Annual Report 2010 - Scana Industrier ASA

3 THE SCANA GROUP4 Objectives and means5 Group Management and Board of Directors6 Comments from the CEO8 Historical highlights10 Business areas12 BUSINESS AREA STEEL14 Scana Steel Björneborg16 Scana Steel Booforge17 Scana Steel Söderfors18 Leshan Scana Machinery Ltd20 Scana Steel Stavanger21 Scana Steel AB22 BUSINESS AREA MARINE24 Scana Propulsion28 Scana Skarpenord30 Scana Korea Hydraulic Ltd.32 BUSINESS AREA OIL & GAS34 Scana Subsea35 Scana Offshore Vestby36 Scana Offshore Technology37 Scana Offshore Services38 ENVIRONMENTAL IMPACT40 ANNUAL ACCOUNTS 201041 Directors’ report47 Scana group profit and loss account48 Scana group balance sheet49 Scana group cash flow statement50 Scana group statement of change inshareholders equity51 Scana group notes83 Parent company profit and loss account84 Parent company balance sheet85 Parent company cash flow statement86 Parent company notes91 Declaration by the Board of Directors andthe CEO and group chief executive92 Auditors´ report94 Shares and shareholders 201096 Articles of association98 key figuresThe front page picture shows a semi finished shaft typical for the Energy segment within Scana Steel.

3THE SCANA GROUPScana Industrier ASA (Scana) is a Nordic industrial group operating in three business areas:Steel, Marine and Oil & Gas.Annual Report 2010 Scana Industrier ASAThe main products for the Steel area are the productionof customized steel forgings and castings for the oil andgas, energy, marine, machine and tool industries.The Marine area develops and produces gears, propulsionsystems and valve control systems for ships.The main products for the Oil and Gas area are designand production, marketing and sale, in addition tomaintenance and repair of equipment and steelcomponents for the oil and gas industry.The companies in the three business areas provideproducts and system solutions for three market segments;namely marine, energy and steel and machinery.Scana’s technology, unique materials knowledge andextensive production experience form the basis of ourcompetitive power. Our aim is to be the preferred supplierto leading companies within our market segments.The majority of our customers are located in Europe, theAmericas and Southeast Asia.The group has as at 31.12.2010 1 759 employees, ofwhich 675 work in China. The head office is situatedin Stavanger. The group has operative companies inNorway, Sweden, China, Poland, USA, South-Korea,Brazil and Singapore, and representatives in a series ofcountries, worldwide.Scana’s technology, unique materials knowledgeand extensive production experience”form the basis of our competitive power.

4Annual Report 2010 Scana Industrier ASAObjectives and meansThe majority of Scana’s companies service one or several of three market segments:marine, energy, steel and machinery. Scana possesses market-leading knowledge inthese areas, and in the future the company will sell a greater portion of finished productsand solutions.Scana creates progress”Business conceptThe objective of the company is to own and managemanufacturing industry, commercial activities and relatedactivities. The objectives of the company also includeinvesting in other companies that can promote thecompany’s primary activities.Scana shall be a market-driven industrial group with nicheproducts for growing markets.VisionScana creates progress.Bythis, we maintain that:Scana Industrier shall be a profitable industrial group.The head office shall be in Scandinavia, with industrialbases and centres for technology and market expertisein Europe and Asia. The group shall serve customersthroughout the entire world.Scana shall have a reputation for excellent customerresponse, strong competition, robust quality and deliveryreliability, and be an attractive and challenging workplace.Scana’s finances shall be sufficient to develop the groupindustrially and commercially.Main aim and strategiesThe main aim of the group is to increase the shareholders’values.On this basis, the following primary strategies have beendetermined:1. Continued organic growth in all business areas.2. Maintain a good operating margin and effectivefinancial management.3. Strengthen the group’s strategic position throughacquisitions• in order to strengthen our market position• in order to increase capacity• in order to supplement our product range or value chain.4. Develop the repair and service concept within the marineand energy areas.

5Group management and board of directorsScana has a decentralised organisation in which a large part of the group’s technical andcommercial expertise shall be located in the companies. Scana’s group management teamand finance and accounts functions are based at the head office in Stavanger, Norway.Annual Report 2010 Scana Industrier ASAGroup Management:Board of DirectorsRolf Roverud, Group CEORolf Roverud (born 1958) took up theappointment of Group Chief Executive inScana Industrier on January 1, 2008. Hehas previously had a number of leadingpositions in Saga Petroleum, and camefrom the position of Vice Chief Executivein NSB AS. Mr Roverud is an economicsgraduate and holds a master’s degree instrategy and management.Kjetil Flesjå, Group Director / CFOKjetil Flesjå (born 1967) has a Master inBusiness Administration and came to Scanafrom a position in Fokus Bank. Flesjå hasa thorough expertise in banking and acomprehensive experience with corporatefinance processes, including acquisi tionsand sales, financial risk analysis, balanceand liability strategies, in addition to anextensive analytical experience.Jan Henry Melhus,Group Director Oil and GasJan Henry Melhus (born 1963) is educatedas production engineer with additionaleducation within marine technology. Hehas more than 20 years of experience fromScana’s areas of commitment. Mr. Melhuscame to Scana from the position of directorfor GE Oil & Gas. He has previously heldleading positions at Vetco Gray, GMCgroup, NAT and ABB Group.Frode Alhaug, Chairman of the BoardFrode Alhaug (born 1949) was elected aschairman of the board in Scana IndustrierASA in 2008. He worked as the group’sCEO from 2005-2007 and chairman/member of the board since 2000-2005.Mr. Alhaug is vice chairman of the board inHelse Sørøst RHF. Previously Mr. Alhaugwas CEO in Moelven Industrier. Mr. Alhaugis Scana’s third largest shareholder.Bjørn DahleBjørn Dahle (born 1947) worked in theoffshore industry from 1966 and as anindependent investor and entrepreneursince 1971. Mr. Dahle is among Scana’slargest shareholders.Mari SkjærstadMari Skjærstad (born 1969) has a lawdegree from the University of Oslo, withadditional education within organisationand management. She is a partner in thelaw firm Johnsrud, Sanderud & SkjærstadAS and has worked as legal counsel since1995. Mrs. Skjærstad is also a boardmember in a number of other companies,including Mesta, Norfund and Forsvarsbygg.Martha Kold BakkevigMartha Kold Bakkevig (born 1963) has extensiveexperience in Management, Strategyand R&D within Technology and BusinessDevelopment. She has a PhD (Dr.scient.)from Norwegian University of Science andTechnology (1995) and a PhD (Dr. Oecon.)from BI Norwegian School of Management(2007). Bakkevig is Managing Director inDeepWell, a well intervention companylocated i Haugesund.John Arild ErtvaagJohn Arild Ertvaag (born 1955) runs hisown investment business through hiscompany Camar AS. The investments areprimarily within oil and gas, industry andcommerce. He holds a number of boardpositions in both listed and non-listedcompanies. Camar AS is the secondlargest investor in Scana Industrier ASA.

Historical highlights1652Scana’s oldest company, Scana Booforge, is20109established in Karlskoga.1656Permission is granted to build a forgeham mer at the Vismes estuary. This formsthe basis for Björneborg’s growth anddevelopment.1911Stavanger Electro-Stålverk is established.Today, Scana Steel Stavanger AS is Norway’sonly special steel works and is located inStrand municipality.1987Scana Industrier is founded through a mergerbetween ScanArmatur AS and ScanPaint AS.1989The actuator and valve control systemmanufacturer Scana Skarpenord AS is takenover by Scana Industrier.1991Scana Industrier buys Stavanger Staal AS,now Scana Steel Stavanger AS.1993Scana Industrier buys Björneborgs JärnverkAB, now Scana Steel Björneborg AB, one ofthe oldest ironworks in the world.1994Scana Industrier buys a company steepedin forging traditions: Booforge AB, nowScana Steel Booforge AB. Production waspreviously run by Alfred Nobel’s Bofors.1995Scana Industrier is listed on the Oslo StockExchange.1996Scana Steel Stavanger AS secures its ownpower supply through the licence allocationto Jørpeland Kraft AS, a third of which isowned by Scana.1997Scana establishes itself in China throughthe joint venture company Leshan ScanaMachinery Company Ltd.1998Scana buys Volda Mekaniske Verksted AS,now Scana Volda AS.1999Scana signs an agreement with Caterpillar,making Scana Volda a preferred supplierof propellers, reduction gears and controlsystems for Caterpillar’s diesel engines.2000The first complete year of operation for ScanaKorea Hydraulic Ltd. This company hasincreased Scana’s market share considerablyin one of the world’s largest shipbuildingnations.2001Scana increases its capital, which givesthe company NOK 106 million in new sharecapital.2002Smedvig sells his share majority in Scana toleading employees in Scana Industrier.2004Scana Korea Hydraulic becomes one of fivesubcontractors to be given the prestigious“Quality Gold Mark” by Samsung HeavyIndustries, one of the world’s largestshipyards.2005Scana establishes the offshore servicecompany Scana Offshore Technology ASin collaboration with International OilfieldServices AS. The new company aims tofurther develop the group’s activities withinservice and maintenance.2006Scana acquires the companies “BrødreneJohnsen AS” and “AMT AS”, now ScanaOffshore Vestby AS, in collaboration withInternational Oilfield Services AS. Theseacquisitions confirm the company’sexpressed objectives for growth within oiland gas.2008Scana’s turnover reaches almost NOK 2.9billion after a peak in activity in all of thegroups key areas. Scana Offshore Services isestablished after an acquisition of business inHouston. The company strengthens Scana’sposition in the USA and Singapore.2009Scana buys ABB’s marine activities in Polandand establishes Scana Zamech Sp.Zo.o. Theacquisition strengthens and complementsScana’s activities within the business areaMarine. Scana’s establishment of business inBrazil will create big opportunities for growthin an exciting market. Scana also establishesScana Subsea delivering subsea and risercomponents to the oil and gas industry.2010Scana emphasizes consolidation andefficiency of operations to strengthenour competitive power. The order intakeincreases significantly towards the end ofthe year.Annual Report 2010 Scana Industrier ASA

10Annual Report 2010 Scana Industrier ASABusiness AreasScana is organized into three business areas with a decentralized organization, in which theproduction units are separate legal entities.StEElScana Steel Björneborg AB,SwedenForged special components.Scana Steel Booforge AB, SwedenArms for forklift trucks and specialisedforging and heat treatment.Scana Steel Söderfors AB, SwedenRolled special profiles and rolled/forged rods and billets, mainly inspecial steel.Leshan Scana Machinery Ltd, ChinaSteel rolls and castings. Scana owns80 %.Scana Steel Stavanger AS, NorwayHigh-alloy castings and forgings, andwear-resistant steel.Scana Steel AB, SwedenManages Scana’s real estate inKarlskoga, Sverige.MarinePROPULSIONScana Volda AS, NorwayGears, propellers and propulsionsystems.Scana Mar-El AS, NorwayElectronic remote control systemsfor the propulsion and navigation ofvessels.Scana Zamech sp. zo. o, PolandGears and propeller systems.Scana Singapore Pte. Ltd.Design, engineering, repairs andmaintenance of drilling equipment.VALVE CONTROL SYSTEMSScana Skarpenord AS, NorwayHydraulic actuators and valve controlsystems.Scana Korea Hydraulics Ltd,South KoreaHydraulic actuators and valve controlsystems. Scana owns 49 %.Scana Skarpenord ShanghaiService Station, ChinaHydraulic actuators, valve controlsystems and service.OIL & GASScana Subsea AB, SwedenSubsea and riser systems for the oil& gas industry.Scana Do Brasil Industrias, BrazilSales and marketing of Scana’sproducts in Brazil and on the SouthAmerican continent.Scana Offshore Vestby AS, NorwayEngineering, design, constructionand production of special equipmentfor the petroleum industry.Scana Offshore Technology AS,NorwayRepair, maintenance and recertificationof equipment for the oil industry.Scana Offshore Services Inc, USADesign, engineering, repair andmaintenance of drilling equipment.

11Annual Report 2010 Scana Industrier ASABusinessareas

12Annual Report 2010 Scana Industrier ASABUSINESS AREA stEElThe steel business area has a several hundred yearlong tradition in the Swedish steel industry with regardto the companies Scana Steel Björneborg, Scana SteelBooforge and Scana Steel Söderfors, in addition to thecooperation with Motala Verkstad AB. This businessarea also includes Leshan Scana Machinery Companyin China, plus the Norwegian company Scana SteelStavanger.The companies each have an independent and longhistory, and specialise in different production areas.The business area supplies complete products toworkshops, the marine industry and the oil and gasindustry. Production takes place at Scana’s ownproduction facilities, which include melting plants,forges, rolling mills, foundries and heat treatment andmachining units. Production is of a high standardand complies with ISO-certified quality assurancesystems. The business is characterised by high levels ofmetallurgical expertise and strong market positions inthe respective product areas.Strategic positionScana maintains a high standard with regard to itsproduction as well as a broad product range. Getting afoothold in this industry is difficult since both productionfacilities and infrastructure represent major investments,and because it is also extremely challenging to acquiresufficient levels of metallurgic and technical expertise.Scana is one of few players in its area with integratedproduction facilities that include both melting/productionof steel, heat treatment and machining of components.Few of Scana’s competitors have their own steelworksand have to buy billets and semi-finished goods in orderto be able to offer finished steel products. This givesScana a clear competitive advantage, which the groupwill develop further.In the period from 2008-2010, more than NOK 200million has been invested in the steel companies. Theinvestments increase capacity and delivery precision,and reduce risk and production costs. In 2010, Scanaexpanded the production capacity in China with regardto rolls and larger rings. Scana’s investments alsoincluded a new forge manipulator at Björneborg, whichis able to handle tonnage up to 75 tonnes and lengthsup to 24 metres.ProductsScana is a leading supplier of specialised products insteel and customises solutions for various uses. Keyelements are close collaboration with the customer andhigh quality. Scana’s technological expertise is pivotal tothe production and in connection with the developmentof new, customised products. Scana’s productioncapacity in terms of steel produced in-house is around150,000 tonnes of melted material.Scana offers a broad range of products weighing from50 kg to 45 tonnes, in lengths up to 24 metres. Scanais a market leader in the upper weight and length range,particularly with regard to cylindrical products. Scanahas a large capacity within heat treatment. This renderspossible specific material qualities and extended tensilestrength, an important competitive advantage.Markets and customersOur special products provide us with customers amongthe great international players in industries such asmarine, oil/gas and energy. Scana offers optimumdesign and material alternatives, which, combinedwith short delivery times and good logistics, provide acompetitive total solution.Special steel customers are primarily steel companies,major wholesalers and end users. Scana has enteredinto several long-term collaboration agreements with anumber of key customers. This provides a good basisfor developing the business concept further.The development is heading in the direction ofcustomers requesting supplies of finished productsdelivered directly to their own facilities. High quality andtechnical expertise, combined with precise deliverieshave all helped Scana capture a strong position in themarket.

13Annual Report 2010 Scana Industrier ASASteel

14Annual Report 2010 Scana Industrier ASAManaging director: Ingvar WinboSCANA STEEL BJÖRNEBORGScana Steel Björneborg refines steel in an integrated chain that includes steelworks, heat treatment,forge with a 4,500 tonne press and a well-equipped machining workshop.The company was founded 354 years ago, making itone of the group’s most venerable companies – not tomention one of the oldest forges in the world.Due to low demand and high pressure on prices,following a financial recession and an economicdown turn in the heavy steel industry, the company’sorder reserve and turnover has decreased. But witha number of cost cutting measures, the result is stillpositive.Markets and customersScana Steel Björneborg exports 70 % of its turnover,directly or through other companies in the group. Thelargest market is Europe, but export also goes to theUSA, Asia and other parts of the world.The entire steel industry has throughout 2010 beenfaced with a low demand and increased competitiondue to a much larger capacity in both Europe and Asia.As a consequence, the organization and crew of thecompany has been adjusted accordingly and marketinghas been intensified. Scana Steel Björneborg has,adhering to our long-term strategy, continued our workon increasing the refinement of our products. The resultfor 2010 is an increasing number of customers orderinga higher number of finished products, especially in themarine business area.In 2011, a slight increase in market demand is expected.The business as a whole will experience an increasingforge capacity in the world. Scana Steel Björneborg willcontinue to focus on established customer relations,cooperation with other Scana companies and also onnew markets.Investments for the futureIn the course of the recent three years, large,productivity-increasing investments have been carriedout, and the majority were concluded during thesummer of 2009. Investments for increased productioncapacity, more advanced testing equipment and abetter environment, has continued in 2010 as well. Themost important completed investments in the course of2010 were:• Upgrades of lathes for the machining workshop• Continued development of the steelworks, part 2,through purchase of a new transformer. Installation ofthe arc oven transformer is due during summer 2011,and for ovens some time during summer 2012. Theseinvestments will increase capacity to 115,000 tonnesannually.• Upgraded equipment for heat stability testing,completed and run-in. With this test equipment, axlescan be tested at high temperatures, meeting theparticularly high demands of energy customers.• New CTOD test equipment for the testing of steel,especially for customers in oil and gas. Having thismachine in-house shortens the lead-time for e.g.risers with several weeks.• New pendulum impact tester increasing safety andcapacity.• New cooler intake and new dam hatches minimize therisk of flooding and cooler liquid breakdowns.• Equipment to ensure that no radioactive materials areled onto the property.

15Annual Report 2010 Scana Industrier ASAInvestments have been carried out according toschedule, resulting in more reliable productionequipment with a higher total capacity, plus moreadvanced test facilities. The company is well preparedfor an increased demand for forged steel productsweighing up to 45 tonnes and a length of 24 metres.Increased productivity and qualityIn the course of the year, Scana Steel Björneborg hasintroduced “Lean Production” in all production divisions,partly under our own auspices and partly within theframework of a programme by Chalmers tekniskehøyskole, called “The Production Lift”. Our goal hasbeen to attain a high and even quality through control ofevery process. This also contributes to a higher deliveryprecision.The costs for quality divergences are now less,as a direct result of the aforementioned work, andcombined with the programme for cost reduction, thishas contributed to increased competitive power. Theprogramme continues through 2011, and several ofthe company’s workers are involved and contribute tothe improvements. This is a continuation of the earlierwork where we systematically shorten the lead-time forall products. The company has introduced bottleneckcontrol, setting a maximum limit for the number ofproducts at work in critical processes.We want to ensure that the company’s workersare highly skilled, which in turn leads to improvedquality. The company identifies critical skills using acompetence matrix, in addition to certification of specificskills through practical and written tests. A recentlyintroduced salary system for employees is an incentiveto further develop one’s skills and competence.All in all, the aforementioned measures entail that ourwork in progress have decreased drastically, our deliveryprecision has increased, the throughput times areshortened and the divergences are more than halved.ProductsScana Steel Björneborg delivers customer designedproducts for four market segments: industrial, marine,machine and energy. The company’s main products areforged, rotation symmetrical, large and long componentsof steel with a high technical content. Scana SteelBjörneborg also supplies raw forged and semi-finishedbillets. The products are for instance axles, shafts, joints,risers, poles and sheet metal.The company’s products are often key components forthe customer, and are delivered with different degreesof completion, depending on customer requirements.The company has an on-going cooperation with materialinstitutes to further increase the quality of our products.

16Annual Report 2010 Scana Industrier ASAManaging director: Håkan SchillScana Steel BooforgeScana Steel Booforge is a world leader in the production of large arms for forklift trucks – armsthat can lift in excess of 10 tonnes. With Scana’s expertise in free form forging, the company canmanufacture large forks and other forged products according to any specification with stringentdemands for strength. Since 2009, Booforge also manufactures masts and lifting carriages, andthus complete lifting systems in the heavy segment.Markets and customersThe company is mainly aimed at forklift truck andmachine manufacturers, as well as other steelworks.In addition the company has customers within oil andgas and the food industry. The customers are primarilylocated in the Nordic region and in other parts ofEurope. Scana Steel Booforge exports approximately 15% of its production. The company’s largest customersinclude Cargotec, Konecranes, Svetruck, Sandvik, AlfaLaval, Moorlink og Scana Steel Björneborg.The market for Scana Steel Booforge’s core products –forks, free form forging and heat treatment – has beenimproved in 2010. The order intake has increased by 30% for these products. The demand for racks and liftingcarriages was temporarily weakened as a resultof aggressive pricing from Eastern Europe.ProductsScana Steel Booforge’s main products are:• Forged arms for forklift trucks• Lifting equipment for forklift trucks• Heat treatment of larger goods• Free form forged componentsIn 2010 Scana Steel Booforge also has invested inmarketing, resulting in, among other things, a newwebsite: www.booforge.com. The strengthening ofScana Steel Booforge as a brand in the forklift truckindustry has increased demand and global sales. Tofurther expand our global activities, new sales channelsand dealer networks are being established.A special research and development function wasestablished in 2010, where Booforge can perform as amore active partner in customer collaboration in a valuechain perspective, and develop supplemental products.With a stronger market focus, our own technological development and increased efficiency in the production, ScanaSteel Booforge AB emerges well prepared for the future.

18Annual Report 2010 Scana Industrier ASAManaging director: Johnny SjöströmLeshan Scana Machinery LtdLeshan Scana Machinery Co. was founded in 1998 and is a Norwegian-Chinese joint venture,where Scana Industrier ASA owns 80 %. Local authorities in China own the remaining 20 %.Leshan manufactures rolls for the steel industry andcast special products for the steel, energy, oil andgas, construction and shipping industry. Leshan is arespected supplier in the Chinese market and is amongthe leading in the Chinese roll manufacturing industry.The company has an annual capacity of 20,000 tonnesrolls and cast products.Leshan´s vision is to be a leading manufacturer of rolls.This strategy entails manufacturing niche productsof a high quality. Scana collaborates closely with thecustomers to develop existing and new products.Products and marketRolls are the company’s core product and are utilised byLeshan’s customers to make profile steel, hot materialsand plates. Chinas entire production of steel totals670 million tonnes, or roughly 50 % of the world’s totalproduction. The production is expected to increase tomore than 1,000 million tonnes towards 2020. LeshanScana is a strong brand and has world leading steelproducers on our client list.In spite of surplus capacity in the Chinese market,Leshan Scana has increased the order intake with anexcess of 300 %, compared to 2009. But substantialcompetition, plus increased energy and raw materialsprices, has lessened profitability. Towards the end of2010, Leshan Scana carried through cost reductionsand workforce downsizing to strengthen our competitivepower.Castings are mainly used in the power generation,petroleum, cement, construction and shippingindustries. Leshan Scana is certified according tointernational class companies like DNV, ABS, LRS, BV,GL, RINA and NK. Scana is an important supplier ofcast nodes and connectors to several large projects inChina, like the EXPO2010 in Shanghai and Bird’s NestStadium in Beijing, for the Olympic Games 2008.The sales ratio between rolls and castings is 85 % and15 %, respectively. Sales are largely generated fromthe domestic market, but some of the production isexported to India, Turkey, Malaysia and Taiwan. Throughcooperation with international partners, the goal is toincrease export sales considerably towards 2015.The company has adopted and implemented the “LeanProduction” philosophy to optimise production andreduce cost.Leshan Scana is completing a large investmentprogramme for a new production line for large rings.The project will be completed in 2011 and ensurethe company a leading role in this area as well. Thecompany will introduce new technology, improvetechnical skills, plus strengthen product and marketdevelopment.Change of directors at Leshan: Johnny Sjöstrom (at left) becomes newManaging Director at Leshan Scana. Ingvar Winbo, who works as managingdirector at Scana Steel Björneborg, has taken the role as new Chairman of theBoard for Leshan.The investment will also bring positive side effects,such as increasing the maximum weight of castings toa theoretical value of 50 tonnes, and the total meltingcapacity to over 100 tonnes. This will improve theflexibility.

