Although gradually easing, impacts of elevated inflation are still being felt in global capital markets. “The inflation monster has not truly been tamed,” a piece in The Economist recently noted, pointing to what many are describing as surprisingly sticky inflation. The oil market, heavily impacted by rising interest rates, fears a looming recession, which led to record-low speculative positions so far in 2023. Further, just as policy winds were starting to blow in favor of the green energy industry, increasing interest rates – coupled with factors like high equipment cost – has caused the industry to get stuck at a financial red light. Aker cannot escape the short-term impact. The Net Asset Value (NAV) for the second quarter was down 2.3 percent, adjusted for dividend, from the first quarter. For the first half of the year, the NAV was down 12.8 percent, adjusted for dividend.

As the events of the last couple of years has shown, even the most clairvoyant of experts and analysts cannot accurately project the future. Energy companies are now increasingly displaying capital discipline and revising strategies and timelines to grapple with uncertainties. Aker is no exception. Current oil and gas supply and demand forecasts would normally indicate an upside. However, other factors, including the continued fear of recession and energy transition mechanisms still weigh down prices. This is just one example of why our priority is to maintain a steady course and consider a multitude of factors and scenarios as we execute our active ownership. We recognize the intense uncertainty of the future of energy markets, are mindful of wide-ranging oil demand predictions for the long-term, the widening gap between policy regulations and commercial realities, supply chain constraints, impacts of urbanization, and growth of various technologies, such as carbon capture and storage and artificial intelligence (AI). Unforeseen issues, like Siemens Gamesa’s recent trouble with creaky components or our own Aker Horizons’ challenges in Chile, also reflect just some of the many wild cards along the bumpy road to cleaner energy production.

History has afforded us lessons. Through times, most (if not all) industries have experienced a shakeup. The ones with the strongest foundation, talent, financial flexibility, and agility to react in response to market realities, remain standing and can continue to grow into profitable businesses. The current market environment, forces industry players across the globe to reckon with the fact that the energy transition is capital-intensive, infrastructure-reliant, and requires strong public-private collaboration. Not unlike our peers, we have hit snags in the build-up of our renewable business, however, remain confident that the industry is poised for promising growth. Along the way, I am encouraged to see such strong operational performance in the ‘bread and butter’ of our portfolio, including Aker BP, which recorded record high production in the second quarter, and Aker Solutions, with a robust order intake and revenue projections. Going forward, we will continue to play to our strengths, making the necessary strategic adjustments, both to meet existing investor expectations and to seize new opportunities for long-term growth.

In other words, negative performance in the renewables sector does not change Aker’s strategic direction. However, it impacts the ambition level, capital allocation, and pace of development and deployment. The current situation in Aker mirrors what most of the world is experiencing. Shareholders are more concerned with short-term returns in the form of dividends and share buybacks, rather than large investments in green and more unpredictable projects. At the same time, emissions are increasing. The imbalance makes it increasingly less realistic to succeed with Net Zero within targeted timeframes. To reverse this trend, private capital must be mobilized at a much greater scale than what we are seeing currently. Hopefully, companies like our own ICP can contribute to that by engaging more integrated with industrial players, like Aker Solutions, to manage risks and opportunities in a more value-accretive way than what the situation is today. In addition, a more integrated public-private collaboration will be required in different regions and industry segments to improve the risk and reward balance and attract private capital to green projects at scale.

One topic, which in record-time has propelled into a powerful catalyst for growth – including across the Aker portfolio – is generative AI. I agree with the notion that ‘generative AI is probably overhyped in the short-term, but underhyped long-term.’ We are still in the early stage of realizing AI’s full potential, however, it is fast becoming an integral part of being both a consumer and an employee. From predicting heart attacks and strokes, to tracking wildlife, assembling cars, and preparing tax returns, AI is having a pervasive impact on our lives. Forecasters at PwC predict that AI could boost the global economy by over USD 15 trillion by 2030. However, industries have yet to fully exploit AI’s transformative potential. The application of AI can harness data to become more efficient, lower costs, innovate, and adapt to the ongoing transition to a lower-carbon future.

But as industries prepare to unlock the potential of AI, they also need to recognize the synergetic relationship with their data. AI is useless without data, and mastering data is insurmountable without AI. According to Forbes, research indicates that a combination of big data and AI can automate nearly 70% of all data processing work and 64% of data collection tasks. As Girish Rishi, CEO of Cognite put it: “this is the moment that Cognite was built for.”

Hundreds of millions of people are putting chatbots like ChatGPT to use for an increasingly wide array of tasks. However, today, there is no way of ensuring that the systems produce accurate information. The chatbots are driven by a technology called a Large Language Model, or L.L.M, which learns its skills by analyzing and processing massive amounts of data to give persuasive answers. But while outputs look realistic, they are, in fact, not always true. The tech industry refers to these inaccuracies as ‘hallucinations.’ In fields like medicine or heavy-asset industries, a near-correct answer is simply not an option and can have detrimental consequences.

Cognite’s recently released product, Cognite AI, couples generative AI with its core product, Cognite Data Fusion, to eliminate hallucinations, mitigate data leakage, and enable full trust and access control. Having worked with over 100 global energy, utility, and manufacturing companies to make data available from cross-data sources to operators, Cognite AI couples generative AI with accurate, timely, contextualized data. Microsoft, already at the forefront of the generative AI race, is now using Cognite AI as an example of how energy, manufacturing, and power and renewable customers can deploy AI to accelerate efficiency and realize value. Aker BP, Aker Solutions and Aker BioMarine, are already generating promising use-cases and I look forward to following the journey. I agree with Girish: this truly is the moment Cognite was built for.

Despite headwinds in our core industries, I am enthusiastic about what the next period holds for Aker and our portfolio companies. We are well-positioned with a strong project portfolio, an excellent work force ready to adapt to evolving trends, and an industrial foundation for long-term growth. I wish you all a great summer, recharging before its full speed ahead into a new season with renewed energy to do our part, grow and continue to create value for our shareholders.

All the best,

Øyvind Eriksen