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Atlantic Sapphire – Land-based salmon farming
Introductory 2-pager to Equity Sales
DNB Markets | Investment Banking Division
Company Presentation
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This presentation (the "Presentation") has been produced by Atlantic Sapphire AS (the “Company”) with assistance from DNB Markets and Arctic Securities (the “Managers”) solely for use at the presentation to investors held in connection with the contemplated
equity issue in the Company (the "Private Placement"). This Presentation has not been independently verified nor verified by any of the Mangers. This Presentation and any information contained herein or provided at this Presentation are being made available on a
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This Presentation contains several forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other
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assumptions, opinions and views of the Company, are based upon various assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third party sources.
Although the Company believes that these assumptions were reasonable when made, the statements provided in this Presentation are solely opinions and forecasts that are uncertain and subject to risks, contingencies and other important factors which are di fficult or
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This Presentation shall be governed by Norwegian law. Any dispute arising in respect of this Presentation is subject to the exclusive jurisdiction of the Norwegian courts with Oslo City Court as legal venue in the first instance.
2
IMPORTANT INFORMATION
Equity offering summary
- Transaction
- Timeline
- Sources and uses
2
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Strictly private and confidential |
Pioneering Land-Based Salmon Farming, Locally.
Transforming Protein Production, Globally.
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Executive summary
Equity offering summary
- Transaction
- Timeline
- Sources and uses
1
2
3
4 Sole US land-based producer with scale to become the most cost efficient supplier of salmon to the US By locating in the US, Atlantic Sapphire avoids the costly air freight cost(~15 NOK/kg) currently carried by the salmon farmers exporting their salmon
from Norway, Chile, Faroe Islands and other to the US (95% of the US Atlantic Salmon is imported)
The US market for Atlantic salmon is the world’s largest and has a strong growth profile and large potential
Disruptive technology with a sustainable competitive advantage used in an environmental friendly framework Land-based salmon farming is the next big thing within aquaculture, disrupting today’s conventional industry by offering a more cost effective and
environmental friendly approach
Conventional salmon farming sites need to be located at specific geographical areas, remote and far away from the main markets. Land-based salmon
farming facilities can be located close to the largest markets, which eliminates transportation costs and increases the freshness of the product
Experienced management team and board of directors with significant equity investments in the company The management and board of directors have significant experience within salmon farming
Seafood experience include 1) founders of listed salmon farmers, 2) CEO positions of listed salmon farmers, 3) Chairman position in the world’s largest
value added salmon products provider, 4) Chairman of Norway’s largest non-listed salmon farmer and 5) 20+ years in Marine Harvest ASA and 6)
significant land-based salmon farming experience from 6 years of operations in Denmark
5 Premium quality salmon with strong brand attributes The Atlantic Sapphire salmon is widely praised by high demanding consumers and the Company has developed a strong brand through producing a
high quality product coupled with targeted marketing
The company is selling salmon from their Danish facility at a significant premium to other salmon producers
4
Atlantic Sapphire has been operating a land-based salmon farming facility in Denmark for 6 years, and is the first company to solve all the
major land-based salmon farming challenges Next step is a commercial scale-up, targeting a 90,000 tonnes land-based salmon farming facility in the US – all permits already in place
Current operational performance in the Danish facility is above the budgeted KPIs in the US business plan
Principal assumptions in the business plan seem conservative and highly realistic. For instance, by assuming 1) that the US facility will perform at current
Danish KPIs and that 2) current salmon prices remain unchanged, then the company will fund the next expansions with funds from operations and have
an EBITDA of ~USD 740 million by 2026
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5
AGENDA
The Atlantic Sapphire Story
Business Plan
Appendix
Brief Introduction to the Commercial Scale-Up and Land-Based Salmon Farming
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Introduction to the Commercial Scale-Up - Commercially Best in Class, Danish Facility is Performing Above Budgeted US KPIs
Equity offering summary
- Transaction
- Timeline
- Sources and uses
Denmark
US, Miami
2
1
Atlantic Sapphire has used 6 years to innovate and fine-tune to
build up a commercial scale land-based salmon farming
competence in its Danish facility. 1
The company has secured groundwater infrastructure rights in
Miami to build up a large-scaled land-based salmon farming
facility. The company has already started the construction on
the site.
2
Atlantic Sapphire has permits for an annual production of
~90,000 tonnes salmon in Miami, and will initiate three
expansion phases to reach this production level. 3
The company will raise approx. USD 105 million in equity (70
USDm in the private placement, and 35 USDm within ~1 year)
and USD 60 million in debt for the “US Phase 1 expansion” and
“Denmark Expansion”, which will give them a total production
capacity of ~10,500 tonnes annually (8,500t + 2,000t). The
~10,500 tonnes run-rate production is expected in 2020.
4
6
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Land-based Salmon Farming is Well Positioned to Ride the Megatrending Seafood
Sector, and to Outdistance Conventional Salmon Farming in Several Aspects
Equity offering summary
- Transaction
- Timeline
- Sources and uses
Why salmon farming? Why land-based?