20Annual Report 2010 Scana Industrier ASAManaging director: Jan-Øyvind JørgensenScana Steel StavangerScana Steel Stavanger’s customers are users of special steel and high alloy steel with stringentrequirements for design and documentation. These are mainly found in the oil and gas, marine,energy, mining and general mechanical industries.Scana Steel Stavanger was founded in 1910 and hasproduced steel since 1913. The business is located atJørpeland, near Stavanger, Norway. The company’sbusiness concept was based on the idea of remeltingscrap steel from the local cannery industry and shipscrapping. Scana Industrier bought the company in 1991.Markets and customersScana Steel Stavanger operates in a global market, butthe majority of our customers are in Scandinavia andnorthern Europe. The company competes in the marketof high alloy forged components and complex, cast,special components. Scana Steel Stavanger AS is, inaddition to Scana Leshan in China, the only company inScana with a foundry.In 2010, Scana Steel Stavanger had an export share of65 %, with the main export going to the UK, Swedenand Germany. There is tough competition in the market.Scana’s competitive edge is that we are a relatively smallplayer able to produce small series, where quality anddelivery times are vital. Our deliveries are often specialproducts, custom made to meet the client’s needs.In 2010, the company secured its first steel deliverycontract to the down-hole product “Liner hanger”.With extreme demands for corrosion and mechanicalproperties, this is a product that fits the company’sstrategy of higher alloy and processing degrees inproducts.Furthermore, Scana Steel Stavanger AS has in 2010secured large contracts in the mining industry. Thecontract with LKAB in Sweden to adjust the crushinglevel at the site in Kiruna was important. These deliveriesare due in 2011.Aker Solutions has awarded the company several largeorders for delivering anchor handling equipment, wherethe end customer is, among others, Petrobras in Brazil.Scana Steel Stavanger AS also landed contracts forintegrals with Jack & St. Malo at the end of 2010, to bedelivered spring and summer 2011.ELG Carrs in the UK tripled the order volume of ScanaSteel Stavanger AS from 2009 to 2010 of forgedproducts of the material quality Super Duplex.For Scana Steel Stavanger AS, 2010 started off with7 weak months, followed by 5 months of higher orderintake and activity. The order intake in 2010 was40 % higher than in 2009. The company views 2011with optimism and a higher predictability in the market.Scana Steel Stavanger AS has secured a contract for delivering protective components to the downfall pits at a new crushing level for LKAB’s processing facilities at Kiruna.

Managing director: Sten IsraelssonSCANA STEEL ABScana Steel AB is a small, prospering and cost efficient real estate firm that manages Scana’sreal estate in Karlskoga, north-east of Väneren in Sweden.21Annual Report 2010 Scana Industrier ASAThe company owns 35,000 m 2 of real estate in total.This mainly consists of industrial premises, withadditional office and service areas. The business islocated on the old industrial site of Bofors, and theproperties were acquired in 1997, when Scana bought apart of Bofors AB.After structural changes in the defence industry, a needhas arisen to see new activity in the halls; to replace theexisting tenants’ lessened need for rented area.Logistics and geographyFrom a Swedish perspective, Karlskoga is locatedalmost in the middle of a centre for logistics. And withthe improved road E18 towards Örebro and Karlskoga,Karlskoga today represents a strong, competitivealternative to other closely situated places.Business has been positive in 2010 for Scana Steel ABand its tenants. Especially the logistics companies haveseen a positive development and are asking for larger areas.ServicesToday, six external companies rent areas for a total of23,000 m 2 . The remaining areas are rented and utilisedby Scana Steel Booforge AB.Today, two companies are operating on the premises,on a surface area covering just over 15,000 m 2 .One of these companies are KGA Logistik AB, ownedby Galatea Spirits AB. KGA Logistik AB is one of the fivelargest distributors of beer, wine and spirits in Sweden.

22Annual Report 2010 Scana Industrier ASABusiness area MARINEThe Marine business area consists of companies thatsupply equipment and services for ship propulsion andmanoeuvring. The core market of the business area is inthe shipping industry, and key customers are shipyards,shipping companies and agencies. The business areaalso supplies products such as valve control systems tothe oil and gas industry.Strategic positionThe business area is an important market playerthat can supply complete and technically leadingsolutions and has a presence in the most centralmarkets. Within the product area Scana Propulsion,Scana will coordinate sales, marketing, purchases,product development and manufacture concerningpropellers, gears, thrusters and remote control. Thesteel companies have products that are components inthe propulsion companies’ products, and this renderspossible a considerable value chain control and addedvalue within the Scana group.ProductsScana develop, produce and delivers controllable pitchpropellers, reducuction gears, tunnel thrusters, hydraulicactivators, ship propulsion and manoeuvring systems fornew constructions, re-constructions and repairs.Markets and customersThe business area operates primarily in the globalshipbuilding and ship repair markets. Our customersare shipyards, shipping companies, consultancy firmsor other system suppliers. Scana has sales officesin Singapore, China, Korea, the USA and Brazil.Establishing a representation office in Shanghai for saleand service of gears and propulsion systems has provento be a strategic success, given Scana’s strengthenedposition in the Asian market, both commercially andtechnically. Through our own facilities and an extensiveagent and distributor network, the business area hasdeveloped a worldwide representation network.2010 has seen a bustling activity in the completionof ships in Asia, based on contracts entered duringthe contract boom of 2006-2009. In 2009 and 2010,however, the number of new contracts has been thelowest in a 10-year perspective. The combination of ahigh number of cancelled orders and a global orderdeficiency has led to economic difficulties and bankruptciesfor several shipyards, globally. This has in turnreduced delivery times from 2-3 years to approximately1 year. Contracts signed in 2010 are mainly for deliveriesin 2011, except for series stretching into 2013.Scana has so far suffered only to a limited extent fromfinancial crisis cancellations in Norway or globally. Fewernew contracts the recent two years have, however, madethe market for Scana’s products dwindle. This effect willspill over into 2011, but demand is expected to increasegradually towards the end of the year. Scana’s increasedfocus on service and maintenance will dampen the effectof temporarily reduced new sales.Scana Propulsion is one of Europe’s leading manufacturers of ship propulsion and manoeuvring systems. We supply systems to most vessel types, from fast boatsand yachts to fishing boats, ferries and special ships within the oil and gas business. The image shows construction of electronic control systems at Scana Mar-El ASin Dalen, Norway.

23Annual Report 2010 Scana Industrier ASAMarine

24Annual Report 2010 Scana Industrier ASAScana Volda, managing director: Kristian SætreScana Mar-El, managing director: Egil KongsbakkScana Zamech, managing director: Jacek PabianScana PropulsionThe product area Scana Propulsion was established to coordinate and increase the market interestfor Scana’s propulsion technology: propellers, gears, thrusters and remote control. ScanaPropulsion is marketed as a complete equipment package in the global ship equipment market.The restucturing will continue through 2011.The companies that form Scana Propulsion are:Scana Volda, formerly Volda Mekaniske Verksted, wasestablished in 1913 in Volda, Norway, and was takenover by the Scana group in 1998. Volda Mek. startedas an engine factory and later developed into includingshipbuilding and production of propellers and gears. Atthe end of the 1980s, the last hull was delivered – andthe shipyard was removed in 1997.Since 1966, gears and propulsion systems have beenthe most important products. Scana Volda has been aConsortial Partner to MaK (Caterpillar) since 1996. From2009 Scana Volda has held a leading role in the productgroup Scana Propulsion, which also consists of ScanaMar-El, Scana Zamech in Elblag, Poland, and ScanaSingapore.Scana Mar-El is located in Dalen in Telemark,Norway, and has been a part of Scana Industrier ASAsince 1996. Scana Mar-El is one of Europe’s leadingmanufacturers of maritime control systems for shippropulsion and manoeuvering, in addition to controlsystems for special applications. Since the start in 1974,the company has delivered about 3,000 control andnavigational systems.Scana Zamech’s origins date back to 1837 whenFerdi nand Gotlob Schichau opened the machine workshop“Schichau Werke” in Elblag, Poland. The work shopmanufactured elements for steam engines, equipmentfor sugar factories, oil mills and lumber mills as well ashydraulic presses and rollers. In 1855, the first seagoingship with a steel hull and a propeller was launchedfrom “Schichau Werke”. Scana Industrier ASA acquiredthe company in 2009. The company has an extensiveservice activity, in addition to being responsi ble for ScanaPropulsion’s sales to Poland, the Baltic and Russia.Scana Singapore was established in 1996 and isowned 100 % by Scana. The company is responsiblefor sales and service on Scana’s marine products inSouth-East Asia. Personnel local to the area performproduct service and installation, in addition to service onrelated products for external companies.

25The product area Scana Propulsion is representedthrough offices, strategic partners and agentsthroughout Norway, Poland, Iceland, the Netherlands,Turkey, Singapore, India, China, Korea, the USA,Brazil and Chile. By structuring our organisation inthis manner, Scana Propulsion can nurture closerrelationships with customers regarding both sales andservice preparedness for the marine fleet.Annual Report 2010 Scana Industrier ASAScana Marine Service is a special profit centre in thegroup and performs service and after market activitiesto the product area. Scana Marine Service has servicepersonnel at every sales office, in addition to serviceagreements with independent companies in selectedmarkets.The companies constituting Scana Propulsion havegained a good international reputation and export 80 %of their products, in total.Markets and customersScana Propulsion’s core segment is offshore, merchantvessels, speedboats, passenger ships and fishery.Geographically, the main activity is located in Asia, withChina as the largest building market, involving Europeanshipyards and design firms. In Brazil, there is a bustlingactivity in the offshore and merchant segment as aresult of Petrobras’ extensive development programme.This is an important market for Scana Propulsion.Scana Propulsion’s hallmark is technologically advancedsolutions and a strong market position for ships fordemanding operations, like anchor handling vessels andother special vessels.Scana Propulsion is marketed as a complete equipmentpackage in the global ship equipment market, but theproducts are also independent units. Gears from ScanaVolda are an example of a strong brand in the market,and similarly, control systems from Scana Mar-El andthrusters from Scana Zamech.In collaboration with Caterpillar, Scana offers completepropulsion packages for ships, consisting of engine,gears, propellers, axles, tunnel thrusters and propulsioncontrol. A close collaboration with ship designers andleading electronic suppliers has created a strong focuson developing products that are a part of eco-friendlyhybrid and diesel-electric propulsion systems.Among our partners, there is a great interest indevelop ing propulsion solutions in collaboration withScana. A continued commitment to complete packageswithin hybrid and diesel-electric solutions is expectedto yield in creased results. Scana Propulsion’s productline is “drawn in” with several design firms, and they aremarke ting these products in different ship design fortheir clients.Scana Marine Service has a strong commitment toselling service to the global market. This commitmenthas yielded positive results. Synergies between thepropulsion companies and a continued internationalcommitment are expected to increase turnover andprofit for the service organisation. Sales and marketingof service is aimed mainly at Scana’s own products, inthe form of start-up, maintenance, replacements andshipwrecking, plus other special services and inspection.2010 was a challenging year, with a low order intake and,globally, a high number of planned builds cancellations.Scana Propulsion is not untouched by this situation. Butbecause of a large share of contracts with the offshorefleet, the largest cancellation wave among bulk andcargo vessels has been avoided. In 2010, the companysigned important strategic orders within the Scanacommitment areas offshore and special vessels with,among others, Brazil, China, Singapore and Norway.As a consequence of the general market developmentin the recent years, Scana Propulsion is expecting aprudent turnover growth for 2011. Our commitment withinservice counteracts a lower activity within new sales.Solstad Offshores Normand Pioneer har en motorkapasitet på 27 900 hk og er utrustet med en 140 tonns kran. Dette gjør skipet særlig egnet tilkonstruksjonsarbeid på havbunnen. Scana Volda AS har levert gir til Normand Pioneer og en rekke andre fartøy hos Solstad Offshore AS.

26Annual Report 2010 Scana Industrier ASAProductsThe product line of Scana Propulsion:• Controllable pitch propellers from 520-1900 mm hubdiameter (8 metre max outer diameter)• Fixed propellers in diesel-electric propulsion systemswith gears• Reduction gears up to 20,000 kW engine output• Tunnel thrusters up to 3,000 mm diameter and 3,000kW• Maritime control systems for ship propulsion andmanoeuvring• Rudder control, control machines, thrusters controls• Joystick systems• Agency agreements for positioning sensors, joysticksand instrumentation• Service and customer support:– Planned repairs and maintenance at dry docks– Service according to customer wishes and demands– Rebuildings and modernisations for increased safetyand better operations economy, plus eco-friendlysolutions– Parts– Training, consultation and surveillanceProduct developmentIn the market for high-technological solutions,development is of paramount importance – especiallydevelopment governed by specifications from thecustomer. Consequently, Scana Propulsion hascontinuous product development and upgrade as anintegral part of the group’s work. Deliveries are adaptedto each ship and are detailed in collaboration withshipowners and ship designers. The development teamfor mechanical solutions in Scana Propulsion is locatedat Scana Volda, who develops, projects, manufacturesand sells propulsion solutions for all ship types, in ascale of up to 20,000 kW engine output. The group alsohas a department at Scana Mar-El for developing andmanufacturing remote control systems.Scana Mar-El has an agency department that sellscomponents of a very high quality. These are utilisedwithin offshore, telecommunications, energy, sea andland based defence installations and other industry.The department represents large international players inadvanced, high-tech components and has technologicalfirms in Norway in its customer portfolio.Scana Propulsion has a strong market focus andfrequently commercialises new products. In 2010,Scana delivered the first contract for a new, high-tech,remote controlled system as a replacement for anexisting system, making the company ready to supplyto a increasingly demanding and complex market. Later,the joystick system Marco V was introduced, a productsparking great interest in the market.

27Annual Report 2010 Scana Industrier ASAImportant new orders in 2010Scana entered a contract with Ulstein Verft AS for thesupply of remote controlled gear and propeller systemsfor seismic vessels for the shipping company Polarcus.The design is Ulstein SX134 from Ulstein Design &Solutions, having the characteristic X-Bow hull. Thiscontract strengthens Scana’s position as market leaderin the advanced ship operations segment. The deliveryis for a market segment tending towards eco-friendlyand flexible systems through the use of diesel-electricsolutions.Scana entered a contract with STX OSV AS for thedelivery of remote controlled gear and propeller systemsfor three anchor handling vessels for Norskan Offshorein Brazil. The ships will be built in Brazil, commissionedby Petrobras. This is a strategically important deliveryfor the activity in Brazil, in the segment for advancedoffshore vessels.Scana signed a contract with the Turkish shipyardTersan Shipyard for the delivery of complete propulsionsystems, consisting of gears, propeller, tunnel thrustersand remote control for a longliner for the shippingcompany Frøyanes AS. The propulsion system is adiesel-electric solution with Siemens electromotors,giving the vessel a fuel saving solution with greatflexibility.vessel. The delivery consists of two controllable pitchpropellers and one fixed pitch propeller with an axlesystem, each propeller with a diameter of 1,700 mm.With the polish Gdansk Shiprepair Yard “Remontowa”,a contract was signed to deliver tunnel thrusters fortwo supply vessels, with an option for deliveries foran additional two ships. The vessels will be operatedby Ezra Holding Ltd. from Singapore. The deliveryfor each ship is four controllable pitch thrusters withremote control and DP-demands. This is a delivery to acommitment area in an important geographical marketand confirms Scana’s position as an international playerin a demanding market.In 2010, we delivered 2 out of a total of 8 deliveries forbulk ships at Nantong Mingde Heavy Industry StockCo. Ltd. in China. The delivery was for controllable pitchpropellers and tunnel thrusters. The shipyard is thepolish Polsteam.Scana has signed several contracts for single units oftunnel thrusters and controllable pitch propellers.A contract for propeller delivery was signed withNorthern Shipyard in Poland for equipment to a rescue

28Annual Report 2010 Scana Industrier ASAManaging director: Ragnar ØhrnSCANA skarpenordScana Skarpenord was originally established as a subsidiary of Norsk Hydro, Rjukan Fabrikker, inthe late 60’s. The company has been on the market with its current product range since the middleof the 70’s, and is among the leading suppliers of hydraulic valve systems for the ship and oil & gasindustry. Scana Industrier ASA took control of the company in 1989.In 2010, the company has adapted the organisation toa tighter market, due to changes in the world economythe recent years. The company has strengthened itscompetitive power through increasing its efficiency, andis now competitive in a rising market.Products and servicesThe company develops, manufactures and supplieshydraulic systems for remote control of valves in cargo,ballast boom and coolant systems on board tankersand dry cargo ships. The remote control systems arealso installed in production ships, rigs and permanentoffshore installations.One of our key products is hydraulic actuators, mounteddirectly on valves. The actuators are one of our designsand manufactured at Rjukan. The control systemsfor the actuators include magnetic valve centrals,oil generators and PC-based terminals for systemoperation.There are no other concepts or technologies todaythat can replace the company’s products, and they willremain highly relevant in the foreseeable future.The company has a strong commitment to after salesand service. The organisation is well prepared to deliver

30Annual Report 2010 Scana Industrier ASAManaging director: H. B. NohSCANA KOREA HYDRAULIC LTD.The company develops, manufactures and supplies systems for remote control of valves in cargo,ballast and other systems for ships, offshore vessels and permanent offshore installations.The LNG-ship Iberica Knutsen was built at the Daewoo shipyard in South Korea. Scana Skarpenord AS and Scana Korea has supplied systems for remote control forboth this and several other ships in the Knutsen OAS fleet.Scana Korea was established as a joint venturecompany in 1998. The company was at the time aminor supplier of valve remote control systems in Korea.At present, the market share in Korea has reachedapproximately 25 %. Consequently, the company is the2nd largest local supplier in Korea. Scana’s ownershipis 49 %.In 2010, the company has renewed the highest possiblequalification among Samsung shipyard suppliers. Thecompany’s order intake in 2010 is strengthened as aresult of good competitive power and several contractsin South Korea, securing a robust order reservefor 2011. By the end of 2010, the company had 50employees and a turnover of NOK 180 million and asatisfactory operating result.Markets and customersScana Korea’s key customers are shipyards that buildlarger types of ships, such as tankers, LNG tankers,LNG carriers, LPG carriers, bulk carriers and largeoffshore vessels, such as FPSOs (production ships),rigs etc. The main customers are currently shipyardsat Hyundai, Samsung, DSME, STX, Hyundai-Mipo,Hyundai-Samho, SPP and other medium and smallsized shipyards in Korea.In 2010, the company successfully completedsophisticated valve remote control systems to two hugeFPSO projects (Pazflor and Usan). In 2011, the CLOVproject will be of prominent importance. Major Koreanshipyards are working on several offshore projects thatScana Korea Hydraulic Ltd. will tender for.Products and servicesNo other products or technologies can currently besubstituted for the company’s products. They willgenerate a high level of interest in the foreseeable future.The company includes tank level gauging systems in apackage delivery with valve remote control systems, andas a result, the contract volume per project is increased.

31Scana has once more succeeded in achieving “Samsung Q Gold Mark” at the Samsung shipyard in Korea. This is the highest possible qualityachievement for a supplier to Samsung. Companies in all Scana’s business areas supply products and services to the great shipyards in Korea.Contracts for new ships in the global market has been increasing since 2010. Korea has a prominent position in construction of advancedvessels for transportation of oil and LNG, container ships and drilling and production units for the oil & gas business.Annual Report 2010 Scana Industrier ASA

32Annual Report 2010 Scana Industrier ASABUSINESS AREA Oil & GASThe Oil & Gas activities in Scana were establishedas a separate business area in 2006. The activities inthe business area has a wide scope – from design,engineering and consultancy services, to production,assembly and testing of equipment and products,components and parts developed in-house, as well asmaintenance and repair of mechanical components forthe oil & gas industry.Strategic positionThe trend in recent years has been that customerswant fewer suppliers, and that these are capableof taking an overall responsibility for a number ofdisciplines. Customers want the supplier to have a clearresponsibility for quality and timely deliveries, all throughone point of contact. This has led to consolidation andmerging of players in the supplier industry.Through its own companies, Scana Oil and Gas hasestablished an environment that is embedded in theentire value chain. This broad spectrum of expertiseand overall focus on product life cycle – from designto operation and maintenance, will strengthen Scana’scompetitive position.In 2008, Scana, through acquisitions in Houston,established Scana Offshore Services. The companysupplies engineering services, purchases andconstruction, in addition to project management ofblowout preventer systems (BOP). The companydelivers systems to several of the world’s largest drillingcontractors and is a niche-supplier with substantialdevelopment potential.Scana also has a service unit in Singapore, performingengineering services. In 2009, Scana established abusiness in Brazil to position sales towards large projectdevelopments the coming years. Through its offices,the Scana group can serve customers in all the marketsegments the group operates in (steel and machine,energy and marine).Scana Offshore Services has provided Scana with anoperative pier head in the important petroleum marketin the Gulf of Mexico. Scana Offshore Services has inaddition established an office in Singapore to servethe large construction and maintenance market inSoutheast Asia.ProductsThe main products for the business area Oil & Gas aredesign and production of components and systems,laboratory services, in addition to maintenance andrepair of oil and gas industry equipment.Scana Offshore Vestby AS offers established productsand systems for anchoring, cargo loading andoffloading. Through Scana Skarpenord, valve control isoffered, in addition to electric, hydraulic and pneumaticautomation solutions within ballast and liquid basedloading and unloading systems.Scana Offshore Technology AS offers thermic treatmentand maintenance services aimed at drilling devices andequipment. The company works closely with the officesin Houston and Singapore.Scana’s has a considerable production and skill inthe manufacture of risers to drilling and productionrigs through Scana Subsea AB. Scana is establishedin Houston through Scana Offshore Services Inc.,possessing a strong competence within design andproject management with regard to blowout preventersystems. SOS Inc. delivers systems to rig owners anddrilling contractors.Markets and customersScana’s ambition is to establish a strong market positionwithin the supply of special solutions to the oil andgas industry. The majority of Scana’s customers areglobal players in design, production and/or operators ofproduction facilities, drilling and production equipment,as well as manufacturers of subsea facilities. Thecustomers’ head offices and production facilities arelocated both in USA and Europe, and are served byScana’s sales and service offices locally.It is Scana’s goal to increase the activity towardsthese customers and establish long-term contractualrelationships in order to decrease vulnerability andincrease value within the business area.

33Annual Report 2010 Scana Industrier ASAOil &Gas

34Annual Report 2010 Scana Industrier ASAManaging director: Peter JanssonScana subseaScana Subsea is a company that delivers subsea and riser applications to the oil and gas industry.With high material and production skills and competence, the company takes an overallresponsibility for manufacture, assembly and testing of complex products. The companyadds value for customers through optimal production solutions.The company works with sales, contract managementand product development. Production is done by thesteel producing companies within the Scana group,accompanied by established partners and vendors ofservices outside the group. The company will utiliseScana’s strong market position within steel and forgedproduction of long and heavy components.Markets and customersScana Subsea exports 100 % of its turnover. Customersrange from oil companies to system/product suppliersinternationally, with the USA representing the largestmarket. The North Sea, Brazil and Southeast Asia arealso important commitment areas.2010 became a good year for Scana Subsea, securingseveral large contracts for risers to the North Sea andthe Gulf of Mexico. Sales increased by more than100 % compared to recent years. An importantcompetitive advantage is Scana’s experience inhandling long and heavy products. This enables Scanato accept orders with shorter delivery times than manyof our competitors. The company also has a strongsales network.Risers will continue to be the company’s most importantproduct. In addition, the company works hard to expandthe product range. For 2011, an increase in demandfor risers is expected. In addition, the company canutilise production capacity in the Scana group in timesof relatively low production. This provides access to anumber of smaller and shorter projects.Through establishing Scana Subsea, Scana attainsa more efficient project mangament and takesresponsibility for the entire manufacturing process.The effects of this is increased efficiency and reducedcost for the customers resulting in increased orderintake.Products and servicesThe company’s main products are forged, rotatingsymmetrical, long and thin components with a hightechnical content. These are delivered to riser andtendon systems within the oil and gas industry. Materialengineering and metallurgical skills are also a part of thecompany´s deliveries.Scana has won contracts for delivery of forged and machined tandon systemswith high tensile materials for several major development projets in the gulfof Mexico and Brasil. Scana also won the contract for delivery of forgedproduction risers to Snorre TLP on the Norwegian Continental shelf.The company’s products are often key components forthe customers. Scana Subsea supplies componentswith different degrees of completion, depending on thecustomers’ requirements. The company emphasisesresearch and development to further strengthen thequality of its products and has an ongoing cooperationwith research institutes in Sweden.

