Download pdf - WB7717 Economics of Environmental Technologies for Open Cage Aquaculture - Final Report

ADVANCING ENVIRONMENTAL SUSTAINABILITY OF CAGE AQUACULTURE IN ONTARIO: AN ECONOMIC

AND FEASIBILITY ANALYSIS

Prepared for:

MINISTRY OF THE ENVIRONMENT

Land and Water Policy Branch, 6th Floor 135. St. Clair Ave West Toronto, ON M4V 1P5

Prepared by:

WESA Inc.

171 Victoria Street North Kitchener, ON N2H 5C5

WESA Project Number W-B7717-00

October 2009

Ref: WB7717 Advancing Environmental Sustainability of Aquaculture.doc

Ministry of the Environment Advancing Environmental Sustainability of Cage Aquaculture in Ontario: An Economic and Feasibility Analysis

Page i

Disclaimer

The information gathered in this report is a compilation of research, publicly available resources and personal communication with various industry experts. Specific financial information from individual cage aquaculture operations was not made available for consideration in this report.


Page ii

EXECUTIVE SUMMARY In January 2009, WESA Inc. (WESA) was retained by the Ontario Ministry of the Environment (MOE) to investigate the following broad objectives:

1. To assess the financial feasibility of existing cage aquaculture operations 2. To assess the costs of implementing MOE’s cage aquaculture monitoring program 3. To prepare an economic evaluation of implementing technologies and/or operational

strategies to enhance/improve environmental performance 4. An economic evaluation of market outlook 5. A sensitivity analysis of aquaculture operations.

An economic evaluation of three scales of cage production operations was conducted to determine the economic feasibility of cage culture operations. The analysis indicated that profitability is highly dependent on the scale of the operation with larger operations being more profitable than smaller operations, as shown in the table below. 260 tonne 460 tonne 1260 tonne

Profitability 10 Yr Avg. 10 Yr Avg. 10 Yr Avg.

Gross Margin 24.9% 28.5% 28.9% Return on Sales 6.7% 19.3% 24.9% Cash Earnings on Sales 5.5% 13.2% 12.9% ROI (cash-in - cash out) 1.3% 26.9% 51.6%

Other Ratios to Consider

NPV (@ 7%) -$394,692 $736,374 $2,806,185 FIRR -11.3% 22.4% 33.9% NPV / Investment -0.66 0.92 2.16

Large operations are most profitable and can generate a net present value (NPV) that is more than double the initial investment and provides a financial internal rate of return (FIRR) of 33.9%. Conversely for small scale operations, the NPV is negative with a negative 11.3% rate of return. Existing operations of this size that are fully capitalized and with little debt may in fact be currently profitable.


Page iii

An assessment of the cost to implement the MOE’s aquaculture monitoring program indicates that the cost of monitoring on a unit basis depends on the scale of the operation and whether sample collection is done in house or contracted out. The cost of the monitoring program has a relatively low sensitivity relative to the total cost of production. Current operations should be able to absorb the additional cost without substantial hardships.

Scenario 260 tonnes 460 tonnes 1260 tonnes

Cost per kg of Production

In House $0.06 $0.03 $0.02

Contracted $0.14 $0.07 $0.03

When these monitoring costs were compared to the monitoring costs of a land-based operation regulated under a Certificate of Approval the unit cost basis were comparable between cage culture operations and land based farms. The economic feasibility of a number of environmental strategies were evaluated at three scales of production. The technologies evaluated include the RH waste recovery system; feed monitoring, fallowing, closed containment, land-based pump ashore production facilities and recirculating aquaculture systems. Improved feed monitoring, which minimized feed waste, resulted in a net economic benefit to the operation. Fallowing was of no economic benefit, but was quite feasible for large scale production. Conversely, RH waste recovery systems resulted in a negative financial performance, and did not provide any economic benefit to the fish culture operation. Both closed containment and land-based pump ashore aquaculture operations are economically feasible at an appropriate scale of operation and are comparable in economic performance to large scale cage production. They both provide good waste recovery and as well as providing significant operational advantages. Both closed containment and pump ashore operations also enable a high degree of management control. For example, operators can use oxygen supplementation to boost performance thereby reducing capital requirements and operating costs. An evaluation of the current and projected market demand indicates that unsatisfied domestic and export market demand could support an industry growth rate of up to 20% per year. The Ontario trout industry currently accounts for 70% of domestic trout production and is very well positioned to supply U.S. markets, where the unsatisfied demand for trout is expect to a grow to live weight equivalent of 6,000 tonnes per year by 2020.


Page iv

A sensitivity analysis was conducted on the economics of aquaculture for all operational scales and technologies; however the results did not vary substantially. The single most sensitive variable affecting economic performance is farmgate selling price with a 10% variation price resulting in a 46% variation in profit margins. The analysis indicated that after farmgate price and feed costs, growth is the third most significant factor affecting profitability, and as a result environmental conditions at the site (e.g., temperature, oxygen concentration) can have a large impact on the profitability of a cage production operation. Aquaculture operations are moderately sensitive to labour and fingerling costs. A 10% change in these costs results in corresponding change in profitability of 2.7% and 4.2%, respectively and a change in production costs of 0.78% and 1.2%, respectively. All other variables are fairly minor in comparison. Due to the relatively low power consumption of pump ashore operations that are designed for energy efficiency, pump ashore and closed containment operations are fairly insensitive to variations in power costs. For example, a 10% variation in power costs only changes production costs by 0.5% and profits by 1.4% for a pump ashore facility. Based on an evaluation of the economics of cage production and environmental strategies, it is evident that economical feasible opportunities to make significant improvements in the environmental performance of cage production facilities are limited. Through careful feed management, fallowing and ongoing site monitoring there will likely be further incremental improvements reducing the impact of cage operations on the local environment and ensuring there is no lasting impact from fish culture operations. The current focus of environmental management for cage operations essentially becomes an exercise of finding the best way to disperse wastes so that their impact on the local environment is minimized, however very little can be done to further reduce loading into the receiving water. The study recommends the development of a research facility and a test site where new approaches to fish production can be tested and monitored; with the long term objective of facilitating the adoption of emerging sustainable technologies as they mature. The development of such a facility could include contributions and collaborations with industry, non-industry stakeholder groups, government and/or aboriginal communities.


Page i

TABLE OF CONTENTS

EXECUTIVE SUMMARY

1. INTRODUCTION .............................................................................................................. 1

1.1 BACKGROUND ................................................................................................................... 1

2. CURRENT STATUS OF KNOWLEDGE ............................................................................... 4

3. STUDY RESULTS ............................................................................................................... 8

3.1 FINANCIAL FEASIBILITY OF EXISTING CAGE AQUACULTURE OPERATIONS ................................... 8 3.2 ASSESSMENT OF THE COSTS OF IMPLEMENTING MOE’S CAGE AQUACULTURE MONITORING

PROGRAM ....................................................................................................................... 17 3.3 ECONOMIC EVALUATION OF IMPLEMENTING TECHNOLOGIES AND/OR OPERATIONAL STRATEGIES

TO ENHANCE/IMPROVE ENVIRONMENTAL PERFORMANCE .................................................... 26 3.3.1 RH Waste Retrieval System .................................................................................... 27 3.3.2 Improved Feed Delivery and Monitoring .............................................................. 29 3.3.3 Fallowing of Production Sites ................................................................................. 31 3.3.4 Recirculation Aquaculture System .......................................................................... 33 3.3.5 Closed Containment and Land-Based Pump Ashore Production ............................. 35 3.3.6 Effectiveness of Environmental Control Measures .................................................. 38

3.4 ECONOMIC EVALUATION OF MARKET OUTLOOK ................................................................ 42 3.5 SENSITIVITY ANALYSIS ....................................................................................................... 47

4. CONCLUSIONS .............................................................................................................. 49

5. RECOMMENDATIONS .................................................................................................... 51

6. CLOSING ........................................................................................................................ 53

7. REFERENCES .................................................................................................................. 54


Page ii

LIST OF TABLES (In text of Report)

Table 1: Expected Feed Conversion Rates Based on Fish Size Table 2: Summary of conclusions of the ReThink & Canadian Aquaculture Systems study Table 3: Common Model Assumptions for all Production Scenarios Table 4: Modeling Assumptions for all Cage Production Scenarios Table 5: Cage Scenarios and Cage Configuration Table 6: Financial Performance Ratios for Cage Production Scenarios Table 7: Cost of In-House Water Quality Monitoring for Cage Operations Table 8: Cost of Contracting Water Quality Monitoring for Cage Operations Table 9: Cost of In House Benthic Sampling for Cage Operations Table 10: Cost of Contracting Benthic Monitoring for Cage Operations Table 11: Costs of Water Quality and Benthic Monitoring Table 12: Environmental Technologies and Practices Evaluated Table 13: Comparison of Cage Scenarios with and without Waste Recovery Table 14: Comparison of Cage Scenarios with and without Improved Feed Monitoring and

Feed Delivery Table 15: Assumptions for Evaluation of the Economic Impact of Site Fallowing Table 16: Comparison of Cage Scenarios with and without Fallowing Table 17: Comparison of Cage Production Scenarios with IPSFAD Model Aqua-Farm Table 18: Comparison of Large Scale Production Scenarios Table 19: Summary of Investment Requirements and Financial Performance Table 20: Summary of Financial Ratios and Investment Performance Table 21: Effectiveness of Environmental Strategies Table 22: U.S. Fresh Trout Imports Table 23: Results of Sensitivity Analysis


Page iii

LIST OF FIGURES (In text of Report)

Figure 1: Comparison of Ontario land-base and cage aquaculture production between

1988-2006 Figure 2: Rainbow Trout Temperature Growth Relationship Figure 3: Average Monthly Water Temperature for Fish Production Modeling Figure 4: US Trout Imports by Product Form

LIST OF APPENDICES Appendix A: Economic Scenarios for Open-Water Cage Production Appendix B: Scenarios for Assessing the Economic Impact of Environmental

Management Alternatives for Cage Production Appendix C: Economic Scenarios for Large-Scale Aquaculture Operations (Closed

Containment and Pump Ashore) Appendix D: Economic Scenario for Model Recirculation Aquaculture System Appendix E: Glossary of Terms


Page 1

1. INTRODUCTION WESA Inc. (WESA) was retained by the Ministry of the Environment to conduct an economic evaluation of the current costs associated with operating a cage aquaculture operation; the cost of implementing the sediment and water quality monitoring program for a range of scenarios and operational scales; and to evaluate the cost of implementing technologies and/or operational changes to improve environmental performance. The study was based on conducting six tasks in order to determine the impact of proposed provincial environmental regulations and measures on the existing industry and its economic health; and to evaluate the economics and feasibility of implementing sustainable environmental practices by the industry. 1.1 BACKGROUND Fish have been reared in Ontario in provincial government hatcheries since the turn of the last century. The Ontario aquaculture industry had its start in 1962 when the Ministry of Natural Resources (MNR) permitted the culture of rainbow trout, brook trout, and smallmouth and largemouth bass. From a handful of early pioneers the industry gradually grew into the current industry. During this time the industry has transformed from a large number of small farms growing rainbow trout in ponds, tanks and concrete raceways using springs, artesian and pumped wells or in some cases surface water, to an industry that is largely dominated by production from a small number of producers growing trout in open net pens within Georgian Bay and the North Channel. After a period of more or less steady growth, stretching from the 1970’s to the mid 1990’s, the total output of the industry has largely flatlined. While there was a period of transition from land based farms to net pens as outlined in the below figure; since 1996, when total industry output reached 4200 tonnes, output has not increased significantly and was in fact lower in 2006 than in 1996 (Figure 1).


