Salmon Evolution Indre Harøy as it stands now, with Phase 1 completed. The company will start construction of Phase 2 in Q3 2024.
Photo: Salmon Evolution.
This has been an important week for Salmon Evolution which announced that, after completing a new round of funding, it is all set for Phase 2. The Norwegian land-based salmon farming company is ready and fully funded. With an estimated investment of NOK 2.2 billion (EUR 195.2 million / USD 208.6 million), construction is scheduled to begin in the third quarter of 2024.
"For Salmon Evolution, this is really a transformative milestone as we are now creating a fantastic platform, fully funded, for 18,000 tonnes gutted, and with a significant cashflow generating capacity that can support strong organic growth in the years to come," CEO Trond Håkon Schaug-Pettersen said in the update provided by the company following its announcement to the market on the financing of what they called their "improved Phase 2 project."
"What we are doing now is creating the foundation for substantial profitable growth in the years to come," Schaug-Pettersen added, taking stock of what has been achieved so far. Salmon Evolution's CEO noted that the company has now been operating the farm for more than two years and proving the viability of land-based salmon farming at scale and with strong results both biologically and financially, as demonstrated by Q1 2024 results.
"Therefore, we are now very much ready for Phase 2, which will be what we call an improved copy of Phase 1, increasing total production capacity from Phases 1 and 2 combined to 18,000 tonnes, get that by optimizing the production plan, and adding additional tank capacity at the site," he said.
Compared to the original financing plan submitted in April 2023, in this improved project the Norwegian land-based salmon farmer has sought an optimization of its production plan. Thus, they will add some additional tank capacity which will enable them to increase their stocking weights and also have a higher throughput in the farm, increasing the combined production capacity of Phases 1 and 2 from 15,800 to the mentioned 18,000 tonnes.
This will also have a positive effect on their production costs, as, given the infrastructure already in place at the site, they can do this in a very cost-effective manner. They plan to do the same in Phase 3, which means that Indre Harøy's total production capacity, once developed, will increase from 32,000 to 36,000 tons gutted.
Trond Håkon Schaug-Pettersen also said that, with Phase 2, Salmon Evolution's operation reaches critical mass and is thus expected to generate a substantial operating cash flow, which is putting them in a position with significant organic growth capacity.
During the presentation Schaug-Pettersen was accompanied by the company's CFO, Trond Vadset Veibust, who explained that to fund the improved Phase 2 expansion project, they will use a combination of debt, equity cash at hand, and free cash flow. As mentioned, the project has an estimated investment level of NOK 2.2 billion (EUR 195.2 million / USD 208.6 million), as well as NOK 200 million (EUR 17.7 million / USD 18.9 million) in project contingencies.
"We already had a very competitive bank package in place for Phase 2 with a little over NOK 1 billion (EUR 88.6 million / USD 94.7 million) in available bank facilities for the project. To fund the improved project, we have again received strong support from our bank syndicate, and NOK 675 million (EUR 59.8 million / USD 63.9 million) in new bank facilities as part of the total financing package," Salmon Evolution's CFO stated.
The day before, the company had completed a successful private placement raising approximately NOK 365 million (EUR 32.3 million / USD 34.6 million) through the allotment of 48,666,666 new shares at a subscription price of NOK 7.50 (EUR 0.66 /USD 0.71 dólares) per share. Of these, Trond Vadset Veibust himself subscribed for 35,000 shares and Trond Håkon Schaug-Pettersen subscribed for 100,000.
"With these sources combined, we have fully funded Indre Harøy Phase 2," the CFO said, and went further. "We have a potential to fully fund our expansion plans based on our own cash flow. This puts us in a unique position where we basically control our own destiny and further scaling becomes more a question of how quickly we want to do it instead of how we are going to fund it," Veibust claimed.
"We are very pleased with having completed this financing round," added CEO Trond Håkon Schaug-Pettersen summing up. "We are fully funded for Phase 2. Now we have a unique operational platform, we have a very competent organization, and also with face-to-upper running to also have a strong cash flow generation capacity that can support organic growth in the years to come."