as follows:Amounts in USD thousands 31 Dec 2023 31 Dec 2022 Cash and cash equivalents 79 463 137 586 Restricted cash 44 180 55 431 Trade receivables 7 169 47 Total 130 812 193 064

Liquidity risk

Liquidity risk is the risk that Philly Shipyard will encounter difficulty in meeting the obligations associated with its financial liabilities that are set-

tled by delivering cash or other financial assets. PSI’s approach to managing liquidity is to ensure, to the extent possible, that it will always have

sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking

damage to the Company’s reputation. Philly Shipyard attempts to mitigate this risk through project financing and working capital facilities, prog-

ress payments from its customers, and material supplied and paid directly by its customers.

The following are the contractual maturities of financial liabilities including interest payments: 31 December 2023 Book Contractual Less than 6-12 1-2 2-5 More thanAmounts in USD thousands value cash flow 6 months months years years 5 years Non-derivative financial liabilities: Lease liability 7 845 10 797 (826) (826) (1 698) (1 302) (6 145) Trade payables 25 314 (25 314) (25 314) - - - - Total 33 159 (14 517) (26 140) (826) (1 698) (1 302) (6 145)

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 53

31 December 2022 Book Contractual Less than 6-12 1-2 2-5 More thanAmounts in USD thousands value cash flow 6 months months years years 5 years Non-derivative financial liabilities: Lease liability 2 640 3 527 (236) (236) (472) (1 417) (1 166) Trade payables 10 890 (10 890) (10 890) - - - - Total 13 530 (7 363) (11 126) (236) (472) (1 417) (1 166)

Book values included in the above tables are gross loan amounts.

Foreign exchange risk

Philly Shipyard is exposed to foreign exchange risk for purchases made in currencies other than the U.S. dollar which primarily relates to mate-

rials, suppliesand costs related to the services of expatriate workers purchased from Norway and other countries in Europe. Philly Shipyard

attempts to mitigate this risk through its foreign exchange hedging program or passing this risk onto its end customers by having them purchase

certain materials directly in foreign currency or agree to exchange rate adjustment clauses for purchases made in foreign currency.

The Company incurs foreign currency risk on purchases that are denominated in a currency other than USD. The currencies giving rise to this

risk are primarily EUR (Euro), NOK (Norwegian Krone), KRW (Korean Won) and SEK (Swedish Krona).

The Company had no forward contracts as of 31 December 2023 and 31 December 2022.

Exposure to foreign exchange riskThe Company’s exposure to foreign exchange risk at 31 December 2023 and 31 December 2022 was as follows based on the following notional amounts: 2023 2022Amounts in USD thousands EUR NOK KRW SEK EUR NOK KRW SEK Balance sheet exposure: Trade payables (-) (170) - - - (41) - - - Cash - 18 - - - 65 - - Gross balance sheet exposure (170) 18 - - (41) 65 - - Estimated forecast expenses (-) (16 989) - (9 510) (5 343) (21 700) - (711) - Net balance sheet exposure (17 159) 18 (9 510) (5 343) (21 741) 65 (711) -

Sensitivity analysis

In managing currency risks, the Company aims to reduce the impact of short-term fluctuations on its earnings. Over the longer term, however,

permanent changes in foreign exchange rates would have an impact on consolidated earnings.

It is estimated that a 10% strengthening of the USD against other foreign currencies would not have significantly impacted the Company’s loss

before tax for 2023 and for 2022.

Fair values

Carrying amount of the Group’s financial assets and financial liabilities is a reasonable approximation of their fair value. There were no financial

instruments measured at fair value as of 31 December 2023 or 31 December 2022.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202354

NOTE 18: SHARES OWNED OR CONTROLLED BY AND REMUNERATION TO THE PRESIDENT AND CHIEF EXECUTIVE OFFICER,

BOARD OF DIRECTORS AND SENIOR MANAGEMENT OF PHILLY SHIPYARD

Shares owned in Philly Shipyard ASA as of 31 December 2023 and 31 December 2022 2023 2022 number of number ofName Position shares held shares held Elin Karfjell Board Member 1 200 1 200 Steinar Nerbøvik President and CEO 1 000 1 000

There is no share option agreement between Philly Shipyard ASA and Senior Management or Directors.

Remuneration to the Board of Directors for the years ended 31 December 2023 and 31 December 2022 2023 remuneration 2022 remuneration Name Position (NOK) (USD) (NOK) (USD) Kristian Røkke Board Chairman 497 000 48 874 475 000 48 188 Elin Karfjell Board Member 392 000 38 549 375 000 38 043 Jan Petter Hagen Board Member 392 000 38 549 250 000 25 362 Susan Hayman Board Member 392 000 38 549 - - Amy Humphreys Deputy Board Chairperson - - 125 000 12 681 Total Directors’ fees 1 673 000 164 520 1 225 000 124 274

No Board members received any remuneration other than Directors’ fees shown above and audit committee members’ fees described below.

The Board remuneration for Kristian Røkke is paid to his employer Aker Horizons AS.

Remuneration to the audit committee

The audit committee of PHLY is comprised of Elin Karfjell (Chairperson) and Jan Petter Hagen. Remuneration for the Chairperson is NOK 58,000

(USD 5,704) and for the member is NOK 47,000 (USD 4,622). This is in addition to the amounts shown in the Board of Directors’ table above.

Remuneration to the nomination committee

The nomination committee of PHLY is comprised of Ingebret G. Hisdal (Chairperson) and Charlotte Håkonsen. Hilde K. Ramsdal serves as dep-

uty member to the committee. Remuneration for the Chairperson is NOK 52,000 (USD 5,114) and for the member is NOK 42,000 (USD 4,130).

Remuneration for Charlotte Håkonsen is paid to her employer Aker ASA.

Guidelines for remuneration to the President and CEO and other members of the Management Team

The President and CEO and other members of PSI’s Management Team that report directly to the President and CEO receive a base salary. In

addition, a variable pay as further described below may be awarded.

The President and CEO and other members of the Management Team participate in the insurance schemes, applicable to all employees.

The President and CEO receives monthly pension contributions. The other members of the Management Team participate in the standard Com-

pany 401K plan (employer-sponsored retirement account), applicable to all employees.

The Company practices standard employment contracts and standard terms and conditions regarding notice period and severance pay for the

President and CEO and other members of the Management Team.

The Company does not offer share option programs to the President and CEO or other members of the Management Team, but the President

and CEO and certain senior members of the Management Team can be awarded shares under the AVP program as further described below.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 55

Annual variable pay program

The Company has an annual variable pay (AVP) program, which was developed in order to create a performance-based system. The system of

reward is designed to contribute to the achievement of good financial results and increase shareholder value.

The AVP program is based on the achievement of defined annual results such as financial targets (profit and working capital), order intake, project

targets, development of commercial solutions, alignment with Company’s values and improvement of HSE results. The AVP program includes two

payments, i.e., a base award and a deferred payment. The base award represents a potential for an additional variable pay up to 70% of base

salary for the President and CEO and 60% for other members of the Management Team. The deferred payment, which is designed to incentivize

and retain key personnel, is equal to 50% of the base award and is payable between 12-21 months after the base award.

From 2024, the AVP program includes the two payments described above and share awards (as further described below) for the President and

CEO and certain senior members of the Management Team.

The Company cannot demand repayment of the variable remuneration that has been awarded, but the Company is not required to pay the

variable remuneration if the recipient is no longer employed by the Company on the distribution/payment date or has given notice of the recip-

ient’s intention to resign.

Share awards under the annual variable pay program

From 2024, it is the Board’s current intention to implement share awards as a third method of renumeration to the President and CEO and

certain senior members of the Management Team under the AVP program. Notwithstanding the inclusion of share awards, the criteria for the

AVP program remains the same.

The share awards, which are designed to incentivize and retain key personnel, will be equal to 50% of the base awards at the average share price

for the period spanning 30 days prior to the award date. The shares underlying the awards are not subject to a traditional vesting schedule, but

will be deposited into a securities account for a period of 12 months following the date of the award. After which, the shares will be transferred

to the recipient, who will be responsible for any tax liability payable on the value of the shares at the date of receipt. The shares underlying the

awards will be subject to certain restrictions on sale and transferability.

Given the relative value of the share awards, and the fact that the Company will use treasury shares to settle the share awards, the AVP program

will have minimal effects on the Company and the shareholders.

Remuneration to Senior Management for 2023 (1) Pension Total Base Variable contri- Other remun- SeveranceAmounts in USD salary pay (2) bution benefits eration pay President 1 Jan -Steinar Nerbøvik and CEO 31 Dec 451 952 106 094 32 000 70 772 660 818 12 months 1 Jan -Jeffrey Theisen CFO 31 Dec 298 869 58 314 21 590 18 636 397 409 12 months

(1) PHLY has no employees. The Senior Management employees are employed in the operating company.

(2) Mr. Nerbøvik’s variable pay in 2023 consisted of an award under the 2023 AVP program, as well as a deferred award under the 2022 AVP

program earned in 2023 (USD 39,294 and USD 66,800, respectively). Mr. Theisen’s variable pay in 2023 consisted of an award under the

2023 AVP program, as well as a deferred award under the 2022 AVP program earned in 2023 (USD 22,200 and USD 36,114, respectively).

Mr. Nerbøvik and Mr. Theisen will earn deferred awards under the 2023 AVP program of USD 19,647 and USD 11,100, respectively, if they

remain employed with PSI during 2024.

CONSOLIDATED ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202356

CONSOLIDATED ACCOUNTS

Remuneration to Senior Management for 2022 (1) Pension Total Base Variable contri- Other remun- SeveranceAmounts in USD salary pay (2) bution benefits eration pay President 1 Jan -Steinar Nerbøvik and CEO 31 Dec 449 079 133 601 32 000 73 556 688 236 12 months 1 Jan -Jeffrey Theisen CFO 31 Dec 283 250 72 229 16 166 11 768 383 413 12 months

(1) PHLY has no employees. The Senior Management employees are employed in the operating company.

(2) Mr. Nerbøvik’s variable pay in 2022 consisted of an award under the 2022 AVP program.

Mr. Theisen’s variable pay in 2022 consisted of an award under the 2022 AVP program.

NOTE 20: GOVERNMENT GRANTS, OTHER COMMITMENTS AND CONTINGENCIES AND LEGAL MATTERS

Government grants

For the year ended 31 December 2023, the Shipyard received USD 918 thousand for reimbursement of employee training costs from various

governmental agencies (USD 167 thousand in 2022).

For the year ended 31 December 2022, the Shipyard received USD 720 thousand in grant funds for capital and infrastructure improvements

under the Small Shipyard Grant Program.