Long-term fundamentals: Most competitive protein source in
terms of production efficiency The world’s population is expected to reach 9.7 billion within 2050, which will
increase the demand for protein significantly, salmon production is one of the
most efficient ways to produce protein
70% of the world’s surface is covered by water, however only 6.5% of the
protein sources for human consumption are produced in this element
4.0
3.02.21.1
10.0
Cattle
6.0
Chicken Salmon Pork
Feed needed(kg) to increase bodyweight with 1 kg
9.77.5
2.5
+29%
2050E 1950 2016
World population
Short-term fundamentals: Attractive supply-demand
characteristics support strong prices going forward Salmon supply is currently curbed by biological issues and regulatory obstacles,
giving reasons to expect limited supply growth from conventional salmon farming
While seafood demand is on an everlasting growth trajectory
Source: Marine Harvest Handbook 2016, worldometer.com
Land-based farming offers the best growth story
Ample room for growth and expansion from land-based farming, not impacted by
conventional farming’s growth impediments
Better conditions for feed control and biomass growth
While conventional farming growth is cyclical (especially in colder regions), land-
based farming retains constantly the optimal water temperature (14 Celsius)
The stable water temperature optimizes growth rates and feed conversion ratio
Enables production to take place close to the end-consumers in
the largest and most attractive markets
While sea-based salmon production is limited to certain geographical areas (due
to water temperature), land-based farming is more flexible in terms of location
The US and Asia are large markets with limited production. Hence room to
eliminate transportation costs and increase freshness
Attractive risk/reward
Eliminates several risks present in conventional salmon farming (e.g. higher
biological risk for open net pen assets)
Potentially lower capex per kg than conventional farming at the moment due to
the rapid increase in license values/costs
Disruptive technology with a significant first-mover advantage
Approximately 40 companies dominating global production with little incentive to
substitute technology and write-off heavy investments in net pen assets
5 land-based salmon farming companies exist at various stages of development,
internationally. Combined estimated 2016 production capacity of 5Kmt
Sustainable competitive advantage with vast opportunity to grow
15.6 16.8 17.2 18.0 18.2
9.9
20
10
15
2020E 2030E 2010E 2006 1960 2000
Development of global average fish consumption (kg per capita)
7
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8
AGENDA
The Atlantic Sapphire Story
Business Plan
Appendix
Brief Introduction to the Commercial Scale-Up and Land-Based Salmon Farming
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Atlantic Sapphire is a State-of-the-Art Land-Based Salmon Farming Company That
is Expected to Deliver Significant Growth in Harvest Volumes Going Forward
Equity offering summary
- Transaction
- Timeline
- Sources and uses
Aqua Health Aqua Health
8 1
2
3 6
7
5
Right management
and board
Right location
Right market
Right size Right business plan
Right product quality
Right timing
Right branding and
positioning
4
9
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Right Management and Board - Atlantic Sapphire’s Management Team is Strong and Possesses Unique Experience
Equity offering summary
- Transaction
- Timeline
- Sources and uses
1
Johan Andreassen CEO & Co-Founder Headed a 30,000 tonnes capacity salmon farming company,
Villa Organic, from idea inception to IPO and strategic exit at
age 32
Was the lead supplier to Whole Foods for 7 years
Has together with co-founder Bjørn-Vegard Løvik invested ~USD
4.5 million into Atlantic Sapphire to date
Jose Prado CFO 21 years full investment cycle experience, from early stage to
mid-cap exit, 16 years in Florida
MBA from Kellogg School of Management (1993-1995)
Dharma Rajeswaran COO More than 26 years of salmon farming experience
More than 20 years in Marine Harvest ASA, with main focus on
their land-based RAS facilities for smolt/post-smolt
Experience includes inter alia CEO in Villa Arctic AS, Chairman
in Norsk Marin Fisk AS and Board member in Villa Organic
Bjørn Myrseth Board Member Former Chairman of Morpol, the world's leading provider of
value-added salmon products
Founder and CEO of Marine Farms ASA until 2011
One of the founders of Stolt Sea Farms where he was CEO from
1972-1987
Thue Holm CTO Thue trained as an environmental biologist at Roskilde University
in Denmark
Worked seven years in Billund Aquaculture, a leading supplier of
RAS systems
Co-managed the establishment of Billund Aquaculture Chile
10
Damien Claire EVP - Offtake Currently CEO of Platina Seafoods, the US sales channel of
Atlantic Sapphire
10 years US salmon industry national account management
experience
Kjell Bjordal Upcoming Chairman Extensive aquaculture and board experience
Served as CEO of the industry giant EWOS from 2000-2013,
Currently serves as Chairman in several companies, including
Nordlaks (largest non-listed Norwegian salmon farmer),
Broodstock Capital and Entra ASA (board member)
Selected board members
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Right location (1/2) -The Miami Location Gives a Huge Transport Cost Advantage and Increases Freshness
Equity offering summary
- Transaction
- Timeline
- Sources and uses
US landed production cost: Industry Norway vs Atlantic Sapphire (NOK/kg HOG)
2
6
15
5
1
36
57
Other production cost Feed Industry average
Norway
(US landed)
AS 2022 Eliminate
freshness discount
4
Depreciation
and interest
Freight
1 2 3 4 5
Superior biological performance and efficient feeding methods should improve feed conversion ratio
Optimal farming temperature throughout lifecycle and no biological issues
No air-freight cost compared to Norwegian or Chilean salmon farmers
Accounting depreciation is estimated to be higher than economic depreciation
No air freight and shorter processing and delivery cycle extends shelf life by 3 days
1
Lowest cost producer supplying the US market
11
2
5
4
3
Superior biological
performance and
efficient feeding
methods should
improve feed
conversion ratio
1
Optimal farming
temperature
throughout lifecycle
and limited
biological issues
2
Accounting
depreciation is
estimated to be
higher than
economic
depreciation
4
No air freight,
shorter processing
and delivery cycle
extend shelf life by
3 days
5
No air-freight cost
compared to
Norwegian and
Chilean salmon
farmers
3
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Right location (2/2) -The Miami Location has Sufficient Groundwater Resources to Become a “New Salmon Region”
Equity offering summary
- Transaction
- Timeline
- Sources and uses
Optimal groundwater infrastructure
2
Florida groundwater aquifer production and discharge geology Onsite access to South Florida underground aquifers for fresh and
saline water supply, as well as deep well waste water discharge to
lower “boulder zones” – provides unique, optimal water
infrastructure conditions for land-based salmon farming
Water rights secured and well drilling process is underway for up to
90,000 tonnes annual production capacity, led by leading
hydrologist teams
Has obtained a permit from the Florida Department of
Environmental Protection to dispose of up to 20 million gallons of
wastewater per day
Atlantic Sapphire has a pending patent to obtain exclusivity on the
method used on groundwater and discharge wells in Miami (right
to exclude/charge)
Waste disposal
– max allowed
20m gallons/day
Fresh and saline
water for use in
tanks
12
Ongoing drilling activity Ongoing site construction
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Right Market -The US Salmon Market is the Worlds Largest, and Has a Large Untapped Potential Going Forward
Equity offering summary
- Transaction
- Timeline
- Sources and uses
3
0
100
200
300
400
500
+12%
2012 2013 2014 2011 2015
0
100
200
300
400
Sp
ain
Chin
a
US
Ja
pa
n
Ge
rma
ny
Russia
UK
Ita
ly
Norw
ay
Sw
ed
en
7.6
5.8
3.5
2.01.71.31.11.00.90.1
Sw
eden
Japan
Norw
ay
Chin
a
US
Italy
Spain
Russia
UK
Germ
any
Market size Atlantic Salmon(kt) US Atlantic salmon demand (WFE kt) Salmon consumption per capita (kg/year)
95 % of salmon is imported to the US
(ranking : Chile #1, Canada #2, Norway #3,
Europe (exc. Norway) # 4)
The demand for salmon has increased with
an average of 12 % the last 5 years
There is large potential in increasing the
salmon consumption per capita in the US
Source: Norwegian Seafood Council, Kontali and DNB Markets Equity Research
Atlantic Sapphire is targeting the 360,000 tonnes fresh, farmed Atlantic salmon imported to US annually
89 % implied increase in
US salmon demand if
lifted to German levels
US is the single largest market for Atlantic
salmon..
