Stena Finance

FINANCIAL STRENGTH Offers FLEXIBILITY

Stena Finance’s main task is to manage the funding requirements of the Stena Group, both short and long term. Stena Finance also manages the operational business units’ financial risks in the interest rate, currency and oil markets. In addition, Stena Finance manages the Group’s liquidity and financial investments. Another important role is to act as a resource for the operational units when identifying and analysing new business deals.

The global economy continued to climb further during 2014, mainly led by the United States. Activity in the US economy has been steadily expanding and continues to show much strength. Households financial situation has become stronger thanks to debt deleveraging and growing wealth. An increasingly strong labour market will probably lead to gradually higher wages and the first US increase in Interest Rate in many years is now approaching. The euro zone, on the other hand, is suffering from weak demand as well as weak growth and structural problems, which is why the European Central Bank has cut policy rates to zero and is signaling that additional monetary easing can be necessary.

There is good potential for a solid growth in most Asian emerging markets. Strong labour markets are helping to drive domestic demand. An important issue for the Asian economies is how big deflationary effect the weak Japanese yen will have.

During 2014, the eastern European economies were hurt by the Russian decelerating growth, its import ban and a sharp fall in oil prices.

The Swedish economy is showing a healthy performance led by domestic demand offset by flattish trend in export sector as well as that Riksbanken lowered the interest rate close to zero. Sweden has a solid financial position and expects further growth acceleration during 2015.

Liquidity and financing

Stena Finance’s task is to optimise the Group’s loan and bond profile and to manage liquidity in such a way that there are sufficient resources available when the loans and bonds mature. To achieve this, Stena Finance maintains a high level of liquidity, which ensures that the group’s cash flow requirements would be safeguarded if access to international capital were to be cut off.

In January 2014, Stena issued a ten-year MUSD 600 unsecured note in the US to extend its amortisation profile and reduce debt under the revolving credit facility. In February 2014, Stena issued a ten-year MUSD 350 note and a MUSD 650 seven-year term loan with a low capital repayment rate. The bond and the loan is secured by the vessels Stena DrillMAX and Stena Carron. This transaction was also designed to extend Stena’s maturity profile and free up more liquidity.

In 2013, Stena Drilling contracted two semi-submersible drilling rigs for MUSD 800 each with option to cancel one unit. In July 2014, the financing (MUSD 574) arrangement was concluded for one rig.

Liquidity also opens up good, long-term investment opportunities in equities and bonds.

Stena AB is funded largely through the banking system and the European and US bond markets. Together with credit ­facilities and vessel loans, this generates good financial strength and flexibility. Total available liquidity as of 31 December 2014 was SEK 17.7 billion.

Thanks to successful new financing, the Group’s financial position continues to be very strong.

Portfolio management

During the year, Stena reduced its exposure to the oil and gas sector which helped to prevent the losses from falling stock markets in this sector. Management of financial investments experienced a modest result in 2014 with an average return of 3%. Bonds and other alternative investments performed well, with a return higher than comparable index.

The equity portfolio consisted of around 50 companies which are listed on Nordic, European, U.S. and Asian markets. The total value of Stena Finance’s equity and bond portfolio was SEK 6,4 billion as at 31 December 2014, compared with SEK 5,7 billion on 31 December 2013.

Liquidity1)

Interest-bearing liabilities1)

Investment portfolios1)

1) Stena AB Group as of 31 December 2014

CEO Comments

We are very pleased with the capital market activities we conducted in spring 2014. The extension of our amortisation profile and strengthening of our liquidity further consolidates our financial position. The investment activity is planned to be reduced, while our strong liquidity increases our financial flexibility. Our new bond issues, long-term financing and locked-in future cash flow leave the company very well equipped for the future.

Peter Claesson

CEO, Stena Finance