New and cheap means of production should ensure low costs, the entrepreneur hopes.
On Friday, SalmonBusiness reported on RAS farming veteran Arve Gravdal’s spectacular plans to build a land-based facility that’ll produce 100,000 tonnes of salmon at the Portuguese seaside resort of Figueira da Foz.
The huge farming initiative will be developed in the newly founded company Maiken Foods. Maiken Foods was registered on a business register a month ago, with a share capital of EUR 10,000. The company will now raise EUR 5 million in fresh capital, where the company’s business idea has a EUR 20 million valuation.
“We have just finished the business plan and the board has just been registered in Brønnøysund (business register – ed.). So we haven’t raised capital yet,” entrepreneur and sole owner Arve Gravdal told SalmonBusiness.
“We have not engaged investment banks to raise capital. Our project is special in several ways due to the fact that the individual tanks are independent of each other and as we raise relatively little money in phase one compared to many others. The downside of this strategy is that we exclude most institutional investors and large investment companies,” continued Gravdal.
“We are in contact with a niche, a limited circle of people, where we will raise capital through directed issues,” he said. “The idea is to build two to three tanks of the same size as we have done before at the same time as we are preparing preliminary projects and business plans together with professional players for the next phases”.
Arve Gravdal has for many years run land-based salmon farming in Scotland, with not much luck. He has also, together with his business partner and billionaire minicomputer entrepreneur Terje Mikalsen, plans for land-based salmon farming at Lista, Southern Norway.
“When it comes to Lista and Scotland, it is Mikalsen who can comment about it. I am currently in Southern Norway and am working on the projects there. We have an option for a given period of time in an existing fish farm in Portugal that already has a licence to produce other fish species and which and has access to seawater and freshwater,” he said.
Given that you want to produce 100,000 tonnes, it will be extremely capital intensive. How will you fund this without broker help and institutional investors?
“I think you misunderstood my previous message. In phase one, when we build the first two-three tanks, we will engage investment companies for capital raising and engineers/engineering companies to prepare the preliminary project for phase two. We will adapt the organisation to the activity in the next phases,” said Gravdal.
“The 100,000-tonne facility will be built in several phases and through phase one a detailed propulsion plan for phase two will be prepared. As we can build one by one tank, it is difficult to predict how big the development will be in phase two. We have prepared a preliminary plan that will require new equity in the range of NOK 500 million (EUR 50 million). How quickly we will expand then is difficult to predict now,” he added.
But the capital needed for 100,000 tonnes is enormous. Working capital alone is EUR 500-600 million. How do you envision the funding here?
“I simply don’t know how to deal with this. Now I’ve said three times to you how we’re going to build into phases, three times that we’ll use professional advisers when phase one is underway. When we are developing into phases and growing organically, there will be no need to raise 5-6 billion kroner (EUR 500-600 million) for working capital. By the fact that the tanks are independent of each other we can build out at the pace that is natural,” he said.
“We have made a sober start and a sober upgrade in phase two. If the technology and cost levels succeed, it will be natural to develop the project into a large industrial enterprise for several reasons.
When you go out with 100,000 tonnes, and the production costs are EUR 5-6 a kilo, this is a relevant question, don’t you think?
“I have said that we will build three tanks, not that we have built tanks. We have gained access to an area of this vast delta. There is currently an earth pond project on the plot. We have received a “comfort letter” from the authorities that there is nothing in the way that we can build farm tanks on the site and an indication that we can get a licence for salmon in a relatively short time. We have access to fresh water and seawater,” he said.
“And no, I don’t think it’s a relevant question after I’ve explained this three times. You conclude in advance that we will receive costs of 50-60 kroner (EUR 5-6) per kilogram and then it will all become impossible to deal with. I have taken the liberty of creating a video blog on three videos about how the project has evolved over time and why it has become such that land-based farming is not made for life. I know I provoke a lot of people with what I say on this site, but that storm I’m prepared for,” he added.
“That is precisely why we will implement phase one. To show that we can produce salmon at significantly lower cost than that. Then we’ll see what happens in phase two and beyond. What is exciting for us is that if not so long, we know, and in the meantime, both you and I have the right to believe what we want,” said Gravdal.
What production costs per kilo of salmon do you envisage here? How are you going to achieve significantly lower production costs than other players in land-based salmon farming?
“First and foremost, the fact that our facilities are very cheap to build. We are largely cutting two-thirds of the cost compared to regular RAS because we don’t need the big piping and pumping systems. I’m talking about the development of a lot of tanks and not the first ones. So we don’t need the big halls that are about one-and-a-half of the investment costs. Pump costs we know very much about, we have empirical data. So let’s say we cut roughly 1/3 of the costs. Remember, I’m talking about the food fish part and not the smolt part or infrastructure to get the salmon over to the tanks and for harvest,” he said.
“The people who build the tanks have said that if you are going to build many tanks, let’s say many tens, they can build one tank a week. Including bottom, ceiling, insulated walls and internal biofilter. In such a tank we can harvest 500 tonnes per year. Net we produce 400 tonnes of salmon per year in such a tank since we deposit fish at one kilo,” he explained.
“We have empirical data confirming pump costs etc. And we know from someone who has already built a similar technology that they now use 1 kWh per kg of produced salmon. In the last four years, electricity costs from solar panels have fallen by 85 per-cent. This allows us to produce salmon in Portugal where cooling costs are minimal,” he said.
“Everything will hang on whether we can produce salmon at competitive prices, both you and I agree. We’ll get an answer to that in not so many months. Until then, we can agree to disagree.
As far as I have seen, Niri has lost money in Scotland, which suggests that production costs have been higher than market prices for salmon in recent years. Why should you now achieve significantly lower production costs per kilogram?
“That’s right, and it’s my responsibility. We didn’t get so far that we came to commercial production so the numbers are not representative of the purpose you’re talking about. The truth is that we did not have enough money to complete the project, and it was a sad end to phase one although after all, the noise surrounding this managed to reach two of the important milestones I had set before we started,” concluded Gravdal.