Managing director: Ørnulf MyrvollScana OffShore vestbyScana Offshore Vestby is acknowledged as a creative and solid partner within the offshore,industrial and maintenance market. Based on significant knowledge and skills within design,engineering, materials and production, the company has developed and delivered systems,components and carried out maintenance and upgrade assignments.35Annual Report 2010 Scana Industrier ASAIn early 2011, Scana got a significant breakthrough in Brazil when Vestby won a contract for the delivery of unloading systems to eight FPSOs to be operating inBrazilian waters.Scana Offshore Vestby traces its roots back to 1953. AtScana Offshore Vestby, there are strong competencieswithin design, engineering, purchase, manufactureand installation aimed at the oil and gas industry. Thecompany also serves select customers within theenergy and industry market and cooperates smoothlywith other Scana companies.Markets and customersScana Offshore Vestby supplies advanced products andsystems to customers in the offshore market. In 2010,the activity has been low because the financial recessionstill affects the company’s primary product areas withinfloating manufacture (FPSO). During 2010, the companyhas strengthened its sales and market initiatives, bothwithin the offshore and maintenance market. Thus,the company has increased its international activitiestowards new customer groups. Increased interestand activity throughout 2010 is expected to yieldresults in 2011. In early 2011, Scana was able to gain aconsiderable breakthrough in Brazil by the award of aletter of intent for the delivery of unloading systems toeight FPSOs to be operating in Brazilian waters.Products and servicesThe company is particularly strong with regard tothe manufacture of prototypes and heavy, complexproducts and systems. Scana Offshore Vestbyassembles, tests and installs anchoring, loading andunloading systems for floating production units. Thecompany undertakes orders within maintenance andupgrade of equipment to the offshore industry.Based on our leading expertise in thermal coating, thecompany is positioned as a supplier of modification andmaintenance on risers and valve components. Furtherdevelopment of the engineering and manufacturingenvironments at Vestby will help strengthen the productand service portfolio towards complete and improvedsystems deliveries.The company’s main products and services are:• Hose reels for unloading oil from floating productionand storage units• Linear anchor winches for floating production andstorage units• Turret and buoy solutions• Gas-tight, multiphace swivels for loading andoffloading systems• Advanced thermal spraying for corrosion protectionand wear-resistant materials• Riser repairs and refurbishments, plus upgrade ofcomponents• Production of deployment machines• Maintenance on offshore equipment

36Annual Report 2010 Scana Industrier ASAManaging director: Per-Allan RøsandSCANA OFFSHORE TECHNOLOGYScana Offshore Technology primarily carries out equipment maintenance and repairs for the oil andgas industry, plus manufactures tools and equipment for these kinds of services.Scana Offshore Technology was established December2005. The company is co-localised with Scana SteelStavanger at Jørpeland, near Stavanger.Markets and customersThe company’s customers are mainly oil companies,equipment manufacturers, drilling- and servicecompanies in the petroleum industry. In 2010 also,Scana Offshore Technology has increased its turnover.The company business philosophy is to work closelywith original equipment manufacturers and, as a resultof this strategy, establish close relationships with severaloriginal equipment manufactures as an approved repairand maintenance workshop for the North Sea market.The company has kept up with the increased demandby investing in additional machinery, welding and testequipment for use offshore. The company has employedboth sales and mechanical personnel, in addition toestablishing a new offshore service department withexperienced technicians.Products and servicesScana Offshore Technology organises its activities in fivemain areas:• Rig equipment and systems• Subsea equipment and systems• Processing equipment• Offshore service• Preventive maintenanceThe products and services delivered to these five mainareas are based on the following disciplines:• Engineering and project management• Material inspection, testing and verification• Thermal spraying, cladding and welding of advancedmaterials• Machining• Offshore assembly, test and installationScana has a strong market position within petroleumindustry component manufacture, and will also attainthe same position within maintenance and repair workin close collaboration with equipment manufacturers.This is a market area with short delivery deadlines,and the company shall grow in line with its customersand increase the capacity of machinery and personnelaccordingly. Our largest customers are experiencingan increasing workload and a major increase in sales,and consequently, this leads to a major increase in ourplanned upgrades and recertifications.Scana Offshore Technology is investigating newproduct areas and services that are compatible withour heavy drilling and processing equipment portfolio.The company has a strong focus on repairs oncompensating equipment (e.g. riser tensioners, guidelinetensioners) and marine riser equipment in a purpose builtworkshop.

Managing director: Tyler KiefSCANA OFFSHORE SERVICESScana Offshore Services provides our clients with innovative, specifically engineered products andservices with an emphasis on quality, cost, and time. Our focus is on new technology solutions,customer satisfaction, and to uphold the highest professional standards in the oil and gas industry.The company works out of Houston and Singapore.37Annual Report 2010 Scana Industrier ASAMarkets and customersScana Offshore Services is developing subsea systemsfor offshore service companies, international drillingcontractors and drill intervention companies. Our workincludes intervention devices, well capping systems andblow out preventers. The company provides controlsystem integration, ROV intervention and pressurecontrol equipment.Products and servicesScana Offshore Services provides design, engineeringand manufacturing services to our customers in theoffshore oil and gas market. Based on our extensiveexperience in the industry, Scana Offshore Services canoffer complete product support from conceptual designto fabrication and installation.Products and services include motion compensatedriser lift frames, subsea intervention tool systems, ROVoperations equipment, hydraulic hose equipment, startingequipment and other tools for drilling and production. Thecompany is also an agent for used subsea installationsand equipment, and offers overhaul, testing andinstallation services.

39Annual Report 2010 Scana Industrier ASAZamechThe company further develops with regard to futureenvironmental and market related requirements throughour cooperation with Scana Volda’s gear and propellertechnology and remote controlled systems from ScanaMar-El.SkarpenordThe production of hydraulic actuators and systems atSkarpenord yields no negative discharges. The wastefrom the production is scrap iron/metal and is sold asscrap metal. This is both environmentally friendly andprovides income. The company mainly uses electricalpower for the production, but some diesel fuel is usedfor heating the production halls.OIL & GASOffshore TechnologyScana Offshore Technology repairs equipment and isISO 9001 certified. Our activity has very little negativeimpact on the outer environment, but we continuallymonitor and prepare new measurable standards to howour activity may have an impact on the environment.Offshore VestbyThe company was established in 1953, but has movedto modern production halls. The company has today nonegative discharges or emissions to the environment,neither water, nor air. With regard to thermal treatment,the company now builds new premises accordingto present regulations. Offshore Vestby is also acompetence and design company that has no negativeimpact on the outer environmentHealth, environment and safety (HES)The group consists of companies that affect the outerenvironment through noise and discharges/emissions.The group is licenced for its activities and the impacton the environment is not regarded as exceeding thedischarge permissions. The group works continually toreduce discharges/emissions, waste to deposits andother negative environmental impact. Residue from theproduction is waste managed and handled accordingto regulations, in addition to being recycled whenapplicable. The companies within the steel businessarea buy large quantities of scrap for remelting, and arethereby also prominent in the recycling industry.

40Annual Report 2010 Scana Industrier ASAannual accounts 201041 Directors’ reportSCANA GROUP47 Profit and loss account48 Balance sheet49 Cash flow statement50 Statement of change in shareholders equity51 Notes51 Note 1. Group accounting principles55 Note 2. Estimate uncertainty55 Note 3. Segment information58 Note 4. Investments in associated and other companies59 Note 5. Specification of other revenues and other costs60 Note 6. Tax61 Note 7. Earnings per share61 Note 8. Intangible assets63 Note 9. Tangible fixed assets64 Note 10. Staff costs68 Note 11. Pensions and other long-term employeebenefits69 Note 12. Stocks70 Note 13. Trade receivables71 Note 14. Other short-term receivables71 Note 15. Bank deposits71 Note 16. Share capital and premiums71 Note 17. Interest-bearing debt72 Note 18. Other current liabilities72 Note 19. Creditors73 Note 20. Leasing obligations73 Note 21. Related-party transactions74 Note 22. Financial risk75 Note 23. Financial instruments79 Note 24. Shares and shareholders80 Note 25. Pledged assets and guarantees80 Note 26. Retained assets81 Note 27. Own shares82 Note 28. Events after balance sheet dateParent company83 Profit and loss account84 Balance sheet85 Cash flow statement86 Notes86 Note 1. Accounting principles86 Note 2. Shares87 Note 3. Tangible fixed assets87 Note 4. Tax88 Note 5. Shareholders’ equity88 Note 6. Guarantees88 Note 7. Related-party transactions89 Note 8. Remuneration and fees89 Note 9. Share capital89 Note 10. Receivables due after one year89 Note 11. Bank deposits89 Note 12. Short-term interest-bearing debt90 Note 13. Long-term interest-bearing debt90 Note 14. Pledged assets90 Note 15. Financial instruments91 Declaration by the Board of Directors andthe CEO and group chief executive92 Auditors´ report

42Annual Report 2010 Scana Industrier ASArecognised tax expense for the year amounted to NOK-34 million, which is 23 per cent of the loss before tax.Tax payable is NOK 0.3 million. The group has a losscarry-forward of NOK 152 million primarily linked tothe Norwegian operation. There is no time limit on theuse of this. Scana expects positive market trends andprofitable operation in Norway over the next few years,which will provide the opportunity to use the deficit itcan carry forward.The group’s total net loss was NOK 121 million, of whichNOK 3 million is assigned to minority interests. Thisamounts to earnings per share of NOK -0.71 comparedwith NOK 1.51 per share in 2009.Balance sheetThe balance sheet total as at 31 December 2010 wasNOK 1 815 million, which is a reduction of NOK 175million compared with 31 December 2009.The group’s net interest-bearing debt is NOK 416 milliontaking into account bank deposits and liquid assets.Gross interest-bearing debt at the end of 2010 wasrecorded at NOK 517 million, which is an increase ofNOK 21 million from 31 December 2009. Loans andshort-term credit facilities were reduced by NOK 136million.The book value of shareholders’ equity as at 31December 2010 was NOK 731 million, which isequivalent to NOK 4.4 per outstanding share andan equity ratio of 40 per cent. The book value ofshareholders’ equity was NOK 873 million and theequity ratio was 44 per cent at the end of 2009.Intangible assets as at 31 December 2010 wererecorded at NOK 138 million, of which goodwillamounted to NOK 87 million.Cash flowThe operating loss in 2010 was NOK 128 million afterdepreciation, which totalled NOK 85 million. Net cashflow from operational activities totalled NOK 129 million.Positive cash flow from operational activities is due to areduction in working capital and that the operating profitis burdened by impairments that do not have cash floweffect.Activated costs and investments in fixed assets totalledNOK 86 million. Net cash flow from investment activitiesafter sale of fixed assets totalled NOK -76 million.The net cash flow from financing activities was NOK -98million. The net cash flow in 2010 was therefore NOK-44 million. The group’s cash and cash equivalentstotalled NOK 101 million at the end of the year of whichNOK 60 million is included in the group’s cash pool. Inaddition, the group has a satisfactory level of unusedcredit facilities.Capital positionAs at 31 December 2010, Scana’s option programmesconsisted of up to 1.34 million shares, which are aimedat senior employees. Of these, 700 000 options may beredeemed in 2011 and 635 000 options from 2012.STEELThe steel area companies all specialise in differentprocesses and products. Production takes placeat Scana’s own production facilities, which includemelting plants, forges, rolling mills, foundries, andheat treatment and machining units. Production is of ahigh standard, and complies with ISO-certified qualityassurance systems.Turnover in 2010 totalled NOK 1 139 million, down16 per cent compared with 2009. The operating losstotalled NOK 42 million. Ordinary operations showa loss for the year due to strongly reduced prices inseveral market segments and an unfavourable productrange. Significant cost-saving measures implementedin the steel companies have lessened the decline inthe operating profit. Ordinary operations broke even inthe fourth quarter due to a higher level of activity andsomewhat improved product range.The order inflow for 2010 was NOK 1 065 million, up49 per cent from 2009. By the end of 2010 the orderreserve amounted to NOK 414 million. Scana won anumber of important contracts in the fourth quarter inthe marine and energy market segments. This appliesboth to highly alloyed materials for challenging oil wellsand mooring system deliveries to the oil industry. Thesteel and machinery market segment has had a positivedevelopment in order inflow throughout 2010, which isexpected to continue in 2011. Continued improvementin the product range and a higher refinement ratio isexpected to have an impact on earnings throughout2011. Within the marine segment, Scana has strengthenedits position among the company’s most importantclients but activity has been reduced considerably as aresult of fewer contracts globally. The company expectsan improved marine market through to 2013.

Overall, Scana’s steel companies expect a continuedincrease in the order inflow in 2011 and a gradualimprovement in margins.MARINEThe companies within the marine area develop andmanufacture gears, propulsion systems and valvecontrol systems for ships and offshore vessels, inaddition to offering service and after sales services.Customers are shipyards, shipping companies, enginesuppliers and other system suppliers. The business areais particularly well represented in Asia and Europe forsales and service with its own offices and agents, buthas also increased its coverage in the USA and SouthAmerica.Turnover in 2010 amounted to NOK 503 million, whichis 36 per cent lower than in 2009. The operating profitwas NOK 57 million compared to NOK 107 million in2009. The high operating margin is attributed to costreductions and a positive contribution by the activity inthe service and after-sales market.In the second half of 2010, Scana entered into importantcontracts for the delivery of gears and propellerequipment for anchor handling vessels being built inChina, Brazil and Norway.Few new contracts for vessels on a global basis since2008 have reduced Scana’s level of activity in themarine segment. Workforce and cost level must beadapted continuously to the changing level of activity.In 2010, the order inflow was NOK 407 million, which isan increase of 40 per cent compared with 2009. Theorder reserve at the end of 2010 was NOK 290 million.Scana expects a gradual increase in the order inflow forthe marine market. The cost-reduction measures thathave been and will be implemented strengthen Scana’scompetitive position.OIL & GASThe main products within the Oil & Gas area are designand production of components and systems for subseaequipment and drilling activities, and the maintenanceand repair of equipment for the oil and gas industry.The area had a turnover of NOK 168 million in 2010compared with NOK 156 million for 2009. The operatingloss was NOK 110 million. The poor results areattributed to a generally low level of activity, the write-down of loading buoys in Scana Offshore Vestby withNOK 65 million, and the fact that Scana still does nothave any large projects related to the FPSO market.New orders in the subsea area will have an impact onearnings from the middle of 2011.Scana was awarded large contracts in the fourthquarter for forged and machined risers and tensionleg materials for the Gulf of Mexico and Brazil. Thecontracts awarded show that Scana is competitive withregard to deliveries like this, which also gives us goodopportunities for the future. The oil blowout in the Gulfof Mexico is still resulting in lower activity for Scana’sHouston business. In the long term, however, regimechanges are expected that can serve to strengthenScana’s opportunities in the area.Profit performance in oil and gas has not beensatisfactory. This is attributed mainly to a low level ofactivity at Scana Offshore Vestby. Throughout 2010Scana has chosen to maintain its critical competence inthis business and invested a great deal of work in orderto position the business for new contracts. Early in 2011this work resulted in a breakthrough in Brazil, one of theworld’s most important oil and gas markets. The orderin Brazil represents an important increase in activityand utilisation of the competence of parts of the Vestbyorganisation, in addition to important positioning forthe entire group in Brazil. Scana is working on severalmeasures to ensure the profitability of this businessarea. In addition to new contracts, this also includesmeasures for the repositioning of Scana OffshoreVestby, (see note 28).The order reserve at the end of 2010 was NOK 209million, while the order inflow was NOK 310 million. Inaddition, NOK 350 million in Brazil has been includedfor the first quarter of 2011. In 2009, the order reserveamounted to NOK 28 million and the order inflow NOK118 million.RISKThe group’s most critical risk area is linked to thereal financial situation and how the global marketwill develop. Scana has implemented a number ofmeasures in order to address the change in activity asa result of the financial crisis. This includes stepping upthe marketing and sales effort, manpower reductionsand cost-cutting, restructuring of businesses andstrategic collaborations within the marine area. Themeasures are strengthening Scana’s competitive43Annual Report 2010 Scana Industrier ASA

44Annual Report 2010 Scana Industrier ASAposition within the market segments focused on by thegroup, and Scana is therefore regarded as being wellpositioned to be able to produce results in the yearsahead.The group is, to a limited extent, exposed todevelopments in raw material prices such as scrap steeland alloys and electricity prices, since the group haschosen market-based and contractual hedging againstfluctuations in these risk areas.The group is also exposed to financial risks in thefollowing areas to a limited extent:• Currency riskSales in foreign currency are hedged against NOKor SEK at the time of entering into the contract.Fluctuations in exchange rates after entering intocontracts affect sales revenues and operating profit.However these changes are balanced by correspondingeffects in the financial statements. The group is mainlyexposed to fluctuations between NOK and SEK throughits holdings in subsidiaries in Sweden. The developmentof the NOK and SEK will however to a large extent affectScana’s competitiveness and margin outlook.• Liquidity riskThe group monitors the short and long term liquiditysituation through active dialogue with its subsidiaries.In addition, the group has programmes for reducingthe working capital. At year end the group had asatisfactory level of unused credit facilities. Of bankdeposits of NOK 101 million, NOK 60 million is includedin the group’s cash pool. Further details related toliquidity risk are described in note 22. The group’sprognoses for growth in liquid reserves show a positivetrend. During the refinancing in 2007 the group got veryfavourable terms and conditions with tough covenantrequirements. The group were in breach of covenantsin fourths quarter 2010 and first quarter 2011 and weregranted a waiver from the lenders. It is possible that thegroup will be in breach of covenants in second quarter2011. Trough positive communication with the lendersthe group expect to be granted a waiver.• Credit riskThe group has guidelines for ensuring that contractsare not entered into with customers who have hador can be expected to have payment problems andwhere outstanding amounts do not exceed definedcredit limits. Parts of the international sales are hedgedthrough customer insurance. The group has also takenout credit insurance with GIEK in order to reduce itsexposure to credit risk for parts of the activity. Beyondthis, the group believes it can withstand the increasedcredit risk that has occurred in the market in recenttimes, through increased monitoring of customers’financial situations and a more prudent credit appraisalpractice.See note 22 of the group accounts for furtherinformation on financial risk.SHAREHOLDER INFORMATIONScana was listed on the Oslo Stock Exchange in 1995.Scana’s shareholders consist of institutional and privateinvestors. The group’s largest shareholders are VerketFinans AS (11.0 per cent) and Camar AS (10.6 per cent).Camar is owned by board member John Arild Ertvaag.Scana’s chairman of the board, Frode Alhaug, is thethird largest shareholder through his company FamaInvest AS, with 7.6 per cent of the shares.At the beginning of the year, the ten largest shareholdersowned a combined 55.4 per cent of the company’sshares. There were a total of 2 179 shareholders.Four per cent of the total share capital was in foreignownership.The share value fell slightly in 2010 with a final price ofNOK 7.06 compared with NOK 7.83 at the beginning ofthe year. Approximately 14.5 million shares were tradedon the Oslo Stock Exchange during the year, whichgives a turnover rate of 8.6 per cent. In 2009, Scanaentered into a market maker agreement with Oslo Børsin order to increase the liquidity of its shares and ensurelisting on the Oslo Børs Match list.CORPORATE GOVERNANCEThe company’s corporate governance is based on “TheNorwegian Code of Practice for Corporate Governance”[Norsk anbefaling for eierstyring og selskapsledelse]. Amore detailed description of corporate governance isincluded in the annual report chapter entitled “Sharesand Shareholders 2010”.ORGANISATION AND PERSONNEL MATTERSThe group had 1 759 employees at the end of 2010,of which 675 work in the steelworks in China. Aftersubstantial manpower and cost reductions because ofreduced activity several of the groups companies havenow started to recruit personnel to meet increased

demand. Effective cooperation with the trade unionsand a low rate of absence due to illness have enabledthe restructuring, which is an adaptation to the changedlevel of activity. The working environment is consideredto be good.Women have a representation share of 40 per cent inScana’s executive board. Women are also representedin the management teams of the group’s subsidiaries.Traditionally, however, Scana’s production units havehad a large proportion of men in the businesses, but thenumber of women is increasing.DISCRIMINATIONThe group is working actively, purposefully andsystema tical ly to promote the objectives of Norwegiananti-discrimination legislation within our organisation.These activities cover, amongst other areas, recruitment,salary and working conditions, promotion,advance ment opportunities and protection againstharassment.The group also aims to be a workplace free ofdiscrimination due to any form of disability.HEALTH, SAFETY AND ENVIRONMENT (HSE)The number of lost-time injuries in 2010 was 24, comparedwith 23 in 2009. Actual working hours in 2010totalled 3 197 340, compared with 3 452 330 in 2009.There were no isolated serious industrial accidentsat the group’s facilities. The board is satisfied that thecompany has not had any serious industrial accidentsand that HSE measures are systematically undertakenin all of the group’s activities.Absence due to illness, which was 3.5 per cent in 2010,varied between 2.2 and 6.8 per cent for the operativesubsidiaries.The group has obtained the necessary licencesfor its activities and does not affect the externalenvironment beyond the discharge permits granted bythe authorities. The group is continuously working onlimiting discharges to the environment, waste to landfillsand other negative environmental effects. The remainderof the waste from the production is sorted and handledin accordance with regulations, in addition to some of itbeing recycled. Companies in the steel area buy largequantities of scrap for remelting. Scana is therefore alsoa significant recycling company.RESEARCH AND DEVELOPMENTResearch and development has a high priority inScana. The focus has increased in recent years, anddevelopment plays a pivotal role in all companies.Research and development is vital to the furtherdevelopment of the businesses’ market positions. Alarge part of the work is linked to product developmentand the long-term strategy aimed at creating addedvalue for the customers, increased productivity andreduced costs, and further reducing the impact ofoperations on the external environment.OUTLOOKThe main aim of the group is to increase theshareholders’ value. The following primary strategieshave been determined on this basis:1. Continued organic growth within all business areas2. Maintain a good operating margin and effectivefinancial management3. Strengthen the group’s strategic position throughacquisitions­ in order to strengthen the market position­ in order to increase capacity­ in order to supplement the product range or valuechain4. Develop the repair and service concept within themarine area and to the oil and gas industry.For 2011 the board will be emphasising effectiveoperations, including effective financial management.MARKET DEVELOPMENTScana’s main products are niche oriented, and they areleading products within their market segments. Afterseveral years of revenue growth and higher margins, thistrend was reversed in 2009 due to a significantly weakerinternational economy.The products Scana supplies within steel are of veryhigh quality. The activity level in terms of deliveriesto steel and machinery customers is high, but ischaracterised by price pressure which gives a lowrefinement ratio for Scana. The company is cautiousabout entering into long-term contracts because itwants to maintain flexibility in order to achieve increasedactivity with better prices in the energy and marinesegments. A gradual increase in deliveries is expectedin the marine market segment from Scana’s steelcompanies. Scana has used 2010 to strengthen its45Annual Report 2010 Scana Industrier ASA

