Salmon Evolution CEO: “Then we will have a production cost on par with what one has in the sea”

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Land-based salmon farmer Håkon André Berg has been feeling the sector’s stock market decline recently, but considers the likelihood of accidents during production at his facility as minimal.

“I think that if you had been sitting in a meeting room, like this, and been served food for a year, and the air was chemically and theoretically satisfactory, then I still think it would be good to open the door and bring in fresh air,” said Salmon Evolution CEO Håkon André Berg.

This is how he sums up the land-based fish farming company’s production idea.

Single
“When we talk to investors, they want to make it easy and split between RAS (recirculating aquaculture systems ed.) and flow through. Our facility is a hybrid solution that, in relation to tank structure, is more like a traditional RAS than, for example, Andfjord Salmon, which has large square pools,” he said.

“Our approach is to be conservative in what is nevertheless a disruptive industry. On biology, on being in Norway, where one has the entire value chain, with veterinarians and infrastructure. When establishing in an overseas market, one must solve all problems alone, while in Norway one has many strong partners to draw on. By working with a local partner, we are convinced that we can fast-track an international establishment,” said Berg, who has experience from the aquaculture-focused private equity firm Broodstock.

Salmon Evolution is already in full swing casting tanks and contructing the massive land-based fish farm at Indre Harøy, Møre og Romsdal, Western Norway.

Photo: Salmon Evolution

Gained
“We base our concept on solutions developed through the construction and operation of traditional smolt plants, by adding oxygen and venting CO2. This has been in smolt facilities for 20-30 years,” he said.

“The question we have asked ourselves is: How much does recirculating need to be done before an increased complexity and risk is given in the facility? A high recirculating rate entails complexity, where, among other things, one cannot feed the fish for too long,” he said.

“We could have run 100 per-cent flow-through. We do not do that since we then have to pump and heat more water, and that would have caused us more OPEX (operating expenses .ed). We want a facility that provides optimal living conditions for salmon and that has a recirculating rate of a maximum 65 per-cent of the water. We believe that the likelihood of accidents during production is minimal, and thus the possibility is that one will have a smooth and good operation in the facility,” Berg told SalmonBusiness.

Photo: Salmon Evolution

“We couldn’t build this in Florida or Utah, since we have to have access to cold and clean seawater. We can build it in South Korea, but not Ethiopia or the Middle East, since it’s too hot there,” he said.

Filter
Like players such as Andfjord Salmon, Bulandet Miljøfisk and Losna Seafood, Salmon Evolution will source fresh seawater from the depths just outside the production site.

“We take in water from the sea, and run it through a filter that takes out particles and potential lice larvae. Then we run it through a UV filter, then through a heat exchanger before taking it through a heat pump to reach the correct temperature.,” he said.

“When we heat the water, nitrogen accumulates, which we aeration in a similar way to CO2 aeration. Pouring and “crushing” the water. It’s a mechanical process. After the water is used in production, it is cleaned through a drum filter and then it goes into the sea,” explained Berg.

Photo. Salmon Evolution

“We will produce the fish up to six kilograms since we consider the probability of accidents to be low,” he said.

What production costs do you envisage?

“Fixed costs will account for a larger share of production costs. We are building a facility with 7,900 tonnes in harvest volume per stage of construction. With four stages of construction, it will be 31,500 tonnes. Then we will have a production cost in line with what looks in the sea, and at a fully developed facility we will be under what we see in the sea today,” he said confidently.

What do you see in the sea today?

“You can see an average between NOK 38.50 (EUR 3.8 .ed) and NOK 39.50 (EUR 3.9 .ed) per kilogram.”

So fully developed will you produce the fish under EUR 3.8 per kilogram?

“Yes, yes. That must be the goal,” he said.

Are you considering to scale up?

“There is more area on the island where the facility is located. But we do not have concrete plans to build more on Indre Harøy,” he added.

Photo: Salmon Evolution

Optimal
That’s what they’re going to do in East Asia.

“South Korea will be two years behind Indre Harøy. There we have exactly the same concept as Indre Harøy. We collect water from a depth of 30 to 100 metres from the northeast coast. There’s cold, clean water. Asians love large salmon with lots of taste. We believe our solution is absolutely optimal for Korea and the Asian market,” he added.

The facility is located in Yangyang, Gangwon Province, on the northeast coast of the country.

“The surface temperature in Korea can get quite warm in summer. So it is not possible to produce salmon in open cages there. But the cold water flow coming from Russia makes it cold on the seabed and really optimal for salmon production,” continued Berg.

With its many filters, pipes, tanks and pumps, a modern land-based fish farm is an advanced industry. For that, people and knowledge are needed.

“Our facility is both a processing facility and a fish farm. Ormen Lange, Norsk Hydro and Hustadmarmor provide good access to expertise in our region,” said Berg further.

Do you expect to achieve a price premium for the fish?

“We are convinced that it is possible to get a premium on the salmon. With smooth production and even harvest profile. We see in similar facilities that the quality of the fish is very high. You can control the current and temperature,” said Berg.

What other similar facilities are there?

“A couple. SalmoBreed Salten is built by Artec Aqua and takes fish from roe to 15 kilograms. We also see some smaller facilities in Iceland,” he added.

Photo: Salmon Evolution

But there are no comparable facilities on this scale?

“Someone’s at it. But here in Europe, there is little production”.

Are you in danger of becoming a commodity producer?

“We have to do a good job and communicate to the right people who are willing to pay for it. And we think we’re going to do that,” he said.

Debt
In South Korea, financing conditions are better than in Norway as its business partner, fisheries giant Dongwon, provides guarantees to banks.

“Dongwon provides 75 per-cent debt and 25 per-cent equity. The interest rate is very competitive.

Like a mortgage loan for real estate?

“A little over it, but not very much,” concluded Berg.

Planned land-based salmon farm in South Korea. Illustration: Dongwon Industries