Other commitments and contingencies

PSI is required to pay a common area maintenance charge each month of approximately USD 69 thousand, subject to escalation, through the

term of its shipyard lease.

For the years 2018 through 2025, PSI is committed to a fixed payment-in-lieu-of-taxes (PILOT) of approximately USD 863 thousand per year to

the City of Philadelphia.

Pursuant to the Shipyard lease between PSI and Philadelphia Shipyard Development Corporation (PSDC), if PSI fails to maintain an average of

at least 200 full-time employees at the shipyard for 90 consecutive days, then the lease term (i.e., a 99-year lease with approximately 75 years

remaining including options) is automatically converted to month-to-month and PSDC has the right to terminate the lease, subject to the right of

PSI to complete work-in-process projects and a one-time, limited cure right which allows PSI to restore the lease to a five-year term under certain

circumstances. PSI was in compliance with this lease condition as of 31 December 2023.

Legal matters

The Company is involved in various legal disputes in the ordinary course of business related primarily to personal injury matters, employment

matters and commercial matters. Provisions have been made to cover the expected outcomes when it is probable that a liability has been

incurred and the amount is reasonably estimable. Although the final outcome of these matters is subject to uncertainty, in the Company’s opinion

the ultimate resolution of such legal matters will not have a material adverse effect on the Company’s financial position or results of operations.

NOTE 19: PHLY COMPANIES Incorporation Ownership Company name State Country % Philly Shipyard, Inc. Pennsylvania USA 100.0%

PHILLY SHIPYARD - ANNUAL REPORT 2023 57

CONSOLIDATED ACCOUNTS

NOTE 22: SUBSEQUENT EVENTS AFTER 31 DECEMBER 2023

There are no events after 31 December 2023 that require disclosure.

NOTE 21: TRANSACTIONS AND AGREEMENTS WITH RELATED PARTIES

Aker Capital AS, a wholly-owned subsidiary of Aker ASA, is the majority shareholder in PHLY, owning 57.6% of its total outstanding shares as of

31 December 2023. Kristian Røkke, the Chairman of the Board of Directors of PHLY, is a board member of TRG Holding AS, which owns 68.2%

of the total outstanding shares of Aker ASA as of 31 December 2023. TRG Holding AS is controlled by Kjell Inge Røkke through The Resource

Group TRG AS.

Transactions

On 4 March 2022, PSI obtained a USD 25.0 million standby letter of credit (SBLOC) from a bank to fulfill its contractual obligation under the SRIV

contract. The standby letter of credit is secured by a first priority lien in the shares and material assets of PSI, subject to certain exclusions, has

normal and customary fees, and accrues interest quarterly in arrears at 4.0% per annum. Aker Capital AS holds 50.0% of the commitment. For

the full year ending 31 December 2023, Philly Shipyard paid fees of USD 507 thousand (USD 544 thousand for the same period in 2022) for

further payment to Aker Capital AS pursuant to this arrangement.

Philly Shipyard has service agreements with Aker ASA and certain of its affiliates which provide specified consulting, tax, financial, insurance

and administrative services. All payables (including service fees and insurance premiums) under these agreements are paid within the normal

course of business. Philly Shipyard believes that related party transactions are made on terms equivalent to those that prevail in arm’s length

transactions.

Related administrative costs and financial statement amounts are as follows: Expenses Expenses Amounts in USD thousands 2023 2022Aker U.S. Services LLC 132 132 Aker Insurances AS 387 358 Aker ASA (inclusive of above noted SBLOC fees) 522 549

PHILLY SHIPYARD - ANNUAL REPORT 202358

Income Statement

Amounts in USD thousands Note 2023 2022

Operating revenues - -

Operating expenses 2 (680) (598)

Operating loss (680) (598)

Interest income earned from subsidiaries - -

Interest expense payable to subsidiaries (1 160) (1 094)

Other interest income and financial income 59 58

Other interest expense and financial expense (45) (60)

Loss before tax (1 826) (1 694)

Income tax (expense)/benefit 4 - -

Net loss after tax (1 826) (1 694)

Allocation of net loss:

Net loss after tax (1 826) (1 694)

Other equity 5 1 826 1 694

PARENT COMPANY ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 59

Statement of

Financial Position

as of 31 December

Amounts in USD thousands Note 2023 2022

ASSETS

Shares in subsidiary 67 000 67 000

Total non-current assets 67 000 67 000

Prepayments and other receivables 91 108

Cash and cash equivalents 6 78 79

Total current assets 169 187

TOTAL ASSETS 67 169 67 187

EQUITY AND LIABILITIES

Share capital 22 664 22 664

Share premium reserve 12 542 12 542

Total paid in capital 35 206 35 206

Other equity 2 096 3 922

Total equity 5 37 302 39 128

Loan from subsidiary 8 29 611 27 851

Total non-current liabilities 29 611 27 851

Trade payables and accrued liabilities 256 208

Total current liabilities 256 208

Total liabilities 29 867 28 059

TOTAL EQUITY AND LIABILITIES 67 169 67 187

PARENT COMPANY ACCOUNTS

Kristian Røkke

Board Chairman

Elin Karfjell

Board Member

Steinar Nerbøvik

President and CEO

Oslo, Norway - 12 March 2024 - Board of Directors Philly Shipyard ASA

Jan Petter Hagen

Board Member

Susan Hayman

Board Member

PHILLY SHIPYARD - ANNUAL REPORT 202360

Cash Flow

Statement

Amounts in USD thousands 2023 2022

Loss before tax (1 826) (1 694)

Payment-in-kind interest expense payable to subsidiary 1 160 1 091

Change in prepayments and other receivables 17 (94)

Change in trade payables and accrued liabilities 48 17

Net cash flow used in operating activities (601) (680)

Net cash flow used in investing activities - -

Loan proceeds from subsidiary 600 600

Net cash flow from financing activities 600 600

Net change in cash and cash equivalents (1) (80)

Cash and cash equivalents as of 1 January 79 159

Cash and cash equivalents as of 31 December 78 79

PARENT COMPANY ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 61

The accounts of Philly Shipyard ASA (referred to herein as PHLY) are presented in conformity with Norwegian legislation and generally accepted

accounting principles in Norway. PHLY’s functional and reporting currency is the U.S. dollar (USD), except when indicated otherwise.

Subsidiaries

Subsidiaries are presented on a historical cost basis in the parent company accounts. The investment is valued at historical cost for the shares

unless impairment write-downs have been deemed necessary. The shares are written down to fair value if the impairment is not of a temporary

nature and is necessitated by generally accepted accounting principles. Write-downs are reversed when the basis for the write-down no longer

exists.

Dividends and other payments are taken to income in the year they are accrued in the subsidiary. If dividends exceed retained earnings after

the purchase, the excess represents repayment of invested capital and the payments are deducted from the invested value in PHLY’s statement

of financial position.

Classification and valuation of statement of financial position items

Current assets and current liabilities include items that have less than one year to maturity, and other items that are deemed operational working

capital. Other items are classified as non-current assets/non-current liabilities.

Current assets are valued at the lower of historical cost and fair value. Current liabilities are valued at their nominal historical value at the time

the liability arises.

Non-current assets are valued at historical cost, but are written down to fair value if impairment is deemed to be of a permanent nature. Non-cur-

rent liabilities are valued at nominal historical values.

Tax

Tax benefit/(expense) in the income statement comprises both current payable taxes and the change in deferred tax. Payable tax is calculated

on the basis of the profit for the period in Norwegian Kroner (NOK). Deferred tax at 31 December 2023 is calculated using a 22% income tax rate

utilizing the difference that exists between book values and tax values and the net operating losses that can be carried forward at the statement

of financial position date. Tax-increasing and tax-reducing temporary differences that are reversing or can reverse in the same period are offset

against each other. Net tax assets are shown in the statement of financial position to the extent it is probable that these assets can be utilized.

Cash flow statement

The cash flow statement is shown using the indirect method. Cash and cash equivalents comprises cash, bank deposits and other short-term

liquid placements.

Use of estimates

Preparation of financial statements in conformity with generally accepted accounting principles in Norway requires management to make esti-

mates and assumptions that affect the income statement, the reported amounts of assets and liabilities and also the disclosure of contingent

assets and liabilities on the statement of financial position date.

Contingent losses that are probable and quantifiable are expensed when they are identified.

Going concern

As noted in note 1 of the consolidated financial statements, the 2023 financial statements have been prepared on a going concern basis which

contemplates continuity of normal business activities and realization of assets and settlement of liabilities in the normal course of business.

Notes to the

Parent Company Accounts

NOTE 1: BASIS FOR PREPARATION

PARENT COMPANY ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202362

NOTE 2: OTHER OPERATING EXPENSES

Fees to the auditors for ordinary audit and other audit and attestation fees have been expensed.

Amounts in USD thousands 2023 2022

Audit fees 30 29

Other audit and attestation fees 20 -

Total 50 29

PHLY has no employees. The Senior Management is employed in the operating company. Fees to the Board of Directors of USD 172 thousand

and USD 178 thousand were expensed in 2023 and 2022, respectively.

NOTE 3: SHARES IN SUBSIDIARY

This item comprises the following as of 31 December 2022:

Ownership

and voting Business Historical Book

Amounts in USD thousands rights (%) address cost value

Philadelphia,

Philly Shipyard, Inc. (PSI) 100% PA 67 000 67 000

Total shares in subsidiary 67 000 67 000

PSI’s results after-tax in 2023 and equity at the end of 2023 are (in USD thousands):

Results after-tax 2023 (66 111)

Equity at 31 December 2023 35 533

Based on the net asset position of PSI (the investment in subsidiary) as well as the cash on hand at PSI, PHLY has concluded that no impairment

indicators have been identified at 31 December 2023.

PARENT COMPANY ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 2023 63

NOTE 4: TAXES

The table below shows the difference between book and tax values by the end of 2023 and 2022 and the amounts of deferred taxes at these

dates and the change in deferred taxes.

Amounts in USD thousands 2023 2022

Losses carried forward 8 636 6 598

Other temporary differences 26 996

Total differences 8 662 7 594

Net deferred tax asset/(liability), 22%/22% - -

Foreign currency impact - -

Deferred tax asset/(liability) in the statement of financial position - -

Estimated result for tax purposes:

Amounts in USD thousands 2023 2022

Loss before tax measured in NOK for taxation purposes (1 826) -1 694

Change in temporary differences (23) 20

Interest limitation - 1 070

Foreign currency impact (721) 604

Estimated income for tax purposes (2 570) -

Income tax payable, 22%/22% - -

Income tax benefit/(expense) in the income statement:

Amounts in USD thousands 2023 2022

Income tax payable - -

Change in deferred tax liability - -

Foreign currency impact - -

Excessive accrued income tax payable from prior year - -

Income tax benefit - -

The Norwegian deferred tax assets of USD 2.1 million have not been recorded because the Company does not believe that they will be able to

use them.