…and the US demand for salmon is
increasing rapidly.. ..with considerable upside potential
5.0 % 0.0 % 10.0 % -5.0 %
Germany
Y Axis
China
Japan
Russia US
X Axis
13
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Right Business Plan -The Atlantic Sapphire Concept has Already Been Verified as Successful by the Facility in Denmark
F h
Equity offering summary
- Transaction
- Timeline
- Sources and uses
4
s
More than 6 years of experience and continuous dialogue with
valuable vendors, partners and collaborators
Innovation center
Gives a strong fundamental for a successful US expansion
Technology and concept is tested and optimized for
several years, well positioned to avoid expensive
start-up errors or repairs
The concept has proved to have great operational
efficiency, first land-based project to break-even,
expect ~USD 0.8 million EBITDA in 2017 even with low
production volumes (500 tonnes)
As vendors have already been tested for several years,
the vendor risk is significantly reduced
The Danish facility has proved that land-based salmon
quality is excellent – served in Michelin-starred
restaurants
Built strong relationships to key decision makers in all
of their most relevant vendors – should increase
service, and minimize vendor response time
Successful proof of concept in Denmark – currently
operating above KPIs in US budget!
14
Storfiskur
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Right Size - One of Few Land-Based Projects that Offers the Necessary Scale to Bring Unit Costs Down
Equity offering summary
- Transaction
- Timeline
- Sources and uses
5
Source: DNB Markets Equity Research & Kontali 1 2017 expected production cost for Norwegian listed salmon farmers. Current cost for Chilean salmon farming industry.
Avg 2017E
harvest OSE
salmon farmers
125,000
Avg other
landbased
projects 2020+
6,700
AS phase
3 capacity
potential
90,000
Projected harvest volumes comparable players
(HOG, tons)
Atlantic Sapphire dwarfs any other land-based projects
Atlantic Sapphire’s commercial scale-up is the largest land-based project to date with visibility on further upscaling of harvest figures
Atlantic Sapphire dwarfs any other
known land-based project Production cost US landed compared to competitors1
43 4235 33
2015
15 1532
36
48
AS 2026 AS 2022 Bakkafrost
57
50
Lerøy Salmar
63
Freight
Production cost
NOK/kg HOG
According to an extensive mapping done by DNB
Markets Equity Research, Atlantic Sapphire is the
largest known land-based project
Atlantic Sapphire offers scalability to reduce operating costs to levels close to traditional salmon farming –
combined with no transport cost to key market, Atlantic Sapphire will be the most competitive supplier of
salmon to the US market
15
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Right Product Quality -The Product is Widely Recognised by Professionals For Its Superior Quality
Equity offering summary
- Transaction
- Timeline
- Sources and uses
6
s
Salmon produced in the Danish
facility is being sold in Michelin
starred restaurants and ultra high-
end grocery stores
The product quality is recognized
by the most demanding consumer
groups
Fish texture, colour, flavour profile
and size are unanimously
celebrated by chefs and buyers
The land-based concept reduces
the biological risk from external
sources significantly
The fish produced will hence be
free of any antibiotics, pesticides,
hormones and GMO
US produced salmon will reduce
delivery time to consumer
significantly, hence increased
freshness
The increased freshness expands
the “fresh selling window”, giving
rise for price premiums
Increased freshness All natural Michelin-starred recognition
16
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Right branding and positioning -The Atlantic Sapphire Brand is Perfectly Positioned Towards Strong Consumer Trends
Equity offering summary
- Transaction
- Timeline
- Sources and uses
7
s
Sustainability – collapses carbon foot print due to the
elimination of air transport
Eco-friendly – reduces impact on other species
Product of the U.S.A – creates jobs, pays taxes and
supports the local community
Local and Farm to Table – produced nearby
All natural – free of antibiotics, hormones, pesticides
and GMO
Healthy – Rich on proteins, omega-3, minerals and
vitamins
Brand attributes and promises
Due to its strong brand attributes and promises, Atlantic
Sapphire has already been recognized by large and
important NGOs
Recommended as “best choice” by Seafood Watch
Endorsements
Strong national offtake demand for
the Atlantic Sapphire brand!
Their Danish salmon is sold at a
significant premium today!
17
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Content Content Unprecedented good transparency in the supply from conventional salmon farming,
as growth is currently curbed by regulatory constraints and biological issues
Combined with an increasing demand for salmon, allows Atlantic Sapphire to tap
into a market with demand surplus – support for high salmon prices going forward
Atlantic Sapphire has through its pilot project in Denmark mitigated the majority of
the concerns for a commercial scale-up
Limited operational risk: Danish facility is performing above US budget
Zero construction risk: Facility will be constructed on a maximum price
guarantee agreement with a large US constructor
Minimized managerial risk: Optimal management and board already in place
All the necessary permits from legislative bodies in place – ready for US expansion
18
Right Timing - Atlantic Sapphire has the First-Mover Advantage in the “Next Big Thing” Within the Salmon Market
8
Land-based
technology and
knowledge
sufficiently
developed
Attractive market
dynamics
Atlantic Sapphire is currently the most developed among a rapidly increasing base
of land-based salmon farming projects
Atlantic Sapphire’s technology and the management’s knowledge is in the forefront
relative to the other projects
If desirable, Atlantic Sapphire is well positioned to be the leading consolidator in
land-based farming across all geographies
First mover
advantage
Kanskje ha noe om at teknologien har kommet langt nok.