46Annual Report 2010 Scana Industrier ASAposition with world-leading customers. A higher degreeof completion and more complete project responsibilityare expected to add value for both customers andScana.Few new contracts globally have gradually reduced thelevel of activity in the Marine business area in 2010, butcost adaptations have provided good results. Scanahas strengthened its sales and marketing efforts andis increasing its presence in emerging markets. It alsowon important new contracts in the fourth quarter. Theshort order horizon will result in greater variation in ourquarterly revenues and earnings than in previous years.In recent years, the focus on service and after sales hasresulted in higher revenues and had a positive effect onearnings. Scana expects this development to continue.The group has developed several advanced productsand systems in the Oil & Gas business area in recentyears. Multi-disciplinary training, leading expertise withinmaterials technology and the capability for in-houseproduction of special components translates into futureopportunities. The order inflow increased throughoutthe last part of 2010 as a result of the group’s increasedfocus on marine risers and subsea components in theworld’s most active oil and gas markets. The formationof Scana Subsea simplifies the customers’ businessprocesses for specialised equipment, and providesScana with considerable business opportunities ona global basis. An upturn is expected in the FPSOmarket as we approach 2013. Scana is dependenton larger projects in the FPSO market if it is toachieve satisfactory results in this business area. Thecontracts that have been negotiated in Brazil representan important start. Additional measures will beimplemented to ensure future profitability.Scana has implemented extensive measures to adaptits capacity and consumption of resources to lowerdemand and reduced prices. In addition, Scana hasalso freed up working capital and introduced a strictprioritisation of its operational and investment resources.In addition to focusing on optimum daily operations,Scana is also working on strategic measures tostrengthen the group’s size and creation of value. Scanais also considering disposing of assets that are notconsidered to be part of the core operations. This is inorder to increase our financial scope for manoeuvre andour focus on the value-adding portion of our business.APPROPRIATION OF EARNINGSThe net loss assigned to the owners of the parentcompany was NOK 118 million, giving earnings pershare of NOK -0.71. The parent company, ScanaIndustrier ASA, posted a net loss of NOK 64.5 million.The Board will propose to the AGM that it will not payout dividends for 2010 and that NOK –64.5 million istransferred to other equity.Stavanger, 12 April 2011frode AlhaugChairman of the Boardjohn Arild ErtvaagMari Skjærstad Martha Kold Bakkevig Bjørn Dahle Rolf RoverudCEO

48Annual Report 2010 Scana Industrier ASAScana GROUP BalanCe SHEET(NOK 1000) Note 31.12.10 31.12.09Fixed assets:Intangible assets 8 137 547 149 668Property, plant and equipment 9 760 744 722 292Deferred tax assets 6 15 639 2 512Shares in associated companies 4 11 714 24 881Other shares 4 292 233Total fixed assets 925 936 899 586Current assets:Inventory 12 340 774 380 527Trade debtors 13 351 572 500 853Derivatives 23 27 060 10 630Other current assets 14 55 676 58 884Cash and cash equivalents 15 101 249 139 523Assets hold for sale 26 12 315 0Total current assets 888 646 1 090 417Total assets 1 814 582 1 990 003Shareholders' equity:Paid-in capital 16 331 256 325 748Other equity 372 997 515 203Equity before minority interests 704 253 840 951Minority interests 27 142 32 475Total shareholders’ equity 731 395 873 426Non-current liabilities:Interest-bearing loans and borrowings 17/20/22 397 878 369 802Pension obligations 11 12 535 20 605Deferred tax liability 6 76 972 91 298Derivatives 23 92 346Other non-current liabilities 435 674Total non-current liabilities 487 912 482 725Current liabilities:Interest-bearing loans and borrowings 17/20/22 119 016 126 452Trade payables 19 241 826 194 924Advances from customers 13 47 691 53 938Tax payable 6 751 14 351Derivatives 23 8 779 20 578Other current liabilities 18 177 212 223 609Total current liabilities 595 275 633 852Total liabilities and shareholders’ equity 1 814 582 1 990 003Stavanger, 12 April 2011Frode AlhaugChariman of the BoardJohn Arild Ertvaag Mari Skjærstad Martha Kold Bakkevig Bjørn Dahle Rolf RoverudCEO

49Scana GROUP Cash flow STATEMENT(NOK 1000) Note 2010 2009Cash flow from operating activities:Profit / loss ( - ) before tax -155 586 324 917Tax paid 6 -698 -52 650Gain ( - ) / loss 4/8/9 -3 736 -9 004Depreciation / Amortization / Writedowns 8/9 84 578 62 355Employee share options 3 167 3 724Unrealised foreign currency gain / loss and derivatives 2 852 -109 465Interest income -2 565 -1 295Interest expense 21 087 20 757Differences between paid and expenced pension cost -8 110 1 216Change in trade debtors / advances from customers 13 154 726 70 700Change in inventory 12 49 721 73 101Change in trade payables 19 35 904 -45 018Change in other current liabilities and accruals 14/18 -52 213 -10 749Annual Report 2010 Scana Industrier ASANet cash flow from operating activities 129 127 328 589Cash flow from investing activities:Proceeds from sale of property, plant and equipment 8/9 7 531 2 610Purchase of property, plant and equipment 8/9 -85 778 -141 988Sales of business 4 45 390 0Investments in shares and paid in equity 4 -44 294 -44 804Received dividend from associated companies 4 1 512 331Net cash flow used in investing activities -75 639 -183 851Cash flow from financing activities:Proceeds from long-term borrowings 17 108 772 49 672Repayment of long-term borrowings 17 -125 002 -90 939Net increase/(decrease) in short-term borrowings 17 -10 831 -9 966Proceeds from issue of shares 16 2 340 0Dividend received on holding of own shares 34 949Dividend -56 379 -50 489Interest received 2 564 1 295inperest paid -19 235 -23 518Net cash flow from/(used in) financing activities -97 737 -122 996Net cash flow -44 249 21 742Cash and cash equivalents at 1 January 139 522 138 884Net foreign exchange difference 5 976 -21 104Cash and cash equivalents at 31 December 101 249 139 522Change in cash and cash equivalents -44 249 21 742

50Annual Report 2010 Scana Industrier ASAScana GROUP statement of change in shareholders equityTotalOther Currency Reserves equity excl.Issued Own Paid in Retained translation for change minority Minority Total(NOK 1000) capital shares capital earnings reserves in value interest interest equityShareholders equity at 1 Jan. 2010 209 167 -141 116 722 513 506 8 832 -7 135 840 951 32 475 873 426Total comprehensive income -118 314 12 832 16 844 -88 638 -3 072 -91 710Share option programme 3 168 3 168 3 168Paid-in capital 450 1 890 2 340 2 340Acquisition minority interest -2 261 -2 261Dividend -53 568 -53 568 -53 568Shareholders equity at 31 Dec. 2010 209 617 -141 121 780 341 624 21 664 9 709 704 253 27 142 731 395TotalOther Currency Reserves equity excl.Issued Own Paid in Retained translation for change minority Minority Total(NOK 1000) capital shares capital earnings reserves in value interest interest equityShareholders equity at 1 Jan. 2009 209 167 -3 956 120 564 308 907 53 262 -6 780 681 164 41 778 722 942Total comprehensive income 250 389 -44 430 -355 205 604 -6 764 198 840Share option programme 3 723 3 723 3 723Allocation of own shares (a part of dividend) 3 815 -7 565 4 699 949 949Dividend -50 489 -50 489 -2 539 -53 028Shareholders equity at 31 Dec. 2009 209 167 -141 116 722 513 506 8 832 -7 135 840 951 32 475 873 426

51notes group 2010Note 1. Group accounting principles 2010General informationScana Industrier ASA is located at Strandkaien 2 in Stavanger,Norway. The company is a public limited company listed on theOslo Stock Exchange. The business is described in note 3. Theconsolidated accounts for Scana Industrier ASA for 2010 wereapproved by the board on April 12th 2011.The group implemented the following changes to standards andinterpretations in 2010:• IFRS 3 (clarification) Business Combinations• IFRS 7 (change) Financial Instruments – Disclosures• IAS 27 (clarification) Consolidated and Separate Financial Statements• IAS 1 (clarification) Presentation of Financial Statements• IAS 34 (guidance) Interim Financial ReportingAnnual Report 2010 Scana Industrier ASAFundamental principleThe consolidated accounts for Scana Industrier ASA have been preparedin accordance with IFRS and interpretations determined by theInternational Accounting Standards Board as approved by the EU.The group accounts have been prepared on the basis of the goingconcern assumption. The annual accounts consist of a profit and lossaccount, balance sheet, cash flow analysis, an overview of changes inequity and notes to the accounts. The most important consolidationandaccounting prin ciples used in the compilation of the annualaccounts are as follows:The consolidated accounts have been prepared based on historicalcost, with the exception of:• Buildings valued at restated value• Financial instruments valued at fair value• Loan, receivables and other financial liabilities valued at amortised costThe consolidated accounts have been prepared using uniformaccounting principles for corresponding transactions and eventsunder otherwise equal conditions.Functional currency and presentation currencyThe consolidated accounts are presented in Norwegian Kroner(NOK), and all figures are rounded off to the nearest thousand(‘000) unless otherwise specified. The functional currency ofthe parent company Scana Industrier ASA is Norwegian Kroner(NOK), while the functional currency of the subsidiaries is their localcurrency. Subsidiaries with a functional currency other than NOKare translated at the rate on the balance sheet date for balancesheet items, and items in the profit and loss account are translatedusing the transaction rate. The monthly average rates are used asan approximation of the transaction rate. Translation differencesare recorded against total comprehensive income. For the disposalof investments in foreign subsidiaries, accumulated translationdifferences linked to the subsidiary are recognised.Consolidation principlesThe consolidated accounts include the parent company ScanaIndustrier ASA and the companies in which Scana Industrier ASA hasa controlling interest, either directly or indirectly through ownership oraccording to separate agreements. Controlling interest is defined asScana Industrier ASA controlling more than 50 per cent of the votingrights at the shareholders’ meeting. The group subsidiaries are listedin note 2 of the parent company’s annual accounts. Minority interestsare included in the group’s shareholders’ equity.The acquisition method is used for the accounting of businessmergers. Cost price is measured at fair value of the acquired assets,the shares issued or debt transferred on the acquisition date pluscosts directly attributable to the acquisition. The cost price thatexceeds fair value of net assets in acquisitions is recorded asgoodwill. Companies that are acquired or disposed of during the yearare included in the consolidated accounts from the date control isestablished until control ceases.Inter-company transactions and accounts, including internal profitand unrealised gains and losses are eliminated. Unrealised gainslinked to transactions with associated companies and joint venturesare eliminated by the groups holding in the associated company.Correspondingly, unrealised loss is eliminated, but only to the extentthat there are no indications of a fall in value of the asset that is soldinternally.The implementation of these changes has not implied any changesfor the group.The following standards and interpretations have been announcedbut have not come into force, and have not therefore been applied.Amendments to IFRS 7 Financial Instruments – DisclosuresThe amendment relates to disclosure requirements for financialassets that are derecognized in their entirety, but where the entityhas a continuing involvement. The amendments will assist users inunderstanding the implications of transfers of financial assets andthe potential risks that may remain with the transferor. The amendedIFRS 7 is effective for annual periods beginning on or after 1 July2011, but the standard is not yet approved by the EU. The Groupexpects to implement the amended IFRS 7 as of 1 January 2012.IFRS 9 Financial InstrumentsIFRS 9 replaces the classification and measurement rules in IAS 39Financial Instruments- Recognition and measurement for financialinstruments. According to IFRS 9 financial assets with basic loanfeatures shall be measured at amortised cost, unless one opts tomeasure these assets at fair value. All other financial assets shallbe measured at fair value. The classification and measurement offinancial liabilities under IFRS 9 is a continuation from IAS 39, withthe exception of financial liabilities designated at fair value throughprofit or loss (Fair value option), where change in fair value relatingto own credit risk shall be separated and shall be presented inother comprehensive income. IFRS 9 is effective for annual periodsbeginning on or after 1 January 2013, but the standard is not yetapproved by the EU. The Group expects to apply IFRS 9 as of 1January 2013.IAS 24 (revised) Related Party DisclosuresThe revised IAS 24 clarifies and simplifies the definition of a relatedparty, compared to the current IAS 24. The revised standard alsoprovides some relief for government-related entities to disclosedetails of all transactions with other government-related entities(as well as with the government itself). IAS 24 (R) is effective forannual periods beginning on or after 1 January 2011, but the revisedstandard is not yet approved by the EU. The Group expects toimplement IAS 24 (R) as of 1 January 2011.Amendments to IAS 32 Financial Instruments: Presentation –Classification of Rights IssuesThe amendment to IAS 32 Financial Instruments - Presentationprovides relief to entities that issue rights in a currency other thantheir functional currency, from treating the rights as derivatives withfair value changes recorded in profit or loss. Such rights will now beclassified as equity instruments when certain conditions are met.Application of the amendment is retrospective and will result in thereversal of profits or losses previously recognized. The amendmentis effective for annual periods beginning on or after 1 February 2010.The Group expects to implement the amendments as of 1 January2011.Amendments to IFRIC 14 IAS 19 The Limit on a Defined BenefitAsset, Minimum Funding Requirements and their Interaction -Prepayments of a Minimum funding RequirementThe amendment to IFRIC 14 intends to correct an unintendedconsequence of IFRIC 14 IAS 19 The Limit on a Defined BenefitAsset, Minimum Funding Requirements and their Interaction. This

52Annual Report 2010 Scana Industrier ASAamendment will allow entities to recognise a prepayment of pensioncontributions as an asset rather than as an expense. The amendmentis effective for annual periods beginning on or after 1 January 2011.The Group expects to implement the amendment as of 1 January2011.IFRIC 19 Extinguishing Financial Liabilities with Equity InstrumentsThe interpretation clarifies the accounting treatment of financialliabilities that, as a result of a renegotiation of the terms of thefinancial liability, are fully, or partially, extinguished with equityinstruments. The interpretation is effective for annual periodsbeginning on or after 1 July 2010. The Group expects to implementIFRIC 19 as of 1 January 2011.The group does not expect the implementation of the aforementionedproposals to have any effect on the consolidated accounts on theimplementation date, but will undertake further analyses of thevarious proposals before implementation.Foreign currency translationTransactions in foreign currencies are accounted for at the exchangerate on the date of the transaction. Monetary assets and liabilities inforeign currencies are translated at the exchange rate on the balancesheet date. Any exchange differences are entered in the profit andloss account under financial items.Balance sheet items relating to foreign subsidiaries are translatedinto NOK using the exchange rate as at 31 December. All items in theprofit and loss account are translated into NOK at weighted averageexchange rates. Consolidation gives rise to translation differences,which are taken directly to total comprehensive income in the groupbalance sheet. Translation differences relating to debt in foreigncurrency that for accounting purposes are considered to be hedgingof investments in foreign subsidiaries and the currency effects relatedto cash items that represent a proportion of the net investment inforeign subsidiaries, are also charged against total comprehensiveincome until the subsidiary is divested.Significant accounting judgements and estimatesManagement has used estimates and assumptions that affectthe recognition and measurement of assets, liabilities, revenues,expenses and information on contingent liabilities. This particularlyapplies to the entering of revenues from long-term manufacturingcontracts, depreciation and write-down valuations of fixed assets,income tax, evaluations of losses on accounts receivable, evaluationsof dead stock linked to inventories, recognition of development costs,and valuations of pension obligations. Future events may lead tothese estimates being changed. Future events may lead to changesin these estimates. Estimates and the underlying assumptionsare evaluated on an ongoing basis. Amendments to accountingestimates are entered in the accounts in the period in which thechanges occur. See also note 2.SIGNIFICANT ACCOUNTING POLICIESRevenuesRevenue is recognised when it is probable that transactions willgenerate future economic benefits that will be transferred to thecompany and the amount can be reliably estimated. Sales revenuesare presented net of VAT and discounts.Revenues from the sale of goods are recognised in the profit andloss account once delivery has taken place, i.e. when the risks andpotential gains associated with the goods are transferred to the buyerand the company has established a claim against the customer.Rental income is recognised on a linear basis over the rental period.Revenues relating to long-term manufacturing contracts (projects)are recognised in the profit and loss account in line with the project’sprogress and when the project’s results can be reliably estimated.The degree of completion is calculated using the method that is mostappropriate for the individual contract, which is normally the accruedcosts as a percentage of estimated total costs. When the project’sresults cannot be reliably estimated, only revenues equal to theaccrued project costs will be recognised as revenue. Any loss on acontract will be recognised in full in the profit and loss account for theperiod when it has been determined that the project will incur a loss.Accrued income, not received, is included in the balance sheet underother current receivables. Advances on long-term contracts arepresented in the balance sheet under other current liabilities.Royalties will be recognised in the profit and loss account in relationto the terms and conditions of the various royalty agreements.Dividends are recognised in the profit and loss account for theperiod when the shareholders’ rights to receive dividends have beendetermined.Interest income is recognised as interest accrues.Taxes in the profit and loss account are the sum of tax payable andchanges in deferred tax.Intangible assetsIntangible assets with limited lives are amortised over the useful lifeand assessed for write-down whenever there is an indication thatthe intangible asset may be impaired. The amortisation period andthe amortisation method for an intangible asset with a limited usefullife are reviewed at the end of each financial year as a minimum.Changes in the expected useful life or the expected pattern ofconsumption of the intangible assets are accounted for by changingthe amortisation period or method, as appropriate, and treated aschanges in accounting estimates.Internally-generated intangible assets, excluding capitaliseddevelopment costs, are not capitalised and the expenditure ischarged against profits in the accounting period in which theexpenditure is incurred. The useful life of intangible assets isassessed to be either limited or undefined.GoodwillGoodwill that arises from an acquisition of business is valued at cost.This constitutes the part of the total acquisition cost that exceedsthe net fair value of identifiable assets, debt and contingent liabilities.Following initial recognition, goodwill is valued at cost price less anyaccumulated write-downs. Goodwill is not amortised, but is assessedannually for any write-downs, or more frequently if events or changesin circumstances indicate that the book value may be impaired.Research and development costsResearch and development costs are expensed as incurred.An intangible asset that results from development expenditurein an individual project is capitalised when the following can bedemonstrated: the technical feasibility of completing the developmentof the intangible asset so that it will be available for use or sale, itsperformance potential and its potential to use or sell the asset, howthe asset will generate future economic benefits, that it has theresources needed to complete the development of assets and toreliably measure the development costs. Capitalised developmentcosts are entered in the balance sheet at acquisition cost minusaccumulated depreciation and write-downs. Capitalised developmentcosts are depreciated on a linear basis over the asset’s estimateduseful life. Any expenditure capitalised is amortised over the period ofexpected future sales from the related project.The book value of development costs is reviewed for impairmentannually or more frequently when an indication of impairment arisesduring the reporting year.Gains or losses arising from the disposal of an intangible asset arecalculated as the difference between the net disposal proceeds andthe book value, and are recognised in the profit and loss account.Tangible fixed assetsTangible fixed assets are measured by acquisition cost, minusaccumulated depreciation and write-downs. When assets are soldor transferred, the book value is deducted and any loss or gain isentered in the profit and loss account.

53Acquisition cost for tangible fixed assets is the purchase price,including duties/taxes and costs directly linked to rendering the assetusable. Expenses incurred after the asset is commissioned, such asongoing maintenance, are entered in the profit and loss account whileother expenses that are expected to give future economic benefits,including major maintenance work, are entered in the balance sheet.Depreciation is calculated on a straight-line basis over the useful lifeof the assets. The useful life, residual value and depreciation methodof the property, plant and equipment are reviewed annually.Investments and other financial instrumentsFinancial assets in the scope of IAS 39 are classified as eitherfinancial instruments at fair value through the profit and loss account,or as loans or receivables. When financial assets are recognisedinitially, they are measured at fair value, plus, in the case of investmentsnot at fair value through profit or loss, directly attributabletransaction costs. The group determines the classification of itsfinancial assets after initial recognition and, where allowed andappropriate, re-evaluates this designation at the end of each financialyear.Annual Report 2010 Scana Industrier ASAThe book value of property, plant and equipment is reviewed forwrite-down when events or changes in circumstances indicate thatthe book value may not be recoverable.The Group capitalize major periodic maintenance work is depreciatedin line with the periodic maintenance programme.Larger spare parts and back-up equipment are included in property,plant and equipment when they are expected to be utilised over morethan one accounting period. Similarly, if the spare parts and back-upequipment can only be utilised in combination with some property,plant and equipment, they are included in these assets in the balancesheet.Write-down of assetsAn assessment of write-downs on other fixed assets is made whenthere are indications of a fall in value. If an asset’s book value ishigher than the asset’s recoverable amount, the asset will be writtendown via the profit and loss account. The recoverable amount isthe higher of the fair value less sales costs and the utility value(the discounted cash flow from continued use). The fair value lesssales costs is the amount that can be obtained from a sale to anindependent third party minus the sales costs. The recoverableamount is determined separately for all assets but where this is notpossible it is determined together with the cash-generating unit towhich the assets belong.With the exception of the write-down of goodwill, write-downsrecognised in the profit and loss accounts for previous periods arereversed when there is information that the need for the write-downno longer exists. The reversal is recognised in the profit and lossaccount. However, no reversal takes place if the reversal leads to thebook value exceeding what the book value would have been if normaldepreciation had been applied.Deferred tax assetsDeferred tax assets are recognised when it is probable that thegroup will have sufficient tax-related profit in subsequent periods toutilise the tax advantage. The companies recognise previously nonrecogniseddeferred income tax assets to the extent it has becomeprobable that they will be utilised. Similarly, the companies will reducedeferred income tax assets recognised in the balance sheet if it is nolonger considered probable that they will be utilised.Shares in associated companiesAssociated companies are units in which the group has a significantinfluence, but not control (normally with a holding of between 20 and50 per cent), over financial and operational matters. The consolidatedaccounts include the group’s share of the profit from associatedcompanies recorded according to the equity method from the datesignificant influence is established until such influence ceases.When the group’s share of loss exceeds the investment in anassociated company, the group’s book value is reduced to zero, andfurther loss is not entered in the accounts unless the group has anobligation to cover this loss.Other sharesOther investments in shares that are neither subsidiaries norassociated companies are entered in the balance sheet at fair valuewith gains or losses being recognised in the profit and loss account.Loans and receivables are non-derivative financial assets with fixedor variable cash flows that are not quoted in an active market. Suchassets are carried at amortised cost using the effective interestmethod. Gains and losses are recognised in the profit and lossaccount when the loans and receivables are transferred or regardedas lost, as well as through amortisation.InventoryInventory, which comprises purchased goods and own manufacturedproducts, is valued at the lower of purchase/production cost andexpected net realisable value. The net sales value is estimatedat the selling price during ordinary operations, minus estimatedcosts of completion, marketing and distribution. Acquisition cost isdetermined by applying the FIFO method, and includes expensesincurred for the acquisition of goods and costs of bringing thegoods to the present condition and location. Own manufacturedgoods include raw materials, energy, direct labor and a proportion ofoverheads, including maintenance and depreciation.Trade receivablesTrade receivables are normally recognised and carried at originalinvoice amount. Provision for loss is made when there is objectiveevidence that the group will not be able to collect the debt.Financial instrumentsFinancial instruments that are not booked at fair value are reviewed ateach balance sheet date in order to identify any decrease in value.Cash and cash equivalentsCash and short-term deposits in the balance sheet comprise cash inbanks and in hand and short-term deposits with an original maturityof three months or less.For the purpose of the consolidated cash flow statement, cash andcash equivalents consist of cash and cash equivalents as definedabove. The cash flow statement has been prepared using the indirectmethod.Retained assetsBusiness or assets planned for disposal / sale or where adisposal / sale is highly likely are classified as retained assets in thebalance sheet.Share-based remunerationSenior employees in the group are allocated options to buy shares inthe parent company. The options are valued based on their fair valueon the date the option plan was adopted. The options are valued in linewith the Black and Scholes model. The cost of the option is distributedover the period the employees earn the right to receive the options.Own sharesThe group recognise own shares directly against shareholders equityat historical cost.Financial instruments and hedgingThe group uses financial instruments such as forward currencycontracts, interest rate swaps and electricity derivatives to hedge itsrisks associated with interest rate, foreign currency and electricityprice fluctuations. Such financial instruments are initially recognisedat fair value on the date on which a derivative contract is entered intoand are subsequently reassessed at fair value. Derivatives are carriedas assets when the fair value is positive and as liabilities when the fairvalue is negative.