PARENT COMPANY ACCOUNTS

PHILLY SHIPYARD - ANNUAL REPORT 202364

PARENT COMPANY ACCOUNTS

NOTE 5: TOTAL EQUITY

Changes in equity are:

Share Share Treasury Total paid Other Total

Amounts in USD thousands capital premium shares in capital equity equity

Equity as of 1 January 2023 22 664 22 511 (9 969) 35 206 3 922 39 128

Net loss for the year 2023 - - - - (1 826) (1 826)

Equity as of 31 December 2023 22 664 22 511 (9 969) 35 206 2 096 37 302

The share capital of NOK 125,747,660 consists of 12,574,766 shares (including 466,865 treasury shares) with a par value of NOK 10 as of 31

December 2023.

PHLY is a part of the consolidated accounts of Aker ASA, Oksenøyveien 10, NO-1366 Lysaker, Norway.

Twenty largest shareholders

(as of 31 December 2023)

Number of Ownership

Shareholders shares held (in %)

Aker Capital AS 7 237 631 57.6%

J.P. Morgan Securities LLC 1 207 717 9.6%

Philly Shipyard ASA 466 865 3.7%

Nordnet Livsforsikring AS 165 555 1.3%

Kristian Newil Kemp 127 000 1.0%

Interactive Brokers LLC 113 672 0.9%

Sivert Berg 110 800 0.9%

Tor-Fredrik Naevdal 109 145 0.9%

Citibank 100 781 0.8%

Nordnet Bank AB 81 217 0.6%

Kristian Falnes AS 75 000 0.6%

Kim Skailand 68 000 0.5%

Peter Myhre 58 800 0.5%

Trading Partner AS 52 734 0.4%

Filip Kristiansen 49 174 0.4%

Jan Reidar Jørgensen 49 000 0.4%

Thomas Fuglestad 44 612 0.4%

Citibank 39 836 0.3%

Ronny Kandal 36 023 0.3%

Ottar Gisti Kristiansen 35 500 0.3%

Total, 20 largest shareholders 10 229 062 81.4%

Other shareholders 2 345 704 18.6%

Total shareholders 12 574 766 100.0%

PHILLY SHIPYARD - ANNUAL REPORT 2023 65

PARENT COMPANY ACCOUNTS

NOTE 6: CASH AND CASH EQUIVALENTS

There is no restricted cash.

NOTE 7: SHARES OWNED BY THE BOARD OF DIRECTORS AND THE SENIOR MANAGEMENT

For information regarding shares owned by the members of the Board of Directors and the Senior Management, please see note 18 to the

consolidated accounts.

NOTE 8: RELATED PARTY TRANSACTIONS AND GUARANTEES

PHLY supplied a parent company guarantee for the obligations of PSI under the construction contract with TOTE Services, LLC for the NSMV

program. This guarantee prohibits the payment of dividends by PHLY until the delivery of NSMV 3. Thereafter, the payment of dividends is limited

based on the Company’s earnings.

PHLY supplied a parent company guarantee for the obligations of PSI under the construction contract with Great Lakes Dredge & Dock Company,

LLC for the SRIV project.

PHLY supplied a parent company guarantee for the obligations of PSI under the construction contract with Matson Navigation Company, Inc.

for the CV project.

PHLY supplied a parent company guarantee for the obligations of PSI under the payment and performance bonds (P&P bonds) related to NSMVs

1-5. The maximum liability of PHLY under this guarantee is USD 250.0 million.

PHLY supplied a parent company guarantee for the obligations of PSI under the standby letter of credit (SBLOC) related to the SRIV. The maxi-

mum liability of PHLY under this guarantee is USD 30.0 million plus interest thereon and fees, costs and expenses. This guarantee is secured by

a pledge of the shares of PSI.

PHLY has service agreements with Aker ASA and certain of its affiliates which provide consulting, tax, financial, insurance and administrative

services. All payables (including service fees and insurance premiums) under these agreements are paid within the normal course of business.

Philly Shipyard believes that related party transactions are made on terms equivalent to those that prevail in arm’s length transactions. Total

expenses incurred under these agreements in 2023 and 2022 were USD 176 thousand and USD 140 thousand, respectively.

PSI, as lender, and PHLY, as borrower, are parties to a loan agreement. The facility is for up to USD 60.0 million and interest is at a fixed rate of

4.00% per annum, with payment-in-kind quarterly interest payments (in lieu of cash quarterly interest payments) at the option of PHLY. The loan

is payable on demand with advance notice of 90 days. As of 31 December 2023, USD 29.6 million is outstanding under the facility.

PHILLY SHIPYARD - ANNUAL REPORT 202366

AUDITOR’S REPORT

Auditor’s Report

PricewaterhouseCoopers AS, Dronning Eufemias gate 71, Postboks 748 Sentrum, NO-0106 Oslo

T: 02316, org. no.: 987 009 713 MVA, www.pwc.no

Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap

To the General Meeting of Philly Shipyard ASA

Independent Auditor’s Report

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Philly Shipyard ASA, which comprise:

● the financial statements of the parent company Philly Shipyard ASA (the Company), which

comprise the statement of financial position as at 31 December 2023, the income statement and

cash flow statement for the year then ended, and notes to the financial statements, including a

summary of significant accounting policies, and

● the consolidated financial statements of Philly Shipyard ASA and its subsidiaries (the Group),

which comprise the statement of financial position as at 31 December 2023, income statement,

statement of comprehensive income, statement of changes in equity and cash flow statement for

the year then ended, and notes to the financial statements, including material accounting policy

information.

In our opinion

● the financial statements comply with applicable statutory requirements,

● the financial statements give a true and fair view of the financial position of the Company as at 31

December 2023, and its financial performance and its cash flows for the year then ended in

accordance with the Norwegian Accounting Act and accounting standards and practices generally

accepted in Norway, and

● the consolidated financial statements give a true and fair view of the financial position of the Group

as at 31 December 2023, and its financial performance and its cash flows for the year then ended

in accordance with IFRS Accounting Standards as adopted by the EU.

Our opinion is consistent with our additional report to the Audit Committee.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities

under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial

Statements section of our report. We are independent of the Company and the Group as required by

relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’

International Code of Ethics for Professional Accountants (including International Independence Standards)

(IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these

requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide

a basis for our opinion.

To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation

(537/2014) Article 5.1 have been provided.

We have been the auditor of the Company for 2 years from the election by the general meeting of the

shareholders on 20 April 2022 for the accounting year 2022.

PHILLY SHIPYARD - ANNUAL REPORT 2023 67

2 / 5

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our

audit of the financial statements of the current period. These matters were addressed in the context of our

audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a

separate opinion on these matters.

The Group’s business activities are largely unchanged compared to last year. We have not identified

regulatory changes, transactions or other events that qualified as new key audit matters this year. Revenue

Recognition from Construction Contracts has the same characteristics during 2023, and consequently have

been areas of focus also for this year’s audit

Key Audit Matters

How our audit addressed the Key Audit Matter

Revenue Recognition from Construction

Contracts

The Group recognises revenue over time

based on the estimated stage of

completion of contracts. Revenue

recognition requires application of

Management judgment when determining

the stage of completion of contracts at

the balance sheet date. The stage of

mpletion is a function of incurred

project costs relative to total forecasted

project costs.

We focused on revenue recognition from

construction contracts because of the

material effect Management judgment

may have on the financial statement line

items Re

venue and Customer advances

(net).

Specifically, Management judgment is

applied in estimating total forecasted

project costs related to vessel

construction. Although a significant part

of the vessel cost is fixed, the estimate

involves Management judgment

on the

future outcome of comprehensive

production processes based on a vast

amount of data, including forecasting the

cost and amount of labor hours, the

future prices of certain vessel materials

and services, and contingencies. The

existing contracts hav

e long duration and

there is limited history from similar

constructions, which makes the estimates

more demanding.

We obtained a

n understanding of the Group’s construction

contracts by reviewing the contracts, and through

discussions with Management. Based on our understanding

of the Group’s construction contracts, we evaluated

Management’s application of accounting principles agai

nst

IFRS 15 Revenue from contracts with customers. We found

that the accounting practices are consistent with the

contracts’ stipulations and IFRS 15.

We performed various procedures to assess whether

Management’s judgments were reasonable.

Specifically, we:

●

Interviewed both project and finance Management in

order to understand the Group’s internal control over

financial reporting with respect to project

accounting, and to gain an understanding of the

estimation and accounting process as well as

Management’s competence and experience.

● Performed a retrospective review of historical

estimates on delivered vessels to test historical

accuracy.

● Assessed the reasonableness of the assumptions

used by Management to develop cost estimates for

the different cost components that were not fixed

costs.

● Tested internal controls related to the Group’s

quarterly approval of estimate changes.

● Tested material input factors against supporting

documentation, such as vendor contracts for vessel

materials and services, indexes for steel prices,

approved budgets for production and support hours,

and production schedules.

AUDITOR’S REPORT

PHILLY SHIPYARD - ANNUAL REPORT 202368

AUDITOR’S REPORT

3 / 5

Note 1 and 2 include information on the

Group’s construction contracts and how

Management exercises their judgment.

● Challenged and reviewed Management’s evaluation

of contingencies for uncertain costs and assessed

the reasonableness of the assumptions used for

overhead allocation.

● Challenged and reviewed estimated cost

development related to production of the five NSMV

vessels and reconciled the stage of completion

on open projects to amounts recognised in the

financial statements.

Finally, we evaluated the overall consistency of information

gathered in discussions with key personnel including

Management, performed internal control testing, te

st of

details, and assessed information received after the reporting

date.

We found that assumptions used, and judgements made by

Management were reasonable. We also reviewed the

disclosures in note1 and 2 and found them to be appropriate.

Other Information

The Board of Directors and the Managing Director (management) are responsible for the information in the

Board of Directors’ report and the other information accompanying the financial statements. The other

information comprises information in the annual report, but does not include the financial statements and

our auditor’s report thereon. Our opinion on the financial statements does not cover the information in the

Board of Directors’ report nor the other information accompanying the financial statements.

In connection with our audit of the financial statements, our responsibility is to read the Board of Directors’

report and the other information accompanying the financial statements. The purpose is to consider if there

is material inconsistency between the Board of Directors’ report and the other information accompanying

the financial statements and the financial statements or our knowledge obtained in the audit, or whether the

Board of Directors’ report and the other information accompanying the financial statements otherwise

appears to be materially misstated. We are required to report if there is a material misstatement in the

Board of Directors’ report or the other information accompanying the financial statements. We have nothing

to report in this regard.

Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report

● is consistent with the financial statements and

● contains the information required by applicable statutory requirements.

Our opinion on the Board of Director’s report applies correspondingly to the statements on Corporate

Governance and Corporate Social Responsibility.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation of financial statements of the Company that give a true and

fair view in accordance with the Norwegian Accounting Act and accounting standards and practices

generally accepted in Norway, and for the preparation of the consolidated financial statements of the Group

that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU.

Management is responsible for such internal control as management determines is necessary to enable the

preparation of financial statements that are free from material misstatement, whether due to fraud or error.

PHILLY SHIPYARD - ANNUAL REPORT 2023 69

AUDITOR’S REPORT

4 / 5

In preparing the financial statements, management is responsible for assessing the Company’s and the

Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern.

The financial statements of the Company use the going concern basis of accounting insofar as it is not likely

that the enterprise will cease operations. The consolidated financial statements of the Group use the going

concern basis of accounting unless management either intends to liquidate the Group or to cease

operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are

free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes

our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit

conducted in accordance with ISAs will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they

could reasonably be expected to influence the economic decisions of users taken on the basis of these

financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional

scepticism throughout the audit. We also:

● identify and assess the risks of material misstatement of the financial statements, whether due to

fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit

evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not

detecting a material misstatement resulting from fraud is higher than for one resulting from error, as

fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of

internal control.

● obtain an understanding of internal control relevant to the audit in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the Company's and the Group's internal control.

● evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

● conclude on the appropriateness of management’s use of the going concern basis of accounting

and, based on the audit evidence obtained, whether a material uncertainty exists related to events

or conditions that may cast significant doubt on the Company's and the Group's ability to continue

as a going concern. If we conclude that a material uncertainty exists, we are required to draw

attention in our auditor’s report to the related disclosures in the financial statements or, if such

disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit

evidence obtained up to the date of our auditor's report. However, future events or conditions may

cause the Company and the Group to cease to continue as a going concern.

● evaluate the overall presentation, structure and content of the financial statements, including the

disclosures, and whether the financial statements represent the underlying transactions and events

in a manner that achieves a true and fair view.

● obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Group to express an opinion on the consolidated financial statements.

We are responsible for the direction, supervision and performance of the group audit. We remain

solely responsible for our audit opinion.

PHILLY SHIPYARD - ANNUAL REPORT 202370

AUDITOR’S REPORT

5 / 5

We communicate with the Board of Directors regarding, among other matters, the planned scope and timing

of the audit and significant audit findings, including any significant deficiencies in internal control that we

identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical

requirements regarding independence, and to communicate with them all relationships and other matters

that may reasonably be thought to bear on our independence, and where applicable, actions taken to

eliminate threats or safeguards applied.

From the matters communicated with the Board of Directors, we determine those matters that were of most

significance in the audit of the financial statements of the current period and are therefore the key audit

matters. We describe these matters in our auditor’s report unless law or regulation precludes public

disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should

not be communicated in our report because the adverse consequences of doing so would reasonably be

expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

Report on Compliance with Requirement on European Single Electronic Format (ESEF)

Opinion

As part of the audit of the financial statements of Philly Shipyard ASA, we have performed an assurance

engagement to obtain reasonable assurance about whether the financial statements included in the annual

report, with the file name “549300HMTSHZZD4YR890-2023-12-31-en.zip”, have been prepared, in all

material respects, in compliance with the requirements of the Commission Delegated Regulation (EU)

2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to Section

5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the

annual report in XHTML format, and iXBRL tagging of the consolidated financial statements.

In our opinion, the financial statements, included in the annual report, have been prepared, in all material

respects, in compliance with the ESEF regulation.

Management’s Responsibilities

Management is responsible for the preparation of the annual report in compliance with the ESEF regulation.

This responsibility comprises an adequate process and such internal control as management determines is

necessary.

Auditor’s Responsibilities

For a description of the auditor’s responsibilities when performing an assurance engagement of the ESEF

reporting, see: https://revisorforeningen.no/revisjonsberetninger

Oslo, 12 March 2024

PricewaterhouseCoopers AS

Anne Kristin Huuse

State Authorised Public Accountant

PHILLY SHIPYARD - ANNUAL REPORT 2023 71

PHILLY SHIPYARD - ANNUAL REPORT 202372

The timely release of information to the mar-

ket that could affect PHLY’s share price helps

ensure that Philly Shipyard ASA’s share price

reflects its underlying value.

PHLY’s goal is that its shareholders will, over

time, receive competitive returns on their

investments through a combination of div-

idends and share price growth. In line with

this objective, PHLY has paid out significant

dividends in the past.

On 12 March 2024, the PHLY Board revised

the Company’s dividend policy as follows:

“The Company’s objective is to provide its share-

holders with a competitive return on its shares

over time based on the Company’s earnings.

The Company’s focus is on long-term profit-

ability, and its current priority is to strengthen

its balance sheet. Accordingly, no dividends are

contemplated until further notice.”

In 2023, PHLY did not pay any dividends.

The PHLY Board does not foresee payment

of shareholder distributions, including div-

idends and share buybacks, until the Com-

pany has returned to sustained profitability.

The Norwegian Public Limited Liability Com-

panies Act allows for the Board of Directors

to pay dividends on the basis of an authori-

zation from the annual general meeting. The

Board of Directors will therefore propose to

the annual general meeting in 2024 that the

Board of Directors is granted an authoriza-

tion to pay dividends based on PHLY’s annual

accounts for 2023, valid up to PHLY’s annual

general meeting in 2025. Such authorization

will facilitate potential payments of dividends

by the Board of Directors in accordance with

PHLY’s dividend policy.

SHARES AND SHARE CAPITAL

As of 31 December 2023, Philly Shipyard ASA

has 12,574,766 ordinary shares; each share

has a par value of NOK 10 (see note 5 to the

Parent company’s 2023 accounts). As of 31

December 2023, PHLY had 1,322 sharehold-

ers, of whom 59 shareholders, or 4.5%, were

non-Norwegian shareholders.

PHLY has a single share class. Each share is

entitled to one vote. PHLY holds 466,865 of

its own (treasury) shares, constituting 3.7% of

the shares outstanding, as of 31 December

2023.

STOCK EXCHANGE LISTING

Philly Shipyard ASA was listed on the Euronext

Expand Oslo (formerly known as Oslo Axess) on

17 December 2007 (ticker: PHLY). PHLY’s shares

are registered in the Norwegian Central Securi-

ties Depository; the shares have the securities

registration number ISIN NO 0010395577.

DNB Bank ASA is PHLY’s registrar.

MAJORITY SHAREHOLDER

Philly Shipyard ASA’s majority shareholder is

Aker Capital AS, a wholly-owned subsidiary of

Aker ASA. Companies that are part of Aker

are legally and financially independent units.

Aker Capital AS exercises active ownership as

part of systematic efforts to create value for

all PHLY shareholders.

From time to time, agreements are entered

into between the Company and one or more

Aker companies. The Boards of Directors and

other parties involved in the decision-making

processes related to such agreements are all

critically aware of the need to handle such

matters in the best interests of the involved

companies, in accordance with good corpo-

rate governance practice. If needed, external,

independent opinions are sought.

Shares and

Shareholder Matters

Philly Shipyard ASA (PHLY) is committed to maintaining an open and direct dialogue

with its shareholders, potential investors, analysts, brokers and the financial commu

nity in general.

SHARES AND SHAREHOLDER MATTERS

SHARE CAPITAL DEVELOPMENT OVER THE PAST THREE YEARS

Change in share Share capital Number of Par value

capital (in NOK) (in NOK) shares (in NOK)

Change in 2021 - - - -

31 December 2021 - 125 747 660 12 574 766 10.00

Change in 2022 - - - -

31 December 2022 - 125 747 660 12 574 766 10.00

Change in 2023 - - - -

31 December 2023 - 125 747 660 12 574 766 10.00

PHILLY SHIPYARD - ANNUAL REPORT 2023 73

CURRENT BOARD AUTHORIZATIONS

As of 31 December 2023, the Board of Direc-

tors of Philly Shipyard ASA has an authori-

zation to pay dividends, an authorization to

increase the share capital and two separate

authorizations to acquire own shares. All of

these current Board authorizations are valid

up until the next annual general meeting in

2024. For more details, please see “Board

authorizations” on page 76.

STOCK OPTION PLANS

As of 31 December 2023, Philly Shipyard ASA

has no stock option program, but the Pres-

ident and CEO and certain members of the

senior management team can be awarded

shares under the AVP program as further

described in note 18 of the consolidated

accounts.

INVESTOR RELATIONS

Philly Shipyard ASA seeks to maintain an

open and direct dialogue with shareholders,

financial analysts and the financial market in

general.

All Philly Shipyard press releases and inves-

tor relations publications, including archived

material, are available at the Company’s web

site: www.phillyshipyard.com. This online

resource includes PHLY’s quarterly and

annual reports, prospectuses, articles of

association, financial calendar and its Inves-

tor Relations and Corporate Governance pol-

icies, along with other information.

Shareholders can contact the Company at

communications@phillyshipyard.com.

QUARTERLY AND ANNUAL REPORTS

Philly Shipyard’s quarterly and annual reports

are published electronically on the Company’s

website at the same time as they are released

via the Oslo Stock Exchange distribution ser-

vice, www.newsweb.no (ticker: PHLY).

NOMINATION COMMITTEE

PHLY’s nomination committee has the fol-

lowing members: Ingebret G. Hisdal (Chair-

person) and Charlotte Håkonsen. Hilde K.