Page 2

Source: (Moccia and Bevan (2007), Aquastats 2006, Aquastats Ontario Aquacultural Production in 2006, OMAFRA Factsheet 07-002 Moccia and Bevan (2007) state a number of reasons for this. The authors attribute the lack of growth due to internal factors rather than competition and highlight that this lack of growth has occurred at a time when world seafood consumption continues to grow. They further go on to state that the “Ontario industry is languishing in one of its worst periods in the last decade”. Moccia and Bevan (2007) state that the major constraint is the fragmented legislative, regulatory and policy barriers that have limited the expansion of cage culture in public waters. Ontario’s share of Canadian aquaculture production has fallen from more than 10% in 1986 to less than 3% in 1995 (Canadian Aquaculture Systems Inc., 2008). Ontario Industry share was about 2.6% of total Canadian production in 2005 (Harry Cummings and Associates Inc., 2007). To help deal with these constraints the MNR and other federal and provincial agencies are working to develop siting guidelines to assist with the site and aquaculture license approval process. This current situation contrasts sharply with the industry outlook in the early 1990’s. At that time the Ontario Aquaculture Association (OAA) prepared a vision statement which projected a diverse industry twice the size of the current industry consisting of small and large land-based farms, new cage sites and pump ashore facilities in the Great Lakes.


Page 3

A recent market study by J.M Johnston and Associates (2008) commissioned by the Department of Fisheries and Oceans identified the potential for an additional 6,000 tonnes of live trout sales to the US. A recent study by Canadian Aquaculture Systems (2008) stated the aquaculture producers and related industries generate a total of almost $51 million in sales and support 229 full-time jobs. A recent study commissioned by the Northern Ontario Aquaculture Association (NOAA) (Canadian Aquaculture Systems, 2008) confirmed that with 10% growth that total farm gate receipts could reach almost $34 million, with a further $84 million in indirect sales to related business. Many of the jobs created by the industry are in rural and northern communities where their impact can be significant. Despite the potential for growing the cage culture industry, there are a several concerns and constraints that need to be taken into account, including environmental concerns for the public waters from various interested parties (e.g. Georgian Bay Association, Green Peace) such as potential impact of nutrient additions, dissolved oxygen levels, fish escapes and the potential impacts of fish manure and uneaten feed on benthic organisms. Some of these groups have stated that they do not oppose the presence of a strong and vibrant aquaculture industry as long as it is done in a manner which is environmentally sustainable. There are also several other interested parties (e.g. Ontario Federation of Anglers and Hunters, local fish and game clubs, etc.) who believe there is tremendous potential for growth of the cage aquaculture industry in Ontario. One of the major challenges for the industry is that rearing fish in cages makes the recovery of manure and uneaten feed very difficult and expensive. As a result, the major focus of the industry has been a reduction in solid waste production per unit of feed and the proper site selection to ensure adequate dilution and to minimize local impacts. Significant effort has been devoted to improving fish diets in an effort to reduce waste volume and nutrient content. Data shows that commercial scale cage operations can potentially contribute a significant phosphorus loading to the surrounding environment (Bolton, 2006) the majority of which is delivered to the sediment (Bristow et al, 2008) and approximately 60% of it is bioavailable (Yan, 2004; references therein).

For the above reasons it is vital to find the balance that provides an industry that is both environmentally and economically sustainable for the long term.


Page 4

2. CURRENT STATUS OF KNOWLEDGE A number of studies have been conducted examining the impact of cage production and the opportunities which may exist for reducing the ecological “foot print” of the cage operations. The Ontario Ministry of Environment (MOE) commissioned a study by Stechey and Linquist (2005) titled, Wastewater Management and Best Practices of the Freshwater Aquaculture Sector. This report provided a comprehensive evaluation of wastewater management and best management practices in the context of the aquaculture industry. The study examined the technical feasibility and economics of wastewater management. A further study conducted for OMAFRA by Rethink Inc. & Canadian Aquaculture Systems (2006) included a thorough assessment of emerging technologies and their feasibility for both land-based and open-cage aquaculture. The study also examined the economics of a range of scenarios for land-based and open-water production. For this study, a feed analysis was conducted and it was determined that though the nitrogen and phosphorus content was similar between feeds, feeds with higher dietary protein and digestible energy resulted in less waste. It was also found that feeds with lower phosphorus content resulted in waste with lower P content. Extensive work has been done by producers, researchers and the feed industry to improve feed digestibility and reduce phosphorus content, with significant improvement in feed quality and waste generation. Currently, commercial feeds based on the most nutrient dense diet formulations have the following expected conversions:


Page 5

Table 1 Expected Feed Conversion Rates Based on Fish Size

Expected Conversion Rate (Feed : Fish)

Fish Size

<0.7 : 1 <100g <0.8 : 1 100g-250g <0.9 : 1 250-350g <1.2 :1 Overall for fish up to 900g

Source: Jeff Mountjoy (2009). There has been a concerted effort devoted in several jurisdictions, such as Denmark and in Ontario at the University of Guelph, to improve fish feed performance, as a means of reduce the environment impact of aquaculture operations (Dansk Aquaculture, 2009). It should also be noted that further improvements in diet formulation will provide diminishing returns as it becomes more difficult to improve formulations without significantly impacting the economics of feeding lower pollution diets (Dansk Aquaculture, 2009). The ReThink study (2006) concluded that at production levels reviewed by the study (9 to 36 tonnes / year), new land-based flow-through aquaculture operations, even without the cost of environmental controls, were not commercially viable. Existing farms with existing assets and little debt may however still be financial viable. This finding is confirmed by current experience in the Ontario industry. There have been very few new land-based farms starting up with an overall decrease in farm numbers as owner-operators retire or leave the business due to lack of profitability. While total trout production has remained fairly steady over the last 15 years, the number of farms has dropped. In the early nineties less than 20% of production came from open cages. The ratio is now flipped, with over 80% of trout production coming from larger cage based operations (Moccia and Bevan, 2007). The ReThink study also assessed the economics of open-water cage operations and concluded that a production threshold of 450 tonnes was required to generate acceptable financial returns, and found large economies of scale in the industry with the cost of production decreasing with increased farm size; $3.61/kg for 210 tonnes, $3.26 for 450 tonnes and $2.98 for 1260 tonnes. The study also found similar economies of scale for the waste treatment scenarios. It is important to note that these conclusions apply to new operations, and do not necessarily apply to existing facilities which have already been capitalized.


Page 6

The study also concluded that effluent treatment facilities add between 3% and 35% to the investment cost of a land-based farm, and add between $5 and $16 per kilogram of solids removed, with the net cost of effluent treatment adding $0.06 to $0.30 per kilogram to the cost of production. The study concluded that the most practical treatment option in terms of efficacy and economic efficiency was the use of a double drain system to concentrate waste solids within the tank, prior to removal of a concentrated solids stream for settling. The findings for cage systems were that solids recovery resulted in an added cost of $3 to $7 per kilogram of solids removed and $0.08 to $0.23 per kilogram to the cost of production. The most promising technology for waste removal from cages is the RH Waste Retrieval System (Aquatech Environmental Systems Ltd., 2009). Table 2 Summary of Some Conclusions of the ReThink & Canadian Aquaculture Systems (2006) Study

Production Technology Cost per kg of solids removed Cost per kilogram of

production Land-based flow-through $5 to $16 $0.06 to $0.30 Open-water cage $3 to $7 $0.08 to $0.23

One of the most significant findings of the study was that the economies of scale were very important to the application of waste treatment technologies to cage culture operations. Waste treatment was only affordable at a very large scale of operation. The studies concluded that to be able to adopt more sustainable technologies, the industry must be allowed to develop production sites of sufficient scale to be economical. A number of studies have been conducted into the feasibility of production alternatives to open net cages. In 1984, around the same time as the first commercial cage operations were being established in the North Channel, a large flow through land-based operation, Coolwater Farms Limited, was constructed next to the Pickering Nuclear Generating Station in a decommissioned wastewater treatment plant located within a kilometer of the plant with an annual production of 550 tonnes of trout. This was made possible by the use of heated water from the power plant, and the use of oxygen supplementation in deep production tanks with a solid waste collection system that diverted solid wastes from the aquaculture facility to the Duffin Creek WPCP in order to improve their wastewater treatment processes.


Page 7

The Coolwater operation was able to achieve profitability with an 11 to 12 month growing cycle for 900 gram marketable fish, where feed conversions frequently approached 1.0:1, however this operation ceased when the infrastructure was no longer available. Today, with current power rates, the operation would be difficult to sustain (Kamaitis, Pers. Comm.). A number of attempts have been made to develop feasible alternatives to net pens with floating containments. Two commercial floating bag systems have been developed. Procean AS from Norway and Future SEA Technologies in British Columbia developed floating bag systems that would fit inside a standard 50’ x 50’ cage enclosure for the production of salmonids. Both of these systems were flexible walled bags with provision for a floatation collar and with inlets and outlets for pumped water circulation. Both systems are no longer manufactured due to the large number of failures of the bag enclosures with resulting fish losses. While published studies on the economics of bag systems for salmon indicated that bags were not cost competitive with cages (Liu & Sumaila, 2007), there is reason to believe that at a large scale under intensive production conditions for rainbow trout results may be more favourable result. Based on operating experience with Future SEA bags at Trillium Valley Fish Farms in Wesleyville and intensive production experience at Coolwater Farms, there is reason to believe that the energy efficiency of a closed containment under intensive rearing conditions, may be feasible if the system reliability issue with bags can be addressed (Kamaitis, 2009). There have also been many attempts to fully integrate the fish production and wastewater treatment to recondition, recycle and reuse water for fish production. Northern Tilapia in Lindsay has been actively producing an African ciclid tilapia in a warmwater re-circulating fish culture facility at Sir Sanford Fleming College in Lindsay Ontario. There are also an increasing number of freshwater Atlantic Salmon smolt production facilities on both the East and West Coasts commercially producing salmon smolts for stocking sea cages for salmon production. The limiting factor for Recirculation Aquaculture Systems (RAS) is no longer technical, as it has been demonstrated by successful operations for salmon smolts and trout and other coldwater species in countries such as Denmark. The critical issue is economic, and the need to be cost competitive. RAS systems are being successfully utilized where the value placed on the product is sufficient to justify the substantial capital investment and greater operating cost. Recently an initiative was undertaken by the Interprovincial Partnership for Sustainable Freshwater Aquaculture Development (IPSFAD) to develop a model aqua-farm based on RAS technology to help refine and develop the technology and then transfer it to farmers.