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Biological
performance
Biohazard & disease
management
Water infrastructure
management
Market dynamics
Taste
19
Potential Concerns and Mitigating Factors
Potential concerns Mitigating factors
“ I have heard that land-based
farmers struggle to grow their
salmon to optimal harvest
weights”
Investments in technology – continued process innovation
Optimization of flow, CO2 stripping, particle removal
Management of stocking density levels, water temperature, feeding processes – Salmon harvested in
Denmark facility have had harvest weights of 4-5 kg
“How is biohazard and
diseases being managed in
the closed environment of
land-based farming?”
“There are regulatory risks
related to water rights & water
infrastructure management ”
“ How can we be sure that the
constructions are build in time
and to the planned cost?”
“ I have heard rumors that
land-based salmon farming
have a strange taste”
1
2
3
6
Construction
management
Technology investment
Multiple system design – Atlantic Sapphire will develop 12 independent water systems in their Florida
facility, securing optimal disease management
All groundwater rights are in place - the intake and discharge wells are common in Florida and used for
several decades
No water quality issues for several decades
Leading Denmark / US multidiscipline, pre-construction services team
Facility will be constructed on a guaranteed maximum price agreement with one of the larger US
contractors
5 year constrained global production expected – regulation is curbing growth from conventional salmon
farming
Strong demand fundamentals - increasing US consumption per capita expected
Proven superior taste through Denmark facility
Atlantic Sapphire salmon chosen by top chefs in Denmark and US
4
5 “ The case is highly dependent
on the strong salmon markets
– can this persist?”
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Unique Water Infrastructure Conditions Enables Production to Operate at Scale -World-Class Design Following 6 Years of Commercial Innovation Experience in Denmark
Heading
40 acre, agriculture zoned, property (27Kmt potential
HOG production capacity (phase 1+2)) in Homestead,
Florida
Pre-construction planning is underway to build an
approximate 8,500 tonnes HOG production, 390,000
sq.ft. insulated biosecure facility in Phase 1
Onsite access to South Florida underground aquifers
for fresh and saline water supply, as well as deep well
waste water discharge to the lower boulder zones
provides unique optimal water infrastructure conditions
Water rights secured and well drilling process is
underway for up to 90,000 tonnes annual production
capacity, led by leading hydrologist teams
Systems and methods of intensive recirculating
aquaculture patent pending, claiming the unique
integrated aquifer/RAS farming methodology
Proposed (75% drawing completion) US facility layout – Phase 1
Waste water
discharged
to lower
boulder
zones
Fresh, saline
water from
underground
aquifers
12 independent systems increase biosecurity significantly – eliminates probability for mass contagion in the facility!
20
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21
AGENDA
The Atlantic Sapphire Story
Business Plan
Appendix
Brief Introduction to the Commercial Scale-Up and Land-Based Salmon Farming
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22
Business plan – Consolidated figures (US phase 1, 2 & 3 + Denmark)
Harv
est
(HO
G t
on
nes
) E
BIT
DA
(U
SD
m)
n.a 3.9 4.0 0.3 0.4 3.2 4.4 4.7 4.4 4.4
Capital need – US phase 3
Capital need expected to be in the USD 200-350
million area, financed with CF from operations
and debt
Capital need – DK Phase 1+2 & US Phase 1
US Phase 1 will have a capital need of USD 110
million (fixed assets), plus a working capital and
operational losses need in the period of USD 20-
25 million
Need USD 10-12 million to fund Denmark Phase
2 expansion
Capital need – US phase 2
Illustrated business plan is based on a 20,000
tonnes expansion, however the expansion may
be up-scaled to 42,000 tonnes
Capital need for the US Phase 2 expansion is
expected to be in the USD 100-220 million area
(depending on size of expansion)
2026
466.0
2025
306.2
2024
145.2
2023
149.0
2022
150.7
2021
45.0
2020
48.2
2019
6.2
2018
2.8
2017
-2.6
2016
-2.4
DK + US Phase 1 US Phase 2 US Phase 3
EBIT/kg(HOG) (USD)
2,9302,9302,9302,9302,9302,9302,9302,930
1,956
916
300
2023 2025 2026 2024 2022 2021 2020 2019 2018 2017 2016 10,67010,670
2,1701,448500391
2017 2018 2019 2020 2021
30,857
2022
30,857
2023 2016 2026
92,672
2025
61,765
2024
30,857
US Phase 2
US Phase 3 US Phase 1 + DK
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23
Business plan – US phase 1, 2 & 3 H
arv
est
(HO
G t
on
nes
) E
BIT
DA
(U
SD
m)
n.a. 3.7 3.9 n.a. n.a. 2.8 4.4 4.7 4.4 4.3
8,5008,500000 0
2026
90,502
2025
59,595
2024
28,687
2023
28,687
2022
28,687
2021 2020 2019 2018 2017 2016
US Phase 1 US Phase 2 US Phase 3
2026
454.6
2025
294.8
2024
133.8
2023
137.6
2022
139.3
2021
33.6
2020
36.8
2019
-5.1
2018
-4.0
2017
-3.4
2016
-0.7
US Phase 1 US Phase 2 US Phase 3
EBIT/kg(HOG) (USD)
2026
507
769
2025
327
507
2024
126 244
2023
139 244
2022
141 244
2021
35 72
2020
38 72
2019
-4
2018
-3
2017
-3
2016
-1
90,502
59,594
28,68628,68628,686
8,5008,500
2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016
Cost of biomass gain per kg(HOG), USD
3.023.113.403.503.37
3.784.17
2026 2025 2024 2023 2022 2021 2020 2019 2018
Net cash flow, USDm
20
26
231
20
25
121
20
20
24
20
19
2
20
18
7
20
17
3
20
16
0
20
24
-15
20
23
-20
20
22
-2
20
21
6
Cash Flow from Financing
Cash Flow from Investing
Cash Flow from Operations
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24
First Company to Solve All the Major Land-Based Salmon Farming Codes - The Danish Facility is Currently Performing Significantly Above US Budget
Equity offering summary
- Transaction
- Timeline
- Sources and uses
Actual Danish JEA-index development
Innovation center
Other Danish KPIs1
Successful proof of concept – several risk factors
already mitigated!