SHARES AND SHAREHOLDER MATTERS

TWENTY LARGEST SHAREHOLDERS

(as of 31 December 2023)

Number of Ownership

Shareholders shares held (in %)

Aker Capital AS 7 237 631 57.6%

J.P. Morgan Securities LLC 1 207 717 9.6%

Philly Shipyard ASA 466 865 3.7%

Nordnet Livsforsikring AS 165 555 1.3%

Kristian Newil Kemp 127 000 1.0%

Interactive Brokers LLC 113 672 0.9%

Sivert Berg 110 800 0.9%

Tor-Fredrik Naevdal 109 145 0.9%

Citibank 100 781 0.8%

Nordnet Bank AB 81 217 0.6%

Kristian Falnes AS 75 000 0.6%

Kim Skailand 68 000 0.5%

Peter Myhre 58 800 0.5%

Trading Partner AS 52 734 0.4%

Filip Kristiansen 49 174 0.4%

Jan Reidar Jørgensen 49 000 0.4%

Thomas Fuglestad 44 612 0.4%

Citibank 39 836 0.3%

Ronny Kandal 36 023 0.3%

Ottar Gisti Kristiansen 35 500 0.3%

Total, 20 largest shareholders 10 229 062 81.3%

Other shareholders 2 345 704 18.7%

Total shareholders 12 574 766 100.0%

OWNERSHIP STRUCTURE BY NUMBER OF SHARES HELD

(as of 31 December 2023)

Number of % of share

Shares owned shareholders capital

1 - 100 445 0.1%

101 - 1 000 495 1.7%

1 001 - 10 000 302 7.5%

10 001 - 100 000 71 14.0%

100 001 - 500 000 7 9.5%

Over 500 000 2 67.2%

Total 1 322 100.0%

PHILLY SHIPYARD - ANNUAL REPORT 202374

SHARES AND SHAREHOLDER MATTERS

Ramsdal serves as deputy member to the

committee. Shareholders who wish to con-

tact PHLY’s nomination committee may do so

using the following address:

Nomination Committee of

Philly Shipyard ASA

Vika Atrium

Munkedamsveien 45

NO-0250 Oslo, Norway

ANNUAL GENERAL MEETING

Philly Shipyard ASA’s annual general meeting

is normally held in March or April. Written

notification is sent to all shareholders individ-

ually or to shareholders’ nominees. To vote at

general meetings, shareholders (or their duly

authorized representatives) must either be

present or vote by proxy.

Annual general meeting notices and atten-

dance registration forms are sent to share-

holders by the deadlines laid down in the

Norwegian Public Limited Liability Compa-

nies Act and made available on the com-

pany’s website and through the Oslo Stock

Exchange distribution service. The annual

report and other enclosures to the meeting

notice are made available solely via the com-

pany’s website and the Oslo Stock Exchange

distribution service. Shareholders who wish

to receive the enclosures by post must con-

tact the company.

2023 SHARE DATA

PHLY’s total market capitalization as of 31

December 2023 was NOK 659 million. During

2023, a total of 3,201,976 Philly Shipyard ASA

shares traded, corresponding to 0.255 times

PHLY’s freely tradable stock. The shares

traded on 251 trading days in 2023.

GEOGRAPHIC DISTRIBUTION OF SHAREHOLDERS

(as of 31 December 2023)

Number of Ownership

Shareholders shares held (in %)

Norwegian shareholders 10 824 952 86.1%

Non-Norwegian shareholders 1 749 814 13.9%

Total 12 574 766 100.0%

SHARE PRICE DEVELOPMENT IN 2023

(2023 share data)

Highest traded (in NOK) 59.8

Lowest traded (in NOK) 27.0

Share price as of 31 December (in NOK) 52.4

Shares issued as of 31 December 12 574 766

Own (treasury) shares as of 31 December (466 865)

Shares issued and outstanding as of 31 December 12 107 901

Market capitalization as of 31 December (in NOK millions) 659

Proposed share dividend (NOK per share) -

SHARE PRICE DEVELOPMENT

(2021 - 2023)

NOK / share

100

1 Jan 2021 31 Dec 2023

PHILLY SHIPYARD - ANNUAL REPORT 2023 75

The Board of Directors (the “Board”) of PHLY

has reviewed and updated PHLY’s principles

for corporate governance. The principles are

based on the Norwegian Code of Practice for

Corporate Governance, dated 14 October

2021 (the “Code of Practice”), the principles

set out in the continuing obligations of com-

panies listed on the Oslo Stock Exchange,

and the relevant Norwegian background law

such as the Norwegian Accounting Act and

the Norwegian Public Limited Liability Com-

panies Act. The Code of Practice is available

at www.nues.no and the continuing obliga-

tions of stock exchange listed companies

may be found at www.euronext.com/en/

markets/oslo.* The principles also apply

to PHLY’s subsidiaries when relevant. The

following presents the current practice of

PHLY regarding each of the recommenda-

tions contained in the Code of Practice. Any

deviations from the recommendations are

explained under the item in question. In

addition to the Code of Practice, the Norwe-

gian Accounting Act section 3-3b stipulates

that companies must provide a report on

their policies and practices for corporate

governance either in the annual report or in

a document referred to in the annual report.

This report is integrated in this corporate

governance statement.

Purpose

PHLY’s Corporate Governance principles

ensure an appropriate division of roles and

responsibilities among PHLY’s owners, its

Board, and its executive management, and

that business activities are subject to satis-

factory control. The appropriate division of

roles and satisfactory control contribute to

the greatest possible value creation over

time, to the benefit of owners and other

stakeholders.

Values and ethical guidelines

The Board has adopted corporate values

and ethical guidelines. The Company’s corpo-

rate values are presented on page 8 of this

annual report. PHLY has a code of conduct

which is approved by the Board, and it consti-

tutes a framework for managing compliance

and integrity risks. It describes PHLY’s ethi-

cal commitments, requirements and expec-

tations for personal conduct and business

practice. PHLY’s code of conduct outlines

clear principles and rules in key compliance

and integrity areas such as anti-corruption

and anti-bribery; facilitation payments; con-

flicts of interest; gifts and hospitality; human

and labor rights; fair competition; anti-money

laundering; and trade compliance. The code

of conduct applies to all employees (including

temporary personnel), officers and directors

in PHLY and its subsidiaries. PHLY’s code of

conduct is available on PHLY’s home page

www. phillyshipyard.com, under the heading

“Corporate Governance.”

PHLY has not adopted specific guidelines on

equality and diversity due to its lack of employ-

ees. The Company is focused however on car-

rying on its business in line with the principles

of equality and diversity with respect to the

composition of its management and Board,

and its Board currently comprise of four

members where two are female.

Business

PHLY’s business purpose clause in the arti-

cles of association is as follows:

“The Company’s business is to own and man-

age industry and other related business related

to building of ships, capital management and

other operations for the group, including partic-

ipating in or acquiring other business.”

The function of the business purpose clause

is to ensure that shareholders have control of

the business and its risk profile, without limit-

ing the Board or management’s ability to carry

out strategic and financially viable decisions

within the defined purpose. PHLY’s goals

and main strategies and risks for its business

activities are presented in the Board’s report.

PHLY’s vision is for Philly Shipyard “To be –

and be recognized as – a leading shipyard in

America that delivers on its commitments,

every time” and its supporting strategies for

2024 are executing its existing order backlog,

securing new orders for major shipbuilding

programs, and pursuing a mix of commercial

and government work. When carrying out this

work, the Board of Directors and manage-

ment will take into account financial, social,

and environmental considerations.

EQUITY AND DIVIDENDS

Equity

The PHLY group’s equity as of 31 December

2023 amounted to USD 5.9 million, which

corresponds to an equity ratio (total equity

divided by total assets) of approximately 2%.

PHLY regards its current equity structure as

appropriate and adapted to its objectives,

strategy and risk profile. PHLY anticipates that

its equity level will increase over time as the

Company returns to sustained profitability.

Dividends

PHLY’s dividend policy is included in the

Shares and Shareholder Matters section on

page 72. As stated in that policy:

“The Company’s objective is to provide its share-

holders with a competitive return on its shares

over time based on the Company’s earnings.

The Company’s focus is on long-term profit-

ability, and its current priority is to strengthen

Corporate

Governance

Philly Shipyard ASA (PHLY) aims to create maximum value for its shareholders over

time. Good corporate governance will help to reduce risk and ensure sustainable value

creation.

CORPORATE GOVERNANCE

* The Issuer Rules / Regulations / Oslo Børs / Home - Oslo Børs (www.euronext.com/en/markets/oslo)

PHILLY SHIPYARD - ANNUAL REPORT 202376

its balance sheet. Accordingly, no dividends are

contemplated until further notice.”

At this time, the Board does not foresee pay-

ment of shareholder distributions, including

dividends and share buybacks, until the Com-

pany has returned to sustained profitability.

Board authorizations

It is the intention that the Board’s proposals

for future Board authorizations to issue shares

and to undertake share buy backs are to be

limited to defined purposes and to be valid

only until the next annual general meeting.

The Board has the following authorizations:

 to facilitate the potential payment of divi-

dends in accordance with PHLY’s dividend

policy, an authorization to pay dividends

based on PHLY’s annual accounts for

2022;

 an authorization to increase the share

capital by up to NOK 12,574,766, which

can only be used to raise equity capital for

new shipbuilding projects or other future

investments within the Company’s scope

of operations;

 an authorization to acquire own shares

with a total nominal value of NOK

12,574,766, which can only be used for

the purpose of utilizing PHLY’s shares as

transaction currency in acquisitions, merg-

ers, de-mergers or other transactions; and

 an authorization to acquire own shares

with a total nominal value of NOK

12,574,766, which can only be used for

the purpose of investment or subsequent

sale or deletion of such shares.

All of these Board authorizations are valid up

to the annual general meeting in 2024.

The Board currently has no other authoriza-

tions to issue shares or undertake share buy-

backs. The Board will propose to the annual

general meeting in 2024 that the Board

is granted an authorization for payment

of dividends, an authorization to increase

the share capital and two authorizations to

acquire own shares similar to the authoriza-

tions described above.

Equal treatment of shareholders

PHLY has a single class of shares, and all

shares carry the same rights in PHLY. Equal

treatment of all shareholders is crucial. If exist-

ing shareholders’ pre-emptive rights are pro-

posed waived upon an increase in share capi-

tal, the Board will justify the waiver. The Board

will also publicly disclose such justification in

a stock exchange announcement issued in

connection with such increase in share cap-

ital. Transactions in own (treasury) shares are

executed on the Oslo Stock Exchange or by

other means at the listed price.

Shares and negotiability

There are no limitations on any party’s abil-

ity to own, trade or vote for shares in PHLY.

No restrictions on transferability are found in

PHLY’s articles of association.

General meetings

The Board encourages shareholders to par-

ticipate in general meetings. It is PHLY’s pri-

ority to hold the annual general meeting as

early as possible after the year-end. Notices

of general meetings are sent physically by

post and comprehensive supporting informa-

tion, including the recommendations of the

nomination committee, are made available

for the shareholders on PHLY’s home page

www.phillyshipyard.com, in each case not

later than 21 days prior to the annual general

meeting. The Board seeks to ensure that the

resolutions and supporting information are

sufficiently detailed and comprehensive to

enable the shareholders to form a view on all

matters to be considered at the meeting. The

notice materials include a thorough explana-

tion of all procedures for registration, voting

and attendance. In addition, information on

how to propose a resolution to the items

on the agenda at the annual general meet-

ing will be included in the notice. If a general

meeting is held as a physical meeting, the

shareholders will also be given the opportu-

nity to participate virtually unless the Board

of Directors finds there is sufficient cause

for it to refuse to allow this. The proxy form

includes instructions for representation at

the meeting through a proxy or by virtual par-

ticipation and allows shareholders to nomi-

nate a person who will be available to vote

on behalf of the shareholders. In addition, to

the extent possible, the proxy form includes

separate voting instructions to be given for

each matter to be considered by the meeting.

