Aquaculture Innovation Workshop 2015 | October 14, 2015

PROGRESS REPORT

YEAR TWO OF OPERATIONS

Eric Hobson, Chair| Garry Ullstrom, CEO

Land Raised™ Atlantic salmon

KUTERRA

KUTERRA

Vancouver

Seattle

Washington

Why we’re doing this

Why we’re doing this

KUTERRA Land Raised™ Atlantic Salmon farm

Who is involved

Project

partners

Lead funders

Advisors

Marketing

partner

Our mission Assess

technical, biological, economic

feasibility of raising Atlantic salmon to harvest size using land-based RAS.

Final reporting

• Final milestone report

• Capital cost retrospective report

• Addendum on Cohort 4, expansion assumptions

• IEMP final report from Pacific Salmon Foundation

http://tidescanada.org/programs/

salmon-aquaculture-innovation-fund/

Stages and milestones

Technology focus

Stages and milestones

Biology focus

Stages and milestones

Stages and milestones

Economic focus

Technological feasibility DEFINITION: Create an environment that can

grow and harvest healthy fish. DONE

Optimizing technology

Reduce

CAPEX per kilo

Improve technology

to improve fish

performance

Reduce operating

costs

DEFINITION: Efficiently grow high volumes of

healthy, premium quality fish. STEADILY IMPROVING.

Biological feasibility

Five key metrics

1.Growth (TGC)

2.Feed conversion (FCR)

3.Mortality

4.Density

5.Early maturation

Growth

Weeks at farm

Siz

e (

g)

1000

0

2000

3000

4000

Cohort 1

Cohort 2

Cohort 3

Cohort 4

10 20 30 40 50 60 0 70

Growth (actual TGC)

Weeks at farm

Siz

e (

g)

Cohort 1

Cohort 2

Cohort 3

Cohort 4

10 20 30 40 50 60

1000

2000

3000

0

Feed conversion ratio FCR FC

Rb

Cohort 1 Cohort 2 Cohort 3 1.00

1.10

1.20

1.30

1.08

1.12

1.25

Cohort 4

1.03

Mortality

Cohort 1 24%

Cohort 6 3.3 %

Mo

rta

litie

s a

nd

lo

sse

s (%

)

Weeks at farm

10 20 30 40 50 60 70 0

5

15

25

10

20

0

Cohort 1 2 3 4 5 6 7

Mortality (%) 24 13 29 22 6.4 3.3 3.4

Weeks at farm harvest harvest harvest harvest 50 39 27

Cohort 4 22 %

Density D

en

sity

(k

g/m

3)

20

100

80

60

40

Kuterra

target

90 Kuterra

design

spec

75

Kuterra

max

>100

Early maturation

When fish mature:

• Body growth slows dramatically.

• Flesh pales. Skin darkens.

• Flavour changes.

• Body shape changes.

• Food energy goes to their reproductive systems.

Financial impacts from early maturation:

• Non-premium fish

• Reduced revenues 50%/lb

Early maturation Ea

rly

ma

tura

tio

n

20

100

80

60

40

100 %

Cohort 1

downgrade

25 %

41 %

Cohort 2

downgrade

13.6 %

Open

net-pen

1 - 3 %

45 %

Cohort 3

downgrade

10 %

Metrics review

2011 projected vs 2015 actual

performance metrics

2011 projected

2015 actual

TGC 2.50 1.64

FCRb 1.05 1.03

Mortality 7.6 % 6.4 %

Density 90 kg/m3 >100 kg/m3

Harvest size 3-6 kg 3 kg

Optimizing performance • Improve growth

• Reduce early maturation

• Reduce cataracts

• Determine optimal salinity

Economic feasibility DEFINITION: Return on capital > 20 % LOOKS PROMISING AT SCALE.

4. Scale-up

3. Hatchery

2. Performance optimization

1. Steady state

Next steps

Production costs

feed

2.59

power

0.42

labour

1.12 smolts

1.68

Pro

du

ctio

n c

ost

($

/kg

/HO

G) Six month running average

Ma

r-1

4

$30.0

$20.0

$10.0

$0.0 Ju

n-1

4

Ma

y-1

5

Se

p-1

3

Jun

-13

De

c-1

3

De

c-1

4

Se

p-1

4

Ma

r-1

5

* $ CDN are used throughout this presentation.

Production costs April - June 2015

feed

2.59 insurance 0.22

water treatments 0.34

power

0.42

labour

1.12 smolts

1.68

other

1.10

maintenance 0.22

Total 7.68 $/kg HOG

Economics review 2011 vs 2015 costs ($/kg HOG)

Feed $ 2.10 $ 2.29

Labour 0.90 1.12

Smolts 0.87 1.68

Power 0.43 0.42

Other 1.04 1.88

Total production 5.34 7.69

Capital cost $17/y * $24/y

Revenue $5.99 ** $9.04

2011

projected

2015

actual

* For 400 mt/y

** Blended

(premium and

downgrades)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Total Production Costs

($/kg HOG)

Farm Gate Revenue

($/kg HOG)

Margin on costs

($/kg HOG)

Harvest Size

(kg live)

5.34

7.69

9.04

1.35

3.2

2011 projected vs 2015 actual

2015

2011

5.99

0.65

5.0

Economic review

Preliminary projections

10%

15%

20%

25%

30%

35%

40%

10 12 14 16 18 20

Re

turn

on

Ca

pita

l

Capex ($/kg Live)

Return on Capital vs Capex ($/kg live)

for 3000 mT/y facility

Capex ($/kg live) 10 12 14 16 18 20

Return on capital 38% 33% 29% 26% 23% 21%

ASSUMPTIONS

Capex: Construction cost (includes inventory build up)

Harvest: 6 kg live Downgrades: 5 % Smolts: $2.50 ea

Product pricing

Substantial premium possible >30%

Pricing risks:

•downgrades

•market saturation

Chef Dan Norcott

Catch The Oyster Bar, Calgary

Product qualities

•Freshness, taste, texture, appearance

•No antibiotics, no hormones

Feed

Key issues for customers:

•Effect on nutrition

•Effect on food safety

•Wild fish content

•GMOs and animal byproducts

•Impact on taste

Environment

Impacts and benefits

We've also busted myths Land

Power

Water

Fish

Husbandry

What we've learned

It is possible to

grow top quality

Atlantic salmon

for which

consumers and

chefs are willing

to pay a

premium price.

What we've learned

2. Is technologically feasible

Land-based RAS farming of Atlantic salmon:

1. Can be environmentally benign

3. Is biologically feasible

4. Is expected to generate returns of > 20%

per year at scale, once technological and

biological elements are optimized.

KUTERRA.com

CONTACT Garry Ullstrom | garryu@namgis.bc.ca

http://tidescanada.org/programs/

salmon-aquaculture-innovation-fund/