Second quarter highlights
- Construction of Phase 1 at Indre Harøy progressing according to plan – on time and on budget
- Closing of first equity tranche of NOK 27.4 million in Korean JV company K Smart and signed agreement for extended feasibility study for both the smolt and grow out facility in South Korea
- Secured and formalized a NOK 625 million debt financing package ensuring a fully funded platform for Indre Harøy phase 1 and equity commitment for K Smart
- Available cash of NOK 868 million (NOK 2.86 per share) on 30 June 2021
Subsequent events
- Listing of the company’s shares at the main list on Oslo Stock Exchange
- Acquisition of renowned smolt company Kraft Laks AS securing in-house sourcing of high quality smolt for Indre Harøy phase 1, with identified growth potential to cover smolt needs for at least Phase 2
Since the groundwork at Indre Harøy started in May 2020, Phase 1 has developed according to plan, on time and on budget. Construction work during first half 2021 has mainly been on the production facilities, where the company has made solid progress on construction of buildings and structures. Seven out of twelve fish tanks are assembled, where the remaining fish tanks are expected to be completed in Q4. The first process equipment and pipes have also arrived at Indre Harøy and are expected to be installed during the next quarters. The plan for first smolt release in March 2022 remains on track.
Total capital expenditures during the quarter were NOK 172 million, of which NOK 168 million were investments related to the turnkey project with Artec Aqua at Indre Harøy. As per 30 June 2021, accumulated capex from project initiation in 2019 amounts to NOK 506 million.
During the quarter, Salmon Evolution announced the signing of legally binding loan documentation for the senior secured debt financing package of up to NOK 625 million, relating to its Phase 1 build out at Indre Harøy at commercial competitive terms. The debt package ensures a fully funded platform for Indre Harøy phase 1 and equity commitment for K Smart Farming.
Salmon Evolution executed its first tranche of about NOK 27.5 million in Korean JV company K Smart during May 2021. Together with Dongwon’s initial equity investment into K Smart, the proceeds will be used to finance: (i) design and engineering, (ii) site evaluation and permitting, (iii) acquisition of an existing and operating smolt facility in Jeongseon of which closing has already taken place and (iv) general corporate purpose. Construction of phase 1 is expected to start in 2022, with commencement of grow out production in 2024.
Commenting on the development, CEO Håkon André Berg, said:
“Activity on Indre Harøy was high during the quarter, and we are happy to see that the project is developing according to plan and that we remain on track for production start in the first quarter of 2022. The joint venture with Dongwon Industries also made real progress this quarter with closing of the first equity tranche, which allows the project to commence with feasibility study for both the smolt and grow out facility.
Further, we are very grateful for the support shown by our banks and believe the debt financing package is unique in the new land-based salmon farming industry”, says Berg.
On July 9, the Salmon Evolution share was transferred from listing on Euronext Growth to the main list on Oslo Stock Exchange, opening new opportunities for funding of future growth.
On 16 August 2021 Salmon Evolution announced the acquisition of Kraft Laks AS (“Kraft Laks”), a smolt producer located in Dalsfjorden, Volda. Kraft Laks has an annual production capacity of around 1.8 million smolt but holds licenses to produce up to 5 million smolt per year subject to certain conditions. The acquisition gives Salmon Evolution operational control over critical parts of the value chain and ensures that the company is self-supplied with smolt for Phase 1 at Indre Harøy, and potentially for Phase 2 if expansion is undertaken.
Outlook
Salmon Evolution’s main focus short- to mid-term, is centered around successfully managing the company’s two construction projects, preparing for the first smolt release in March 2022, in addition to integrating Kraft Laks into the group.
Over the coming months Salmon Evolution will further scale up the organization, recruiting more and more operating personnel. In parallel, significant resources will be devoted for the development of internal systems and infrastructure.
Following a very receptive capital market for land-based salmon farming projects during second half 2020 and into 2021, the sentiment has become more cautious. With this backdrop, Salmon Evolution is in a unique position with its fully funded platform.
Salmon Evolution is confident that land-based salmon farming will play a vital role in growing the overall salmon market. However, as lead times are long, capital intensity is high and access to competent and experienced personnel may become a bottleneck, it will take time before meaningful volumes are brought to market.
With a solid project pipeline established, funding secured and a strong organization in place, Salmon Evolution is uniquely positioned to take a position as a global frontrunner in the development of land-based salmon farming.
Results presentation
CEO Håkon André Berg and CFO Trond Håkon Schaug-Pettersen will present the results by webcast today, Thursday August 19 at 08:00 a.m. CEST.
The presentation and subsequent Q&A will be held in English.
The presentation can be accessed at www.salmonevolution.no, or with the following link: https://streams.eventcdn.net/salmonevolution/q2-h1-2021/