24
Storfiskur
JEA-index = Biomass growth(kg) per m3 per day
The JEA-index is considered as the single most important KPI – current Danish level implies 20% upside to the EBITDA in the business plan
0.45
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
mai-17 mar-17 jan-17 nov-16 sep-16 jul-16 mai-16 mar-16
Budgeted Danish JEA-
index before Danish
expansion is completed
83%80%
apr-16 jul-16 okt-16 jan-17 apr-17
60%
40%
100%
jan-16
Superior quality salmon / total production
86%100%
apr-17 jan-16 apr-16 jul-16 okt-16 jan-17
80%
40%
60%
20%
Harvest over 3 kg
Apr-16 Jul-16 Oct-16 Jan-17 Apr-17
1.00x
2.00x
3.00x
4.00x
1.04x
Feed conversion ratio(FCR)
The EWOS
feed issue
solved
CO2 issue
solved
Early
maturation
issue solved
Taste issue
solved
1 No harvest in June 2016
Farm is
performing
normal
Increased
flow
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25
Due to the Current Operational Performance in Denmark, the Principal
Assumptions for the US Expansion Seem Conservative
25
Sales price (USD/Kg HOG)
JEA INDEX1 Harvest(HOGt) $7.50 $8.50 $9.50 $10.50 $11.50 $12.50
0.25 5,171 12,231 17,401 22,572 27,743 32,914 38,085
0.30 6,205 17,670 23,875 30,080 36,285 42,490 48,695
0.35 7,239 23,110 30,349 37,588 44,827 52,067 59,306
0.40 8,273 28,550 36,823 45,096 53,370 61,643 69,916
0.45 9,308 33,989 43,297 52,604 61,912 71,219 80,527
0.50 10,342 39,429 49,771 60,112 70,454 80,796 91,137
0.55 11,376 44,869 56,245 67,620 78,996 90,372 101,748
0.60 12,410 50,309 62,719 75,129 87,539 99,949 112,359
0.65 13,444 55,748 69,192 82,637 96,081 109,525 122,969
Budget
Budget Current
price
Current
AS price
Budgets in
other well-
known
projects
Phase 1: EBITDA sensitivity on JEA and price (USD ‘000)
Sales price (USD/Kg HOG) JEA INDEX1 Harvest(HOGt) $7.50 $8.50 $9.50 $10.50 $11.50 $12.50
0.25 56,271 187,549 243,819 300,090 356,361 412,632 468,903
0.30 67,525 246,558 314,083 381,608 449,133 516,658 584,183
0.35 78,779 305,568 384,347 463,126 541,905 620,685 699,464
0.40 90,033 364,578 454,611 544,644 634,678 724,711 814,744
0.45 101,288 423,587 524,875 626,162 727,450 828,737 930,025
0.50 112,542 482,597 595,139 707,680 820,222 932,764 1,045,305
0.55 123,796 541,607 665,403 789,198 912,994 1,036,790 1,160,586
0.60 135,050 600,617 735,667 870,717 1,005,767 1,140,817 1,275,867
0.65 146,304 659,626 805,930 952,235 1,098,539 1,244,843 1,391,147
Budget Current
price
Current
AS price
Phase 3: EBITDA sensitivity on JEA and price (USD ‘000)
Budgets in
other well-
known
projects
The sensitivity table includes only US operations,
Danish EBITDA of USD 11.4 million comes on top in
the business plan
Atlantic Sapphire has budgeted a JEA index (biomass
growth per m3 per day) of 0.4. The Danish facility is
over-performing this level today
Several other well-known land-based projects are
budgeting with a much higher JEA (even though they
have no previous land-based farming experience)
The budgeted price of 8.5 USD/kg is well below
today’s market price, and significantly below what
Atlantic Sapphire sells its Danish salmon for today
Achieving upside to budget will limit the new equity
need significantly for phase 2 and 3
When the second and third expansion take place, the
probability for a JEA above 0.4 is considered high
Filter technology and other technology have
likely developed and improved
Farming practices are further optimized
Salmon demand is on an ever growing trend, there
are currently no signs of a long-term price decline
1 Biomass growth(kg) per m3 per day
Denmark today
Budget
Denmark today
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26
Business plan – Denmark H
arv
est
(HO
G t
on
nes
) E
BIT
DA
(U
SD
m)
0.7 3.5 3.5 2.8 3.5 3.5 3.5 3.5 3.5 3.5
2,1702,1702,1702,1702,1702,1702,1702,170
1,448
500391
2026 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016
2026
11.4
2025
11.4
2024
11.4
2023
11.4
2022
11.4
2021
11.4
2020
11.4
2019
11.4
2018
6.8
2017
0.8
2016
-1.7
EBIT/kg(HOG) (USD)
Average actual harvest size 2016 (HOG kg)
0.0
2026
6.2
2025
7.3
2024
7.3
2023
7.3
2022
9.0
2021
9.0
2020
9.0
2019
9.0
2018
7.1
2017
1.1
2016
Cash Flow from Financing
Cash Flow from Investing
Cash Flow from Operations
Net cash flow, USDm
2021
11.4 11.4
2022
19.9
2024 2023
19.9
11.4
19.9
11.4
19.9
2025
11.4
2026
11.4
19.9
2019
11.4
19.9
2020
11.4
19.9
2018
6.8
13.3
2017
2.5 6.2
2016
-1.6
2.0
19.9
2,9302,9302,9302,9302,9302,9302,9301,956
916300
2,930
2,1702,1702,1702,1702,1702,1702,1702,1701,448
500391
-760-760-760-760-760-760-760-508-416
91
-760
2021 2022 2023 2024 2025 2026 2020 2016 2017 2018 2019
No Harvest in June 4.20
2.0
2.5
3.0
3.5
4.0
4.5
5.0
jul-16 jan-16 apr-17 okt-16 apr-16 jan-17
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Strictly private and confidential |
Disruptive technology, used in an environmental
friendly framework
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28
AGENDA
The Atlantic Sapphire Story
Business Plan
Appendix
Brief Introduction to the Commercial Scale-Up and Land-Based Salmon Farming
|
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Content Content
29
Appendix:
Notice of Permit – 20 Million Gallons Per Day Water Disposal Well Permit
Equity offering summary
- Transaction
- Timeline
- Sources and uses
29
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30
Appendix:
Organizational Chart
Equity offering summary
- Transaction
- Timeline
- Sources and uses
Atlantic Sapphire A.S.
