Salmon Evolution Asa · OSL:SALME
Salmon Evolution Asa — Investor Presentation (April 2023)
46 slides from Salmon Evolution Asa's investor presentation, Apr 18, 2023
Slide 1: Company Update
COMPANY UPDATE ee Un ory 18 April 2023
Slide 2: Disclaimer (I/II)
DISCLAIMER (I/II) IMPORTANT INFORMATION. THIS DOCUMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES OF AMERICA, ITS TERRITORIES, DEPENDENCIES OR POSSESSIONS, INCLUDING ANY STATE OF THE UNITED STATES AND THE DISTRIC
Slide 3: Disclaimer (II/II)
DISCLAIMER (II/II) Information provided on the market environment, developments, trends and on the competitive situation is based on data and reports prepared by third-parties and/or the Company, and is derived from the Company’s own information and the information sourced from such third-parties. T
Slide 4: Summary of Risk Factors
SUMMARY OF RISK FACTORS RISK FACTORS In the following is a summary of the key risks facing the Company. Please see pages 38-46 for more detailed descriptions of risk factors pertaining to the Group, the Shares and the Private Placement. Key risks relating to the Group and the industry in which it op
Slide 5: Agenda
Agenda • Investment highlights • Fully funding phase 2 expansion • Q1 operational update • Extending the ocean potential™ • Appendices • Operations Norway • Operations International • Other 5
Slide 6: Investment Highlights
INVESTMENT HIGHLIGHTS First mover on HFS technology – proven operational model after ~1 year of production with strong biological results Phase 1 run-rate volume of 7,900t HOG expected reached during Q3 2023 – further upside potential identified Production cost expected on par with conventional farm
Slide 7: On Track for Profitable Farming Operations
ON TRACK FOR PROFITABLE FARMING OPERATIONS Salmon Evolution will harvest out Batch 2 during Salmon prices are currently at above 100 Batch 2 production cost at 56 NOK/kg HOG per Q2 NOK/kg HOG December 2022 @ 1.9 kg LW Biomass Indre Harøy (t, LW) Salmon price NOK/kg HOG2 Production cost illustration
Slide 8: Agenda
Agenda • Investment highlights • Fully funding phase 2 expansion • Q1 operational update • Extending the ocean potential™ • Appendices 8
Slide 9: Continuing Indre Harøy Phase 2 Preparations
CONTINUING INDRE HARØY PHASE 2 PREPARATIONS 9
Slide 10: Equity Raise to Secure Phase 2 Expansion Plan
EQUITY RAISE TO SECURE PHASE 2 EXPANSION PLAN Sources and uses1,2 NOKm • Remaining capex for Phase 2 to be funded through combination of debt, equity, excess liquidity and cash CFO Buffer and general flow from operation (CFO) corporate purposes3 • Additional buffer generated from Phase 1 operation C
Slide 11: Production Capacity to Double in Phase 2
PRODUCTION CAPACITY TO DOUBLE IN PHASE 2 • Phase 1 fully taken over in April and completed1) Phase 2 capex estimate vs Phase 1 • Phase 2 to double production capacity on Indre Harøy NOKm to an estimated 15.8k Tonnes HOG annually ~1,650 250-350 1,600-1,700 • Phase 2 preparations have been ongoing for
Slide 12: New Green Debt Financing Facility in Place
NEW GREEN DEBT FINANCING FACILITY IN PLACE Debt funding plan Indre Harøy NOKm Increased overdraft facility4 Existing overdraft facility Debt • New green debt financing facility arranged by DNB and Nordea • Signed legally binding loan agreement1 i) increasing debt on phase 1 facility with 250 NOKm an
Slide 13: Production Cost Expected to Improve with Scale
PRODUCTION COST EXPECTED TO IMPROVE WITH SCALE Targeted EBITDA cost bridge (NOK/kg HOG) Norway facility1 Comments OPEX SG&A • Alongside increasing volumes, farming cost is coming down Actual costs2 • Batch 2 with NOK ~56/kg HOG farming EBITDA cost per Dec 2022 at a fish weight of 1.9kg LW • Cost tre
Slide 14: Potential New Revenue Stream from Stocking of Post-Smolt
POTENTIAL NEW REVENUE STREAM FROM STOCKING OF POST-SMOLT Unused tank capacity can be used to grow post-smolt Limited additional cost due to scalable cost base Stocking density (kg/m3) Illustrative margin potential (NOK per additional smolt stocked) Additional post-smolt (150-200k) Original stocking
Slide 15: Low-Cost and Stable Energy Supply
LOW-COST AND STABLE ENERGY SUPPLY Salmon Evolution is favorably located in power NO3 prices have been consistently lower than price area NO3 comparable prices • Salmon Evolution is located in power price area 3 (“NO3”) Euro/MWh • NO3 is not directly connected to 250 the grid towards Europe, causing
Slide 16: Agenda
Agenda • Investment highlights • Fully funding phase 2 expansion • Q1 operational update • Extending the ocean potential™ • Appendices 16
Slide 17: Gearing Up Biomass Production