54Annual Report 2010 Scana Industrier ASAThe group’s criteria for classifying a derivative or other financialinstrument as a hedging instrument are as follows: (1) the hedgeis expected to be effective in that it counteracts changes in thefair value of or cash flows from an identified asset - a hedgingefficiency within the range of 80-125 per cent is expected, (2) theeffectiveness of the hedging can be reliably measured, (3) there isadequate documentation when the hedge is entered into, (4) forcash flow hedges, the pending transaction must be probable, and(5) the hedge is evaluated on an ongoing basis and has proven to beeffective.When entering into a hedging arrangement, the group documentswhich assets, debt or future transactions the group wishes to applyhedge accounting to, and the associated risk management targetand strategy. The documentation includes identification of thehedging instrument, the hedged item or transaction, the nature ofthe risk being hedged and how the entity will assess the hedginginstrument’s effectiveness in offsetting the exposure to changes inthe hedged item’s fair value or cash flows attributable to the hedgedrisk. The hedges are expected to be highly effective in achievingoffsetting changes in fair value or cash flows and are assessed onan ongoing basis to determine that they have actually been highlyeffective throughout the financial reporting periods for which theywere designated.The group utilises hedge accounting for cash flow hedges relatedto hedging future electricity prices and hedging of future interestpayments on external loans through interest rate swaps. In addition,the group uses hedge accounting for hedging the currency effects ofnet investments in its Swedish subsidiaries. Foreign exchange gainsand losses on loans that are hedging instruments in the hedging ofnet investments are booked directly against total comprehensiveincome.The fair value of forward currency contracts is calculated accordingto current forward exchange rates for contracts with similar maturityprofiles. The fair value of interest rate swap contracts and electricityderivatives is determined by reference to market values for similarinstruments.PensionsSome group employees are covered by pension plans fundedthrough insurance companies or directly by the company.Pension obligations are valued at the present value of future pensionentitlements accrued on the balance sheet date based on a linearaccrual method and anticipated final salary. Pension plans are valuedat their anticipated market value. Plan assets are recognised atassumed market value. Net pension obligations (pension obligationsless plan assets) are reported in the balance sheet as long-termliabilities after adjustments for net accumulated deviations fromestimates. The net liability in the balance sheet includes employers’national insurance contributions.The net pension costs for the period (gross pension costs lessestimated return on plan assets) are included in staff costs. Thegross pension costs consist of the present value of the pensionentitlements accrued during the period, interest on pensionobligations, and the amortised effects of changes in the benefit planand estimate deviations in the pension scheme.Changes in pension obligations due to changes in economic oractuarial assumptions are amortised and recognised in the profit andloss account over the expected remaining average vesting period, ifthe deviations at the beginning of the year exceed 10 per cent of thegreatest of gross pension liabilities and gross pension assets.Introduction of a new defined-benefit plan or an improvement of thecurrent plan will lead to changes in the pension liability. This will beexpensed on a linear basis until the effect of the change is earned.The introduction of new plans or changes in existing plans that arecarried out retrospectively such that the employees immediatelyhave earned a paid-up policy (or a change in the paid-up policy) isimmediately entered in the profit and loss account.For pension plans where agreed payments are made by the groupand where the plan assets are administered separately (definedcontributionpension schemes), the yearly contributions are includedin staff costs.Changes in the value of financial instruments that qualify for cash flowhedging, are booked directly against total comprehensive income.Any ineffective part of the hedging is recognised in the profit and lossaccount.Any gains or losses arising from changes in fair value of derivativesthat do not qualify for hedge accounting are expensed as they occur.Interest-bearing loans and borrowing costsLoans are recognised at the original amount received, less directlyattributable transaction costs. After initial recognition, interest-bearingloans and borrowings are subsequently measured at amortised costusing the effective interest method. Gains and losses are recognisedin net profit or loss when the liabilities are derecognised as well asthrough the amortisation process.LeasingThe group has entered into leases as a lessee. Leases are classifiedas either financial or operational leases on the basis of a specificassessment of each agreement.For financial leases, an amount equal to the lower of fair value and thepresent value of the minimum lease is recognised in the balance sheet.The depreciation period is consistent for equivalent assets that areowned by the group. If it is not certain that the company will take overthe asset when the lease expires, the asset is depreciated over the termof the lease or the depreciation period for equivalent assets owned bythe group, whichever is the shorter.Operational leases are expensed on a linear basis over the period ofthe lease.The pension plans for the group’s Swedish employees areconsidered to be defined-benefit plans organised as multi-employerplans. These plans are treated as defined-contribution plans in theaccounts because the necessary information for treating the plans asdefined-benefit plans has not been made available by the life insurerwith whom the plans are financed. When the necessary informationis available and the plans are recognised as defined-benefit plansin accordance with IAS 19, this can have a significant effect on thegroup accountsDeferred taxDeferred tax/tax assets in the balance sheet are carried at nominalvalue and calculated based on temporary differences between valuesfor assets and debt for tax and accounting purposes on the balancesheet date, adjusted for loss carried forward for tax purposes.Current and deferred income taxes are recognised directly in equityto the extent they are related to equity transactions.Taxes payableCurrent tax assets and liabilities for the current period and priorperiods are valued at the amount that is expected to be paid fromor to the tax authorities. The tax rates and tax laws used to estimatethe amount are those that are in force or substantively in force on thebalance sheet date.ProvisionsProvisions are recognized when the group has an obligation (legalor self-imposed) as a result of a past event, it is probable that anobligation must be redeemed through economic benefits and whena reliable estimate can be made of the amount of the obligation.

55Where the group expects some or all of a provision to be reimbursed,for example under an insurance contract, the reimbursement isrecognised as a separate asset but only when the reimbursement isvirtually certain. The expense relating to any provision is presentedin the profit and loss account net of any reimbursement. If the effectof the time value of money is material, provisions are discountedusing a current pre-tax rate that reflect the risks that are specific tothe relevant liability. Where discounting is used, the increase in theprovision due to the passage of time is recognised as a financialexpense.of a fall in value, the book value is evaluated against the recoverableamount.Deferred tax assetThe deferred tax asset is recognised when it is probable that therewill be future taxable income and that the temporary differencesor loss carry-forward can be deducted in this income. Changes inassumptions and estimates can make it necessary to reduce thedeferred tax asset. The company has carried out a test related to therecognised deferred tax asset.Annual Report 2010 Scana Industrier ASAA guarantee provision is recognised when the underlying productsare sold. The provision is based on historical information aboutguarantees and a weighting of possible outcomes against theirprobability of occurring.Derecognition of financial assets and liabilitiesA financial asset (or where applicable a part of a financial assetor part of a group of similar financial assets) is deducted from thebalance sheet where:• the rights to receive cash flows from the asset have expired,• the group retains the right to receive cash flows from the asset,but has assumed an obligation to pay them in full without materialdelay to a third party under a ‘pass-through’ arrangement, or• the group has transferred its rights to receive cash flows from theasset and either (a) has transferred almost all risks and potentialgains associated with the asset, or (b) has neither transferred norretained the majority of risks and potential gains associated withthe asset, but has transferred control of the asset.A financial liability is derecognised when the obligation is settled,cancelled or expires. Where an existing financial liability is replacedby another from the same lender on substantially different terms, orthe terms of an existing liability are substantially modified, such anexchange or modification is treated in such a way that the originalliability is removed from the balance sheet and a new liability isrecorded in the balance sheet. The difference in the respective bookamounts is entered in the profit and loss account.Note 2. Estimate uncertaintyEstimates and judgements are evaluated on an ongoing basis andare based on historical experience and other factors, includingforecasts of future events that are regarded as being probable underthe present circumstances.The group draws up estimates and makes assumptions/forecastslinked to the future. The accounting estimates that result from this willper definition rarely be completely in agreement with the final result.Estimates and assumptions/forecasts with a considerable risk ofleading to material adjustments of recognised values, are discussedbelow.Impairment assessmentThe group carries out impairment tests annually on cash generatingunits with goodwill items and units showing indications of a fall invalue. An impairment test is carried out for the cash flow-generatingunits with recognised goodwill items. This is done based on futurecash flows and discount rates. Changes in these assumptions andestimates can lead to a write-down, which is entered in the profit andloss account. Where there are indications of a fall in value, the bookvalue is assessed against the recoverable amount.Development costsThe company activates development costs in accordance with thecriteria for activation in IAS38. The present value of the estimatedcash flow is based on budgets and business plans. Otherdevelopment costs in the group are expected to have a limitedlifetime and the estimates are based on a 5-year horizon. Changesin these assumptions and estimates can lead to a write-down beingentered in the profit and loss account. Where there are indicationsInventoryValued at the lower of the purchase/production cost and expectednet sales value. The net sales value is estimated at the selling priceduring further operations, minus estimated costs of completion,marketing and distribution. Changes in estimates related to theexpected net sales value can lead to changes in product costs.Trade receivablesTrade receivables are assessed on an ongoing basis, and the writedownof the trade receivables is carried out if there are objectivecriteria for the occurrence of a loss-triggering event that can bemeasured reliably and will affect the payment of the receivable.Changes in management’s basis for the assessment of the credit riskmay affect the estimated loss provision. In the same way, changesin market conditions, internal conditions at our customers, etc. canmean a final result that deviates from the write-down of the tradereceivables.Manufacturing contractsWhen reporting manufacturing contracts, assumptions are maderegarding estimated costs and earnings as well as the definition andmeasurement of degree of completion. Changes in these estimatesmay mean that reporting of revenue and earnings deviates from theunderlying value created, relative to the project’s overall revenue andearnings. Thus, earnings can be reported too early or too late in theproject.Guarantee provisionsThe management estimate the provision for future guaranteeobligations based on information on historical guaranteerequirements, together with other information to calculate futureguarantee obligations. Factors that can affect estimated obligationsinclude unknown errors in completed deliveries. For furtherinformation, see note 18.Note 3. Segment informationBUSINESS AREASScana is a Nordic industrial group operating in three business areas:Steel, Marine and Oil & Gas. The main products for the steel businessarea are customised steel forgings and castings for the oil and gas,energy, marine, machine and tool industries. For the marine businessarea, the products include gears, propellers, propulsion systems,hydraulic actuators and valve control systems. The companies in theoil and gas business area provide design and production, in additionto the maintenance and repair of equipment and steel componentsfor the oil and gas industries. The presentation coincides with theinternal reporting to the Board.Internal costs in the parent company that are not owner costsare divided between the business areas and their subsidiaries.Revenues from sales to external customers and transactions withother segments are reported in each of the business areas. Internaldeliveries are booked at estimated market value. Sales between thebusiness areas only occur to a limited extent. “Eliminations” primarilyrefer to eliminations within business areas. Other mainly refers torevenues/costs relating to group management and its associatedstaff and administration. Assets and liabilities included in “other”mainly apply to the parent company. Investments in associatedcompanies are broken down into the different business areas.

56Annual Report 2010 Scana Industrier ASA2010 (NOK million) Steel Marine Oil & Gas Other/Eliminations TotalOperating revenue 1 138.5 503.0 167.9 -61.8 1 747.6Operating costs 1 133.1 432.8 253.9 -28.3 1 791.5Depreciation 47.0 13.4 24.0 0.2 84.6Operating profit -41.6 56.8 -110.0 -33.7 -128.5Balance sheet figures:Assets 1 199.4 535.5 319.8 -240.1 1 814.6Long-term debt 356.0 84.2 121.7 -74.0 487.9Current liabilities 427.1 282.6 76.9 -191.4 595.3Other segment information:Intangible assets 15.4 36.0 86.1 0.0 137.5Tangible fixed assets 611.4 98.7 48.1 2.6 760.7Cash flow:Operating activities 19.1 69.4 11.7 29.0 129.1Investments in tangible fixed assets -69.9 -9.6 -3.7 -2.7 -85.8Other investment activities 7.1 0.3 0.5 2.2 10.1Financing activities -34.1 -2.6 -7.6 -53.4 -97.72009 (NOK million) Steel Marine Oil & Gas Other/Eliminations TotalOperating revenue 1 353.9 783.5 155.8 -25.9 2 267.3Operating costs 1 175.1 664.6 158.8 6.0 2 004.4Depreciation 39.1 12.3 10.8 0.1 62.4Operating profit 139.7 106.6 -13.8 -32.0 200.5Balance sheet figures:Assets 1 205.7 557.5 368.5 -141.8 1 990.0Long-term debt 326.5 91.8 89.8 -25.4 482.7Current liabilities 433.7 247.6 112.4 -159.8 633.9Other segment information:Intangible assets 12.4 38.2 99.1 0.0 149.7Tangible fixed assets 565.2 101.5 55.5 0.1 722.3Cash flow:Operating activities 72.5 118.1 19.0 119.0 328.6Investments in tangible fixed assets -114.3 -15.1 -12.6 -0.1 -142.0Other investment activities 2.6 -44.4 -0.2 0.1 -41.9Financing activities -10.6 1.8 -6.1 -108.0 -123.0

58Annual Report 2010 Scana Industrier ASAOperating revenues by countryThe specification of operating revenues is based on the location of the customer.(NOK million) 2010 2009Denmark 18.3 43.0Finland 25.9 52.1France 18.5 37.4Germany 310.7 406.4Italy 8.1 7.6Poland 27.3 186.4Spain 9.7 9.8Sweden 317.2 268.9Netherlands 47.8 60.0UK 121.2 151.6Other EU countries 48.5 53.9Total EU 953.3 1 277.0Norway 324.6 368.5Russia 0.8 0.3Other European countries 13.4 11.3Total Rest of Europe: 338.8 380.1Other South America 6.2 14.4Brazil 8.2 21.2North America 58.0 140.8Total Amerika 72.4 176.5China 249.4 279.9Japan 7.1 6.3Singapore 21.8 41.6Other Asian countries 83.4 69.9Total Asia 361.6 397.8Africa and Oceania 2.9 18.2Total 1 729.0 2 249.5Note 4. Investments in associated and other companiesScana Korea Hydraulic Ltd.The group has a 49 per cent holding in Scana Korea Ltd, which isinvolved in the sale and part production of hydraulic valve controlsystems. The company is located in Busan in South Korea. Scana has33.33 per cent of the voting rights.Stingray Inc.Stingray Inc. was founded in 2009 and Scana Offshore Services hasa 25 per cent holding in the company. The company assist ScanaOffshore Services through sales and design engineering effortstowards oilfield drilling contractors, and is engaged in various projectssuch as flex loops and BOP stack modifications for their customers.PetroParts JVScana Offshore Services has a 50 per cent holding in PetroPartsJV. The activity is linked to the sale of subsea hoses and fittings toSoutheast Asia through Scana Offshore Services.TTS GroupThe Group bought 9,9% of the shares in TTS Group on 6 July 2010.These shares were sold on 17 November with gains shown in note 5.Associated companies; financial information 2010 (group share): Scana Korea Ltd OtherOperating revenue 112 409 1 642Net profit/loss for the year 3 729 271Fixed assets 7 432 5Current assets 21 175 1 474Long-term debt -3 615 0Current liabilities -14 683 -72Shareholders’ equity 10 308 1 406

59Associated companies; financial information 2009 (group share): Scana Korea Ltd OtherOperating revenue 117 381 1 643Net profit/loss for the year 4 711 494Fixed assets 6 195 887Current assets 22 586 813Long-term debt -1 809 -14Current liabilities -19 809 -165Annual Report 2010 Scana Industrier ASAShareholders’ equity 7 163 1 498Book value associated companies: 2010 2009As of 01.01. 24 881 12 251Additions and deposits 34 3 046Disposals -13 827 -225Share of profit/loss for the year -1 269 11 521Share of profit/loss not included in previous years/agio effects 1 895 -1 713Total book value shares in associated companies 11 714 24 881Other consists of Stingray Inc. and PetroParts JV.Other shares: 2010 2009Book value other shares 292 233Note 5. Specification of other revenues and other costs2010 2009Other operating revenues:Rental income 13 899 11 644Service income 0 1 136Other revenues 1 914 4 504Total 15 813 17 284Other operating costs:Operating and maintenance 130 164 128 118Contract services 77 185 112 547Rental costs 27 147 29 130Fees and consultancy services 45 023 41 278Travel and marketing costs 40 021 35 496Office and administration costs 28 772 29 640Bad debts 8 020 -555Grants and subsidies -1 720 -2 703Energy costs 10 711 4 782Losses on disposal of tangible fixed assets 883 2 824Other operating costs 34 580 71 199Total 400 786 451 756Auditor fees: *)Statutory audit Ernst & Young 3 504 2 926Other certification services 9 162Other services excluding auditing 946 1 495Tax advice 202 238Total 4 661 4 821*) Figures are exclusive of VAT.

61Tax included in the total result: 2010 2009Hedge accounting net investment -4 761 11 161Electricity derivatives 5 600 801Total tax included in the total result 839 11 962Note 7. Earnings per shareAnnual Report 2010 Scana Industrier ASAOrdinary earnings per share are calculated as the ratio between the financial result for the year that falls to the shareholders and the weightedaverage of outstanding shares.The earnings per diluted share is the result that falls to the shareholders and the number of weighted average outstanding shares is adjusted forall dilution effects related to share options. The “denominator” includes all share options that are “in-the-money” and can be exercised over theoptions’ validity period in the current year.2010 2009Net profit/loss for the year -118 314 250 389Weighted average no. of shares *) 167 570 048 166 117 032Effect of dilution:Options/subscription rights 1 184 548 1 247 671Weighted average no. of shares adjusted for effect of dilution 168 754 596 167 364 703Earnings per share -0.71 1.51Earnings per diluted share -0.70 1.50*) In the weighted average number of shares, the effect of the company’s weighted holding of own shares has been taken into account.Note 8. Intangible assetsPatents and Development Customers/IIntangible assets 31.12.10 licences Goodwill costs order reserve TotalAcquisition costAccumulated 01.01 16 452 112 223 45 478 35 196 209 349Additions 705 0 5 904 0 6 609Translation differences 579 -13 3 405 -3 184 787Transfers 0 0 0 0 0Disposals 0 0 0 0 0Accumulated 31.12 17 736 112 210 54 787 32 012 216 745Depreciation and write-downsAccumulated 01.01 4 862 15 617 19 071 20 131 59 681Depreciation and write-downs for the year 1 111 10 000 1 681 6 631 19 423Translation differences 149 0 701 -756 94Disposals 0 0 0 0 0Accumulated 31.12 6 122 25 617 21 453 26 006 79 198Book value 31.12 11 614 86 593 33 334 6 006 137 547Depreciation period in no. of years 10 - 50 no depreciation 5* 5*) The straight-line depreciation method has been used. See below for further information.

62Annual Report 2010 Scana Industrier ASAPatents and Development Customers/IIntangible assets 31.12.09 licences Goodwill costs order reserve TotalAcquisition costAccumulated 01.01 18 753 100 308 39 698 28 498 187 257Additions 162 0 3 789 0 3 951Additions from acquisition of business 0 20 590 3 382 7 014 30 986Translation differences -2 463 -6 885 -795 -316 -10 459Disposals 0 -1 790 -596 0 -2 386Accumulated 31.12. 16 452 112 223 45 478 35 196 209 349Accumulated 01.01Depreciation and write-downs for the year 3 263 17 745 18 465 15 985 55 458Translation differences 1 053 0 1 756 4 146 6 955Disposals -593 -337 -11 0 -941Avgang 0 -1 791 0 0 -1 791Accumulated 31.12 4 862 15 617 19 071 20 131 59 681Book value 31.12 11 590 96 606 26 407 15 065 149 668Depreciation period in no. of years 10 - 50 no depreciation 5* 5*) The straight-line depreciation method has been used. See below for further information.Patents and licences also include ownership rights/rights of useof an area of land in China. This right of use is amortised over thelease period of 50 years and has a book value as at 31.12.10 of NOK8.6 million.Customer relations and order reserves at the end of 2010 consistof valued customer relations with the acquisition of Scana Zamech,Scana Offshore Services. Customer relations are amortised overfive years. Added value related to the order reserve is depreciatedin accordance with the production period. At the end of 2010, thevalue related to the order reserve was amortised.Recognised development costs relating to the loading buoyproduced by Scana Offshore Vestby total NOK 15.4 million.These costs are amortised over five years. No depreciation wasundertaken in 2010. The Marine business area has book valuedevelopment costs equivalent to NOK 10 million linked to productdevelopment and increasing the efficiency of the production.Goodwill broken down into cash-generating units: 2010 2009Scana Steel Björneborg AB 1 565 1 565Leshan Scana Ltd 2 437 2 437Scana Zamech 20 224 20 634Scana Mar-El AS 1 076 1 076Scana Offshore Technology AS 3 053 3 053Scana Offshore Vestby AS 33 431 43 431Scana Offshore Services Inc. 24 807 24 410TOTAL 86 593 96 606Goodwill broken down by business area:Steel 4 003 4 002Marine 21 300 21 710Oil & Gas 61 290 70 894The group performs impairment tests on goodwill annually or moreoften if indications of a fall in value are present, by calculating utilityvalue. The calculations are based on the budget and businessplans determined by management for the period 2011–2015. Forsubsequent periods the model is based on a growth rate of 2%which is within Norges Bank’s expectations for future inflation. Theestimates are based on budgeting of the various cash generatingunits. Revenue is based on current contracts along with managementexpectations and external information with regards to potential newdeals. Estimated operating margin is expected to increase followingpositive market development. The estimates do not include additionsfor price increases. The group recognise impairment in the P&Lif the recoverable amount is less than booked assets or the cashgenerating unit. Goodwill has been written down with NOK 10 millionin 2010. The table below shows the key assumptions for impairmenttesting.

63Scana Offshore Vestby Scana Offshore Services Scana ZamechOperating margin 6.6 % 14.4 % 5.7 %Discount rate (nominal before tax) 14.2 % 14.5 % 10.6 %Rate of growth 2011 – 2015 23.0 % 11.5 % 7.0 %Rate of growth after 2015 (corresponding to inflation) 0.0 % 1.5 % 1.5 %Price trends:Market share:It is expected that changes to the price of purchased components in the forthcoming period will be reflected in the marketprice of sold goods and will therefore not affect the operating margin considerably.The estimates are based on assumptions that the market share will not change significantly.Annual Report 2010 Scana Industrier ASASensitivity analysis:Sensitivity analysis with relation to the impairment testing is done to test for reasonable changes in the key assumptions of the impairment test.Write-downs could be required if actual key assumptions are lower than those listed in the below table.Scana Offshore Vestby Scana Offshore Services Scana ZamechOperating margin 0.0 % -4.1 % -1.1 %Discount rate (nominal before tax) 0.0 % -2.2 % -2.5 %Rate of growth 2011 – 2015 0.0 % -2.0 % -9.0 %Note 9. Tangible fixed assetsMachinery,BuildingsTangible fixed assets 31.12.10 equipment etc. and property Land TotalAcquisition costAccumulated 01.01 1 035 543 325 062 37 864 1 398 469Additions 68 382 6 840 3 946 79 168Additions from acquisition of business 0 0 0 0Translation differences 40 865 13 209 1 390 55 464Transfers -579 579 0 0Disposals -10 917 -3 009 0 -13 926Accumulated 31.12 1 133 294 342 681 43 200 1 519 175DepreciationAccumulated 01.01 555 330 120 337 510 676 177Depreciation and write-downs for the year 55 005 9 224 926 65 155Translation differences 20 001 5 391 68 25 460Transfers -579 579 0 0Disposals -8 130 -231 0 -8 361Accumulated 31.12 621 627 135 300 1 504 758 431Book value 31.12 511 667 207 381 41 696 760 744Depreciation period in no. of years 5 - 40 40 - 50The straight-line depreciation method has been used.