92.25%
Langsand Laks
(Denmark Operation)
100% 100% 100%
Atlantic Sapphire USA, LLC
(U.S. Operation)
S.F Development, LLC
(Land Holding)
Atlantic Sapphire IP, LLC
(Intellectual Property)
30
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31
Appendix:
Top 20 Shareholders
Equity offering summary
- Transaction
- Timeline
- Sources and uses
31
Shareholder # of shares (‘000) Ownership
Alsco AS 966,303 38.5%
DANSKE BANK A/S HOLMENS KANAL 2-12 238,627 9.5%
NORRON SICAV - TARGET P.O.BOX 487 105,000 4.2%
VERDIPAPIRFONDET DNB SMB Dronning Eufemias gate 30 95,571 3.8%
JEA Invest AS 91,529 3.6%
UBS SWITZERLAND AG BAHNHOFSTRASSE 45 66,283 2.6%
NORSK LANDBRUKSKJEMI AS Co Bjordal,boks4 Sentum 62,975 2.5%
TACONIC AS MADSERUD ALLE 7 62,857 2.5%
LANI INVEST AS Nedre Storgate 46 54,446 2.2%
VATNE CAPITAL AS Postboks 1575 Vika 51,250 2.0%
Altitude capital 46,025 1.8%
HORTULAN AS Bloksbergstien 17 43,000 1.7%
VINFOS AS c/o NRP Business Management AS 42,475 1.7%
BORGANO AS JOHANNES SANDVIKSVEI 2 42,224 1.7%
NORRON SICAV SELECT P.O.BOX 487 40,000 1.6%
FOUGNER INVEST AS V/ REIDAR FOUGNER 39,852 1.6%
SOHN INVEST APS Helgolands gade 19 35,714 1.4%
PLATINA SEAFOOD AS Strandvegen 88 35,357 1.4%
MØRING AS Postboks 168 34,501 1.4%
TIGERSTADEN AS c/o Ketil Skorstad 29,440 1.2%
Total top 20 2,183,429 86.9%
Others 328,221 13.1%
Total 2,511,650 100.0%
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32
Appendix:
Income statement – Consolidated (USA phase 1, 2 & 3 + Denmark)
Equity offering summary
- Transaction
- Timeline
- Sources and uses
32
Income Statement 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
US - - - - - 72,246,843 72,246,843 243,833,096 243,833,096 243,833,096 506,548,890 769,264,683
Denmark - 2,128,088 4,516,826 13,298,960 19,926,522 19,926,522 19,926,522 19,926,522 19,926,522 19,926,522 19,926,522 19,926,522
Global - - - - - - - - - - - -
Total Revenue - 2,128,088 4,516,826 13,298,960 19,926,522 92,173,365 92,173,365 263,759,618 263,759,618 263,759,618 526,475,412 789,191,205
COGS - US - - - - - 28,936,746 29,052,805 93,757,197 94,017,948 94,855,982 192,635,089 290,374,640
COGS - Denmark - 2,649,897 3,053,121 5,749,927 7,833,527 7,811,016 7,810,842 7,810,841 7,810,841 7,810,841 7,810,841 7,810,841
COGS - Global - - - - - - - - - - - -
Total COGS - 2,649,897 3,053,121 5,749,927 7,833,527 36,747,762 36,863,647 101,568,038 101,828,789 102,666,823 200,445,930 298,185,481
Gross Profit - (521,808) 1,463,705 7,549,033 12,092,995 55,425,603 55,309,718 162,191,580 161,930,829 161,092,795 326,029,481 491,005,724
General & Administrative - US 247,914 590,899 2,716,577 3,362,744 4,474,706 5,825,759 8,908,208 10,089,267 11,572,111 14,511,384 18,463,546 23,614,977
General & Administrative - Denmark - 1,196,858 652,603 701,328 735,344 733,305 733,305 733,305 733,305 733,305 733,305 733,305
General & Administrative - Global - 89,763 651,145 669,946 669,946 669,946 669,946 669,946 669,946 669,946 669,946 669,946
Total General & Administrative 247,914 1,877,520 4,020,325 4,734,018 5,879,995 7,229,009 10,311,459 11,492,518 12,975,362 15,914,635 19,866,797 25,018,228
EBITDA (247,914) (2,399,328) (2,556,620) 2,815,016 6,213,000 48,196,594 44,998,259 150,699,063 148,955,468 145,178,160 306,162,685 465,987,496
Depreciation - US - 28,121 70,639 1,588,321 4,685,745 6,081,761 10,595,538 13,846,139 13,846,139 22,431,623 32,734,203 34,422,133
Depreciation - Denmark - 502,876 463,184 737,494 751,453 751,453 751,453 751,453 751,453 751,453 751,453 751,453
Depreciation - Global - - - - - - - - - - - -
Total Depreciation - 530,997 533,823 2,325,816 5,437,197 6,833,214 11,346,991 14,597,592 14,597,592 23,183,075 33,485,656 35,173,586
EBIT (247,914) (2,930,326) (3,090,443) 489,200 775,802 41,363,380 33,651,268 136,101,471 134,357,876 121,995,084 272,677,029 430,813,910
Interest - US - - 668,643 2,364,455 3,598,778 4,973,619 7,298,206 10,247,711 12,415,681 13,981,885 15,351,143 15,110,884
Interest - Denmark - 452,207 209,721 58,191 63,351 63,129 63,127 63,127 63,127 63,127 63,127 63,127
Interest - Global - (92,604) (223,177) - - - - - - - - -
Interest - 359,603 655,187 2,422,646 3,662,129 5,036,747 7,361,333 10,310,838 12,478,808 14,045,012 15,414,270 15,174,011
Pre-Tax Profit (247,914) (3,289,929) (3,745,630) (1,933,447) (2,886,326) 36,326,632 26,289,935 125,790,632 121,879,067 107,950,073 257,262,759 415,639,899
Tax - US - - - - - 710,996 6,448,226 40,562,474 39,193,426 34,318,278 86,577,718 142,009,717
Tax - Denmark - (878,582) - 838,513 2,319,426 2,324,876 2,324,915 2,324,915 2,324,915 2,324,915 2,324,915 2,324,915
Tax - Global - - - - - - - - - - - -
Tax - (878,582) - 838,513 2,319,426 3,035,872 8,773,141 42,887,389 41,518,341 36,643,193 88,902,633 144,334,632
Net Income (247,914) (2,411,347) (3,745,630) (2,771,960) (5,205,753) 33,290,760 17,516,795 82,903,244 80,360,726 71,306,880 168,360,126 271,305,267
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RISK FACTORS
Investing in the shares ("Shares") issued by Atlantic Sapphire AS ("Company" or "Atlantic Sapphire") involves inherent risks. An investor should consider carefully all of the information set forth in this
Presentation, and in particular, the specific risk factors set out below. An investment in the Shares is suitable only for investors who understand the risk factors associated with this type of investment and
who can afford a loss of all or part of the investment. If any of the risks described below materialize, individually or together with other circumstances, they may have a material adverse effect on the
Company’s and its subsidiaries (collectively the "Group") business, financial condition, results of operations and cash flow, which may cause a decline in the value of the Shares that could result in a loss
of all or part of any investment in the Shares. The risks and uncertainties described below are not the only ones faced by the Group. Additional risks and uncertainties that the Group currently believes are
immaterial, or that are not presently known to the Group, may also have a material adverse effect on its business, financial condition, results of operations and cash flow. The order in which the risks are
presented below is not intended to provide an indication of the likelihood of their occurrence nor of their severity or significance.