Page 8

The program is modeled on similar Danish initiative developed in 2004 to address concerns with the economic sustainability and environmental impact of the Danish industry. It is important to note that the Danish environmental program was 100% funded by the Danish government and EU, with 30% of farmers capital costs also covered by the Danish government and EU (Dansk Aqvakulture, 2009). The IPSFAD initiative plans to develop a model farm of a minimum size which would ensure economic viability, however economics are dependent on current land and farm infrastructure ownership. The Department of Fisheries and Oceans are conducting a multi-year study in the Experimental Lakes Area near Kenora to measure and monitor the impacts of cage trout production on water and sediment quality in a lake ecosystem. As this information become available it will be considered in the Province’s environmental monitoring programs. Most recently, Agrimarine Corporation has developed a model farm for closed containment marine aquaculture for salmon at a site near Campbell River on Vancouver Island. The model farm will test the performance of a patented floating rigid tank system under production conditions. The company has also installed floating tanks in a freshwater lake in China for the grow-out of rainbow trout for the Chinese domestic market. The Agrimarine system is designed to facilitate manure recovery and to provide a controlled environment for fish production.

3. STUDY RESULTS This study was broken down into six fundamental tasks with the preparation of a final report to present the results of the study. It is a desktop study based on the information from a literature review, documents and studies provided to WESA by OMAFRA and the MOE and information gathered from producers, industry groups, interested parties, suppliers and knowledgeable experts. 3.1 FINANCIAL FEASIBILITY OF EXISTING CAGE AQUACULTURE OPERATIONS One of the key concerns of the aquaculture industry is financial viability in an increasingly competitive global economy. Farm operators often characterize their industry as having to manage substantial risks, maintain large inventories and having to run on small margins.


Page 9

To develop a clearer picture of the existing cage aquaculture industry a model was constructed to evaluate key cost inputs and to project the financial performance of typical aquaculture ventures. As concluded in the Rethink and Canadian Aquaculture Systems Report (Rethink Inc. & Canadian Aquaculture Systems, 2006) the scale of cage operations has a large impact on the cost of production. A large variability in cost structure also exists within the industry because of site conditions, and operator experience. There can also be significant differences in water temperatures from site to site, with differences as great as 3 to 4 degrees Celsius, which affect facility viability (e.g., fish growth). Three sizes of operations were selected for this evaluation representing the range of farm sizes currently in operation. The projected economic performance of small (260 tonne), medium (460 tonne) and large (1260 tonne) operations was evaluated. Capital and operating budgets were developed and projected Income Statements, Cash Flows, Balance Sheets and financial ratios projected for 10 years, the typical length of two site tenure permits for a cage operation. All key cost inputs were verified using current industry data for feed prices and feed conversion efficiency (Mountjoy, personal communication, 2009). The operating costs were broken down into variable and fixed operating costs. To allow for comparison of the current economic projections with previous studies (Stechey, D., J. Linquist, 2005, ReThink Inc. & Canadian Aquaculture Systems Inc., 2006) a similar report format with comparable cost categories was used to generate the projected financial statements. Due to the significance of water temperature on projected growth, scenarios were modeled using typical average monthly temperature data. To make the scenarios comparable a single temperature regime was utilized for each of the production scenarios. To reduce impact of live fish inventory valuation on production and cost data, a fiscal and operating year end of April 30 was selected for the production and financial models. At that time of year live fish inventories are at a minimum and the bulk of new stock purchases are being made for the coming production cycle. Inventory valuation can have a significant impact on the perceived economic performance within the first two production cycles. Early in the operation’s production life, aquaculture operations tend to be significantly less efficient than once they reach full capacity. Facility and staff utilization is usually sub-optimal. Staff and management early in their learning curve will tend to be more conservative to try avoid mistakes or by not pushing production beyond their comfort level. Once staff and management develop some operational experience they will tend to manage the operation more confidently and efficiently. To the extent possible this inefficiency was modeled in the operating model by keeping stock densities lower in the first two years of operation.


Page 10

The two smaller production scenarios of 260 and 460 tonnes were assumed to be tied to shore. The large production operation is modeled after the large production scenario evaluated in the ReThink study (2006). A production operation of this size is designed for an off-shore location and would not be practical in a near shore environment. Fish are an exothermic (cold-blooded) animal and unlike most other livestock, their metabolism, respiration and growth are very closely tied to water temperature. The length of a production cycle can vary significantly based on the temperature regime in which fish are raised. Figure 2 below provides a typical growth curve for rainbow trout based on water temperature. The growth rate of trout also varies with body size and is at its maximum rate (expressed as a percentage) when the fish are smallest, decreasing over the production cycle. While the rate of growth decreases as the fish grows, the absolute growth expressed as grams per fish per day actually increases with fish size. For the purposes of this assessment the model was run for a fish at the mid-point of its production cycle, or about 1/3 of its market weight. This assumption slightly under estimates growth early in the production cycle and overestimates it later in the cycle, but is not significant over the entire production cycle. It is important to be able to model the effect of temperature on fish production and growth and economic performance in order to compare sites and to evaluate the impact of different production technologies. One of the potential advantages of closed containment technologies is the ability to manage water temperature extremes in the winter and summer months by selecting the depth from which water is drawn.


Page 11

Figure 2: Rainbow Trout Temperature Growth Relationship (Kamaitis, 1999) Fish growth can also be affected by other environmental factors such as dissolved oxygen (DO) and un-ionized ammonia levels. Temperatures can also have an indirect effect on fish growth as the solubility of oxygen decreases with increasing temperatures. In practice it can be difficult to distinguish between the impact of temperature and lower oxygen concentration on a fish production, as both tend to occur at the same time. Extensive experience with rearing trout in power plant cooling water has clearly demonstrated that oxygen supplementation can in fact offset and boost feeding and growth at temperatures that are commonly considered to be above the optimum for trout growth (18oC). While at most cage sites temperature and oxygen levels are rarely at the level where they affect fish survival, there are sites where temperature and oxygen conditions in August and early September will require farmers to reduce or entirely withdraw feed until conditions improve.


Page 12

Depressed DO levels tend to inhibit feeding and growth; however, heavy feeding increases a fish’s oxygen demand while depressing oxygen concentrations. Sub-optimal oxygen levels, particularly in the warmer months when a fish’s requirement for oxygen is high and the saturation level of oxygen is lower, can significantly reduce growth potential. This growth reduction was modelled in the growth model by imposing an environmental feed-back factor for the months of August and September of 60% and 85% of maximum potential respectively. Elevated un-ionized ammonia levels will also negatively affect fish feeding and growth. In cage sites with good flow and currents this is not normally an issue, but it can be of concern in RAS, closed containment, tank-based facilities or cages sited in locations with poor circulation or water exchange. A number of assumptions were made for the purposes of running the production and economic models. Figure 3 provides the monthly temperature profile for a typical cage site. This temperature data was used model the three cage production scenarios.

0

5

10

15

20

25

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Average

Monthly W

ater

Temperature (C)

Month

Figure 3: Average Monthly Water Temperature for Fish Production Modeling (ReThink Inc.

& Canadian Aquaculture Systems Inc., 2006) Table 3 Common Model Assumptions for all Production Scenarios below provides the assumptions for all of the production scenarios prepared for this evaluation. Table 4: provides the assumptions relating to the three cage production scenarios.


Page 13

Table 3 Common Model Assumptions for all Production Scenarios

Modeling Assumptions

Production

Cost of Feed (per Martin Mills Standard Schedule, assuming delivery in 1 tonne totes)

$1.603 /kg

Cost of Fingerlings (delivered to site)

10g @ 0.20 each 15g @ 0.25 each 25g @ 0.35 each 45g @ 0.55 each

Delivery Charge Shipping cost is assumed to be midway between Parry Sound and Manitoulin

$0.058 /kg $1000 per 26 tonne load to Parry Sound $2000 per 26 tonne load to Manitoulin

Average Mortality Rate 1%/month Maintenance & Repairs 0.035% of capital investment/month Supplies and Other Directs $.0025/kg/month

Based on the (Biomass+Growth)/2 for each month

Fish Health $.0025/kg/month Based on the (Biomass+Growth)/2 for each month

Fuel Separate item for offshore operations, included with the supplies for shore based

Stock Insurance 5% of inventory valuation Average Market Size of Fish 900 gm Fish Growth According to Figures: 1 and 2

Financial

Sales Price of Fish $3.86/kg ($1.75/lb) Inventory Value of Live Fish $3.315/kg ($1.50/lb) Equity Financing 50% Debt Financing up to 50% at 7% amortized over 120 months

secured against hard assets of farm Feed Financing up to 50% of feed

based on feed purchased for current fish inventory


Page 14

Table 4 Modeling Assumptions for all Cage Production Scenarios

Modeling Assumptions (Cage Production Scenarios)

Labour

Average labour rate $40,000/person/year (based on multipliers tied to growth and standing biomass – given for each scenario)

Labour Multiplier

75,000 kg/person Based on the (Biomass+Growth)/2 for each month

Manager $60,000/year (260 and 460 tonne) $72,000/year (1260 tonne)

Small Scenario Medium Scenario Large Scenario

1 manager 3 crew 1 manager 1 foreman 5 crew 1 manager 1 foreman 12 crew

Production

Feed Conversions 1.20 kg feed : 1 kg live wt. fish The economic evaluation fish production for each scenario was modelled with a production model that has been developed and tuned based on many years of fish production and growth data. The model is based on a 10th order polynomial which was fitted to temperature-growth curve program using curve-fitting program DataFit™ Version 9.


Page 15

The curve fit has an r2 value greater than 0.99. The equation of the polynomial is:

SGR=-1.81336x10-10T10 + 2.06312x10-8T9 - 9.9774x10-7T8 + 0.00002682T7 -0.00043876T7

+ 0.00043876T6 + 0.00043876T6 + 0.0044784T5 - 0.02793T4 + 09935T3 + 0.16508T2

+ 0.09867T - 0.001466

Where: SGR = Specific Growth Rate (as a %) T = Water Temperature (oC)

The production model was developed using a Microsoft Excel spreadsheet to model fish production on a monthly basis to generate the necessary inputs into the economic model. The production and economic model were run for three cage scenarios in t able 5 Cage Scenarios and Cage Configuration below. Table 5 Cage Scenarios and Cage Configuration

Cage Production Scenarios


Cage Configuration 8 steel cages 12 steel cages 30 steel cages in clusters of 6 cages

Cage Size 15m x 15m x 15m 15m x 15m x 15m 15m x 25m x 15m Location Tied to shore Tied to shore Offshore

Income Statements, Cash Flows, Balance Sheets and Capital Budgets were prepared for each scenario (Appendix A). Detailed Financial Ratios for each production scenario have been prepared and are found in Appendix A, and are summarized in Table 6: Financial Performance Ratios for Cage Production Scenarios below.


Page 16

Table 6 Financial Performance Ratios for Cage Production Scenarios

260 tonne 460 tonne 1260 tonneIn Year 10 In Year 10 In Year 10

RATIOSLiquidity

Current Ratio (times) 10.29 16.09 25.61 Quick Ratio 7.58 13.42 22.72

Assets ManagementInventory Turnover (days) 82 78 88

Debt ManagementDebt Ratio 0% 0% 0%Times Interest Earned 28.08 65.45 188.60

Profitability 10 Yr Avg. 10 Yr Avg. 10 Yr Avg.