64Annual Report 2010 Scana Industrier ASAMachinery,BuildingsTangible fixed assets 31.12.09 equipment etc. and property Land TotalAcquisition costAccumulated 01.01 1 025 876 322 268 35 584 1 383 728Additions 109 474 24 520 4 043 138 037Additions from acquisition of business 3 271 582 0 3 853Translation differences -75 944 -21 952 -1 763 -99 659Disposals -27 134 -356 0 -27 490Accumulated 31.12 1 035 543 325 062 37 864 1 398 469DepreciationAccumulated 01.01 566 260 121 093 424 687 777Depreciation and write-downs for the year 47 141 8 133 126 55 400Translation differences -35 323 -8 538 -40 -43 901Disposals -22 748 -351 0 -23 099Accumulated 31.12 555 330 120 337 510 676 177Book value 31.12 480 213 204 725 37 354 722 292Depreciation period in no. of years 5 - 40 40 - 50The straight-line depreciation method has been used.Depreciation period, machinery, equipment etc.:5-10 years for office equipment, tools, vehicles and forklift trucks15-20 years for laboratory and test equipment, as well as small production equipment20-40 years for larger production machinery, electrical installations and transformersImpairment tests have been carried out on tangible fixed assets in individual companies. The impairment tests show that the present value offuture cash flows is higher than the recognised value of the assets.Tangible fixed assets are pledged to the group’s main bankers whereby there are restrictions ondisposals. This does not apply to the subsidiary Scana Leshan Machinery Co Ltd, Scana Offshore Services Inc. and Scana Zamech sp.zo.o.Book value of pledged assets is NOK 633.3 million as of 31 December 2010.Financial leasing of machines to NOK 33 million is included in tangible fixed assets as of 31 December 2010.Note 10. Staff costsStaff costs: 2010 2009Salary expenses 453 862 452 755Employer’s NI contributions 100 285 104 979Pension costs 20 777 32 122Insurance 7 723 8 529Share option programme 2 027 3 724Other staffing costs 16 725 14 428Total salary expenses 601 399 616 537Average no. of FTEsNorway 536 577Sweden 470 535China 716 754Poland 60 60Other 32 16Total average no. of FTEs 1 814 1 942

65Remuneration to key personnel (group management):Other natural PremiumName Position Salary Bonus payments deposits Fees Totalt2010Frode Alhaug Chairman of the board 1 224 1 224Rolf Roverud CEO 3 431 475 272 55 4 233Per Ravnestad Group director 1 462 1 462Jan Henry Melhus Group director 1 519 137 54 1 710Christian Rugland Group director 1 327 150 6 55 1 538Annual Report 2010 Scana Industrier ASATotal remuneration to key personnel 2010 6 277 625 415 164 2 686 10 1672009Frode Alhaug Chairman of the board 1 055 1 055Rolf Roverud CEO 3 272 400 173 49 3 894Per Ravnestad Group director 1 419 1 419Jan Henry Melhus Group director 511 46 17 574Christian Rugland Group director 1 292 123 6 51 1 471Total remuneration to key personnel 2009 5 075 523 225 117 2 474 8 413Frode Alhaug has, in addition to his position as Chairman of the Board, carried out work on behalf of the board. He was hired from his owncompany. Per Ravnestad is engaged from his own company and receives a fee.The pension scheme for senior employees is a defined-contribution plan. Salaries include pension disbursements to Rolf Roverud, Jan HenryMelhus and Christian Rugland.The period of notice for key personnel is from 3-6 months. Termination payment agreements have been entered into by the group chiefexecutives, which provide for a salary to be paid out for 12 months. Any salaries that are received from other work during the period in whichtermination payments are made shall be deducted from the termination payment.A bonus scheme is in operation for the managing directors of the group’s subsidiaries and the group management. This is linked to profit andcapital. A profit sharing model was introduced in 2005 for all employees in operational units in Norway and Sweden.Board fees:Fees totalling NOK 1 100 000 were paid to the Board in Scana Industrier ASA. Fees are listed below.Frode Alhaug Chairman of the Board 300 000Mari Skjærstad Board member 200 000Kristin Malonæs Board member 200 000Bjørn Dahle Board member 200 000John Aril Ertvaag Board member 200 000

66Annual Report 2010 Scana Industrier ASAStatement on the setting of salaries and otherremuneration for the general manager and othersenior employeesIn accordance with the Public Limited Companies Act § 6-16a, theBoard shall draw up a statement on the setting of salaries and otherremuneration for the general manager and other senior employees.The statement shall contain guidelines for setting salaries and otherremuneration, and include the main principles of the company’swages policy in relation to management.allocated to parties that the Board regards as central in relation to thecompany’s value development.Pension plans shall in principle be the same for managers as thosegenerally determined for employees in the business.Bonus schemes for the management team shall be partly linked tothe company’s profits, and partly to the judgements of the Board. Thejudgements of the Board shall take into account, among other things,the quality of the HSE work in the company and the results accordingto the company’s HSE statistics.§ 6-16a of the said Act also imposes a duty on the Board to give astatement on the wage policy for management that has been followedin the preceding financial year.Scana Industrier ASA defines senior employees as the group chiefexecutive and members of the group management team, as well asthe managing directors of the group’s subsidiaries. The guidelines canalso be made to apply to other key personnel in the group.1. The main principles of the company’s wage policy formanagement for the financial year 2010The main principle behind the company’s wage policy formanagement is that the basic salary shall promote added value in thecompany and contribute to related interests between the owners andsenior employees. The basic salary shall not be of such a nature or ofsuch a scope that the company’s reputation will be harmed.As a leading player in its field, Scana Industrier ASA is dependenton offering salaries that can attract the most competent managers.The policy of the Board is that in order to secure the best possibleleadership, salaries must be offered at levels that the individual issatisfied with, and which are competitive in an international market.2. Salaries and other benefits for the financial year 2010It is company policy that the salaries of management are mainly paidas a fixed monthly salary that reflects the level of the individual’sposition and experience.The basic salary for senior employees consists of a fixed and avariable component, which are determined on a case by case basis.The fixed salary is determined according to the following:- Experience and expertise- The size of the company- Competitive situationThe variable salary is paid based on results achieved and individualassessment:- Operating margin achieved- Order intake- Working capital- Personal appraisalOther target figures may apply based on the main duties of theindividual activity. The total value of the variable salary shall notnormally exceed the value of the fixed salary.The general manager’s remuneration is determined by the Board.Salary adjustments for other senior employees are determined by thegeneral manager with subsequent reporting to the Board.The setting of salaries for senior employees shall follow the sameprinciples that apply to other employees with regard to annualceilings for salary adjustments, adjustment dates and a total salarycompensation consisting of a fixed and variable salary.In addition to the basic salary, other remuneration may be paid tosenior employees, including payments that relate to shares andremuneration schemes based on share values. The Board canoffer share schemes to the management team. Options may beEarly retirement plans can be entered into with senior employees, witha mutual entitlement to demand retirement that entails a retirementpension on the employee’s 62nd birthday.Termination payment plans that are established upon departure fromthe company will be viewed in conjunction with confidentiality clausesand clauses that restrict competition in the individual’s contract ofemployment, whereby they only compensate for such limitations in theindividual’s right to take up new employment. Termination paymentplans shall in principle have deductions for income earned elsewhere.Options:Share option programme decided in 2007:In the Board meeting held on 14 August 2007, the Board of ScanaIndustrier ASA decided to allocate options to group management andthe managing directors in accordance with the authorisation grantedat the general meeting of shareholders on 3 May 2007.The options were allocated on 14 and 17 August 2007 at a rate ofNOK 16.60, which was the share price on the date of allocation.After a decision by the general meeting of shareholders on 29 April2009, the exercise price was changed to NOK 6.50. 360,000 shareoptions were redeemed in 2010 after publication of the result aftersecond quarter of 2010. Two of the employees who were includedin the programme have decided to leave. This reduces the numberof options by 100,000. The final redemption takes places after thepresentation of the fourth quarter of 2010. Provisions of NOK 2.5million were made in 2010 in relation to the share option programme inaccordance with the earnings period.Share option programme decided in 2010:The annual general meeting of Scana Industrier ASA decided on28 April 2010 to allocate options to group management and themanaging directors.The options were allocated on the same day at a rate of NOK 9.50,which was the share price on the date of allocation. In 2010, 635,000share options were allocated. One of the employees that was includedin the programme has decided to leave. This reduces the numberof options by 20,000. The options can only be redeemed after thepresentation of the second quarter of 2012 and over the followingthree years. The final redemption period takes places after the fourthquarter of 2014. Provisions of NOK 0.6 million were determined in2010 in relation to the share option programme in accordance with theearnings period.Valuation method:The share option programmes are valued in line with the Black andScholes model. Risk-free interest is in accordance with NorgesBank’s interest rate on the date of allocation. The risk-free interest isinterpolated over the earnings period. The volatility is based on sharetrading in the past three years, which is 50 per cent. No account hasbeen made for sharing.A condition was made as part of the share option programme in 2007,that no one who is allocated options leaves during the earnings periodand that everyone redeems the options after the third quarter of 2010.In relation to the share options programme adopted in 2010, the sameconditions shall apply except that everyone must redeem the optionsafter the second quarter of 2012.

67Share option programmedecided in 2010Share option programmedecided in 2010ExercisingOtherdisposalRemainingoptionsIssue No. of Issue No. of Excercis No. of No. of No. ofName date options date options price options options optionsRolf Roverud 03-01-2008 200 000 28-04-2010 75 000 7.50 -100 000 175 000Christian Rugland 14-08-2007 100 000 28-04-2010 35 000 -135 000 0Jan Henry Melhus 07-09-2009 100 000 28-04-2010 35 000 7.80 -50 000 85 000Per Ravnestad 14-08-2007 100 000 28-04-2010 35 000 7.60 -100 000 35 000Annual Report 2010 Scana Industrier ASAIngvar Winbo 14-08-2007 100 000 28-04-2010 35 000 135 000Jan Øyvind Jørgensen 30-05-2008 100 000 28-04-2010 35 000 135 000Christian Ståhlberg 14-08-2007 100 000 28-04-2010 35 000 -135 000 0Per Jarbelius 22-09-2008 100 000 28-04-2010 35 000 135 000Johnny Sjöström 01-11-2010 35 000 35 000Leif Ness 07-09-2009 50 000 50 000Sten Israelsson 28-04-2010 20 000 20 000Kristian Sætre 17-08-2007 50 000 28-04-2010 35 000 85 000Ragnar Øhrn 17-08-2007 50 000 28-04-2010 35 000 7.60 -20 000 65 000Egil Kongsbakk 28-04-2010 20 000 20 000Hans Olav Kilen 17-08-2007 50 000 7.75 -50 000 0Jacek Pabian 28-04-2010 20 000 20 000Per Allan Røsand 01-06-2010 20 000 20 000Ørnulf Myrvold 14-08-2007 100 000 28-04-2010 35 000 135 000Peter Jansson 28-04-2010 35 000 35 000Jack Ostermaier 01-06-2010 20 000 -20 000 0Erik Ødegård 17-08-2007 50 000 28-04-2010 20 000 70 000Johnar Olsen 28-04-2010 20 000 20 000Inge Kvalvik 17-08-2007 100 000 7.50 -40 000 60 000No. of options to employees 1 350 000 635 000 -360 000 -290 000 1 335 000

68Annual Report 2010 Scana Industrier ASANote 11. Pensions and other long-term employee benefitsIn accordance with the Accounting Act § 7-30a), the companies inNorway are obligated to have a company pension plan in line withthe Act relating to occupational pensions, and the companies have apension plan that meets these requirements.Defined-benefit planThe group’s Norwegian companies are covered by a contractualpension scheme. This scheme covers 519 personnel as at 31December 2010. The obligation is calculated using a linear accrualmethod.In 2010, the old contractual pension scheme was discontinued.The obligation linked to the old contractual pension scheme wasrecognised under operating profit. At the end of 2010, it was decidedthat insufficient cover linked to a new contractual pension schemecorresponding to NOK 7 per employee must be recognised as anobligation. The new contractual pension scheme is classified as adefined-benefit multi-corporate plan. Thus far, we have not receivedsufficient information to undertake the necessary calculations. Thescheme is recognised as a defined-contribution plan. On the date thenecessary information is available, the schemes must be reported asa defined-benefit planIn 2007, Scana Volda discontinued hedged schemes for all employeeswith the exception of the scheme for the managing director. The grouphas no other hedged pension schemes. The scheme covers only 1person as at 31 December 2010.The table below is therefore a presentation of hedged and unhedgedschemes. As at 31 December 2010, the unhedged schemesamounted to NOK 14.6 million of the pension obligation. The pensionassets are placed in Storebrand Livsforsikring.Economic and actuarial assumptions: 2010 2009Discount rate 4.2 % 5.1 %Return on pension assets 5.6 % 6.1 %Salary increases 4.3 % 4.3 %Pension adjustments 2.0 % 2.0 %Inflation rate 2.3 % 2.3 %Voluntary retirement 4.0 % 4.0 %Withdrawal disposition 65 % 65 %Mortality table K2005 K2005Net pension costs are calculated as follows: 2010 2009Present value of net pension entitlement -39 1 678Interest cost of accrued pension obligations 663 1 084Estimated return on pension assets -134 -149Recognised actuarial gains/losses -6 900 -406Recognised effect of plan changes 81 21Net pension costs are calculated as follows: -6 330 2 226Pension obligations and assets: 2010 2009Present value of accrued hedged obligations 17 272 26 559Fair value of pension assets -2 918 -3 121Unrecognised actuarial gains/losses -1 819 -2 833Net recognised pension obligation 31.12 12 535 20 605Changes in gross obligation: 2010 2009Obligation 01.01 26 559 23 660Present value of net pension entitlement for year -39 1 691Interest costs 663 1 072Premiums paid -2 045 -1 773Actuarially calculated loss/gain on obligation -7 866 1 909Gross pension obligation 31.12 17 272 26 559

70Annual Report 2010 Scana Industrier ASANote 13. Trade receivables2010 2009Nominal value of trade receivables 270 084 319 474Earned, non-invoiced revenues 87 542 227 543Trade receivables associated companies 11 785 12 490Provisions for bad debts -17 839 -58 654Total 351 572 500 853Bad debt written off 48 816 4 132Bad debt recognised, including change in provision 8 020 -555Distribution of time periods: 2010 2009Non-overdue receivables 161 237 164 2490-30 days 44 393 47 89031-60 days 22 274 16 39361-90 days 13 451 22 136over 90 days 40 514 81 296Trade receivables 281 869 331 964In connection with FPSOcean’s request for a bankruptcy petition in 2008, the group wrote down trade receivables relating to FPSOcean by NOK47 million. This loss provision was maintained in 2009 and realised in 2010.The illustration below shows accrued revenues and costs relating to manufacturing contracts that are included in the profit and loss account forthe accounting period.2010 2009Revenues linked to manufacturing contracts in the financial year 421 672 792 879Costs linked to manufacturing contracts in the financial year 277 317 537 785Gross margin in NOK 144 355 255 094Gross margin as a per cent 34 32The illustration below shows accrued revenues and costs relating to manufacturing contracts that are not completed and delivered on thebalance sheet date. A number of the contracts have a manufacturing time of more than a year.2010 2009Revenues linked to manufacturing contracts in progress 1 061 935 1 303 229Costs linked to manufacturing contracts in progress 748 038 982 160Gross margin in NOK 313 897 321 068Gross margin as a per cent 30 25Manufacturing contracts in progress are reduced during the period. This is due to reduced delays, a lower level of activity and postponementsinitiated by customers during the period. A considerable share of the revenues has been invoiced.2010 2009Advance revenues on manufacturing contracts 557 387 444 515Advances from customers 47 691 53 938

71Note 14. Other short-term receivables2010 2009Prepaid costs 6 464 10 050Employee loans 2 209Advances to suppliers 12 687 8 109Advance tax paid 11 124 23 893Other short-term receivables 25 399 16 623Annual Report 2010 Scana Industrier ASATotal 55 676 58 884Included in other short-term receivables in 2010 is VAT at NOK 15 million.In 2009, VAT was included in other short-term receivables at NOK 9 million.Note 15. Bank deposits2010 2009Ordinary bank deposits 89 467 127 153Restricted funds 11 782 12 370Total 101 249 139 523The liquid reserves of NOK 29 million in China, Singapore and Poland are not a part of the group’s cash pool.Note 16. Share capital and premiumsNo. of shares:No. of outstanding ordinary shares as at 31.12.09 167 333 750Increase in capital in connection to the redemption of options 360 000No. of outstanding ordinary shares as at 31.12.10 167 693 750The nominal value of the shares is NOK 1.25. There is one class of shares, with all shares carrying equal voting rights.All shares are fully paid.Share capital and premiums: Share capital Share premiumTotal as at 31.12.10 209 617 1 890Note 17. Interest-bearing debt2010: Nominal interest Current Long-term MaturityFinancial leasing obligations 3.53 % - 15.6 % 6 790 16 274Bank overdraft NIBOR + 0.75 % 1 753 0Factoring STIBOR + 1.25 % 47 491 0Syndicate loan SEK STIBOR + 3.00% 46 800 292 340 24-10-12Syndicate loan NOK NIBOR + 3.00 % 0 45 000 24-10-12Bank loan Handelsbanken NIBOR + 1.5 % 667 6 000 01-10-20Bank loan DnBNor and Handelsbanken, China USD LIBOR + 1.00% 12 755 38 264 06-07-12Unpaid interest 2 760 0Total 119 016 397 878

73Note 20. Leasing obligationsOperational leasing agreements:The group has entered into a number of lease agreements for machinery, offices and other facilities with a remaining lease period of 1-10 years.These lease agreements are classified as operational leasing. The agreements do not entail restrictions on the company’s dividend policy orfinancing options. None of the assets that are leased are sub-let. The leasing cost in 2010 was NOK 20.7 million.The figures apply to future minimum leases.Annual Report 2010 Scana Industrier ASAThe figures apply to future minimum leases. 2010 2009Within a year 19 050 13 756More than 1 year and less than 5 years 58 283 48 266More than 5 years 8 441 7 307Total 85 774 69 329The group as lessee – financial leases:The group’s assets under financial leasing agreements include machinery and equipment. In addition to the lease payments, the group has obligationsfor maintenance and insurance of the assets. The remaining lease period varies from 1-9 years. None of the assets that are leased under noncancellablefinancial lease agreements are sub-let. The agreements do not entail restrictions on the company’s dividend policy or financing options.2010 2009Book Minimum Book MinimumFinancial leasing: value payment* value payment*Within a year 6 790 7 473 8 068 9 073After 1 year but not more than 5 years 13 644 14 804 18 666 20 063More than 5 years 2 630 2 970 4 464 5 021Book value of leasing 23 064 25 247 31 198 34 157Book value corresponds to the present value of the lease agreement.The free purchase amount of the larger financial and operational lease agreements amounts to NOK 72.5 million.*) Minimum payment is instalment and interest in accordance with the respective lease agreements.Financial leasing mainly relates to assets classified as machinery in note 9.Note 21. Related-party transactionsCompanies with significant influence: Sale Purchase Receivables LiabilityFrode Alhaug AS 2010 0 924 0 02009 0 775 0 300Panda AS *) 2010 0 1 462 0 2732009 0 1 419 0 134Strandkaien 2 AS **) 2010 0 1 398 0 02009 0 1 502 0 250*) Panda AS is owned by Per Ravnestad.**) Scana Industrier ASA rents office premises from Strandkaien 2 AS. This company is a sister company of Verket Finans AS, which is ashareholder in Scana Industrier ASA. Both companies are controlled by Øgreid AS.

74Annual Report 2010 Scana Industrier ASAAssociated companies: Sale Purchase Receivables LiabilityScana Korea Hydraulic Ltd 2010 32 676 237 3 899 92009 49 945 138 11 967 88Jørpeland Kraft AS 2010 1 552 2 618 7 886 2 3992009 2 532 5 509 334 402Motala Verkstad AB 2010 815 12 753 0 1 1472009 4 267 27 515 183 3 491Scana Wikov AS 2010 21 0 0 02009 32 0 6 0Stingray Inc. 2010 0 2 095 0 1162009 0 2 384 0 552PetroParts JV 2010 202 0 0 02009 0 0 0 0Related-party transactions are carried out at the assumed market price. Outstanding receivables and liabilities are unsecured short-terminterest-free items. Settlements are in cash. The group has not issued any guarantees to its related parties. No provisions have been made forunsecured receivables as at 31 December 2010.Note 22. Financial riskCentralised risk managementScana has a centralised finance function. The most important taskis to secure the group’s room to manoeuvre in the short and longterm. Hedging of currency, interest and electricity price exposure iscarried out in accordance with the group’s policy and routines. This isdone centrally by the Finance Department on the basis of the needsreported by the operational units.Financial riskThe group’s activities are exposed to financial market risk, whichmainly affects exchange rate risk, interest rate risk and fluctuationsin the price of electricity. Furthermore, the group (primarily the steelarea) is also exposed to development in other raw material pricessuch as scrap steel and alloys. Scana aims to reduce the risk linkedto currency, interest and electricity prices by means of derivatives.The group has chosen not to hedge against any fluctuations in otherraw material prices, since Scana believes that any increases in theseprices can mainly be offset by increased sale prices, although with acertain time lag.Currency riskThe group is exposed to exchange rate fluctuations since large partsof the production, purchasing and sales take place abroad and/or inforeign currency. The group’s internal banking function continuouslymonitors and reports the group’s currency positions. The currency riskis estimated for each foreign currency and takes account of assets,debts and probable purchases and sales in the relevant currency.The company tries to reduce the currency risk by means of forwardcontracts, deposits and/or borrowings in the relevant currencies. Themain risks linked to currency in the group are related to future salespayments and the group’s assets in foreign subsidiaries.Interest rate risk:The group’s interest rate risk is mainly linked to the group’s debtportfolio. The risk is managed at group level. The group aims tooffset major effects linked to changes in the market rate. Scana hastherefore tied parts of the debt portfolio to fixed interest rates in orderto curb short-term fluctuations in the market rate. The group’s strategyis for at least 40 per cent of the company’s interest-bearing debt to besecured with fixed interest rates. Scana’s greatest exposure to interestrate fluctuations is related to STIBOR.Price risk on electricity:The group has major electricity costs in relation to the productionof its goods, mainly in the steel segment. Scana protects itself fromfluctuations in electricity prices by buying electricity derivatives forSwedish subsidiaries and through Scana Steel Stavanger AS. Thegroup has an agreement with Vattenfall Power Management AB toadminister Scana’s electricity derivatives with the aim of hedgingthe future electricity prices that need to be paid in Sweden anda Norwegian company. The estimated electricity consumption ishedged by up to 100 per cent for the coming months, while thehedged share of estimated consumption gradually becomes lower forperiods further into the future.Liquidity riskSecuring good financial room to manoeuvre is an important aim ofthe group. As a result of the international financial crisis, a numberof measures have been implemented to reduce the financial risk,particularly through closer follow-up of liquidity projections andprogrammes linked to reducing the working capital.The group monitors the liquidity situation in the short and long termthrough active dialogue with its subsidiaries. At the end of 2010, thegroup had sufficient liquidity reserves and good credit lines. Thegroup has unused credit facilities which amount to NOK 143 millionand consist of the rolling credit facility corresponding to NOK 13million and an overdraft facility of NOK 130 million. Cash included inthe groups cash pool was NOK 60 million (ref. note 15). In total, theliquidity reserve for the group as at 31 December 2010 was henceNOK 203 million. The financial covenant of the syndicate loan linked tothe liquidity reserve is set at a minimum of NOK 100 million. The groupbelieves the liquidity risk to be limited.The group’s prognosis for growth in liquid reserves shows a positivetrend. During the refinancing in 2007 the Group got very favorableterms and conditions with tough covenant requirements. The Groupwas in breach of covenants in the fourth quarter 2010 and first quarter2011 and was granted a waiver from the lenders before the respectivebalance sheet dates. It is possible that the Group will be in breach ofcovenants in the second quarter of 2011. Through positive communicationwith the lenders the Group expects to be granted a waiver.Credit risk:The group has guidelines for ensuring that orders are not enteredinto with customers who have had major payment problems andwhere outstanding amounts do not exceed defined credit limits. Themaximum risk exposure is represented by the capitalised value ofthe financial assets, including derivates, in the balance sheet. Thecustomer in derivative dealings is DnBNor and Nordea, as well asVattenfall Power Management AB, and is subject to inspection byfinance inspectors in Sweden. The credit risk linked to derivates isregarded as low. The group regards its greatest risk exposure to bethe recognised value of trade receivables (see note 13) and otherreceivables (see note 14).