Risks relating to the Group and the industry in which it operates which could have a material adverse effect on the Group's business, operating results or financial conditions:
The Group is in an ongoing developing and commercialization process where the Group's strategy is, inter alia, to develop and build a land-based recirculating aquaculture system for farming of
Atlantic salmon in USA. No assurance can be given that the Group will achieve its objectives or other anticipated benefits. If the Group's operations continue to expand, the Group may need to
increase the number of employees, land/properties and enhance the scope of operational and financial systems to handle the increased complexity of the Group's operations. The Group cannot give
any assurance that it will be able to attract and retain qualified management, employees, land/properties and necessary permits for this purpose or that the Group's current operational and financial
systems and controls will be adequate as the Group grows.
Atlantic Sapphire's commercialization strategy involves the entering into customer, distribution, marketing, sales and other agreements with third parties. A commercial success of the Group will require
such agreements to be entered into with professional third parties on commercially favorable terms.
The Group's financial position and future development depend to a considerable extent on the price of farmed salmon, which has historically been subject to substantial fluctuations. Farmed salmon is
a commodity, and the Company therefore assumes that the market price will continue to follow a cyclical pattern based on the balance between total supply and demand. There can be no assurance
that the demand for farmed salmon will not decrease in the future. Farmed salmon is furthermore generally sold as a fresh commodity with limited time available between harvesting and consumption.
Short-term overproduction may therefore result in very low spot prices obtained in the market. The entrants of new producing nations or the issuance of new production licenses could result in a
general overproduction in the industry. Short-term or long-term decreases in the price of farmed salmon may have a material adverse effect on the business, financial condition, results of operations or
cash flow of the Group.
The Group's operations are subject to several biological risks which could have a negative impact on future profitability and cash flows. Biological risks include for instance diseases, viruses, bacteria,
parasites, algae blooms, jelly fish and other contaminants. These elements as well as oxygen depletion may have adverse effects on fish survival, health, growth and welfare and result in reduced
harvest weight and volume, downgrading of products and claims from customers. An outbreak of a significant or severe disease represents a cost for the Group through e.g. direct loss of fish, lost
growth on biomass, accelerated harvesting, loss of quality of harvested fish and may also be followed by a subsequent period of reduced production capacity and loss of income. The most severe
diseases may require culling and disposal of the entire stock, disinfection of the farm and a long subsequent fallow period as preventative measures to stop the disease from spreading. Market access
could be impeded by strict border controls, not only for salmon from the infected farm, but also for products originating from a wider geographical area surrounding the site of an outbreak. Continued
disease problems may also attract negative media attention and public concerns. Salmon farming has historically experienced several episodes with extensive disease problems. There can be no
assurance that the Group will not experience extensive disease problems in the future. Epidemic outbreaks of diseases may have a material adverse effect on the business, financial condition, results
of operations or cash flow of the Group.
33
Summary of key risk factors (1/4)
Equity offering summary
- Transaction
- Timeline
- Sources and uses
33
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RISK FACTORS (CONT’D)
The Group's activities are subject to extensive international and national regulations, in particular relating to environmental protection, food safety, hygiene and animal welfare. Salmon farming is
furthermore strictly regulated by licenses and permits granted by the authorities in the countries where the Group operates. In general, changes in laws, regulations and licenses may have a material
adverse effect on the business, financial condition, results of operations or cash flow of the Group. The Company cannot predict the extent to which its future operations and earnings may be affected
by mandatory compliance with new or amended legislation or licenses.
The Group's operations depend on the quality and availability of salmon smolt. The quality of smolts impacts the volume and quality of harvested fish. Poor quality or small smolts may cause slow
growth, reduced health, increased mortality, deformities, or inferior end products.
The Group’s development and prospects are dependent upon the continued services and performance of its key personnel and the Group’s ability to attract and retain highly qualified personnel when
needed.
The Group’s business depends on client goodwill, the Group’s reputation and on maintaining good relationships with its clients, partners, suppliers and employees. Any circumstances that publicly
damage the Group’s goodwill, injure the Group’s reputation or damage the Group’s business relationships may lead to a broader adverse effect and prospects than solely the monetary liability arising
directly from the damaging events by way of loss of business, goodwill, clients, partners and employees.
The Group currently conducts its operations through the Group’s subsidiaries. As such, the cash that the Group obtains from its subsidiaries is the principal source of funds necessary to meet its
obligations. Contractual provisions or laws, including laws or regulations related to the repatriation of foreign earnings, as well as the Group’s subsidiaries’ financial condition, operating requirements,
may limit the Group’s ability to obtain cash from subsidiaries that it requires to pay its expenses or meet its current or future debt service obligations or to pay dividends to its shareholders. The inability
to transfer cash from the Group’s subsidiaries may mean that, even though the Group may have sufficient resources on a consolidated basis to meet its obligations or to pay dividends to its
shareholders, the Group may not be permitted to make the necessary transfers from its subsidiaries to meet such obligations or to pay dividends to its shareholders.