Gross Margin 24.4% 20.2% 28.9%Return on Sales 8.3% 10.9% 25.0%Cash Earnings on Sales 6.9% 6.9% 13.0%ROI (cash-in - cash out) 2.9% 13.5% 51.7%

Other Ratios to ConsiderNPV (@ 7%) -$324,334 $132,474 $2,809,817FIRR -11.3% 10.0% 34.0%NPV / Investment (0.54) 0.17 2.16

Based on the economic comparison of three cage production scenarios it is evident that production scale has a very large impact on the economic performance of the operation. The best results, despite being an offshore site which requires vessel access, are for the 1260 tonne production scenario. The Financial Internal Rate of Return (FIRR) is a robust 34% and the net present value of (NPV) at 7% is $2.8 million or 2.16 times the initial $ investment. The 460 tonne scenario does not compare well with the larger production scale. The FIRR is only 10% and the NPV is $132 thousand or a ratio of 0.17 of the initial investment, worth less than the investment required. The small (260 tonne) production scenario produces a negative return on investment and has a negative present value.


Page 17

Clearly the economics of cage production favour larger operations and may be indicative of the significant incentive for existing cage producers to expand their operations. This analysis also indicated that small production sites have limited resources to improve the environmental performance of their operations, and likely cannot adopt many measures which do not improve the profitability of their operations. 3.2 ASSESSMENT OF THE COSTS OF IMPLEMENTING MOE’S CAGE AQUACULTURE MONITORING

PROGRAM The cost for implementing MOE’s cage monitoring program was evaluated based in the requirements of the program as outlined in the Coordinated Guide’s Sediment Discussion Paper and Water Quality Discussion Paper (Phase 2) (Ontario Ministry of the Environment, 2009; Ontario Ministry of the Environment, 2009). The program requires the implementation of both water quality and benthic sampling programs at each site. The program has different requirements depending on site characteristics. Several cost quotes from consultants and laboratories were examined, and final cost estimates were prepared for the annual costs of both the water quality and sediment (benthic) monitoring programs for sites that are tied to shore and located offshore. For each scenario the costs were also estimated based on whether the producer had the inclination and ability to implement the sampling program in house, or would require the services of a qualified environmental consultant. While conducting the work in house would provide savings to the producer, it would require dedicating time on a regular basis to sample collection and for the operator to rent or purchase the necessary equipment for benthic sampling. Retaining a professional firm to conduct the work has a number of significant advantages. It frees up production staff and does not tie sampling schedules to the operating requirements for the site. The collection of samples by an outside firm will also provide strong third party verification of sampling procedures, a documented chain of custody and will ensure that samples are properly collected and handled prior to analysis. Tables 7 to 10, inclusive, summarize the monitoring costs.


Page 18

Table 7 Cost of In-House Water Quality Monitoring for Cage Operations Water Quality Monitoring ProgramOngoing Operation - Assume Type 3 site

Tied to Shore Off-shore

Sample Analysis - Water Chemistry and in situ ProfilesNumber of Samples 55 66Cost per Water Sample $95 $95Total Analytical Cost $5,225 $6,270

Time required for a full series and to deliver samples to labTime per sample series (two people required in vessel for safety)Number sampling events per year 11 11Time per sampling event 8 8Total Time 88 88Labour Rate $20.66 $20.66Total Labour Cost $1,818 $1,818

Cost of Water Quality Monitoring $7,043 $8,088


Page 19

Table 8 Costing of Contracting Water Quality Monitoring for Cage Operations Water Quality Monitoring ProgramOngoing Operation - Assume Type 3 site

Tied to Shore Off-shore

Sample Analysis - Water Chemistry and in situ ProfilesNumber of Samples 55 66Cost per Water Sample $95 $95Cost per Sediment Sample $5,225 $6,270Total Analytical Cost

Time required for a full series and to deliver samples to labTime per sample series (two people required in vessel for safety)Number of sampling events per year 11 11Sampling Time 8 8Travelling Time 8 8Total Time 176 176Labour Rate $80.00 $80.00Total Labour Cost $14,080 $14,080

Vessel for sample collectionNumber of Days Required 11 11Cost for boat and motor $225 $225Total Vessel Cost $2,475 $2,475

Cost of Water Quality Monitoring $21,780 $22,825 * Note: Total travel time to the site is assumed to be eight hours, however if a local company is used, the costs associated with travel time may be significantly reduced.


Page 20

Table 9 Costing of In-House Benthic Sampling for Cage Operations Benthic Monitoring ProgramOngoing Operation

Year 2 and/or Annual Sampling Requirement

Year 4 (only) Sampling Requirement

Sample Analysis - Benthos and SedimentNumber of Samples 18 27 - 36Cost per Benthic Invertebrate Sample $185 $185Cost per Sediment Sample $75 $75Total Analytical Cost $4,680 $7,020 - $9,360

Time required for a full series and to deliver samples to labTime per sample series (two people req 22 32 - 36Total Time 22 32 - 36Labour Rate $20.66 $20.66Total Labour Cost $455 $661- $744

Cost of Benthic Monitoring $5,135 $7,681 - $10,103


Page 21

Table 10 Cost of Contracting Benthic Monitoring for Cage Operations Benthic Monitoring ProgramOngoing Operation

Year 2 and/or Annual Sampling Requirement

Year 4 (only) Sampling Requirement

Sample Analysis - Benthos and SedimentNumber of Samples 18 27 - 36Cost per Benthic Invertebrate Sample $185 $185Cost per Sediment Sample $75 $75Total Analytical Cost $4,680 $7,020 - $9,360

Time required for a full series and to deliver samples to labTime per sample series (two people required in vessel for safety)Sampling Time 22 32 - 36Travelling Time 8 8Total Time 30 40 - 44Labour Rate $80.00 $80.00Total Labour Cost $2,400 $3,200 - $3,520

Vessel for sample collectionNumber of Days Required 2 2Cost for boat and motor $225 $225Total Vessel Cost $450 $450

Cost of Benthic Monitoring $7,530 $10,670 - $13,330 * Note: Total travel time to the site is assumed to be eight hours, however if a local company is used, the costs associated with travel time may be significantly reduced. The cost of both water quality and benthic monitoring were also calculated in terms of the additional cost per kg for each production scenario in order to measure the potential impact on profitability and selling price (Table 11 Costs of Water Quality and Benthic Monitoring).


Page 22

Table 11 Costs of Water Quality and Benthic Monitoring


Cost of WQ Monitoring Annual In House $7,043 $7,043 $7,043

Contracted $21,780 $21,780 $21,780

Cost of Benthic Monitoring

Year 2 In House $5,135 $5,135 $5,135 Contracted $7,530 $7,530 $7,530


Total Cost of Monitoring







Page 23

Table 11 Continued Costs of Water Quality and Benthic Monitoring

Scenario 260 tonnes 460 tonnes 1260 tonnes Cost per kg of Production

Year 1 In House $0.03 $0.02 $0.01 Contracted $0.08 $0.05 $0.02





When the impact of monitoring is calculated in terms of the cost per kilogram of production and as a percentage of the farm gate Price for trout, the impact based on the scale of the operation is immediately evident. The percentage of the selling price ranges from 0.75% to 3.54% if monitoring is contracted out, and 0.35% to 1.93% if done in house. On a cost per kilogram basis, the cost of monitoring can contribute from $0.05 to $0.14 per kilogram in additional operational costs for a small producer.


Page 24

At the other end of the scale the cost can be as low as $0.01 for a large operation when sample collection is conducted in house. It is also interesting to note that the relative cost of monitoring is greatest on a unit cost for those operations that contribute the smallest quantity of waste solids to the receiving water. While total loading may be smaller, it is important to note that due to siting and operational practices the environmental effect of operations can vary significantly based on factors other than loading. The cost of the monitoring program has a relatively low sensitivity relative to the total cost of production. Current operations should be able to absorb the additional cost without substantial hardships. A land-based operation discharging to a receiving water at a single point source under a Certificate of Approval for a wastewater treatment facility would likely be required to sample water quality monthly directly from the discharge and at two reference locations in the receiving water upstream and downstream of the discharge. This would result in the collection and analysis of 36 water samples a year, costing approximately $2,700 per year. The time required for sample collection would likely be substantially less than for a cage production facility due to easier access to the sampling locations. If it is assumed that the three samples are collected in house, and that they can be collected with a couple of hours of work each month; the cost of sampling labour would be approximately $500 per annum. It is important to consider that the size of a large land-based operation would be substantially smaller than the smallest cage operation. Assuming 9 tonnes of annual production, the cost of water sampling is equivalent to $0.36 per kilogram of production, and is substantially greater than the cost of water quality and benthic monitoring even on the smallest cage site. For a large 100 tonne operation monitoring under a Certificate of Approval would contribute about $0.03 per kilogram to production costs or be comparable to unit cost for a large (1260 tonne) cage operation located at a single site. Based on this analysis it can be concluded that the cost of water quality and benthic monitoring for a cage culture operation under currently the proposed in the Draft Coordinated Guide Sediment Discussion Paper and Water Quality Discussion Paper is comparable to the cost of monitoring for a typical land-based operation monitoring under a Certificate of Approval on a unit and percentage cost basis.


Page 25

It can also be concluded that the size of the operation is more of a factor in influencing the per unit cost of sampling and monitoring than whether the facility is operating under a Certificate of Approval or the currently proposed guidelines. Alternatives to benthic sampling have also been suggested for monitoring cage sites. For example, benthic samples could also be evaluated in a bioassay for toxicity. Bioassays can be conducted with invertebrates such as Hyalellea azteca and Chironomus tentans or fish such Rainbow trout (Oncorhynchus mykiss) and Fathead minnow (Pimephales promelas) Typical costs for an invertebrate bioassay would range from $800 to 900 per sample with 5 replicates for statistical analysis. Minnow bioassays would range from $1,500 to $1,800 per sample also with five replicates. Chemical analysis of sediment samples for nutrients, organic content and BOD would cost in the order of $85 to $125 per sample. These alternative analyses are generally comparable in cost to the proposed benthic sampling as outlined in the sediment discussion paper, if a similar monitoring regime is required. In Canada, Environmental Effects Monitoring (EEM) programs exist within two regulations: the Pulp and Paper Effluent Regulations and the Metal Mining Effluent Regulations under the Canadian Fisheries Act. The EEM monitoring program manages industries that release nutrients as well as other contaminants e.g. chemicals in their wastewater. EEM provides a biological, effects-based feedback loop to assess the effectiveness of technology-based regulations in protecting receiving environments. The monitoring protocols for these programs are based on stakeholder consultation and are generally far more extensive than the proposed program for open cage aquaculture. The basic requirements for EEM monitoring would require the enumeration of benthic organisms to the taxa level with the determination of benthic diversity and would require toxicity testing of benthic material (Walker et al, 2003), with costs as outlined in the previous paragraph. The requirements for baseline data would likely be more extensive, and the threshold for ecological impact would likely be lower due to the more sensitive data analysis which is required under EEM. While an exact estimate of costs is not possible it would likely be several times greater that the currently proposed program.


