Phase 2 of Nordic Aqua China's land-based farm fully funded

China's first commercial-scale RAS Atlantic salmon farm, Nordic Aqua Partners, announced yesterday that, following the successful completion of a private placement, it has raised NOK 350 million (EUR 29.7 million / USD 33.1 million). Together with indicative debt financing and cash on hand, these funds will fully finance the estimated construction of Phase 2 of its farm on Gaotang Island, Ningbo.

Additional funding to address the geosmin issue

However, although the completion of the construction of Phase 2 of its land-based RAS facility will be the main destination of the funds raised in this private placement, as announced by the company, it will also serve general corporate purposes, pay down short-term debt, increase working capital and what the company has defined as "geosmin improvement capex."

Following a promising trading update in Q2, at the end of July, Nordic Aqua was forced to downgrade its expectations for 2024 after an off-flavor problem caused by elevated levels of geosmin detected in approximately 190 metric tons (HOG) of harvest-ready salmon.

Geosmin is a naturally occurring compound known to be absorbed by fish in all recirculating aquaculture systems (RAS). It is harmless to both fish and humans, but, in high concentrations, it can adversely affect the flavor of the fish.

In this case, the problem affected not only taste, but also turnover. Dealing with the geosmin issue impacted the company's revenue and cash flow in the short term. This prompted a thorough review of Nordic Aqua's capital requirements to ensure continued strategic execution and operational stability.

In its Q2 2024 results presentation in August, the China-based RAS salmon producer reported that as of June 30, 2024, it had available liquidity of EUR 10.4 million. However, due to reduced harvest volumes and additional capital expenditures (CAPEX) related to addressing the geosmin issue, the company said it planned to raise approximately NOK 250 million (EUR 21.4 million / USD 22.5 million) in additional equity financing.

NOK 100 million more than expected was raised

The result has been that, just with this private placement, the proceeds have been above the expectations set by the company. Specifically, NOK 100 million (EUR 8.5 million / USD 9.5 million) above the forecast.

Instead of the NOK 250 million it expected to raise, the private placement of 4,666,666 shares at an offer price of NOK 75 (EUR 6.37 / USD 7.11) per share has raised final gross proceeds of approximately NOK 350 million (EUR 29.7 million / USD 33.1 million).

The pre-committing investors who have subscribed and been conditionally allocated offering shares in Nordic Aqua Partner's private placement are, in most cases well-known company names or individuals.

If we talk about companies, Kontrari AS - owner of 32.8% of the outstanding shares - has been allocated 1,685,000 offer shares; ILCO - owning 9. 2% of the outstanding shares - will receive 475,000; Akva Group - indirectly owning 2.9% of the outstanding shares - will have 133,333 more; Aino AS - representing Board Member Aino Olaisen, owner of 1.2% of the outstanding shares - has been allocated 61,000; and Maringto AS - representing Board Chairman Atle Eide, who owns 1% of the outstanding shares - will receive 51,000 more shares.

Regarding individuals, former Skretting CEO Therese Log Bergjord, member of the Board, will receive 13,333 offer shares; Ragnar Joensen, CEO of the company, has been allocated 2,666 shares; the same as CFO Tom Johan Austrheim and Andreas Thorud, Managing Director of Nordic Aqua (Ningbo) Co. Ltd., both of whom have also been allotted 2,666 shares.

NOK 35 million more could be raised in a subsequent offering

This private placement was undertaken because the Board considered this way of raising capital was in the common interest of the company and its shareholders as it would reduce execution and completion risk, allowing the company to take advantage of current market conditions and raise capital more quickly, at a smaller discount compared to a rights issue, and without the underwriting fees normally seen in rights offerings.

Nevertheless, Nordic Aqua Partners said it intends to conduct a subsequent offering that will ensure that eligible shareholders receive the opportunity to subscribe for new shares at the same subscription price as applied in the private placement.

Non-tradable subscription rights for up to 466,666 new shares with gross proceeds of up to approximately NOK 35 million (EUR 2.9 million / USD 3.3 million) would be offered at the offer price. They would be directed to existing shareholders of the company as of September 26, 2024 who were not allotted in the private placement or contacted in the run-up to the private placement.

Although, as said, its intention is to conduct a subsequent offering, Nordic Aqua Partners cautioned that, if it is finally carried out or not will depend, among other things, on the evolution of the company's share price after the completion of the private placement.

Allocated offer shares are expected to be settled on or about 22 October 2024. Following completion of this private placement, Nordic Aqua Partners will have a share capital of NOK 21,000,755 (EUR 1.786.141 / USD 1.992.984) divided on 21,000,755 shares, each with a nominal value of NOK 1.00 (EUR 0.08 / USD 0.09).