GEARING UP BIOMASS PRODUCTION Comments Net biomass growth (LW) and harvest volumes (HOG) • New all-time high biomass production in 400 1 600 March with about 320 tonnes in net Net growth Total biomass Net biomass growth (tonnes, LW) 350 1 400 biomass gain Total biomass (tonnes, LW) 300 1 200 • Stand
Slide 18: Group Biomass Overview
GROUP BIOMASS OVERVIEW Group biomass development 31 December 2022 31 March 2023 Biomass Biomass Batch Units (#) Weight (g) Units (#) Weight (g) Comments (tonnes) (tonnes) Batch #2 ~228,000 ~1,875 428 ~225,000 ~3,450 777 Stocked mid July Batch #3 ~200,000 ~555 112 ~198,000 ~1,385 275 Stocked late Oct
Slide 19: Summary
SUMMARY • Attractively positioned to benefit from exceptionally strong salmon market outlook • Production ramp-up proceeding according to plan • Stable conditions throughout the farm – also at targeted densities • Batch 2 on track for harvesting during Q2 2023 with largest fish group at 3.7 kg end o
Slide 20: Agenda
Agenda • Investment highlights • Fully funding phase 2 expansion • Q1 operational update • Extending the ocean potential™ • Appendices 20
Slide 21: Land-based salmon farming responds to long-term demand growth and supply constraints
Land-based salmon farming is a response to long-term salmon demand growth, supply constraints & environmental challenges Protein demand is ever-increasing… …and salmon is the most sustainable option Traditional supply can’t keep up with demand… …and faces environmental issues Salmon harvest 2011-202
Slide 22: Land-based farming solves the growth challenges of the salmon industry
Land-based farming solves the growth challenges of the salmon industry ESG challenges of traditional salmon farming 1 2 3 4 5 6 Diseases, parasites Untreated fish waste CO2 footprint Varying climate Mortality Escapes and sea lice Nature of traditional salmon Diseases, parasites and sea Varying clima
Slide 23: Salmon Evolution at a Glance
SALMON EVOLUTION AT A GLANCE Company overview Salmon farming facilities ▪ Established in 2017 Indre Harøy Yangyang ▪ Based in Hustadvika, strategically located on the west coast of Norway ▪ Listed on main list at Oslo Stock Exchange in 2021 ▪ Market capitalization of USD ~300m 49% ownership ▪ Highly
Slide 24: Aiming to Be the Global Leader in Land-Based Salmon Farming
SALMON EVOLUTION IS AIMING TO BE THE GLOBAL LEADER IN LAND-BASED SALMON FARMING Salmon Evolution in a nutshell 1 2 3 4 5 Born in Norway – Biology is our most International expansion First-mover aiming for Premium position the cradle of salmon important consideration with strong local partners techno
Slide 25: Biology Is Our Number One Priority
BIOLOGY IS OUR NUMBER ONE PRIORITY 1 We have found the sweet-spot: 2 Minimizing risk: Hybrid flow-through system (HFS)1 Each tank is a separate biozone RAS Recirculating aquaculture system Biofilter shared by No biofilter – each tank a several tanks – separate biological causing cross- zone, elimina
Slide 26: International Expansion Enabled by Competence and Track Record
INTERNATIONAL EXPANSION ENABLED BY OUR COMPETENCE AND TRACK RECORD Scalable and capital light expansion models enabled by Global opportunities enabled by HFS technology technological & operational know-how Ocean temperatures and suitability for salmon farming 1 2 3 4 … Royalties & Selling project Sa
Slide 27: Roadmap to 100,000 Tonnes HOG
ROADMAP TO 100,000 TONNES HOG 2020 2022 2024 2026 2028 2030 2032 NORWAY 31.5kt Indre Harøy based on current licenses Phase 1 Phase 2 Phase 3 7.9kt 7.9kt 15.7kt ++ 31.5kt+ ASIA South Korea South Korea phase 1 phase 2 ++ 8.4kt 8.4kt 16.8kt+ North America North America 31.5kt+ ++ 31.5kt+ TOTAL 100kt 27
Slide 28: Agenda
Agenda • Appendices • Operations Norway • Operations International • Other 28
Slide 29: Batch 1 Fully Harvested Out During Q4 2022 with Very Strong Results
BATCH 1 FULLY HARVESTED OUT DURING Q4 2022 WITH VERY STRONG RESULTS Comments Harvest weight distribution (HOG) 70% • Total batch 1 harvest volumes of ~340 tonnes HOG at an average weight of ~3.75 kg HOG (~4.5 kg LW) 60% Share of harvest (%) • Harvest spread over 3 harvesting rounds from early 50% No
Slide 30: Our Salmon Well Received in the Market
OUR SALMON WELL RECEIVED IN THE MARKET World premiere – from local to global Selected customer feedback “Presentation of fillets – excellent, colour, trim, no gaping, no black spots (exactly how the conventional product comes in). Local Taste – excellent , no off flavour, very clean taste, no fishy
Slide 31: Significant Opportunity to Unlock Long-Term Potential at Indre Harøy
SIGNIFICANT OPPORTUNITY TO UNLOCK LONG-TERM POTENTIAL AT INDRE HARØY Short term target Focus areas Long-term target Implications Optimizing Achieve steady state production Capturing built-in production of 7,900 upside potential in Improved profitability tonnes HOG Feed production plan Supported by e