Page 26

3.3 ECONOMIC EVALUATION OF IMPLEMENTING TECHNOLOGIES AND/OR OPERATIONAL STRATEGIES TO ENHANCE/IMPROVE ENVIRONMENTAL PERFORMANCE

To determine the feasibility and economic implications of implementing technologies and operational strategies to enhance and improve environmental performance the most the most feasible technologies and practices that were identified by ReThink Inc. & Canadian Aquaculture Systems Inc., (2006), and Stechey and Linquist (2005); production operations were modeled based on the production and financial models used for the three cage scenarios. Table 12 below provides a summary of the technologies and scenarios which were evaluated to determine the economic impact of these technologies and practices on cage production. Table 12 Environmental technologies and Practices Evaluated

Environmental Technology or Operating Practice

Production Scenarios Description of Technology

RH Waste Retrieval

460 tonne (medium) 1,260 tonne (large)

Waste recovery cones developed by AquaTech Environmental Systems for salmon production

Improved Feed Delivery & Monitoring

260 tonne 460 tonne 1260 tonne

Improved feed delivery with feed blowers and underwater video monitoring

Fallowing of Production Sites

460 tonne 1260 tonne

Two production at two sites with fish production alternating between the two sites

Recirculation Aquaculture 100 tonne Model Canadian Aqua-Farm

Developed by IPSFAD

Closed Containment System 1960 tonne

A floating rigid tank system developed by Agrimarine Industries

Land-based Farms

9 tonne 100 tonne 3500 tonne pump ashore

Flow through farms with tanks (9 tonne and 50 tonne) located inland, 2000 tonne located on shore

Descriptions of each scenario and the assumptions made for each scenario are outlined below.


Page 27

3.3.1 RH Waste Retrieval System

The RH Waste Retrieval System has been installed at three sites in British Columbia (Tweeten, personal communication, 2009) and is still being refined for broader application. The most recent application is an Atlantic smolt rearing facility in an inland lake in British Columbia. The system consists of a large conical bag with 60o sloped walls suspended below each cage, a collection system and a shore or barge-based solids concentration system. The bags act as collection systems; an airlift in the bottom of each bag removes waste manure and uneaten feed, as well as any fish mortalities. The air lift brings these to the surface where they are collected and pumped to shore or to the barge mounted filtration system. The solids are concentrated with a rotating drum filter. Polymer can be added to help thicken the manure prior to filtration. Beneficial wastewater treatment bacteria are added to the separated sludge and to the effluent to help degrade the waste solids and convert any nutrients in the water to bacterial biomass, helping to bind nutrients as beneficial microbial biomass rather discharging dissolved nutrients in effluent and promoting the growth of plant biomass within the receiving water. A cost estimate for a complete system was obtained from Allan Tweeten (2009), which served as the basis for this evaluation. The evaluation assumed that polymer was added to assist with solids removal and that the operation and maintenance of the collection system adds 20% to the labour requirement of the production operation. No additional costs were allocated for waste disposal as it was assumed the collected wastes could be composted, packaged and sold; or would be given away to local farmers to use for their nutrient value. The economic model for waste recovery system was only applied to the medium (460 tonne) and large (1260 tonne) production scenarios. Based on the initial evaluation of the economics of cage production, the small production scenario is unable to support a waste recovery system. Furthermore the solid waste treatment facility, which would be located on shore, cannot not be economically scaled down to for a smaller operation. The results of the evaluation of the RH Waste Retrieval are found in Appendix B (detailed 10 year projections) and Table 13 below:


Page 28

Table 13 Comparison of Cage Scenarios with and without Waste Recovery

460 tonne 1260 tonne 460 tonne 1260 tonne 460 tonne 1260 tonneIn Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10

RATIOSLiquidity

Current Ratio (times) 25.17 25.59 5.59 15.83 -77.8% -38.1%Quick Ratio 22.31 22.70 3.22 13.18 -85.6% -42.0%

Assets ManagementInventory Turnover (days) 84 88 72 81 -14.3% -8.1%

Debt ManagementDebt Ratio 0% 0% 16% 0% 0.0% -66.9%Times Interest Earned 87.41 188.48 18.67 81.07 -78.6% -57.0%

Profitability 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg.

Gross Margin 28.5% 28.9% 13.1% 22.0% -54.2% -23.7%Return on Sales 19.3% 24.9% 3.9% 17.9% -80.0% -28.1%Cash Earnings on Sales 13.2% 12.9% 2.8% 7.7% -79.0% -40.2%ROI (cash-in - cash out) 26.9% 51.6% -1.8% 18.2% -106.8% -64.8%

Other Ratios to ConsiderNPV (@ 7%) $736,374 $2,806,185 -$898,111 $334,165 -222.0% -88.1%FIRR 22.4% 34.0% -21.9% 9.7% -197.5% -71.5%NPV / Investment 0.92 2.16 -0.82 0.15 -188.7% -92.9%

with RH Waste Recovery SystemBase Case Scenario

Comparison (% Improvement)

It is evident from the financial analysis that the economics of waste recovery at both the medium (460 tonne) and large (1260 tonne) scale of production using the RH waste retrieval system are not attractive. At the medium scale the addition of a waste recovery system drives the operation from a positive rate of return and NPV into negative value and returns, and cannot be justified as an attractive investment. For the large scale operation, adopting waste recovery dramatically decreases the net present value and return on investment reducing the NPV by 88.1% rate of return by 71.5 %. It can be concluded that the RH Waste Recovery system, in its present configuration, is not an economically viable environmental technology for trout production in cages at any scale of operation.


Page 29

3.3.2 Improved Feed Delivery and Monitoring An environmental technology that is considered to be effective for a wide range of cage culture operations is the use of improved delivery and monitoring of feed to ensure that optimum levels of feed are fed and that little feed is wasted (Stechey and Linquist, 2005). To achieve maximum feed conversion it is important to not only avoid feed wastage, but to also ensure that sufficient feed has been fed to maintain optimal growth. Under-feeding can just as easily result in poorer feed conversion efficiencies as over feeding; and it is important to recognize that optimal feed usage cannot just focus on eliminating excess feed and feed wastage. This scenario assumes the deployment of an advanced feed monitoring technology such as an underwater video surveillance system to monitor fish feeding behavior and feed wastage, and the use of feed blowers to disperse feed evenly over the cage surface. It was assumed that the additional capital cost of such a system would be $35,000, $50,000 and $85,000 for the 260, 460 and 1260 tonne scenarios respectively, and it would result in a 1% improvement in feed conversion rate. The model also assumed that any time savings from using better feeding equipment would be used for feed monitoring, and as such there would be no net labour savings. The detailed results of the assessment for the three production scenarios are found in Appendix B and summarized in Table 14 below.


Page 30

Table 14 Comparison of Cage Scenarios with and without Improved Feed Monitoring and Feed Delivery

260 tonne 460 tonne 1260 tonne 260 tonne 460 tonne 1260 tonne 260 tonne 460 tonne 1260 tonneIn Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10

RATIOSLiquidity

Current Ratio (times) 8.67 25.17 25.59 9.91 25.98 25.94 14% 3% 1%Quick Ratio 5.94 22.31 22.70 7.19 23.11 23.04 21% 4% 1%

Assets ManagementInventory Turnover (days) 83 84 88 83 88 88 0% 4% 1%

Debt ManagementDebt Ratio 0% 0% 0% 0% 0% 0% -9% -3% -1%Times Interest Earned 24.56 87.41 188.48 28.25 89.79 191.17 15% 3% 1%

Profitability 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg.

Gross Margin 24.9% 28.5% 28.9% 24.6% 29.1% 29.3% -1% 2% 1%Return on Sales 6.7% 19.3% 24.9% 8.5% 19.9% 25.4% 26% 3% 2%Cash Earnings on Sales 5.5% 13.2% 12.9% 5.8% 13.5% 12.7% 5% 2% -2%ROI (cash-in - cash out) 1.3% 26.9% 51.6% 2.6% 27.0% 52.2% 97% 0% 1%

Other Ratios to ConsiderNPV (@ 7%) -$394,692 $736,374 $2,806,185 -$350,671 $755,363 $2,822,644 11% 3% 1%FIRR -11.3% 22.4% 33.9% -11.4% 22.3% 33.1% -1% -1% -2%NPV / Investment -0.66 0.92 2.16 -0.58 0.92 2.17 11% -1% 1%

With Improved Feed Monitoring and Delivery Comparison (% Improvement)Base Case Scenario

From the results of the economic analysis it is evident that at all three scales of operation improved feed monitoring and feed delivery improves the economic performance of the operation and can be considered to be an economically viable environmental technology which should be encouraged. Even assuming no net benefit from labour savings, the systems will pay for themselves out of operational savings due to more efficient feed consumption. In each case the FIRR benefits with the improved feed monitoring and delivery, with the smallest scale operation benefiting the most on a percentage basis. There is also an improvement in NPV for each scenario, with the best improvement for the medium scale operation.


Page 31

3.3.3 Fallowing of Production Sites To assess the economic impact of site fallowing on cage operations it was assumed that site permits will need to be reopened or obtained to either permit two production sites or one large contiguous site which would be able to accommodate two distinct cage anchorages that are capable of being operated on an alternate basis in a manner which does not interfere with each other. The basic assumptions for this comparison are found in Table 15. The premise of fallowing is that by alternating production sites from year to year, the net load in a specific location due to aquaculture activity will be reduced, and a quiescent period with limited additional inputs will help to mitigate the impact on the receiving environment and will improve the assimilation of any waste solids. Table 15 Assumptions for Evaluation of the Economic Impact of Site Fallowing

Scenario 460 tonnes 1260 tonnes

Additional Permitting Costs

75% more than base case 75% more than base scenario in Section 3.1

Additional Anchoring and Buoys

Two times base case Two times base scenario in Section 3.1

Additional Labour to Relocate Cages

50% more in April 50% more in April

Rotation Cycle Annual Cycle Annual Cycle An evaluation of fallowing was not conducted for the small production scenario as the economic performance of this scenario is already marginal and would not support the additional costs of securing a second fallowing site. Furthermore, the environmental impact of small production sites would likely be much less than the two larger production scenarios and therefore a benefit due to site fallowing is unlikely. The detailed results of this comparison are found in Appendix B and summarized in Table 16 below.


Page 32

Table 16 Comparison of Cage Scenarios with and without Fallowing

460 tonne 1260 tonne 460 tonne 1260 tonne 460 tonne 1260 tonneIn Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10

RATIOSLiquidity

Current Ratio (times) 25.17 25.59 25.11 24.71 -0.2% -3.4%Quick Ratio 22.31 22.70 22.24 21.84 -0.3% -3.8%

Assets ManagementInventory Turnover (days) 84 88 87 87 -3.7% 0.6%

Debt ManagementDebt Ratio 0% 0% 0% 0% 0.0% 0.0%Times Interest Earned 65.45 188.48 88.54 177.93 35.3% -5.6%

Profitability 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg.

Gross Margin 28.5% 28.9% 28.3% 28.4% -0.8% -1.6%Return on Sales 19.3% 24.9% 19.1% 24.5% -1.0% -1.8%Cash Earnings on Sales 13.2% 12.9% 13.1% 12.2% -0.2% -5.7%ROI (cash-in - cash out) 26.9% 51.6% 23.6% 48.3% -12.1% -6.4%

Other Ratios to ConsiderNPV (@ 7%) $736,374 $2,806,185 $626,556 $2,591,132 -14.9% -7.7%FIRR 22.4% 33.9% 19.1% 30.8% -14.7% -9.1%NPV / Investment 0.92 2.16 0.70 1.92 -24.4% -11.1%

Base Case Scenario Fallowing Comparison (% Improvement)

While fallowing may have a net benefit to the environment, unless it is tied to some other benefit such as an increase in production capacity, fallowing would not provide any economic benefit to medium and large scale cage operations. The net result is negative in terms of any economic measure for both the medium and large scale of operation. The economic performance of a medium scale of operations is already marginal with a net present value which is much less than the original investment and fallowing is not an economically viable strategy. While the economic net impact of fallowing is also negative at a large scale, it can easily be sustained by the operation due to its healthy economic performance. The main benefit of fallowing may be to reduce the quantity of solids deposited in a given area by spreading out the deposition over a wider area, and by providing quiescent time for solids to decompose. Some producers are already using fallowing as part of their production operations. It is important to note that there are currently no guidelines regarding the frequency and timing for the most effective site rotation.