75In 2010, Scana was affected by cancellations mainly within the Steelarea. The Marine area has only had cancellations to a limited extent.Scana Volda established credit insurance with GIEK Kredittforsikringin 2009 in order to cover the exposure to credit risk. Within the Marinearea, the biggest deliveries are to financially robust shipyards in Chinaand Korea with a large degree of state ownership. Within the Oil & Gasarea, service and after sales services are carried out for internationalleading players. No major reduction is expected in the level of activityin this market segment, and the credit risk is considered to be limited.Increased activity is expected within new projects and expansions.Sensitivity analysisIn accordance with IFRS 7, a sensitivity analysis shall be carried out for all financial instruments that are held on the balance sheet date. In theillustration below, the sensitivity analysis shows material effects linked to financial instruments.Annual Report 2010 Scana Industrier ASACurrency riskThe financial instruments that have currency effects are currency contracts, syndicate loans, accounts receivable, creditors and bank deposits.The table shows the effects of changes in foreign currency against NOK. If foreign currency increases by 5% against the NOK, this has a negativeeffect on the result linked to net assets of NOK 34.7 million. Correspondingly, if NOK strengthens against foreign currency, the effect on the resultis positive.Change in NOK Effect on profit before tax Effect on total profit2010 5 % -34 749 0-5 % 34 749 02009 5 % -30 313 0-5 % 30 313 0Price risk on electricityThe table below shows the effects linked to changes in electricity prices based on the portfolio of electric derivatives that the group has on thebalance sheet date. An increase in electricity prices will mean a positive change in value on profit and equity.Change in electricity price Effect on profit before tax Effect on total profit2010 40 øre 849 8 901-40 øre -849 -8 9012009 40 øre 1 525 6 244-40 øre -1 525 -6 244Interest rate riskThe table below shows the effects linked to interest rate changes in the group on the balance sheet date. The table shows that increased interestrates have a negative effect on profit.Change in interest rate Effect on profit before tax Effect on total profit2010 1 % -2 133 5 747-1 % 2 133 -5 7472009 1 % -1 618 6 830-1 % 1 618 -6 830Note 23. Financial instrumentsHedging net investmentThe group is subject to currency exposure in the form of a net investment in its Swedish subsidiaries. The net investment is defined as Scana’sshare of the subsidiaries’ equity. In order to protect against major currency fluctuations, Scana has taken out a loan in SEK. In accordance withthe rules on hedge accounting of net investments, currency gains/losses on this loan are recorded against the total comprehensive income to thedegree the loan is offset by the net investment.Hedging currency riskSince a significant part of the group’s sales are carried out in foreign currencies, Scana is exposed to exchange rate fluctuations during the periodfrom the time the sales contract is entered into to final payment by the customer. There is also a risk linked to future payments in foreign currency.In order to secure the group’s net cash flow in the individual currencies, currency contracts are entered into that offset the estimated futureincoming/outgoing payments.Classification of currency gains/losses in the profit and loss accountThe group classifies currency gain/loss as financial items. Most subsidiaries have chosen to hedge the net currency exposure based on thebalance positions and sales and purchase orders for each individual currency. Hedge accounting in accordance with IAS 39 is not applied tocurrency contracts.

76Annual Report 2010 Scana Industrier ASABelow is a summary of all open currency contracts at 31.12.10:UnrealisedCurrency Net Net Maturity gain/loss (-)EUR Sale 17 919 2011 1 066GBP Sale 950 2011 77PLN Purchase 400 2011 2SEK Sale 51 000 2011 -71USD Sale 24 495 2011 1 545EUR Sale 1 700 2012 -92USD Sale 6 450 2012 170Total 2 697Below is a summary of all open currency contracts at 31 December 2009:UnrealisedCurrency* Net Nominal value Maturity gain/loss (-)EUR Sale 21 325 2010 3 066GBP Sale 675 2010 109PLN n/a - 2010 -9SEK n/a - 2010 -52USD Sale 8 228 2010 551EUR Sale 1 644 2011 -101USD Sale 220 2011 -113Total 3 451** PLN and SEK have a net nominal value of 0 as a result of counteractive sales and purchase contracts. The individual sales and purchasecontracts are assessed in the balance sheet and the net value of these is presented in the table above as unrealised gains/losses.Hedging interest rate riskFloating interest-bearing liabilities are hedged against changes in the interest rate level by entering into interest rate swaps. As at 31 December2010, 46% of the syndicate loan is secured with a fixed interest rate. In 2010, the group entered into an interest rate swap with Nordea, whereScana receives floating rates of interest and pays fixed rates. Changes in the fair value of the agreement are recognised against the overall resultin line with the rules in IAS 39 on hedge accounting. The maturity profile on the interest rate swap is five years, while the interest-bearing liabilitymatures after two years. Any inefficiencies are recognised in the profit and loss account. For 2010, the hedge ratio is considered to be effective,and the entire change in value linked to the interest rate swaps is consequently recognised against the total comprehensive income. As at 31December 2010, the group has an interest rate swap totalling SEK 200 million, where the group pays a fixed interest rate and receives a floating rate.Currency Amount Fixed interest rate Maturity Fair valueSEK 200 000 3.21 % 25-04-14 -2 904The floating interest rate is set each quarter based on the 3-month STIBOR interest rate. Interest rate swaps that were hedging instruments includedin the cash flow hedging as at 31 December 2010, are NOK -2.9 million before tax and recognised directly against the total comprehensiveincome as at 2010.Hedging fluctuations in electricity pricesThe group has major electricity costs in relation to the production of its goods. Scana protects itself from fluctuations in electricity prices bybuying electricity derivatives for Swedish subsidiaries and Scana Steel Stavanger AS. The group has an agreement with Vattenfall PowerManagement AB to administer Scana’s electricity derivatives with the aim of hedging future electricity prices. The estimated electricityconsumption is hedged by up to 100 per cent for the coming months, while the hedged share of estimated consumption gradually becomeslower for periods further into the future. As at 31 December 2010, electricity hedging is carried out for up to three years in the future. The valueof electricity derivatives is calculated based on the difference between the agreed future electricity price and the market’s forward prices on thevaluation date multiplied by the hedged volume. The change in the fair value of electricity derivatives is carried against the total comprehensiveincome to the degree it satisfies the performance requirements for hedge accounting in accordance with IAS 39. The ineffective share of thechanges in value is recognised in the profit and loss account.For the settlement of electricity derivatives, Scana receives a statement from Vattenfall based on the difference between the agreed price inaccordance with the electricity contracts and the price Scana has paid for its ongoing electricity consumption. This amount is recognised asother operating costs in such a way that the expensed electricity consumption is based on the hedged electricity prices at all times.

77The table below shows the effects in the profit and loss account and balance sheet. The figures are pre-tax.2010 2009Fair value 22 665 -3 380Recognised against total comprehensive income 20 205 -767Hedging instruments removed from total comprehensive income -824 -1 690The table below shows an overview of the book value linked to financial instruments distributed by maturity period:Annual Report 2010 Scana Industrier ASA2011 2012 2013 2014 2015 2016As at 31 December 2010 Remaining years < 1 1 - 2 2 - 3 3 - 4 4 - 5 > 5 TotalFixed interest rateInterest rate swaps -2 904 -2 904FloatingBank deposits 101 249 101 249Bank overdraft -1 753 -1 753Financial leasing -6 790 -4 794 -3 796 -3 078 -1 977 -2 629 -23 064Factoring -47 491 -47 491Syndicate loan -46 800 -337 340 -384 140Interest-bearing loans Leshan Scana -12 755 -38 264 -51 019Handelsbanken -667 -667 -667 -667 -667 -3 332 -6 667Forward currency contracts 2 619 78 2 697Interest -2 760 -2 7602011 2012 2013 2014 2015 2016As at 31 December 2009 Remaining years < 1 1 - 2 2 - 3 3 - 4 4 - 5 > 5 TotalFixed interest rateInterest rate swaps -4 853 -4 853FloatingBank deposits 139 523 139 523Bank overdraft -1 800 -1 800Financial leasing -8 068 -7 085 -4 690 -3 720 -3 171 -4 464 -31 198Factoring -43 169 -43 169Syndicate loan -46 800 -46 800 -243 344 -336 944Interest-bearing loans Leshan Scana -25 033 -25 033 -24 828 -74 894Handelsbanken -667 -667 -667 -667 -667 -3 999 -7 334Forward currency contracts 3 665 -214 3 451Interest -915 -915Setting of fair valueThe fair value of forward currency contracts is calculated according to the closing rate on the balance sheet date adjusted for an interest additionor deduction based on the interest rate difference between the respective currencies. For interest rate swap contracts and electric derivatives, thebasis is the present value of the cash flow. The fair value of cash, bank overdrafts and other interest-bearing debt is regarded to be almost equalto the recognised value, since these have a short maturity period and thereby give floating interest rates that are adjusted in line with changes inthe general interest rate level. Likewise, the fair value of accounts receivable and creditors is considered to be equal to the book value, since bothitems have a short maturity period and were entered into under normal conditions.The fair value of interest rate swaps is calculated using the estimated discounted cash flow based on the market’s forward interest rates on thevaluation date, with an addition to reflect the bank’s profit margins.

78Annual Report 2010 Scana Industrier ASABelow is an illustration of the book value and fair value of the group’s financial instruments.Book value / Fair valueNote 2010 2009Financial assetsBank deposits 15 101 249 139 523Trade receivables 13 351 572 500 853Other financial assets 55 676 58 884Electricity derivatives 23 946 2 044Interest rate swaps 0 0Forward currency contracts 3 114 8 586Total 535 557 709 890Financial liabilitiesCreditors 19 241 826 194 924Advances from customers 13 47 691 53 938Bank overdraft 15/17 1 753 1 800Financial leasing 17/20 23 064 31 198Interest-bearing loans 17/20 492 077 463 256Embedded derivatives 4 269 5 493Forward currency contracts 417 5 154Interest rate swaps 2 904 4 853Electricity derivatives 1 281 5 424Total 815 282 766 040The table below shows how the different financial instruments are categorised, cf. IFRS 7 as at 31 December 2010At fair value over resultLending and Available At amortisedHeld for turnover Hedge accounting receivables for sale cost TotalFinancial assetsBank deposits 101 249 101 249Trade receivables 351 572 351 572Other financial assets 55 676 55 676Electricity derivatives 3 654 20 292 23 946Interest rate swaps 0 0Forward currency contracts 3 114 3 114Total 6 768 20 292 508 497 0 0 535 557Financial liabilitiesCreditors 241 826 241 826Advances from customers 47 691 47 691Bank overdraft 1 753 1 753Financial leasing 23 064 23 064Interest-bearing loans 492 077 492 077Embedded derivatives 4 269 4 269Forward currency contracts 417 417Interest rate swaps 0 2 904 2 904Electricity derivatives 1 259 22 1 281Total 5 945 2 926 0 0 806 411 815 282Fair value – value hierarchyScana applies the following hierarchy when assessing and presenting the fair value of the financial instruments.Level 1: Trading prices (unadjusted) in active markets for identical assets and liabilities.Level 2: Input other than traded prices from active markets that are included in level 1, which can be observed for the asset or liability, eitherdirectly (as prices) or indirectly (derived from prices).Level 3: Input for the asset or liability that is not based on observable market data.

79The table below shows the valuation hierarchy for details of fair value for assets and liabilities.As of 31 December 2010, Scana has the following financial instrumentsthat are recognised at fair value: 31.12.10 Level 1 Level 2 Level 3Assets measured at fair valueFinancial assets taken at fair value with change in value higher than the resultElectricity derivatives 23 946 23 946Forward currency contracts 3 114 3 114Annual Report 2010 Scana Industrier ASATotal 27 060 27 060 0 0Liabilities measured at fair valueFinancial obligations at fair value with change in value higher than the resultEmbedded derivatives 4 269 4 269Forward currency contracts 417 417Interest rate swaps 2 904 2 904Electricity derivatives 1 281 1 281Total 8 871 4 602 4 269 0There were no transfers in 2010 between levels 1 and 2 in the assessment of fair value, and no transfers to or from level 3 in the assessment offair value.Capital structure and equityThe main purpose of the group’s composition and management of liabilities and equity is to ensure commercial room to manoeuvre in relation tothe work of the group in both the short and long term. The group also aims for the best possible credit rating, and thereby competitive loan termswith lenders for Scana’s activity. Through effective asset management in relation to liabilities and debt, the group will support the commercialactivity, and thereby contribute to increasing the values for the shareholders. See note 16.The group aims to have sufficient liquid funds and credit facilities to finance operational activities. This is achieved by maintaining high targetsfor continued operations and financial management. The group manages the capital structure and makes the necessary changes based on anongoing assessment of the market and financial risk and the financial outlook for both the short and medium term. See note 17.Note 24. Shares and shareholdersScana Industrier ASA had 2,179 shareholders as at 31 December 2010. Foreign shareholders held shares totalling 4 per cent of the share capital.No. of shares held by board members and senior personnel:Frode Alhaug* 12 685 966Bjørn Dahle 2 405 207John Arild Ertvaag** 17 849 665Rolf Roverud 360 000Per Ravnestad*** 2 074 900Jan Henry Melhus 55 000* Through the company Fama Invest AS** Through the company Camar A/S.*** Through ownership in the companies International Oilfield Services AS and Panda AS.In addition, the company holds 113,010 own shares.

81The group’s share of Jørpeland Kraft AS the accounts of which for 2010 are presented below:Operating revenue 2 448Net profit/loss for the year -4 231Fixed assets 182 079Current assets 4 378Bank deposits 4 699Annual Report 2010 Scana Industrier ASAFixed assets 191 156Shareholders' equity 2 000Deferred tax 887Long-term debt 1 048Current liabilities 187 221Total liabilities and shareholders’ equity 191 156Motala Verkstad ABThrough Scana Steel Björneborg, the group owns 37.5 per cent ofMotala Verkstad AB. The company’s business areas include railwaycarriages, axle machining, bridges and steel knives. The group hasincluded the share of profit/loss for the ownership period in 2010.An agreement was entered into in December 2010 concerning thesale of shares to Qeep Group AB. The book value on balance sheetdate amounted to NOK 10.3 million. Last year the value of the shareswas classified as shares in an associated company.The group’s share of Motala Verkstad AB the accounts of which for 2010 are presented below:Operating revenue 51 362Net profit/loss for the year -1 037Fixed assets 20 927Current assets 18 921Bank deposits 334Fixed assets 40 182Shareholders' equity 10 315Deferred tax and pension liabilities 3 098Long-term debt 8 072Current liabilities 18 696Total liabilities and shareholders’ equity 40 182Note 27. Own sharesIn accordance with § 7-27 of the Accounting Act, the purchase anddisposal of own shares must be reported. The ordinary general meetingheld on 26 April 2010 granted the board authorisation to acquire thecompany’s own shares for up to a nominal value up to NOK 2.5 million.The authorisation is valid until the next annual general meeting in 2011.In 2010 the company has not traded own shares in accordance withthe aforementioned authorisation granted by the annual generalmeetings of 2009 and 2010.No. of sharesAmountHolding of own shares as at 31 December 2009 113 010 788Holding of own shares as at 31 December 2010 113 010 788

82Annual Report 2010 Scana Industrier ASANote 28. Events after balance sheet date1. Financial covenantThe group has financial covenants connected to its financingfacilities. The financial covenants are related to equity, EBITDA, levelof investments, liquidity reserve and dividend restrictions. Termsrelated to EBITDA for first quarter 2011 was 0. The group was inbreach of the EBITDA covenant at the end of 1’st quarter and hasbeen granted a waiver from the lenders.2. VestbyThe group continues its efforts for re-positioning Scana OffshoreVestby and finding the right partner for the business, so that thecompany can be developed and assets can be safeguarded.Our goal is to have agreements in place for this by the end of 2’ndquarter 2011.3. Issue of new share capitalIn a board meeting on March 30’st the board of directors decidedto issue new share capital with relation to the exercise of employeeshare options allocated under the share option program approved bythe board of directors on August 14’th 2007.The board of directors was, in accordance with the Limited LiabilityCompanies Act (Norway) § 10-14, granted authority by the AnnualGeneral Meeting (AGM) in 2010 to increase the share capital by anamount up to NOK 2 500 000 by issuing 2 000 000 new shares atpar value 1,25 NOK.The Board decided in a board meeting on March 30’st 2011 to usethe authority granted by the AGM to issue 177 500 new shares at parvalue 1,25 NOK in a share capital increase aimed at identified optionholders.The Share capital was increased from NOK 209 617 187,50by NOK 221 875 to NOK 209 839 062,50 by issuing 177 500new shares, each at par value NOK 1,25 and a strike price ofNOK 6,50 accumulating a total paid in capital of NOK 1 153 750.Share premium equalled NOK 5,25 per share and a total of NOK931 875. Share premium is recognised as such in the statement ofshareholders’ equity.4. Sale of shares in Motala Verkstad AB.On December 15’th 2010 Scana Steel Björneborg published thesales of its shares in Motala Verkstad AB. The sale was completedand shares transferred to the new owner on February 15th 2011.5. Sale of shares in Jørpeland Kraft ASScana Steel Stavanger AS has in 2011 signed an agreement for thesale of its shares in Jørpeland Kraft AS. The sale strengthens thegroup’s liquidity however is not expected to have a significant P&Leffect.

83parent company profit and loss ACCOUNTPeriod 1 January - 31 December (NOK 1000) Note 2010 2009Total revenue 7 37 529 45 546Operating costs and expensesWages, social security and pension costs 8 14 819 13 868Depreciation 3 196 82Other operating expenses 7/8 33 753 31 500Annual Report 2010 Scana Industrier ASATotal operating costs and expenses 48 768 45 450Operating income -11 239 96Financial income and expensesIncome from investments in subsidiaries 89 773 104 807Interest income intra-group 7 1 873 16 622Interest income 21 730 1 275Other financial income 3 38 700Writedown of shares in subsidiaries -115 000 -40 000Interest expense -27 330 -10 746Interest expense intra-group 7 -4 200 -2 032Other financial expenses -6 484 -9 737Net finance -39 635 98 889Income before taxes -50 874 98 985Taxes 4 13 645 16 142Net income -64 519 82 843Allocations and transfersDividend 0 50 200Retained earnings -64 519 32 643Total -64 519 82 843

84Annual Report 2010 Scana Industrier ASAParent company balance sheet(NOK 1000) Note 31.12.10 31.12.09Non currenct assets:Intangible assets:Deferred tax assets 4 3 960 12 844Tangible assets:Property, plant and equipment 3 2 602 120Financial assets:Shares in subsidiaries 2 417 514 500 530Other shares 100 100Intercompany long-term receivables 384 529 291 154Total non current assets 808 705 804 748Current assets:Debtors:Intercompany short-term receivables 10 220 269 194 538Prepaid expenses and other short-term receivables 3 512 8 319Total debtors 223 781 202 857Cash and cash equivalents 11 53 713 48 653Total current assets 277 494 251 510Total assets 1 086 199 1 056 258Shareholders’ equity:Paid-in capital:Share capital 9 209 617 209 167Own shares -141 -141Share premium accont 1 890 0Other paid-in capital 113 694 112 554Total paid-in capital 325 060 321 580Retained earnings:Retained earnings/uncovered losses 76 572 134 893Total retained earnings 76 572 134 893Total shareholder’s equity 5 401 632 456 473Liabilities:Long-term liabilities:Long-term interest bearing debt 13 337 340 290 144Other long-term liabilities 92 346Total long-term liabilities 337 432 290 490Current liabilities:Interst bearing short-term debt 12 46 800 46 800Accounts payable 4 119 7 072Intercompany short-term debt 287 592 193 795Dividend 0 50 200Other accrued expenses and liabilities 16 8 624 11 428Total current liabilities 347 135 309 295Total liabilities & shareholder’s equity 1 086 199 1 056 258Stavanger, 12 April 2011Frode AlhaugChariman of the BoardJohn Arild Ertvaag Mari Skjærstad Martha Kold Bakkevig Bjørn Dahle Rolf RoverudCEO

85parent company cash flow statement(NOK 1000) 2010 2009Operating activitiesIncome before taxes -50 874 98 985Income from investments in subsidiaries 25 227 -64 807Depreciation 196 82Change in other current assets -110 958 80 384Change in accounts payable -2 953 5 757Change in other current liabilities and accruals 188 256 -121 762Annual Report 2010 Scana Industrier ASANet cash provided by (used in) operating activities 48 894 -1 361Investing activitiesChange in long-term receivables -93 375 37 004Investments in fixed assets -2 679 -102Sales of business 45 380 20 163Investments in business -57 337 -120 752Net cash used in investing activities -108 011 -63 687Net cash before financing activities -59 117 -65 048Financing activitiesProceeds from long-term borrowings 108 772 26 060Repayment of long-term interest bearing debt -61 576 -110 490Change in short-term interest-bearing debt 0 133Dividend -50 200 -50 489Received dividend 64 841 197 916Buyback own shares 0 0Proceeds from issue of new share capital 2 340 0Net cash provided by financing activities 64 177 63 131Net cash flows 5 060 -1 917Cash and cash equivalents at beginning of year 48 653 50 570Cash and cash equivalents at end of year 53 713 48 653Change in cash and cash equivalents 5 060 -1 917

86Annual Report 2010 Scana Industrier ASAparent company NotesNote 1. Accounting principlesThe company’s annual accounts are prepared in accordance with theprovisions of the Norwegian Accounting Act and good accountingpractice. Continued operation is assumed in preparing the accountsand in determining the value of the company’s assets. The annualaccounts consist of a profit and loss account, balance sheet, cash flowstatement and notes. These elements of the annual accounts constitutean integrated total. All figures in the annual accounts are in NOK 1 000unless otherwise stated. Some of the note information is shown in thenotes to the consolidated group accounts.Revenues and costsRevenues are entered in the books as they accrue. Costs are registeredin the same period as the associated revenues. Direct transaction costsin connection with new loans are distributed over the loan period inaccordance with the amortised cost method.Short term claims and short term liabilitiesClaims and debt are classified as current assets if they mature within one(1) year of their transaction date.Assets and liabilities in foreign currencyTransactions in foreign currency are entered at the exchange ratesapplicable at the time of transaction. The company’s cash balances,bank deposits, receivables and liabilities in foreign currency areconverted at the currency ratios on the balance sheet date.Customer receivablesCustomer receivables are entered in the balance sheet after deductionof known losses and allocation of reserves for coverage of anticipatedlosses.Shares in subsidiariesInvestments in subsidiaries are valued in accordance with the costmethod. If there are applicable criteria for write-downs, such writedownswill be charged against the result. Distribution from subsidiariesrepresenting earned income is booked against the result. Distributiondone as compansation for acqusition of assets is considered asrepayment of invested capital and booked as a reduction of theinvestment.Fixed assets and depreciationFixed assets are entered in the balance sheet at historical acquisitioncosts less depreciation and write-downs. Depreciation is linear basedon acquisition cost. When fixed assets are sold, net proceeds areentered as operating income and losses are entered as operating costs.Anticipated future cash flows discounted to present values are used ascriteria for write-downs.LeasingLeasing agreements are classified as either financial or operationalleasing based on a concrete assessment of each individual agreement.The company only has assets that are classified as operational leases.TaxesTax cost in the profit and loss statement is the sum of taxes payableand deferred tax associated with the year’s accounting result, pluschanges in deferred tax advantage or liability resulting from changes intax rates.Deferred tax in the balance sheet is tax calculated on the basis of nettax-increasing temporary differences between accounting-related andtax-related balance sheet values, after reconciliation of tax-reducingtemporary differences and losses carried forward. Full provisions areallocated according to the liability method without discounting.Deferred tax advantage is entered in the balance sheet on theassumption that the company will be able to show future earnings ortax-related dispositions that justify the balance sheet value.Pensions and pension liabilitiesThe employees are insured through a pension scheme with an agreedemployer contribution (contribution scheme), which is included in theitem Wages and social costs.Financial instrumentsThe company uses a number of financial instruments to manage thegroup’s exposure to currency and interest risks. The accounting-relatedtreatment follows up the intent behind the creation of these contracts.Currency futures contracts are entered in the balance sheet at realvalue. Unrealised gains or losses associated with these contracts areentered as income as they accrue.The company uses hedge accounting for interest rate swaps where thecriteria for hedge accounting are met.Hedging of net investment is treated as hedge accounting. Unrealisedcurrency gains or losses on loans that are used as hedging instrumentsin securing the net investment in Swedish subsidiaries, are initiallyentered in the balance sheet as part of investments in subsidiaries, andwill only be taken to income when the investment is sold.Cash flow statementThe cash flow statement is prepared in accordance with the indirectmethod. Liquid flows include means of payment (cash and bankdeposits) and short-term investments in securities (not equity shares)with a maturity of less than three (3) months counted from the time ofacquisition.Note 2. SharesBook valueShares in subsidiaries: Acquired Holding Voting right No. of shares NOK at 31.12.10Scana Steel Björneborg AB, Björneborg Sweden 1993 100 % 100 % 80 000 32 610Leshan Scana Machinery Co. Ltd 1997 80 % 80 % N/A 51 005Scana Trading AS, Stavanger Norway 1987 100 % 100 % 115 000 29 993Scana Mar-El AS, Dalen Norway 1996 100 % 100 % 150 000 10 452Scana Steel AB (underkonsern), Karlskoga Sweden 1995 100 % 100 % 69 305 73 410Scana Skarpenord AS, Rjukan Norway 1989 100 % 100 % 7 000 11 363Scana Steel Stavanger AS, Jørpeland Norway 1990 100 % 100 % 10 000 25 000Scana Offshore Technology AS, Jørpeland Norway 2005 100 % 100 % 100 10 501Scana Volda AS, Volda Norway 1997 100 % 100 % 94 426 66 010Scana Offshore Vestby AS 2006 100 % 100 % 2 100 14 444Scana Oil & Gas Inc., Houston, Texas USA 2006 100 % 100 % 1 000 0Scana Offshore Services Inc, Houston, Texas USA 2008 100 % 100 % 10 000 41 970Scana Zamech sp.zo. o, Elblag Poland 2009 100 % 100 % 28 100 30 285Scana Subsea AB, Bjørneborg Sweden 2009 100 % 100 % 1 000 13 210Elimination of currency effects on net investment in subsidiaries 7 261Total shares in subsidiaries 417 514