Slide 32: Agenda
Agenda • Appendices • Operations Norway • Operations International • Other 32
Slide 33: K Smart Farming – Focus on Engineering and Permits
K SMART FARMING – FOCUS ON ENGINEERING AND PERMITS • K Smart JV with Dongwon Industries formalized end of March Illustration – Yangyang on-growing site 2021 • Ownership split 49/51% for SE and Dongwon, respectively. Dongwon to facilitate 75% debt financing • Good progress on design and engineering a
Slide 34: North America – Building Pipeline for Future Growth
NORTH AMERICA – BUILDING PIPELINE FOR FUTURE GROWTH Comments Tentative timeline • Evaluating selected potential production sites in 2022 2023 2024 2025 2026 2027 2028 North America, both on the west and east coast • Current focus is centred on site selection processes Site selection and initial due
Slide 35: Agenda
Agenda • Appendices • Operations Norway • Operations International • Other 35
Slide 36: Strong management team with extensive experience
Strong management team with extensive experience leading a growing organization and corporation Management team Organizational structure Corporate structure Trond Håkon Schaug-Pettersen, CEO ▪ >15 years experience from both salmon industry and capital markets notably at About 65 FTEs across the Grou
Slide 37: Highly competent board of directors backed by strong owners
Highly competent board of directors backed by strong owners Board of directors Ownership as per 31 December 2022 Tore A. Tønseth Eunhong Min Ownership Board Shareholders Comments Chairman of the board Board member share representative ▪ Investment Director at Ronja ▪ Chief Executive Officer of Owned
Slide 38: Risk Factors (1/9)
RISK FACTORS (1/9) General: An investment in shares and the Company involves inherent risks. Investors should consider all information set forth in this document and, in particular, the specific risk factors set out below. An investment in the shares of the Company is suitable only for investors who
Slide 39: Risk Factors (2/9)
RISK FACTORS (2/9) The Group is subject to the risk of cost overruns and delays because of legal and planning matters of the Indre Harøy Facility construction project: The Group has made no binding contractual commitments with entrepreneurs as to the Second Phase (or Third Phase). The Group has sign
Slide 40: Risk Factors (3/9)
RISK FACTORS (3/9) The Third Phase of the planned Facility on Indre Harøy is not financed, and may depend on further equity injections, and will depend on further debt financing arrangements in order to be completed: The Third Phase is expected to require additional investments of approximately NOK
Slide 41: Risk Factors (4/9)
RISK FACTORS (4/9) The Group’s indebtedness could furthermore affect the Group’s future operations, since a portion of the Group’s cash flow from operations will be dedicated to the payment of interest and principal on such debt, and will hence not be available for other purposes. Financial covenant
Slide 42: Risk Factors (5/9)
RISK FACTORS (5/9) Substantial fluctuations in the price of salmon and critical input factors could have an adverse impact on the Group’s business and its financial position: The Group’s financial position and future prospect depend on the price of farmed salmon, which has historically been subject
Slide 43: Risk Factors (6/9)
RISK FACTORS (6/9) The Group’s business is inherently exposed to regulatory risk and amendments in legislation could potentially have an adverse effect on the Group’s business and financial position: The Group’s activities are subject to extensive international and national regulations, in particula
Slide 44: Risk Factors (7/9)
RISK FACTORS (7/9) Risk relating to the joint venture with Dongwon Industries in South Korea and any potential future joint ventures: The Group has entered into an agreement for a joint venture (the “JV Agreement”) with the Korean seafood giant and larger shareholder in the Company, Dongwon Industri
Slide 45: Risk Factors (8/9)
RISK FACTORS (8/9) The Group’s business is capital intensive and there is a risk that the Group is not able to raise sufficient capital to fund its current and/or future projects: The Group’s business and future plans are capital intensive. While the aim is to fully fund the Second Phase through a c
Slide 46: Risk Factors (9/9)
RISK FACTORS (9/9) Future issuances of shares or other securities in the Company may dilute the holdings of shareholders and could materially affect the price of the Shares: In order to finance the Group’s strategy, the Group may be dependent on raising additional equity and external debt. For the T
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