Page 33

3.3.4 Recirculation Aquaculture System The three sizes of cage production scenarios were compared to the model farm scenario developed by the Interprovincial Partnership for Sustainable Freshwater Aquaculture Development (IPSFAD) to refine and develop the technology and then transfer RAS technology to farmers. The projections for the IPSFAD model farm are taken from a report prepared by Canadian Aquaculture Systems (date unspecified) which was extended beyond the original 5 year projection to 10 years to provide a similar time horizon for comparison with the cage production scenarios. It is important to note that the IPSFAD report was supplied by OMAFRA, and is confidential and the property of IPSFAD and appropriate clearances will be required from IPSFAD in order to publish this data. The IPSFAD system is a 100 tonne operation which is designed to be retrofitted from an old agriculture operation that is no longer in production. The capital costs for the barn and associated infrastructure are treated as sunk costs in the IPSFAD projection. The cost of obtaining a MOE Permit to Take Water was not included in the IPSFAD model as it is assumed that it would be in place for the original farming operation. Currently aquaculture operations are exempt from the Permit To Take Water administrative fee charged to non-agricultural users. Farm management is not charged out as a cost to the operation and assumed to be part of the farmer’s investment into the operation. All other assumptions for the operation are comparable with the assumptions made for the current production scenarios. The results of a side by side comparison are presented in Table 17 below. The results indicate that that financial performance of the RAS operation is not unlike the small (260 tonne) cage production scenario. Both generate a negative Present Value and FIRR. One difference between the financial model that was used for this study and the original IPSFAD report is that for the IPSFAD report it was assumed that the labour costs for operating the farm were part of the return on investment. This may be a valid assumption for a family farm but was not used in the current projection in order to keep the comparison comparable.


Page 34

Any investment with a negative FIRR is not financially attractive, but when this negative return is combined with the risks that are inherent in aquaculture, or any animal production, there is clearly a lot of work ahead for the IPSFAD initiative before it can successfully be to transferred as an economically viable technology to potential producers. Table 17 Comparison of Cage Production Scenarios with IPSFAD Model Aqua-Farm

260 tonne 460 tonne 1260 tonne

Canadian Model Aqua-Farm 100

tonneIn Year 10 In Year 10 In Year 10 In Year 10

RATIOSLiquidity

Current Ratio (times) 8.67 25.17 25.59 16.36 Quick Ratio 5.94 22.31 22.70 12.82

Assets ManagementInventory Turnover (days) 83 84 88 103

Debt ManagementDebt Ratio 0% 0% 0% 2%Times Interest Earned 24.56 87.41 188.48 13.75

Profitability 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg.

Gross Margin 24.9% 28.5% 28.9% 21.3%Return on Sales 6.7% 19.3% 24.9% 14.4%Cash Earnings on Sales 5.5% 13.2% 12.9% 7.3%ROI (cash-in - cash out) 1.3% 26.9% 51.6% 2.8%

Other Ratios to ConsiderNPV (@ 7%) -$394,692 $736,374 $2,806,185 -$226,318FIRR -11.3% 22.4% 33.9% -4.3%NPV / Investment -0.66 0.92 2.16 -0.48


Page 35

3.3.5 Closed Containment and Land-Based Pump Ashore Production Land–based aquaculture or some form of closed containment production have been discussed as potential alternatives to net cage production (ReThink Inc. & Canadian Aquaculture Systems Inc., 2006; Stechey & Linquist, 2005). Previous economic comparisons have not always compared systems at an appropriate scale of operation to take advantage of the benefits of enclosed tank based production systems or the cost savings which tank based systems allow due to a higher degree of environmental controls, economies of scale and the benefits of being able to highly mechanize fish handling and harvesting operations. For this reason this comparison was conducted using production scales that would be appropriate for each technology and of a sufficient scale to justify the additional infrastructure required to support these operations. Commercial closed containment using Future SEA Technologies rearing bag systems has been attempted in Ontario at two sites. Both did not succeed for a variety of reasons; however, the lack of bag integrity and reliability were at the core of their failure. A new closed containment system has been developed in British Columbia by Agrimarine Industries Inc., based on a floating rigid tank constructed from structural panels consisting of two fiber reinforced plastic (FRP) layers over a foam core. The tanks have been engineered to withstand a wide variety of site conditions and the specifications for the structural panels are based on expected site conditions. Previous economic assessments of land-based farms have largely focused on small inland production facilities that were limited in size due to a relatively small water supply, such as a well or head water stream, with production output from 9 tonnes to 36 tonnes per year (ReThink Inc. & Canadian Aquaculture Systems Inc., 2006). In practice this scale of operation provides little opportunity to efficiently take advantage of the high degree of control and management intervention that is possible in a land-based facility. A large land-based facility, Coolwater Farms, operated in Ontario from 1984 to 1996 next to the Pickering Nuclear Generating Station, with an annual production capacity in excess of 600 tonnes. The operation closed after Pickering “A” was shut-down for undetermined period for major plant maintenance and reconstruction.


Page 36

The Coolwater facility had been constructed in a moth-balled sewage treatment plant and was not optimally designed for fish production or energy efficiency. The farm did however clearly demonstrate the high degree of management control and the production potential of large scale pump ashore facility. Five large scale production operations were compared in order to determine the economic feasibility of appropriate alternatives to cage production. The results for each scenario are provided below in Table 18. This largest cage scenario was evaluated to illustrate the relative economics of cage aquaculture at the same scale as the closed containment and pump ashore scenarios. It is not likely that a single large cage operation of this size would be feasible with current technology. Table 18 Comparison of Large Scale Production Scenarios

Pump Ashore

1260 tonne 3400 tonne 1920 tonne 3,480 tonne 3500 tonneIn Year 10 In Year 10 In Year 10 In Year 10 In Year 10

FINANCIAL RATIOSLiquidity

Current Ratio (times) 25.61 23.58 16.55 16.62 21.10 Quick Ratio 22.64 20.79 14.32 14.02 18.33

Assets ManagementInventory Turnover (days) 88 85 68 79 84

Debt ManagementDebt Ratio 0% 0% 0% 0% 0%Times Interest Earned 188.05 183.47 140.37 150.35 198

Profitability 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg.

Gross Margin 28.9% 25.9% 22.1% 22.5% 28.0%Return on Sales 24.9% 24.3% 19.0% 10.9% 24.6%Cash Earnings on Sales 12.9% 11.8% 9.2% 6.9% 12.7%ROI (cash-in - cash out) 51.5% 49.6% 36.9% 13.5% 46.6%

Other Ratios to ConsiderNPV (@ 7%) $2,792,599 $6,759,819 $1,956,579 $2,823,531 $4,860,110FIRR 33.8% 31.0% 19.5% 16.9% 21.9%NPV / Investment 2.15 1.99 0.98 0.70 1.39

Closed ContainmentCage Production


Page 37

Based on this comparison the large net pen operation has the most solid financial performance followed by the large pump ashore land based farm, and floating closed containment respectively. Each of these alternatives has a solid FIRR in excess of 20%. The NPV for the closed containment is not as favourable as the land-based operation primarily due to the fact that the major capital assets are depreciated more rapidly (10 years vs. 20 years) due the shorter recovery for assets that are not tied to real estate. Under normal conditions floating containments may have useful productive life of 20 years which would result in a similar depreciation rate as land-based facilities. The worst economic scenario is cage production with waste recovery. This alternative has many of the costs of closed containment and land based operations, without a comparable operational advantage in terms of operational efficiency. What the economic comparison does not indicate are the large differences in the level of management and operational control which can be exercised for each of these scenarios. The land-based operations and to a lesser degree the closed containment are full 365 day a year operations, requiring round the clock site supervision. They are fairly independent of offshore conditions, feeding and fish handling can be scheduled independent of open water conditions; harvesting, can be easily adapted on a year round basis to market demand and last minute orders can be accommodated without significant concern over site access and weather conditions. The primary impact of this variability will be to place limits on when fish can be stocked, harvested and graded. In actual practice the more easily managed operations will have a distinct advantage in getting product to market on schedule and in responding to any changes in orders. Through previous experience with the Coolwater operations this can translate into a higher farmgate price paid for product. All of the production scenarios assume a new start-up. The conversion of existing cage operations into land-based operations would be not unlike a start-up operation. With the exception of floating containment, very little of the capital equipment and infrastructure from a cage operation would be useful in a land based operation. In the case of floating containment, some of the docks, anchors and markers buoys can be reused. Tables 19 and 20 provide a summary of the financial results, for the main production scenarios that were evaluated.


Page 38

3.3.6 Effectiveness of Environmental Control Measures The effectiveness of various environmental measures to reduce waste output have been evaluated in this study. Table 21 below provides a calculation of the projected waste production per tonne of trout produced under four production technologies.


Page 39

Table 19 Summary of Investment Requirements and Financial Performance for Production Scenarios

Pump Ashore

260 tonne 460 tonne 1260 tonne 3400 tonne 1920 tonne 3,480 tonne 3500 tonne 460 tonne 1260 tonneIn Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10

INCOME STATEMENT SUMMARYAnnual Production (kg) 234,929 469,858 1,292,110 3,406,473 1,914,346 3,478,375 3,478,375 469,858 1,292,110 Total Revenue 908,589$ 1,817,177$ 4,997,237$ 13,174,534$ 7,403,735$ 13,452,617$ 13,452,617$ 1,817,177$ 4,997,237$

Cost Of Production 672,151$ 1,284,492$ 3,495,341$ 9,567,682$ 5,706,305$ 10,236,143$ 9,589,129$ 1,458,931$ 3,803,399$ Gross Margin 236,438$ 532,685$ 1,501,896$ 3,606,851$ 1,697,430$ 3,216,474$ 3,863,488$ 358,246$ 1,193,837$

Indirect Costs 165,029$ 177,209$ 251,495$ 416,584$ 264,116$ 451,675$ 418,692$ 194,689$ 312,292$

PROFIT/(LOSS) before taxes 71,409$ 355,475$ 1,250,401$ 3,190,267$ 1,433,314$ 2,764,799$ 3,444,796$ 163,557$ 881,546$ Taxes 11,782$ 58,653$ 412,632$ 1,052,788$ 472,994$ 912,384$ 1,136,783$ 26,987$ 290,910$

PROFIT/(LOSS) after taxes 59,626$ 296,822$ 837,769$ 2,137,479$ 960,320$ 1,852,415$ 2,308,013$ 136,570$ 590,635$ Retained Earnings 67,785$ 2,149,942$ 6,692,409$ 16,873,031$ 7,372,756$ 12,233,434$ 16,298,987$ 645,947$ 3,879,927$

INVESTMENT SUMMARY

Capital Budget 755,235$ 1,103,270$ 2,433,245$ 6,753,235$ 3,650,568$ 7,509,068$ 6,637,368$ 1,444,070$ 3,897,845$

Investment RequiredShareholders Equity 600,000$ 800,000$ 1,300,000$ 3,400,000$ 2,000,000$ 4,050,000$ 3,500,000$ 1,100,000$ 2,150,000$ Long-term Loan 600,000$ 800,000$ 1,300,000$ 3,400,000$ 2,000,000$ 4,050,000$ 3,500,000$ 1,000,000$ 2,150,000$ Feed Financing -$ -$ 1,072,584$ 2,827,721$ 839,153$ 1,500,000$ 1,500,000$ 1,072,584$

With Manure RecoveryClosed ContainmentCage Production


Page 40

Table 20 Summary of Financial Ratios and Investment Performance for Production Scenarios

Pump Ashore RAS

260 tonne 460 tonne 1260 tonne 3400 tonne 460 tonne 1260 tonne 1920 tonne 3,480 tonne 3500 tonne

Canadian Model Aqua-Farm 100

tonneIn Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10 In Year 10

FINANCIAL RATIOSLiquidity

Current Ratio (times) 8.67 16.47 25.61 23.58 5.59 15.81 16.55 16.61 21.21 16.36 Quick Ratio 5.94 22.31 22.70 20.79 3.22 13.16 14.32 14.01 18.44 12.82

Assets ManagementInventory Turnover (days) 83 78 88 85 72 81 68 79 84 103

Debt ManagementDebt Ratio 0% 0% 0% 0% 16% 0% 0% 0% 0% 2%Times Interest Earned 24.56 87.41 188.48 183.47 18.67 81.00 140.37 150.35 198 13.75

Profitability 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg. 10 Yr Avg.

