Norway's new resource rent tax on salmon farmers has led to frozen investments and threats of litigation across the industry. But now one of the country's salmon giants has finally made its first major investment move.
Grieg Seafood has announced it will invest NOK 1.1 billion in a new post-smolt unit at its smolt facility in Finnmark, Norway's northernmost county.
At the same time, the company is eyeing opportunities for further expansion in Canada, which it describes as "one of the few salmon farming regions globally with a significant untapped growth potential and proximity to one of the largest and fast-growing markets".
The company said it had decided to move forward with the Finnmark investment as originally planned before the salmon tax was introduced, which will see Grieg increasing annual production of post-smolt from 1,800 to 4,800 tonnes in the region.
Announcing its decision, Grieg Seafood noted that "While many technical details of the tax are still unclear, the final tax was improved from the original version." The company will now prioritize the post-smolt expansion in Finnmark as the first investment as it is expected to drive biological control, earnings and sustainability.
Commenting on the decision, Grieg CEO Andreas Kvame said that although the 25% resource rent tax had reduced the funds available for investments, "It is now more critical to prioritize the location, the investment amount, and the order of investment than before."
"The post-smolt expansion in Finnmark is a relatively low risk investment with a good profitability outlook. Based on our experience in Rogaland, we strongly believe that post-smolt will improve biology, fish health and welfare in our Finnmark region," Kvame said.
Grieg Seafood is also looking beyond Norway as part of its strategy for sustainable growth, the CEO indicated.
The company already has a well-established farming operation in British Columbia, with an annual harvest volume of 20,000 tonnes HOG.
Meanwhile, in Newfoundland, Grieg has recently had its first successful harvest of salmon, and plans to increase harvest volumes from the estimated 5,000 tonnes HOG in 2023 to 15,000 tonnes HOG in 2026, with a further long-term potential of up to 65,000 tonnes HOG, Placentia Bay and Bays West combined.
"In Canada, we see huge opportunities for sustainable salmon farming in close proximity to the growing North American market. We aim to realize the Canadian potential," Kvame said.
However, Kvame noted, "[D]eveloping the Canadian operations require substantial investments at a time when the resource tax and overall inflation require greater capital discipline."
"As such, we are seeking long-term partners to invest with us, allowing us to develop our business in Canada at pace," Kvame said.
Key to success, the company indicated, is balancing the maximization of value with mitigation of risks. Grieg has engaged DNB Markets as a financial advisor to help identify potential partners to develop its Canadian operations, and announced that, subject to market conditions and final approval by the Board of Directors, they expect to finalise the process during 2024.