The shareholders may also vote electronically

in advance of the general meeting.

Pursuant to PHLY’s articles of association,

the Chairman of the Board (the “Chairman”),

or any other person appointed by the Chair-

man, chairs the general meetings. Although

the Code of Practice recommends an inde-

pendent chair for annual general meetings,

it is the view of PHLY that the procedure

followed by PHLY provides efficient and well

prepared annual general meetings and is in

the interests of the shareholders. The share-

holders are invited to make a joint voting on

the composition of the Board as proposed by

the nomination committee and not on each

Board member separately. Hence, PHLY devi-

ates from the Code of Practice in this regard

as the nomination committee emphasizes

that the Board’s composition shall reflect a

variety of experience, knowledge and quali-

fications.

To the extent possible, the CEO/general man-

ager, the chairperson of the nomination com-

mittee and the auditor attend annual general

meetings.

Minutes of general meetings are published

as soon as practically possible on the Oslo

Stock Exchange, www.newsweb.no (ticker:

PHLY) and on PHLY’s home page www.philly-

shipyard.com, under the heading “Company

News”.

NOMINATION COMMITTEE

PHLY has a nomination committee, as set

forth in section 7 of PHLY’s articles of associ-

CORPORATE GOVERNANCE

PHILLY SHIPYARD - ANNUAL REPORT 2023 77

ation. Pursuant to the articles of association,

the nomination committee is to comprise no

fewer than two members. Each member is

normally elected for a two-year period. The

composition of the nomination committee

reflects the interests of the shareholders, and

its members are independent from the Board

and executive management. The members

and chairperson of the nomination commit-

tee are elected by PHLY’s annual general

meeting, which also approves the remuner-

ation payable to committee members. The

general meeting may also decide on guide-

lines for the nomination committee.

Pursuant to PHLY’s articles of association, the

nomination committee recommends candi-

dates for members of the Board. The nomi-

nation committee also makes recommenda-

tions as to remuneration of the members of

the Board and the nomination committee.

The nomination committee will justify its

recommendation and such justification will

address the criteria specified in section 8 of

the Code of Practice on the composition of

the Board.

The nomination committee comprises the

following members:

– Ingebret G. Hisdal, Chairperson (2022-2024)

– Charlotte Håkonsen (2022-2024)

Neither of the members of the nomination

committee is a member of the Board. Nei-

ther the CEO/general manager nor any other

senior executive is a member of the nomi-

nation committee. Hilde K. Ramsdal (2023-

2025) serves as deputy member to the com-

mittee.

The general meeting has stipulated guide-

lines for the duties of the nomination com-

mittee.

PHLY provides the shareholders with infor-

mation on how to submit proposals to the

nomination committee for candidates for

election to the Board on PHLY’s home page

www.phillyshipyard.com.

BOARD OF DIRECTORS:

COMPOSITION AND INDEPENDENCE

Pursuant to section 4 of PHLY’s articles of

association, the Board comprises between

three and seven members. The Board is cur-

rently comprised of a total of four members.

PHLY’s shareholders elect the Chairman at

the annual general meeting. The Board may

elect its own Deputy Board Chairman. Board

members are elected for a period of two

years.

The composition of the Board is designed to

ensure that it can operate independently of

any special interests and function effectively

as a collegiate body. A majority of the share-

holder-elected Board members are inde-

pendent of PHLY’s executive management

and its significant business associates. The

Board does not include any executive per-

sonnel. Further, two of the four sharehold-

er-elected Board members, Elin Karfjell and

Susan Hayman, are independent of PHLY’s

main shareholder, Aker ASA. Kristian Røkke,

the Chairman, is Chief Executive Officer of

Aker Horizons ASA. Jan Petter Hagen, Board

member, is Managing Partner of Converto

AS.

The current composition of the Board, as

well as the Board members’ status on inde-

pendence and expertise, capabilities, and

experience, are presented on pages 80-81 of

this annual report. The shareholder-elected

Board members represent a combination of

expertise, capabilities, and experience from

various businesses and industries.

The Board members’ shareholdings are

presented in note 18 to the consolidated

accounts. PHLY encourages the Board mem-

bers to invest in PHLY’s shares.

Two of the four shareholder-elected Board

members are up for election in 2024. PHLY

will provide the relevant information regard-

ing election of Board members in accor-

dance with the Code of Practice guidelines in

advance of the annual general meeting.

THE WORK OF THE BOARD OF DIRECTORS

The Board of PHLY annually adopts a plan for

its work, emphasizing the goals, strategies,

and risk profile of the Company’s business

activities. The plan also recognizes the Com-

pany’s corporate social responsibility, and

how the Board shall handle agreements with

related parties. If there are material trans-

actions between the Company and a share-

holder, Board member, member of executive

management, or a party closely related to

any of the aforementioned, the Board shall

ensure that independent valuations are avail-

able.

See additional information on transactions

and agreements with related parties in note

21 to the consolidated accounts. As of 31

December 2023, 57.6% of the shares in PHLY

are owned by Aker Capital AS, a wholly-owned

subsidiary of Aker ASA. For further details on

the relationship between Philly Shipyard and

Aker ASA, please see note 21 to the consoli-

dated accounts.

Also, the Board has adopted instructions

that regulate areas of responsibility, tasks,

and division of roles of the Board, the Chair-

man, and the CEO/general manager. These

instructions feature rules governing Board

schedules, rules for notice and chairing of

Board meetings, decision-making rules, the

CEO’s/general manager’s duty and right to

disclose information to the Board, profes-

sional secrecy, impartiality, and other issues.

In order to ensure a more independent con-

sideration of matters of a material character

in which the Chairman is, or has been, per-

sonally involved, the Board’s consideration

of such matters are chaired by the Deputy

Board Chairman, if there is one serving at

the time, or some other member of the

Board in the absence of a Deputy Board

Chairman.

PHLY has an audit committee consisting of

two members elected by and among the

Board’s members, Elin Karfjell (Chairperson)

and Jan Petter Hagen. Both members are

CORPORATE GOVERNANCE

PHILLY SHIPYARD - ANNUAL REPORT 202378

CORPORATE GOVERNANCE

independent from operations of the Com-

pany. One member, Jan Petter Hagen, is

linked to PHLY’s main shareholder, Aker ASA.

PHLY does not have any other active Board

committees at this time. In particular, PHLY

does not have a remuneration committee

because all members of the Board are inde-

pendent of PHLY’s executive personnel.

PHLY has prepared guidelines designed

to ensure that members of the Board and

executive management notify the Board of

any direct or indirect stake they may have in

agreements entered into by the Company.

The Board evaluates its own performance

and expertise once a year.

Risk management and internal control

The Board is to ensure that the Company

maintains solid in-house control practices

and protocols and appropriate risk man-

agement systems tailored to the Compa-

ny’s business activities. These practices and

systems encompass the Company’s guide-

lines for how it integrates considerations

related to stakeholders into its creation

of value. PHLY’s policy regarding sustain-

ability and environmental, social, and gov-

ernance (ESG) is set forth on pages 23-26

of this annual report. The Board annually

reviews the Company’s most important

risk areas and internal control systems and

procedures, and these risk areas are men-

tioned in the Board’s report. Through the

use of a risk matrix and log, the Board also

monitors the key risks related to the Com-

pany’s business goals and assesses those

risks, taking into account mitigating actions,

on a quarterly basis. The issue is further

described in notes 1 and 17 to the consoli-

dated accounts.

Audit committee

The audit committee has reviewed the Com-

pany’s financial reporting systems, systems

for internal control and risk management and

had dialogue with PHLY’s auditor. The audit

committee has also considered the auditor’s

independence.

PHLY’s financial policies ensure follow-up of

financial risk. Key targets are identified by

the Board and management to ensure timely

follow-up of currency exposure, interest rate

exposure and compliance with covenants.

PHLY has prepared an authorization matrix

and approval procedures for costs included

in PHLY’s governing documents.

FINANCIAL STATEMENT CLOSE PROCESS

PHLY has implemented Aker ASA’s account-

ing and reporting guidelines which contains

requirements and procedures for the prepa-

ration of both quarterly and annual report-

ing. The reporting is done quarterly through

PHLY’s reporting and consolidation system.

Consolidation and control over the financial

statement close process is the CFO’s respon-

sibility. Financial results and cash develop-

ment are analyzed and compared to the

budget by the CEO/general manager and CFO

and reported to the Board monthly.

REMUNERATION OF

THE BOARD OF DIRECTORS

Board remuneration reflects the Board’s

responsibility, expertise, time spent, and the

complexity of the business. Remuneration

does not depend on PHLY’s financial per-

formance and PHLY does not grant share

options to members of its Board. Board

members and companies with whom they

are associated are not to take on special

tasks for the Company beyond their Board

appointments unless such assignments are

disclosed to the full Board and the remuner-

ation for such additional duties is approved

by the Board.

Additional information on remuneration paid

to Board members for 2023 is presented in

note 18 to the consolidated accounts.

REMUNERATION OF

EXECUTIVE MANAGEMENT

The Board has adopted guidelines for remu-

neration of executive management in accor-

dance with section 6-16a of the Norwegian

Public Limited Company Act which was orig-

inally presented to the annual general meet-

ing in 2021 and approved by the shareholders

for a period of four years. The guidelines for

remuneration of executive management will

be presented to the annual general meeting

and be subject to the shareholders’ approval

every fourth year, at a minimum. The guide-

lines currently approved by the shareholders

are available on the Company’s website. At the

annual general meeting in 2023, the share-

holders approved that the guidelines were

changed to facilitate remuneration in the form

of shares in PHLY. Salary and other remunera-

tion of the CEO/general manager of PHLY are

determined in a Board meeting. The basis of

remuneration of executive management has

been developed in order to create a system

based on performance and retention.

The system of reward is designed to con-

tribute to the achievement of good financial

results and increase shareholder value.

PHLY does not have stock option plans

or other such share award programs for

employees, but the President and CEO and

certain members of the senior management

team can be awarded shares under the AVP

program as further described in note 18 of

the consolidated accounts. Further informa-

tion on remuneration for 2023 for members

of the Company’s executive management

is presented in note 18 to the consolidated

accounts. PHLY’s guidelines for remunera-

tion to executive management are discussed

starting on page 54 of this annual report and

will be presented to the shareholders at the

annual general meeting. The maximum size

of any payment under the existing perfor-

mance-related remuneration program to any

executive is linked to the size of the execu-

tive’s base salary.