Gross Margin 24.9% 28.5% 28.9% 25.9% 13.1% 22.0% 22.1% 22.5% 28.0% 21.3%Return on Sales 6.7% 19.3% 24.9% 24.3% 3.9% 17.9% 19.0% 10.9% 24.6% 14.4%Cash Earnings on Sales 5.5% 13.2% 12.9% 11.8% 2.8% 7.7% 9.2% 6.9% 13.3% 7.3%ROI (cash-in - cash out) 1.3% 26.9% 51.6% 49.6% -1.8% 18.1% 36.9% 13.5% 47.9% 2.8%

Other Ratios to ConsiderNPV (@ 7%) -$394,692 $736,374 $2,806,185 $6,759,819 -$898,111 $330,186 $1,956,579 $3,253,619 $5,045,110 -$226,318FIRR -11.3% 22.4% 33.9% 31.0% -21.9% 9.7% 19.5% 19.3% 22.9% -4.3%NPV / Investment -0.66 0.92 2.16 1.99 -0.82 0.15 0.98 0.90 1.48 -0.48

With Manure Recovery Closed ContainmentCage Production


Page 41

Table 21 Effectiveness of Environmental Strategies

Pump AshoreSmall Medium Large Medium Large Small Large Large

Production Scale 234,929 469,858 1,292,110 469,858 1,292,110 1,914,346 3,478,375 3,478,375

Feed Used 281,915 563,830 1,550,532 563,830 1,550,532 2,201,498 4,000,132 4,000,132

Total Solid Wastes Produced 51,437 102,874 282,904 102,874 282,904 401,677 729,849 729,849

Nitrogen - solids 2,300 4,600 12,649 4,600 12,649 17,960 32,633 32,633

Phosphorus - solids 1,434 2,869 7,889 2,869 7,889 11,201 20,352 20,352

Soluble WasteNitrogen - soluble 9,397 18,794 51,684 18,794 51,684 73,383 133,338 133,338

Phosphorus - soluble 420 841 2,312 841 2,312 3,283 5,965 5,965

Projected Solids Recovery 0% 0% 0% 80% 80% 85% 85% 90%

Total Solids Discharged 51,437 102,874 282,904 20,575 56,581 60,252 109,477 72,985

Nitrogen - solids 2,300 4,600 12,649 920 2,530 2,694 4,895 3,263

Phosphorus - solids 1,434 2,869 7,889 574 1,578 1,680 3,053 2,035

Total Waste Production (kg/year)Solids 51,437 102,874 282,904 20,575 56,581 60,252 109,477 72,985

Nitrogen 11,697 23,394 64,333 19,714 54,214 76,077 138,233 136,601

Phosphorus 1,855 3,709 10,201 1,415 3,890 4,963 9,018 8,000

Total Waste Production (kg/tonne produced)Solids 218.9 218.9 218.9 43.8 43.8 31.5 31.5 21.0

Nitrogen 49.8 49.8 49.8 42.0 42.0 39.7 39.7 39.3

Phosphorus 7.9 7.9 7.9 3.0 3.0 2.6 2.6 2.3

% RemovalSolids 0% 0% 0% 80% 80% 86% 86% 90%

Nitrogen 0% 0% 0% 16% 16% 20% 20% 21%

Phosphorus 0% 0% 0% 62% 62% 67% 67% 71%

Waste which could be captured with Closed Containment

Solids 44,043.0 88,086.1 242,236.7

Nitrogen 464.2 4,721.6 12,984.3

Phosphorus 963.3 2,491.3 6,851.0

Cage Production Closed ContainmentRH Waste Recovery


Page 42

As expected, there is a fairly substantial difference in the effectiveness of each production technology to remove phosphorus since the bulk of phosphorus produced by fish production is in the waste solids fraction. Phosphorus reduction ranges from 0% for cage production to 67% and 71% for floating containment and land-based pump ashore facilities. However since nitrogen is largely excreted in a dissolved form, solids recovery has a much smaller impact on nitrogenous wastes. Even floating containment and land-based production systems can only remove about 20% of the total nitrogenous wastes produced. Fortunately this is not as critical an issue in freshwater as it would be in a marine environment, as in most freshwater ecosystems phosphorus is the limiting nutrient. Freshwater ecosystems as a result are far more sensitive to phosphorus inputs than to nitrogen. 3.4 ECONOMIC EVALUATION OF MARKET OUTLOOK A number of market studies including H.M. Johnson, & Associates (2008) and Stechey, and Linquist (2005) have assessed the market outlook for seafood and trout specifically generally indicating a positive trend for seafood consumption and for trout specifically. The Johnson study is the most recent and focuses on the export market for trout to the U.S. The study concluded that U.S. imports of rainbow trout have increased sharply in recent years, but at 5,000 tonnes, this represents a very small portion of the total U.S. seafood supply. At the same time Canadian fresh trout exports to the U.S. declined to 700 tonnes due to the high value of the Canadian dollar, still accounting for about 60% of us imports of fresh trout. Table 22 U.S. Fresh Trout Imports

U.S. Fresh Trout Imports – Metric Tons Product Weight

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Canada 270 325 411 681 671 857 880 731 745 466 405 499 667 Ecuador 0 0 0 0 3 0 0 0 0 0 0 2 33 Colombia 1 4 9 0 0 91 221 201 188 196 221 210 152 Mexico 2 51 65 86 88 115 75 63 80 41 37 53 51 Peru 0 0 0 0 0 27 43 42 52 48 60 71 63 Other 24 270 47 107 184 307 225 263 438 324 216 192 172 Total 297 543 532 874 946 1397 1444 1300 1503 1075 939 1027 1138 Source: U.S. Bureau of the Census Customs Statistics


Page 43

About 4,000 tonnes of frozen trout are imported in the U.S., primarily from Chile and Argentina, consisting of frozen fillets. The supply of South American trout is expected to continue to grow with a focus on frozen products, but the supply will remain relatively small due to water issues which include limits on effluent discharges (Johnson, 2008). Fresh and frozen trout fillets tend to be distinct product categories and are generally not interchangeable.

U. S. Trout Imports by Product Form

0

1,000

2,000

3,000

4,000

5,000

6,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Met

ric

To

ns

Frozen Fillet* Not Specified Fresh Not Specified Frozen Fresh Farmed Rainbow Trout

Source: U.S. Bureau of the Census (from Johnson 2008) Figure 4: U.S. Trout Imports by Product Form The Johnston study concluded that the only possible new significant supply for fresh trout for the U.S. market is likely to come from Canada, stating that Canadian trout producers can remain competitive with the current U.S. market prices for fresh trout. The report concluded that the regulatory limits and onerous permitting process make it exceedingly difficult for the Canadian trout industry to expand.


Page 44

Fish consumption in Canada is similar to U.S. consumption, except that Canadians consume about 30% more fish on a per capita basis than U.S. consumers (Canadian Aquaculture Systems, 2009). Canada also has a large growing immigrant population many of whom come from countries with a tradition of consuming seafood. An aging and wealthier population is also tending to consume more seafood. The long-term outlook for seafood consumption is for increased consumption both on an absolute and per capita basis. Despite this positive outlook and rising costs, the farmgate price paid by processors in Ontario for whole trout have not changed substantially in over ten years. During this time the cost of fish diets have increased substantially due to increasing ingredient costs and a shift to more energy dense diets. However, it can be argued that more energy dense diets are cost effective and based on a unit of gain are as good as or better than conventional diets with a reduced impact on the environment. The Johnson study mentions that while over the last three years the cost of production for Idaho trout, which represents about 70% of U.S. domestic trout production, have risen about 25%; prices have only increased 10 to 20 percent. This still is more favourable than in Ontario where market prices for trout have increased from $4.30/kg to $5.87/kg (37%), but farmgate prices have not kept up. A producer who chooses to remain nameless has stated this is due to two key influencing factors one is the fact that producers only have two options when selling to processors in Ontario and the other is the overall influence of market conditions. The Johnson study forecast an unsatisfied demand for 6,000 tonnes a year of live weight trout over the next twelve years. To meet this additional U.S. demand Ontario production would have to grow to 2½ times current production. When it is taken into consideration that Canadian producers should be able to profitably supply this unsatisfied demand, there is a significant opportunity to substantial increase export sales of Ontario produced trout to the U.S. market. The Johnson study only projects U.S. trout consumption based on passive market demand to the year 2020.


Page 45

There are many opportunities to expand markets beyond this rate of growth with an increased supply of trout. The Johnson study was conducted at a time when Canadian Exchange rates relative to the U.S. dollar were at a historic high. Since that time exchange rates have returned to more moderate levels, making Ontario product much more competitive in the market place. The Johnson study also stated that it is highly unlikely U.S. trout production will increase in the future due to a lack of additional water in Idaho and the marginal economics for small scale operators outside Idaho. The study also does not take into consideration the domestic market for trout. Currently Ontario accounts for 70% of Canadian trout production and because of its proximity to Northeastern U.S. markets the Ontario industry is in a preferred position to supply major eastern and central markets. The Canadian market for trout also has significant growth potential. One of the weakness with using historic market data as an indicator of potential demand is that factors other than market demand can be limiting sales. This is clearly the case for the Ontario industry. The industry has flatlined for over 10 years, not due to a lack of markets for trout. Fresh trout fillets are highly interchangeable with other red fleshed salmonid fillets. There is a significant opportunity to grow the market if sufficient product is available to supply market demand. Fresh fish consumers tend to purchase what they see on display, and if a product is not available they will tend to purchase products that are available. As a result sales of trout can be readily increased in the short term given sufficient supply. Both Ontario processors have stated that they could sell more trout if more product is made available, however it is important that any increases in supply be consistent and sustained, so that markets can be grown and maintained once they are established. The opportunity for expanding the market for trout is likely far greater that the 2 ½ times expansion projected by the Johnson report based on projected unsatisfied U.S. demand. With increases in domestic consumption and new exports to the U.S., it is likely that the market could sustain a 10 to 20% annual growth rate for fresh trout. Due to limited opportunities for an expansion of U.S. production it is anticipated that this expansion can be sustained over the longer term. 3.5 ECONOMIC EVALUATION OF SOCIETAL COSTS AND BENEFITS Several studies have been done on the benefits of the cage aquaculture industry. The industry can create significant employment in northern and rural communities where cage farms tend to be located.