The Group is exposed to the economic cycle, as changes in the general economic situation could affect demand for the Company’s products.
Future restrictions on international trade may have a negative effect on the Group. Farmed salmon is a commodity which is produced in a limited number of countries and sold globally.
Environmental organisations, both in Europe and North America, have aims to eradicate salmon farming. The degree of fundamentalism varies from group to group, and the majority limit themselves to
spreading disinformation and untruths about fish farming in general. However, a certain risk of sabotage (i.e. damage to production facilities with the intention of hurting the Group financially and/or
exposing it to negative media coverage) cannot be ruled out and may have a material adverse effect on the business, financial condition, results of operations or cash flow of the Group.
34
Summary of key risk factors (2/4)
Equity offering summary
- Transaction
- Timeline
- Sources and uses
34
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RISK FACTORS (CONT’D)
Risk relating to the Company's owned and leased properties
Changes in, or completion of, planning regulations by relevant authorities may significantly affect the operations of the Group’s properties, including the access to additional properties required for the
Group's further development. Furthermore, changes in planning regulations may limit the possibility to further develop the properties and may lead to increased costs.
There is a general risk that costs for construction, maintenance and replacements, upgrading, etc., for which the Company is responsible may be larger than assumed. The Group's potential obligation
will depend on the technical state and condition of the properties.
The Group's leased properties have fixed terms and are subject to certain terms and conditions, including change of control clauses. No assurance can be given that the Group is able to maintain its
leases, and on favorable terms, or to enter into new leases for new properties
In respect of some of the Company’s properties, and the ground on which some of the properties are placed, pollution/use of toxic material is known to the Company. Further, some of the properties
acquired are situated in areas where it is not unlikely that the ground is polluted, based on the history of the site/area. The risks relating to pollution in the ground and in the properties and associated
buildings largely rest on the Company. Such pollution may render further development of the properties/ground, and excavation, more expensive (due to required soil surveys or otherwise) and subject
to approval from authorities.
Financial risk that could have a material adverse effect on the Group's business, operating results or financial conditions:
The Group is likely to require additional capital in the future to further pursue its business plan, or may require additional capital due to unforeseen liabilities, delayed or failed technical or commercial
launch of its products or in order for it to take advantage of opportunities that may be presented to it. This could ultimately have a material adverse effect on the Group's operations, business, financial
condition, results of operation, cash flow and/or prospects.
The Group operates within, and generates revenue from, other jurisdictions than Norway using currencies such as US Dollars and Danish kroner. Consequently, the Group is exposed to fluctuations in
foreign exchange rates. In addition, as the Group reports its consolidated results in Norwegian kroners, the value of the Norwegian krone relative to its foreign subsidiaries’ functional currencies will
affect its consolidated income statement and consolidated statement of financial position when those subsidiaries’ operating results are translated into Norwegian kroners for exporting purposes.
The Company’s profitability may be adversely affected during any period of unexpected or rapid increase in interest rates.
Liquidity risk is the risk that the Company will not be able to service its financial obligations as they fall due. The Company’s strategy to manage liquidity risk is to have sufficient liquidity at all times in
order to meet its financial obligations when due, both under normal and extraordinary circumstances, without taking risk of unacceptable losses or at the expense of the Company’s reputation.
As the Group is in an ongoing commercialization process, the Company lacks useful financial information for the estimation of its future financial results. There can be no assurance that it will achieve
the estimated future financial results presented in this Presentation.
The Group is currently in the process of securing a EKF guaranteed USD 60,000,000 term loan facility and USD 2,400,000 revolving credit facility with DNB Bank ASA as lender, mandated lead
arranger and security agent and Atlantic Sapphire USA, LLC as borrower under the USD 60,000,000 term loan and Langsand Laks A.S. as borrower under the USD 2,400,000 revolving credit facility.
In the event that the Group fails to secure such financing on acceptable terms for the Group or at all, the Group will need to obtain the additional capital from other sources, including through additional
equity from new and/or existing shareholders.
In addition to the credit risks towards suppliers and other contract parties, the Group has economic exposure against its customers.
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RISK FACTORS (CONT’D)
Risks relating to the Shares that may have a material adverse effect on the Company's business, operating results or financial conditions:
All securities investments involve the risk of loss of capital. Investment in the Company involves significant economic risks.
Norwegian law provides that any declaration of dividends must be adopted by the shareholders at the Company’s general meeting of shareholders. Dividends may only be declared to the extent that
the Company has distributable funds and the Company’s Board of Directors finds such a declaration to be prudent in consideration of the size, nature, scope and risks associated with the Company’s
operations and the need to strengthen its liquidity and financial position. As the Company’s ability to pay dividends is dependent on the availability of distributable reserves, it is, among other things,
dependent upon receipt of dividends and other distributions of value from its subsidiaries and companies in which the Company may invest.
Transfer of the Shares are currently subject to approval by the Board of Directors of the Company. However, the Company will amend its articles of association in order to procure that the new Shares
issued by the Company will be freely transferable and not subject to approval by the Board of Directors of the Company.
The Company considers to generate shareholder value through an industrial sale or an IPO (Initial Public Offering). However, there can be no assurances that such trade sale or IPO will be carried
out, in which case very limited liquidity in the Shares is expected. Even with a listing on a stock exchange liquidity in the Shares may be limited.
Shareholders will be diluted if they are unable or unwilling to participate in future share issuances.
Each potential investor in the Shares must determine the suitability of that investment in light of its own circumstances.
Beneficial owners of Shares that are registered in a nominee account or otherwise through a nominee arrangement (such as through brokers, dealers or other third parties) will not be able to vote for
such shares unless (a) their ownership is re-registered in their names in the VPS, as the branch register, prior to the Company’s general meetings (i.e. the registered nominee holder transfers legal
ownership to the beneficial owner), or (b) the registered nominee holder grants a proxy to such beneficial owner. Any persons that hold their shares through a nominee arrangement should consult with
the nominee to ensure that any shares beneficially held are voted in the manner desired by such beneficial owner.
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