The Board will prepare and present a report

on remuneration of executive management

every year as part of the annual general

meeting, in accordance with the Norwegian

Public Limited Company Act section 6-16b.

This report is subject to the shareholders’

advisory vote only.

PHILLY SHIPYARD - ANNUAL REPORT 2023 79

INFORMATION AND COMMUNICATIONS

PHLY’s reporting of financial and other infor-

mation is based on openness and on equal

treatment of shareholders, the financial com-

munity, and other interested parties.

The long-term purpose of PHLY’s investor

relations activities is to ensure PHLY’s access

to capital at competitive terms and to ensure

shareholders’ correct pricing of shares. These

goals are to be accomplished through cor-

rect and timely distribution of information

that can affect PHLY’s share price. PHLY is

also to comply with current rules and market

practices, including the requirement of equal

treatment.

All stock exchange notifications and press

releases are made available on PHLY’s

home page www.phillyshipyard.com; stock

exchange notices are also available from

www.newsweb.oslobors.no. All information

that is distributed to shareholders is simul-

taneously published on PHLY’s home page.

PHLY’s financial calendar is found on the

inside front cover of this annual report and

its home page www.phillyshipyard.com.

PHLY’s investor relations staff is responsible

for maintaining regular contact with PHLY’s

shareholders, potential investors, analysts

and other financial market stakeholders. The

Board is regularly informed about PHLY’s

investor relations activities. For more infor-

mation regarding PHLY’s guidelines for

reporting of financial and other information,

see pages 72-74.

TAKEOVERS

PHLY has not produced special principles

for how it will act in the event of a takeover

bid. However, if a takeover bid occurred the

Board would follow the overriding principle of

equal treatment for all shareholders. Unless

the Board has particular reasons for so doing,

the Board will not take steps to prevent or

obstruct a takeover bid for PHLY’s business

or shares, nor use share issue authorizations

or other measures to hinder the progress of

the bid, without such actions being approved

by a general meeting after the takeover offer

has become public knowledge.

PHLY will not enter into any agreement with

a bidder that acts to limit PHLY’s ability to

arrange other bids for PHLY’s business or

shares unless it is self-evident that such an

agreement is in the common interest of PHLY

and its shareholders. This provision shall also

apply to any agreement on the payment of

financial compensation to the bidder if the

bid does not proceed. Any financial compen-

sation will be limited to the costs the bidder

has incurred in making the bid.

Agreements entered into between PHLY and

a bidder that are material to the market’s

evaluation of the bid will be announced to

the public no later than at the same time as

the disclosure that the bid has been made is

published.

Upon the issuance of an offer for PHLY’s

shares, the Board will make a statement to

the shareholders that provides an assess-

ment of the bid, the Board’s recommenda-

tions and reasons for these recommenda-

tions. If the Board cannot recommend to the

shareholders whether they should or should

not accept the bid, the Board will explain the

reasons for this. The Board’s statement on

the offer will make it clear whether the views

expressed are unanimous, and if this is not

the case, it will explain the basis on which

specific members of the Board have excluded

themselves from the Board’s statement.

For each instance, an assessment will be

made as to the necessity of bringing in inde-

pendent expertise and obtaining a third party

valuation. If a third party valuation is obtained,

such valuation will include an explanation,

and the Board will aim at recording such val-

uation in its statement. It may be necessary

to obtain a valuation from an independent

expert where a competing bid is made and

the bidder either is the main shareholder or

has a connection to the Board members or

executive personnel.

Transactions that have the effect of sale of

PHLY or a major component of it are to be

decided on by shareholders at a general

meeting.

AUDITOR

The auditor makes an annual presentation to

the Board of a plan for the auditing work for

the year. Further, the auditor has provided

the Board with a written confirmation that the

requirement of independence is met.

The auditor participates in the Board meet-

ing that deals with the annual accounts, and

the auditor has reviewed PHLY’s internal

control with the Board. At these meetings,

the auditor reviews any material changes to

PHLY’s accounting principles, comments on

any material estimated accounting figures

and reports all matters on which there have

been disagreement between the auditor and

PHLY’s executive personnel. Once a year a

meeting is held between the auditor and the

Board, at which no representatives of execu-

tive management are present. In addition to

the presentations to the full Board, the audi-

tor is present at all quarterly audit committee

meetings which occur throughout the year

and presents both its preliminary and final

audit findings to the committee during such

meetings.

CORPORATE GOVERNANCE

PHILLY SHIPYARD - ANNUAL REPORT 202380

KRISTIAN RØKKE

Board Chairman

Kristian Røkke (b. 1983) is Chief Executive

Officer of Aker Horizons AS, an investment

company dedicated to creating value and

reducing emissions from renewable energy

and decarbonization technologies. Mr. Røkke

has previously been Chief Investment Officer

of Aker ASA and has extensive experience

from operations and M&A. Mr. Røkke is

Chair of the board of Mainstream Renewable

Power and Aker Carbon Capture AS, and a

Director of TRG Holding AS. Mr. Røkke has

an MBA from The Wharton School, University

of Pennsylvania. Mr. Røkke holds both Nor-

wegian and American citizenships. Mr. Røkke

owns no shares in the company and has no

stock options. Mr. Røkke has been elected

for the period 2022-2024.

JAN PETTER HAGEN

Board Member

Jan Petter Hagen (b. 1965) is Managing Part-

ner in the advisory firm Converto AS. Before

joining Converto in 2017, Mr. Hagen held the

position as Director of Business Transforma-

tion in Rolls-Royce Marine. Mr. Hagen also

served as CFO in Stokke, a high-end, global,

well-recognized brand in the children prod-

uct segment from 2009-2014. Mr. Hagen

has previously held a variety of executive

positions in Aker Yards, Offshore & Special-

ized Vessels, including Senior Vice President

Finance and Senior Vice President Shipbuild-

ing. Mr. Hagen also has experience from the

oil and gas industry. Mr. Hagen’s current

board positions include inter alia Brattvaag

Electro and Peil. Mr. Hagen holds a MSc in

Energy Economics and Management and a

Bachelor of Science in Business Administra-

tion from Norwegian Business School BI in

Oslo. Mr. Hagen owns no shares in the com-

pany and has no stock options. Mr. Hagen

has been elected for the period 2022-2024.

ELIN KARFJELL

Board Member

Elin Karfjell (b. 1965) is the EVP Property Man-

agement and Development of Statsbygg, a

Norwegian government agency that manages

central parts of the real estate portfolio of the

government of Norway, where she previously

held the position of CFO. Prior to that, Ms.

Karfjell was CEO of Atelika AS and Fabi Group

and Director of Finance and Administration

of Atea AS. Ms. Karfjell is a former partner at

Ernst & Young AS. Ms. Karfjell joined Ernst &

Young AS in 2002. Prior to this, Ms. Karfjell held

various positions including partner at Arthur

Andersen. At Ernst & Young/Arthur Andersen,

Ms. Karfjell held various leading positions, both

within advisory and audit, and Ms. Karfjell has

experience from a broad specter of industries.

Ms. Karfjell is also a Board member of North

Energy ASA, DNO ASA and Contesto AS. Pre-

viously, Ms. Karfjell was a Board member of

Hent AS, Sevan Drilling Ltd., Norse Energy

Corporation ASA, Aktiv Kapital ASA and Aker

Floating Production ASA. Ms. Karfjell is a state

authorized public accountant. Ms. Karfjell has a

Bachelor of Science in Accounting from Okon-

omisk College (Oslo Met) and a higher degree

in accounting and auditing from the Norwegian

School of Economics and Business Administra-

tion (NHH). Ms. Karfjell is a Norwegian citizen.

Ms. Karfjell holds 1,200 shares in the company

and has no stock options. Ms. Karfjell has been

elected for the period 2023-2025. Ms. Karfjell

serves as an independent director.

Presentation of

the Board of Directors

THE BOARD OF DIRECTORS

PHILLY SHIPYARD - ANNUAL REPORT 2023 81

SUSAN HAYMAN

Board Member

Susan Hayman (b. 1958) has held senior

positions in both domestic and interna-

tional maritime transportation companies

including Foss Maritime Company, APL Ltd.

and Matson Navigation. Ms. Hayman is a

graduate of the United States Merchant

Marine Academy and received an MBA from

Harvard Business School. Ms. Hayman has

served on several boards and committees,

including: American Petroleum Institute

(API) Marine Committee, Ship Operations

Cooperative Program (SOCP), Chamber

of Shipping of America (CSA), American

Waterways Operators (AWO), Maritime

Transportation System Advisory Committee

(MTSNAC), and the U.S. Merchant Marine

Academy Board of Visitors. Ms. Hayman is a

U.S. citizen. Ms. Hayman owns no shares in

the company and has no stock options. Ms.

Hayman has been elected for the period

2023-2025. Ms. Hayman serves as an inde-

pendent director.

STEINAR NERBØVIK

President and CEO

Steinar Nerbøvik (b. 1961) was appointed

President and Chief Executive Officer of

Philly Shipyard ASA and Philly Shipyard,

Inc. in November 2014 after serving as

Managing Director since April 2014. Previ-

ously, Mr. Nerbøvik served as SVP Opera-

tions from October 2013. Prior to that, Mr.

Nerbøvik served as SVP Yard Director for

Norwegian Shipyard Vard Langsten (former

Aker Yards and STX OSV Langsten), a lead-

ing provider of sophisticated offshore sup-

port vessels. Mr. Nerbøvik first joined Philly

Shipyard in 2003 as Vice President Projects.

Mr. Nerbøvik has held other management

positions as combined Design Manager

and Project Manager at Aker Langsten from

1991-2003. Mr. Nerbøvik holds a Master of

Science in Ship Naval Engineering from the

Norwegian Institute of Technology (NTNU)

in Trondheim, Norway. Mr. Nerbøvik lives

in Wilmington, DE, USA. Mr. Nerbøvik is a

U.S. and Norwegian citizen. As of 1 Febru-

ary 2024, Mr. Nerbøvik holds 1,000 shares

in the company and has no stock options.

JEFFREY THEISEN

Chief Financial Officer

Jeffrey Theisen (b. 1968) rejoined Philly

Shipyard, Inc. as Chief Financial Officer in

September 2020. Mr. Theisen previously

served as CFO from 2007-2015. Mr. The-

isen has over 30 years of experience in

financial and strategic planning, organiza-

tional leadership, growth and expansion

strategies, debt and equity financing, inves-

tor and banking relations, and budgeting

and cost accounting. Mr. Theisen has held

finance roles with Arthur Andersen, The

Regulus Group, Philly Shipyard and most

recently, People 2.0. Mr. Theisen holds a

Bachelor of Science in Accounting from

Villanova University and is a certified pub-

lic accountant in the state of Pennsylvania.