87Acquired Holding Voting right No. of sharesShares held by subsidiaries:Scana Steel Booforge AB, Karlskoga, Sweden 1994 100 % 100 % 100 000Scana Steel Söderfors AB, Söderfors, Sweden 1995 100 % 100 % 259 000Scana Singapore Pte Ltd, Singapore 1994 100 % 100 % 205 000Scana MTC AS, Jørpeland, Norway 2007 100 % 100 % 100Scana Offshore Services Singapore Pte Ltd, Singapore 2008 90 % 90 % 63 000Scana do Brasil Ind Ltda, Rio de Janeiro, Brazil 2009 100 % 100 % 10 000Annual Report 2010 Scana Industrier ASANote 3. Tangible fixed assetsProperty, plant and equipmentAcquisition costAccumulated acquisition costs at 01.01.10 1 684Additions 2 679Disposals 0Accumulated aquisition cost at 31.12.10 4 363DepreciationAccumulated depreciation at 01.01.10 1 565This year's depreciation 196Disposals 0Accumulated depreciation at 31.12.10 1 761Book value 31.12.10 2 602Depreciation period in number of years 3 - 5Annual lease of office premises (not included in the balance sheet) in 2010 was NOK 1 224Note 4. Tax2010 2009Basis for tax payable:Profit/loss before tax -50 874 98 985Permanent/other differences 82 604 -1 474Change in temporary differences 10 845 -8 336Used loss to be carried forward -42 575 -89 174Basis for tax payable 0 0This year's taxesTax payable 0 0Change in deffered tax 8 884 27 303Tax booked against equity 4 761 -11 161This year’s taxes 13 645 16 142Reconciliation of taxes against ordinary profit/loss before tax:This year's taxes 13 645 16 14228% of profit/loss before tax 2 555 27 716Difference owed; 11 090 -11 574Permanent/other differences 6 329 -413Change in unrecognised/reversed deferred tax asset 0 0Tax booked directly against equity 4 761 -11 161

88Annual Report 2010 Scana Industrier ASA2010 2009Breakdown of basis for deffered tax:Fixed assets 500 -197Receivables 0 0Derivatives -14 486 -5 324Gain and loss account -157 -196Tax liablilities dividend Sweden 0 2 420Tax loss/credit carry forwards 0 -42 575Total temporary differences -14 143 -45 87328% deffered tax -3 960 -12 844Deferred tax with the above basis are recognised as:Deferred tax assets 3 960 12 844Recognised deferred tax assets are based on estimates of future earnings in NorwayThe right to carry forward uncovered losses expires as follows:No limit 0 9 382Limits linked to dividend payments to carry forward that fall due in 2013 0 33 193Tax booked directly against equity:Net investment 4 761 -11 161Total 4 761 -11 161Note 5. Shareholders’ equityShare Share premiumShare premium/ premium non-registered Share holders’Share capital own shares in capital in capital equity EgenkapitalShareholders’ equity at 31 Dec. 2009 209 167 -141 112 554 134 894 456 473Profit/loss for the year -64 519 -64 519Share option programme 1 140 0 1 140Change in market value on cash flow hedges 1 403 1 403Net investment 4 761 4 761Allocation of own shares 34 34Share capital increase 450 1 890 0 2 340Shareholders’ equity at 31 Dec. 2010 209 617 -141 1 890 113 694 76 572 401 632Note 6. Guarantees2010 2009Parent company and other 115 148 139 782Note 7. Related-party transactionsNOK 37 529 of the operation revenues for the year relate to costs charges to subsidiaries, including costs for group assistance and royalties.NOK 21 730 of the net financial items for the year is interest from group companies and NOK 4 200 is interest to group companies.See note 22 in the group accounts

90Annual Report 2010 Scana Industrier ASANote 13. Long-term interest-bearing debtLoans in Loans in NOK Loans in NOK Average interestlocal currency at rate 31.12.10 at rate 31.12.09 rate at 31.12.10Syndicated loans in SEK 335 753 292 340 290 144 2,27 %Syndicated loans in EUR 45 000 45 000 0 5,61 %Total 337 340 290 1442011 2012Sinking fund long-term interest-bearing debt: -46 800 -337 340Note 14. Pledged assets2010 2009Interest-bearing debt secured by pledge 384 140 336 944Book value of pledge objectsShares 417 514 500 530Property, plant and equipment 2 602 120Total 420 116 500 650For further details with regards to pledged assets reference is made to note 26 to the group accounts.Note 15. Financial instrumentsCurrency contractsBelow is a summary of all open currency contracts at 31.12.10UnrealisedCurrency Net Nominal value Maturity profit/loss ( - )EUR Sale 17 919 2011 1 066GBP Sale 950 2011 77PLN Purchase 400 2011 2SEK Sale 51 000 2011 -71USD Sale 24 495 2011 1 545EUR Sale 1 700 2012 -92USD Sale 6 450 2012 170Total 2 697The forward contracts form part of the group’s currency risk management.Interest rate swapThe group believes that having parts of its debt at fixed interest rates minimises the risk in the long term. Interest rate swaps aretherefore used to swap floating interest rates with fixed rates. When the fixed rate is lower than the floating rate, Scana receivesand recognises the difference as income. When the fixed rate is higher than the floating rate, Scana pays and recognises thedifference as cost.The income / cost is accrued over the relevant interes period.As at 31 December 2010, the company has one interest rate swap totalling SEK 200 million, where the company pays a fixed interest rate andreceives a floating rate. The floating rate is set each quarter based on the 3-month STIBOR interest rate.Currency Amount Fixed rate Maturity Fair valueSEK 200 000 3.21 % 25-04-14 -2 904

92Annual Report 2010 Scana Industrier ASAAUDItors’ report 2010

93Annual Report 2010 Scana Industrier ASA

94Annual Report 2010 Scana Industrier ASASHARES AND SHAREHOLDERS 2010Group aim and ownershipThe Practice for Corporate Governance in Scana shallensure that the Company’s business management isin keep with universal and recognized principles andcodes, together with Law and Secondary Law. Scanaaim to follow the principles set out in the NorwegianCode of Practice for Corporate Governance to the extentapplicable.registered share capital as at the AGM in 2010. Thisauthority expires on May 4th 2011, and the authority inconnection with potential acquisitions will be proposedfor renewal by the annual general meeting in 2011.Guidelines have been drawn up to ensure that boardmembers and senior employees obtain prior approvaland report any trading of the Scana share. There are noturnover restrictions on the share.The principles for Corporate Governance is specified indifferent governing documents for Scana’s business. Theprinciples aim to ensure a good interaction between theCompany’s different interest groups, such as customers,employees, governing bodies, management and thecommunity as a whole.The main aim of the group is to increase the shareholders’values.The following primary strategies have been determinedon this basis:1. Continued organic growth in all business areas2. Maintain a good operating margin and effectivefinancial management3. Strengthen the group’s strategic position throughacquisitions­ in order to strengthen the market position­ in order to increase capacity­ in order to supplement the product range or value- chain4. Develop the repair and service concept within theMarine and Oil & Gas areasScana’s shareholder policy is to give its shareholders acompetitive return in the form of dividends and increasein market value. Scana will pursue a conservativeshare issue policy, in which the interests of existingshareholders are given precedence.Satisfactory long-term growth and financial performanceshould provide shareholders with a good value developmentoverall. The company’s dividend policy musttake into consideration the need to maintain adequatelevels of capital and allow for added value throughnew investment. Based on this, the board believes it isappropriate that the long-term dividend constitutes 1/3 ofthe profit for the year. The remainder shall ensure growthand a satisfactory shareholders’ equity.Scana Industrier ASA has one class of share, with eachshare carrying one vote. Each share has a nominalvalue of NOK 1.25. The company has the authority tobuy its own shares in connection with the company’sshare option program and/or connected to potentialacquisitions for up to 10 per cent of the company’sThe group’s supreme management body is theannual general meeting in Scana Industrier ASA.The annual general meeting elects board membersin Scana Industrier, and the group’s external auditor.It also approves fees for the board members and theauditor. The annual general meeting also deals withissues pursuant to the Limited Liability CompaniesAct (Norway), including the annual accounts for thegroup and the parent company. All shareholders in thecompany are entitled to attend and vote at the annualgeneral meeting. The notice of meeting and agenda forthe annual general meeting are distributed no later than21 days prior to the date of the said meeting. The annualgeneral meeting appointed an election committee in2006 consisting of three external members. The Articlesof Association were changed in 2008 to reflect this.Scana currently does not have a supervisory board.In accordance with the company’s Articles ofAssociation, the company’s board of directors shallconsist of 3-5 members who are elected by the annualgeneral meeting for a two-year term. The age limit forboard members is 68; board members must step downat the first annual general meeting following their 68thbirthday. The board’s duties and responsibilities aredetermined by Norwegian legislation, and include theoverall management and control of the group. The boardin Scana Industrier is conscious of its responsibilityto protect the interests of all shareholders, and has inits work prioritised balancing traditional control andsupervisory duties with discussions on strategy andother relevant topics. The composition of the boardtakes account of the requirement for independence fromthe company’s management. The board has drawnup guidelines for the board and its work. Accordingly,the board is responsible for the management of thecompany’s activities and for ensuring that legislation andregulations are complied with. The board’s main dutiesinclude strategy, organisation, control and special tasks.The annual general meeting in 2010 decided that itshould be included in company’s articles of associationthat the entire board shall act as the audit committeeof the company. The board normally convenes fivetimes a year. No profit-related remuneration or option

programmes have been introduced for any membersof the board. Frameworks for option schemes andschemes for allocating shares to employees shall bedealt with and approved by the annual general meeting.A share option programme for senior employees wasapproved by the general meeting on April 28’th 2010.Scana’s objective is for the stock market to haveaccurate information on the group’s operations andposition at all times so as to promote the most accuratepricing possible. Communication with the financialmarket is to be achieved by publishing all new, crucialinformation via stock exchange announcements and inthe group’s annual reports and interim reports.The annual general meeting appoints an independentexternal auditor and sets his fee. Scana’s policy isto use the same auditors in all group companieswhere it is practical to do so, and where Scana candecide this. The external auditor shall confirm to theannual general meeting that the group and parentcompany’s annual accounts have been submitted inaccordance with current legislation and regulations.The auditor also attends board meetings that dealwith the annual accounts. Meetings may be arrangedbetween the board and auditor without the presenceof the general manager, or other representatives ofthe group management. In line with requirements forthe independence of the auditor, Scana will only usethe appointed external auditor for work other than thestatutory financial audit to a limited extent. Scana doesnot have its own internal auditing department, but usesresources from an external audit firm if the need for suchaudits arises.With regards to shares held by board members andsenior employees, reference is made to note 24 of thegroup accounts.Reporting calendarScana Industrier ASA publishes interim reports inNorwegian and English, as well as a comprehensiveannual report.The quarterly interim reports are crucial in relation to thecommunication with the market. The following dateshave been set for the company’s financial reporting in2011:1st quarter May 4’th 20112nd quarter August 17’th 20113rd quarter October 26’th 20114th quarter February 15’th 2012The company reserves the right to change these dates.The Scana shareStructureScana has one class of share, with each share carryingone vote and a nominal value of NOK 1.25. The Scanashare is listed on the Oslo Stock Exchange (ticker codeSCI).The number of outstanding shares as at 31. December2010 was 167 693 750. During the year 360 000new shares was issued in a share capital increase inconnection with the company’s share option program.Authorisation to issue new shares for this purpose givenby the AGM in 2010 was used by the board to implementthe share capital increase. At the end of the year, thecompany’s own stock of shares were 113 010.Performance in 2010At the end of 2010, Scana’s share price was NOK 7.06,which corresponds to a market capitalisation of NOK 1,2billion. The share price at the start of the year was NOK7.83. The number of shares traded on the Oslo StockExchange during the year was 18,2 million, equal to aturnover of 10,9 per cent. Scana has a Market Makeragreement with Oslo Børs to increase the liquidity of itsshares and ensure listing on the Oslo Børs Match list.Annual general meetingThe ordinary annual general meeting of Scana IndustrierASA will be held at Radisson SAS Atlantic Hotel, Olav V’sgt, Stavanger, on Wednesday May 4’th at 5.30 pm.Shareholders who wish to attend the meeting arerequested to notify the company of their intention to doso by May 3’rd 2011. Shareholders may be representedby proxy, subject to written authorisation.DividendThe board of directors proposes that no dividend isdistributed to the shareholders for 2010.Scana on the InternetInformation on the company is also available on thecompany’s website at www.scana.no.Change of addressShareholders registered with the Norwegian CentralSecurities Depository (VPS) must notify any change ofaddress to their registrar and not directly to the company.95Annual Report 2010 Scana Industrier ASA

96Annual Report 2010 Scana Industrier ASAArticles of Association§ 1 The company’s name is Scana Industrier ASA. The company is a Norwegian public limited company.§ 2 The company’s objects are the ownership and management of industrial and commercial activities andany related business, and the ownership and management of properties. The company’s objects alsoinclude investment in other companies to further the company’s operations.§ 3 The company’s head office is to be in Stavanger.§ 4 The company’s share capital is NOK 209 839 062.50 divided into 167 871 250 shares each with a parvalue of NOK 1.25.§ 5 The company’s shares are to be registered with the Norwegian Central Securities Depository (VPS).§ 6 The company’s board is to have between three and five members elected by the general meeting for aterm of two years at a time. The upper age limit for board members is 68 years. Members are to stepdown at the first annual general meeting after reaching the age of 68.§ 6 B The entire Board of Directors shall exercise the Audit Committee’s tasks and duties according to therequirements of the Public Limited Companies Act at any time.§ 7 The chairman of the board or the general manager together with a member of the board may sign onbehalf of the company.§ 8 General meetings are to be chaired by the chairman of the board.§ 9 The following topics are to be considered and resolved at the annual general meeting:i. Adoption of the profit and loss account and balance sheet, including the distribution of the profit forthe year or covering of the loss for the year and the distribution of dividends.ii. Adoption of the group profit and loss account and group balance sheet.iii. Election of the members and chairman of the board on the expiry of their term of office.iv. Emoluments payable to the board.v. Election of an auditor where a proposal for such has been made.vi. Approval of the auditor’s fees.vii. Any other business required to be transacted at the meeting in accordance with the law or thearticles of association.§ 9 B The company is to have an election committee consisting of at least 3 members elected by the generalmeeting. The election committee is to prepare the election of board members for the general meeting,propose candidates to board duties and recommend the size of emoluments payable to the board.The general meeting may give directives as to how the election committee should work.§ 9 C Documentation related to items to be treated by the AGM, inclusive of documents that by law shouldbe included in or attached to the notice of annual general meeting, can be made available on thecompany’s homepage on the internet. The requirement for physical distribution is then not applicable.Shareholders can still request documentation related to items to be treated by the AGM to be distributed.§ 10 In all other respects, reference is made to applicable company law.(Last amended 30 March 2011)

97Annual Report 2010 Scana Industrier ASAScana´s head office is located in Stavanger, Norway.

98Annual Report 2010 Scana Industrier ASAkey fIGURESNOK in Millions, Except per Share Data Def. 2010 2009 2008 2007 2006 2005Operating resultsTurnover 1 748 2 267 2 896 2 469 1 915 1 568Gross operating income EBITDA -44 263 350 327 259 176Operating profit / (loss) -111 201 277 266 208 135Profit before taxes -156 325 75 239 208 105Net Income -121 244 60 197 188 85Operating Margin 1 -6,4% 8.8% 9.6% 10.8% 10.9% 8.6%Return on Capital Employed 2 -8,7% 15.2% 23.0% 25.2% 23.5% 18.6%Return on Equity 3 -15% 31% 8% 29% 36% 29%Financial PositionTotal Assets 1 815 1 990 2 248 1 904 1 559 1 199Gross Debt 4 517 496 611 495 414 397Cash and Cash Equivalents 5 101 140 139 206 90 119Net Debt 6 416 357 472 290 324 278Shareholders' Equity 7 731 873 723 724 617 439Gearing 8 0,71 0.57 0.85 0.68 0.67 0.91Equity Ratio 40% 44% 32% 38% 40% 37%Share DataEarnings per Share 9 -0,71 1.51 0.27 1.11 1.04 0.54Cash Earnings per Share 10 -0,40 2.28 0.46 1.54 1.36 0.81Dividends per Share 11 0,00 0.30 0.30 0.50 0.33 0.16Shareholders' Equity per Share 4,36 5.22 4.32 4.33 3.68 2.62Share Price at Year End 12 7,06 7.83 8.20 18.90 8.20 4.50Market Value at Year End (in thousands) 1 183 913 1 310 225 1 372 139 3 162 613 1 372 139 753 003Shares Outstanding at Year End (in thousands) 167 693 167 334 167 334 167 334 167 334 167 334Weighted Avg. Shares Outst. (in thousands) 13 167 570 166 117 166 532 167 062 167 334 151 294Definitions:1. Operating income as a percentage of total revenue.2. Operating income as a percentage of average net working capital (i.e. less interest bearing items) plus average non-current assets3. Net income attributable equity holders of parent divided by average shareholders’ equity.4. The sum of short- and long-term debt.5. Including tax deductions.6. Gross debt less cash and cash equivalents.7. Including minority interest.8. Gross debt divided by shareholders’ equity.9. Net income attributable equity holders of parent divided by weighted average shares outstanding.10. Net income attributable equity holders of parent plus depreciation and amortization and deferred taxes divided by weighted average shares outstanding.11. Proposed dividend 2010.12. Scana was listed on the Oslo Stock Exchange Main List on 4 December 1995.13. Issue of new shares weighted with respect to dates for equity changes, and the company´s holding of own shares.

Design and production: Printers asPictures: Front page: Sten Anderson. Page 3: Scana Steel Björneborg. Page 4: Scana Steel Björneborg. Page 5: Kjetil Alsvik. Page 6: Scana. Page 7: Kjetil Alsvik.Page 8: Scana Steel Björneborg. Page 9: Scana Steel Björneborg. Page 10 (left): Scana. Page 10 (center): Solstad Offshore ASA. Page 10 (right): Sevan Marine.Page 11: Kjetil Alsvik. Page 12: Sten Anderson. Page 13: Scana Steel Björneborg. Page 14: Scana Steel Björneborg. Page 15: Scana Steel Björneborg.Page 16 (left): Johan Dalhäll. Page 16 (right): Swetruck. Page 17: Scana Steel Söderfors. Page 18: Leshan Scana. Page 19: Scanpix. Page 20: Fredric Alm / LKAB.Page 21: Scana Steel AB. Page 22: Kjetil Alsvik. Page 23: Farstad Shipping ASA. Page 24: Page 25 (left): Ervik havfiske. Page 25 (right): Polsteam.Page 27 (top): Polarcus Limited. Page 27 (bottom): Scana Mar-El. Page 28: Scana Skarpenord. Page 29 (left): Scana Skarpenord.Page 29 (right): DSME, Sør-Korea. Page 30: Knutsen OAS. Page 31: Scanpix. Page 32: Sevan Marine. Page 33: Fotograf Bjørkhaug.Page 34: Terje S Knudsen - Statoil. Page 35: Scanpix. Page 36: Fotograf Bjørkhaug. Page 37: Scana Offshore Services. Page 39: Kjetil Alsvik.Thanks to: Camilla Blomqvist and Kjell Inge Torgersen.In case of any deviations or interpretation differences between the Norwegian and the English version of the annual report, the Norwegian version applies.

Scana Industrier ASAStrandkaien 2, P.O. Box 878, N-4004 Stavanger, NorwayTelephone +47 51 86 94 00, fax +47 51 91 99 80industrier@scana.no • www.scana.noScana Industrier ASAStrandkaien 2. P.o.box 878N-4004 Stavanger, NorwayTel: +47 51 86 94 00Scana Steel Björneborg ABKristinehamnsvägen 2SE-680 71 Björneborg, SwedenTel: +46 550 251 00Scana Steel Booforge ABP.o.box 55SE-691 21 Karlskoga, SwedenTel: +46 586 820 00Scana Steel Söderfors ABP.o.box 104SE-81 504 Söderfors, SwedenTel: +46 29 31 77 00Scana Steel ABP.o.box 55SE-691 21 Karlskoga, SwedenTel: +46 586 815 81Leshan Scana Machinery Co. Ltd.Guan’e Street. Shawan DistrictLeshan City. Sichuan ProvinceChina 614900Tel: +86 833 3445725Scana Steel Stavanger ASN-4100 Jørpeland, NorwayTel: +47 51 74 34 00Scana Skarpenord ASSåheimsveien 2N-3660 Rjukan, NorwayTel: +47 35 09 18 00Scana Korea Hydraulic Ltd.976 Songhyon-ri. Jillye-myeon. GimhaeGyongnam 621-882. KoreaTel: +82 55 343 9007Scana Skarpenord Shanghai Service Station10 Heng Shan RoadShanghai (200031), ChinaTel: +86 21 64 33 08 18Scana Volda ASHamnegaten 24. P.o.box 205N-6101 Volda, NorwayTel: +47 70 05 90 00Scana Mar-El ASStorvegen 48N-3880 Dalen, NorwayTel: +47 35 07 58 00Scana Zamech sp. z o.o.ul. Stoczniowa 282-300 Elblag, PolandTel: +48 55 2364820Scana Shanghai Rep. Office (Volda)8B Crystal Century Tower567 WeiHai RoadShanghai 200041, ChinaTel: +86 21 6288 8881Scana Singapore Pte. Ltd.21 Bukit Batok Crescent#18-73, WCEGA TowerSingapore 658065Tel: +65 6872 2702Scana Offshore Technology ASDir. Poulsens gate 1N-4100 Jørpeland, NorwayTel: +47 51 74 35 00Scana Offshore Vestby ASTverrveien 4. P.o.box 24N-1541 Vestby, NorwayTel: +47 64 95 65 00Scana Subsea ABKristinehamnsvägen 2SE-680 71 Björneborg, SwedenTel: +46 55 02 53 90Scana Offshore Services8901 Jameel, Suite 110Houston, Texas 77040, USATel: +1713 460 0295Scana Industries Inc8901 Jameel, Suite 100Houston, Texas 77040, USATel: +1 281 468 1233Scana do Brasil Industrias Ltda.Lauro Muller 116suite 2401 Torre do Rio SulBotafogo 22290-160Rio de Janeiro, BrazilTel. +55 (21) 3544 0000.Scana Industries Inc (Marine)823 Carroll St., Suite C-1Mandeville, Louisiana 70448, USATel: +1 281 468 1233