Mr. Theisen lives in Blue Bell, PA, USA. Mr.

Theisen is a U.S. citizen. As of 1 February

2024, Mr. Theisen holds zero shares in the

company and has no stock options.

Presentation of

the Management Team

THE MANAGEMENT TEAM

PHILLY SHIPYARD - ANNUAL REPORT 202382

ROBERT FITZPATRICK

Vice President Production

Robert Fitzpatrick (b. 1964) joined Philly Ship-

yard, Inc. in 2001 and had held numerous key

positions including Prefabrication Manager

and Senior Production Manager before being

promoted to Vice President Production in

January 2007. Prior to coming to the shipyard,

Mr. Fitzpatrick amassed 20 years of experi-

ence in industrial manufacturing including 12

years as a production manager responsible

for the fabrication of naval circuit breakers

and switchgear at L-3 Communications. Mr.

Fitzpatrick holds a Bachelor of Science in

Mechanical Engineering from Spring Garden

College in Philadelphia, PA, USA. Mr. Fitzpat-

rick lives in Burlington, NJ, USA. Mr. Fitzpatrick

is a U.S. citizen. As of 1 February 2024, Mr.

Fitzpatrick holds zero shares in the company

and has no stock options.

THE MANAGEMENT TEAM

DEAN GRABELLE

Senior Vice President and General Counsel

Dean Grabelle (b. 1970) was appointed Senior

Vice President and General Counsel of Philly

Shipyard, Inc. (PSI) in November 2016, after

serving as PSI’s General Counsel since May

2008. Prior to joining the shipyard, Mr. Gra-

belle was employed with the law firm Faegre

Drinker Biddle & Reath LLP in Philadelphia,

PA, USA where he established a legal career

in the Business and Finance Department

spanning 12 years. Past experience includes

mergers and acquisitions, business coun-

seling, lending, private equity and corporate

finance. Mr. Grabelle graduated from Duke

University with a Bachelor of Arts in Econom-

ics and Public Policy Studies. Mr. Grabelle

also holds a Juris Doctor from the University

of Pennsylvania Carey Law School. Mr. Gra-

belle lives in Voorhees, NJ, USA. Mr. Grabelle

is a U.S. citizen. As of 1 February 2024, Mr.

Grabelle holds zero shares in the company

and has no stock options.

THOMAS GRUNWALD

Senior Vice President

Thomas Grunwald (b. 1978) joined Philly

Shipyard, Inc. in the role of Senior Consul-

tant in May 2019 before being promoted to

Commercial Director and then again to Vice

President in 2021. At the end of 2023, Mr.

Grunwald was elevated to his current posi-

tion of Senior Vice President in which he is

responsible for sales and business devel-

opment for commercial ship newbuilding

and ship repairs, as well as shipyard capital

investments. Mr. Grunwald previously held

the position of President and Board Member

at R&M Ship Technologies USA, Inc. which

included oversight of the company’s U.S. ship

newbuilding and repair activities. Mr. Grun-

wald holds a Diploma in Business Adminis-

tration with a specialization in International

Business Administration from the Catholic

University of Eichstaett-Ingolstadt, Germany.

Mr. Grunwald lives in Media, PA, USA. Mr.

Grunwald is a German citizen. As of 1 Febru-

ary 2024, Mr. Grunwald holds zero shares in

the company and has no stock options.

PHILLY SHIPYARD - ANNUAL REPORT 2023 83

MICHAEL GIANTOMASO

Vice President Human Resources

Michael Giantomaso (b. 1966) joined Philly

Shipyard, Inc. as Human Resources Man-

ager in May 1998. Mr. Giantomaso was pro-

moted to Vice President Human Resources in

August 2001. Mr. Giantomaso has more than

30 years of human resources experience in

the manufacturing and health care fields. Mr.

Giantomaso holds a Bachelor of Arts in Busi-

ness Administration and Human Resources

from Temple University. Mr. Giantomaso lives

in Huntingdon Valley, PA, USA. Mr. Gianto-

maso is a U.S. citizen. As of 1 February 2024,

Mr. Giantomaso holds zero shares in the

company and has no stock options.

STEVEN MATZ

Vice President Engineering and Planning

Steven Matz (b. 1966) joined Philly Shipyard,

Inc. in 1998 and held key positions in project

planning and engineering until his depar-

ture in November 2004. Mr. Matz returned

to Philly Shipyard in January 2013 and was

promoted to Vice President Engineering and

Planning in February 2022. Mr. Matz has pre-

viously performed project engineering and

management roles at the Naval Surface War-

fare Center and Lockheed Martin. Mr. Matz

holds a Bachelor of Science in Naval Archi-

tecture and Marine Engineering from Webb

Institute in Glen Cove, NY, USA and a Master

of Science in Project Management from Ste-

vens Institute of Technology in Hoboken, NJ,

USA. Mr. Matz lives in Wilmington, DE, USA.

Mr. Matz is a U.S. citizen. As of 1 February

2024, Mr. Matz holds zero shares in the com-

pany and has no stock options.

KELLY WHITAKER

Vice President Sustainability and Communications

Kelly Whitaker (b. 1982) was appointed Vice

President of Sustainability and Communi-

cations of Philly Shipyard, Inc. in September

2023. Ms. Whitaker first joined Philly Shipyard

in 2008 as a Communications Specialist and

served in the communications function with

growing responsibility until 2016, when she

was promoted to HR and Communications

Manager, followed by HR and Communica-

tions Director in 2020. Ms. Whitaker has 18

years of experience in corporate communi-

cations and holds a Bachelor of Arts in Com-

munications from Rowan University in Glass-

boro, NJ. Ms. Whitaker is a U.S. citizen and

lives in Moorestown, NJ, USA. As of 1 February

2024, Ms. Whitaker holds zero shares in the

company and has no stock options.

THE MANAGEMENT TEAM

PHILLY SHIPYARD - ANNUAL REPORT 202384

THE MANAGEMENT TEAM

HARDIK PATEL

Vice President Procurement

Hardik Patel (b. 1984) was appointed Vice

President of Procurement of Philly Shipyard,

Inc. (PSI) in December 2023. Mr. Patel first

joined PSI in 2013 as Quality Engineer and

served in a variety of roles, including Logis-

tics Coordinator, Senior Buyer, Purchasing

Manager and Procurement Manager, before

being promoted to Procurement Director

in April 2020. Prior to joining PSI, Mr. Patel

worked in Design, Planning and Supply Chain

function in Pipavav Defense and Offshore

Engineering Co. Ltd, in India. Mr. Patel has

more than 15 years shipbuilding experience

in various functions. Mr. Patel holds a Mas-

ter in Business Administration in Marketing

Management from Sardar Patel University

and Bachelor of Production Engineering

from Bhavnagar University in India. Mr. Patel

is a U.S. citizen and lives in Phoenixville, PA,

USA. As of 1 February 2024, Mr. Patel holds

zero shares in the company and has no stock

options.

KRISTINE DAMLI

Vice President

Kristine Damli (b. 1990) is Vice President

of Philly Shipyard ASA. In addition to this

responsibility, Ms. Damli serves as Senior

Controller for Aker ASA. Prior to joining Aker

ASA in 2022, Ms. Damli worked for six years

in PricewaterhouseCoopers. Ms. Damli holds

an MSc in Economics and Business Adminis-

tration and an MSc in Accounting and Audit-

ing from The Norwegian School of Economics

(NHH). Ms. Damli lives in Oslo, Norway. Ms.

Damli is a Norwegian citizen. As of 1 Febru-

ary 2024, Ms. Damli holds zero shares in the

company and has no stock options.

PHILLY SHIPYARD - ANNUAL REPORT 2023 85

DISCLAIMER

This annual report includes and is based, inter

alia, on forward-looking information and state-

ments that are subject to risks and uncertain-

ties that could cause actual results to differ.

Such forward-looking information and state-

ments are based on current expectations,

estimates and projections about global eco-

nomic conditions, the economic conditions of

the regions and industries that are major mar-

kets for Philly Shipyard ASA and its subsidiar-

ies and affiliates (the “Philly Shipyard Group”)

lines of business. These expectations, esti-

mates, and projections are generally identifi-

able by statements containing words such as

“expects,” “believes,” “estimates,” “anticipates,”

“intends,” or similar expressions. Important

factors that could cause actual results to differ

materially from those expectations include,

among others, economic, market and polit-

ical conditions in the geographic areas and

industries that are or will be major markets

for the Philly Shipyard Group’s businesses, oil

prices, market acceptance of new products

and services, changes in governmental regu-

lations, interest rates, fluctuations in currency

exchange rates, and such other factors as

may be discussed from time to time. Although

Philly Shipyard ASA believes that its expecta-

tions and the information in this annual report

were based upon reasonable assumptions at

the time when they were made, it can give

no assurance that those expectations will be

achieved or that the actual results will be as

set out in this annual report. Neither Philly

Shipyard ASA nor any other company within

the Philly Shipyard Group is making any repre-

sentation or warranty, expressed or implied,

as to the accuracy, reliability or completeness

of the information in the annual report, and

neither Philly Shipyard ASA, any other com-

pany within the Philly Shipyard Group nor any

of their directors, officers or employees will

have any liability to you or any other persons

resulting from your use of the information in

the annual report.

Philly Shipyard ASA undertakes no obligation

to publicly update or revise any forward-look-

ing information or statements in the annual

report, other than what is required by law.

The Philly Shipyard Group consists of various

legally independent entities, constituting their

own separate identities. Philly Shipyard is

used as the common brand or trademark for

most of these entities. In this annual report

we may sometimes use the “Company,” “Philly

Shipyard,” “Group,” “we,” or “us” when we

refer to Philly Shipyard companies in general

or where no useful purpose is served by iden-

tifying any particular Philly Shipyard company.

This report does not constitute an offer of

any securities for sale.

Philly Shipyard ASA

Vika Atrium, Munkedamsveien 45,

NO-0250 Oslo, Norway

Tel: + 47 23 11 91 00; Fax: + 47 23 11 91 01

Philly Shipyard, Inc.

2100 Kitty Hawk Avenue

Philadelphia, PA 19112 USA

Tel: +1 (215) 875 2600; Fax: +1 (215) 875 2700

website: www.phillyshipyard.com

email: communications@phillyshipyard.com

Photos/illustrations:

All photos courtesy of:

Philly Shipyard, Inc.

Design/production:

www.report.no