Page 46

The industry also has the potential to create a large number of jobs in supporting industries such as fish processing, feed manufacture, equipment supply, transport and in marinas. There are also the supporting jobs which people working in these sectors will provide. NOAA contracted a recent study by Harry Cummings and Associates Inc. (2007) which assessed the benefits of that the industry generates. The report concluded that in 2005 the cage industry produced 3,275 tonnes of fish resulting in a farm gate value of $12.5 million and generated 50 full-time equivalent jobs. The study concluded that the businesses indirectly generated an estimated $38.2 million in cage culture related sales and sustained a total of 179 full-time equivalent jobs. The study determined that the cage culture industry sustains employment in numerous Northern Ontario communities including Little Current, Espanola, Manitowaning, Kagawong, Gore Bay, Mindemoya, Evansville, Val Caron, Parry Sound, Sudbury and North Bay. The bulk of this employment activity is linked to cage culture production and businesses that provide marina supplies and service, cage fabrication and maintenance supplies and service, construction/building materials, and processing. The cage culture industry also provides employment in a number of communities in Southern Ontario including Hanover, Fergus, Guelph, Kitchener, New Hamburg, St. Thomas, Woodstock, Holland Centre, Dunnville, Embro, Elmira, New Dundee, Shelbourne, Coburg and Toronto. The report concluded that the cage industry provides significant benefit to local communities and to the province as a whole relative the size of the industry, with the potential to provide more employment as the industry grows. While the benefit of the industry has been fairly clearly demonstrated, little study has been conducted of the environmental services the industry utilizes to in order to produce fish. Since the quantity of water required to support the industry cannot be readily estimated, it is necessary to find other methods of measuring the degree to which the industry relies on the environmental services it utilizes. Significant effort has been devoted to improving fish diets in an effort to reduce waste volume and nutrient content. Data shows that commercial scale cage operations can potentially contribute a significant phosphorus loading to the surrounding environment (Bolton, 2006) the majority of which is delivered to the sediment (Bristow et al, 2008) and approximately 60% of it is bioavailable (Yan, 2004; references therein). When the substantial cost of phosphorous removal from municipal wastewater is taken into consideration, the phosphorous contribution of cage production is not insignificant.


Page 47

It is also important to note that the phosphorus inputs to the Great Lakes are an important aspect of the International Joint Agreement on the Great Lakes with strong commitments by governments on both sides of the border to limit phosphorus discharges to the Great Lakes.

While the current industry is relatively small compared to marine salmon farming operations on the East and West Coast, and its impact on the Great Lakes ecosystem is small; continued growth of the cage industry has the potential to offset some of the significant reductions in phosphorus loading that have been gained by substantial investments made by industry, agriculture and municipalities to limit their phosphorus contributions. The cage industry also relies on establishing land use permits for a defined area of the lake, similar to permitted use of the lakebed for marina’s. In Ontario, lakes are a public resource that are shared by all citizens. The creation of a water lot makes the water lot inaccessible to the public and effectively puts a common property under temporary private control. The total area occupied by aquaculture operations is very small, less that 0.00001 percent of surface area of Lake Huron (NOAA, 2009). It is important to note that good fish husbandry relies on providing fish a healthy environment, and that cage operations are generally sited in locations where good growing conditions can be maintained and that the water quality within the water lot is unlikely to be detrimental to fish. 3.5 SENSITIVITY ANALYSIS A sensitivity analysis was carried out to assess the sensitivity of cage production to variations in input and output costs, and growing conditions. The major cost inputs were evaluated in terms of their impact on production costs and profitability. The large cage production scenario was selected for the evaluation. The impact of variations in fish growth were also modeled. Two types of growth variability were modeled. The first was a change in growth with a corresponding change in feed consumption. This type of scenario would be representative of the type of response which would be expected if temperatures were more favourable for growth than expected with feed consumption varying proportionately with the decrease or improved growth. The second type of growth variance is a scenario where growth or production is decreased without the corresponding change in feed. This would represent the scenario that includes as adverse environmental conditions, elevated mortalities, fish escapes or losses due to disease. The reverse scenario where growth would increase without the corresponding increase in feed consumption is not a likely scenario.


Page 48

Sensitivity to changes in minor inputs were not projected as even large changes in these inputs will have little impact on the cost of production and profitability. The results of the sensitivity analysis are summarized in Table 24. As expected the profits of aquaculture operations are most sensitive to variations in the farmgate price paid for fish. While farmgate price has no impact on production costs, it is the single largest factor affecting profitability. Each 10% change in farmgate price affects profits by more than 46%. The second greatest factor affecting profitability would be a decrease in growth and production without a corresponding decrease in feed usage. A 10% decrease in production would result in a decrease of 40.6% in profitability, and an 11% increase in production costs. A change in growth with a corresponding change in feed consumption has a far smaller impact on profitability, with a 10% decrease resulting in a 13.6% decrease in profitability and 3.0% increase in production costs. Both labour and fingerling costs impact profitability with a 10% change resulting in corresponding change in profitability of 2.7% and 4.2%, and a .78% and 1.2% in production costs respectively. While the sensitivity to a 10% change in interest rate results in no change in production costs and a 0.73% change in profitability, it is important to note that interest rates can change fairly significantly over a 10 year project horizon, and that substantial changes in interest rates are possible. In summary cage production is sensitive to many of the same factors as other livestock production. Factors such as farmgate price and feed costs tend to have the greatest impact on profitability. Fish are different from other types of livestock because they are a poikilothermic animal, and their growth is highly dependent on water temperature. Seasonal and year to year variations in water temperatures can have a significant effect on growth rates. Fish also take their oxygen from water, where oxygen concentrations are far lower than in the atmosphere, making fish production reliant on having access to a large quantity of clean well oxygenated water. Fish growth is dependant on maintaining good oxygen conditions. The sensitivity analysis indicated that after farmgate price and feed costs, growth is the third most significant factor affecting profitability, and as a result site conditions in terms of temperature and oxygen concentration can have a large impact on the profitability of a cage production operation, as summarized in Table 24.


Page 49

Table 23 Results of Sensitivity Analysis

Variable Production Cost Profit

Feed 10.00% 7.28% -24.35%-10.00% -7.28% 24.35%

Fingerlings 10.00% 1.21% -4.22%-10.00% -1.21% 4.22%

Labour 10.00% 0.78% -2.72%-10.00% -0.78% 2.72%

Farmgate Price 10.00% 0.00% 46.58%-10.00% 0.00% -46.58%

Interest Rate 10.00% 0.00% -0.73%-10.00% 0.00% 0.73%

Growth 10.00% -3.02% 13.59%(with corresponding change in feed) -10.00% 3.02% -13.59%

Growth 10.00% -11.11% 40.64%-10.00% 11.11% -40.64%

% Change

Due to the relatively low power consumption of pump ashore operations that are designed for energy efficiency, pump ashore and closed containment operations are fairly insensitive to variations in power costs. A 10% variation in power costs only changes production costs by 0.5% and profits by 1.4% for a pump ashore facility, then impact on closed containment facilities is even less. 4. CONCLUSIONS Based on an evaluation of the economics of cage production and environmental strategies to reduce the impact of fish culture operations on the freshwater ecosystem, it is evident that economical feasible opportunities to make significant improvements in the environmental performance of cage production facilities are limited.


Page 50

Much has already been achieved through improvements in feed quality, feed management and the selection of an operating site to minimize negative impacts on the local environment. Through careful feed management, fallowing and ongoing site monitoring there will likely be further incremental improvements reducing the impact of cage operations on the local environment and ensuring there is no lasting impact from fish culture operations. However it is unlikely that there will be any large scale improvements in cage technology which economically reduce the quantity of waste released to the environment. One of the limitations of waste recovery for cage operations, such as the RH Waste Recovery system, is that without a corresponding improvement in productivity it results in added costs with little economic benefit to the operation. With closed containment technologies where fish densities can be increased, and water temperatures better controlled there can be offsetting benefits to balance out the additional cost of the technology. This lack of an opportunity to economically intercept and remove waste solids places very definite limits on the growth potential of the industry. The current focus of environmental management for cage operations essentially becomes an exercise of finding the best way to disperse wastes so that their impact on the local environment is minimized, however very little can be done to further reduce loading into the receiving water.

An economic analysis of small, medium and large cage culture operations indicates that operational scale has a large impact on profitability, and other than site selection, the scale of the operation may be the single largest determinant of profitability. When the cost of implementing water quality and benthic monitoring programs under the proposed MOE guidelines is evaluated on a unit cost basis, the proposed programs are consistent with the monitoring programs required for land based operations operating under a Certificate of Approval (0.03 to $0.36 per kg of production for land-based farms). The monitoring costs, though not insignificant, range from $0.01 to $0.07 per kg of production if samples are collected in house, and from $0.03 and $0.14 per kg if both sample collection and analysis is contracted out. The greatest unit costs are for smaller scale operations. The proposed approach to manage the environment impacts of cage aquaculture in Ontario is based on the best economically achievable technology. With contemporary practice for wastewater treatment and treatment of effluent from other industries, there is lots of interest to continue to explore new technologies to minimize environmental impacts from this industry as source reductions should be the first line of defense where possible. Fish manure is a valuable resource and the source of nutrients which should be managed and utilized much like any waste product, which could help to facilitate a shift towards multi purpose productions.


Page 51

The results of this study clearly demonstrate that when operations are scaled appropriately there are at least two alternatives to cage production (floating containment and land-based pump ashore) that may be economically competitive, and may in fact eventually be even more profitable than cage production once products and markets for collected fish wastes are developed. The reason both floating containment and pump ashore facilities can be operated economically is because the production technology can be operated in a manner which gives a high degree of control and allows for management of water temperatures and dissolved oxygen. The use of pure oxygen allows production densities which reduce volume of tankage required to contain the fish, greatly reducing the cost of water pumping and solids removal. Oxygen injection is an added production cost but allows the production facility to be about one quarter of the size of conventional tank based farm. The added cost of oxygenation is substantially less than cost of constructing and servicing a facility four times larger. Based on this analysis it may be more accurate to state that a lack of access to capital and limited industry experience with alternatives to cage production are currently the greatest barriers to adopting new aquaculture technologies. Based on earlier experiences with large scale intensive land-based production in Ontario, alternative technologies may facilitate a more efficient vertically integrated development of the industry, with a much greater potential for economic benefit and job creation than is currently possible. Experience in many other industries has also shown that once more environmentally compatible alternatives are adopted, these can foster substantial growth and improvement in an industry due to increased efficiency and the elimination of many of the constraints to growth. 5. RECOMMENDATIONS While it is recognized that the aquaculture sector provides significant benefits to the province’s economy and to northern and rural communities, it must also be recognized that there are finite limits to the industry’s growth due to environmental constraints of current production technology. Presently, the proposed approach attempts to balance adequate economic viability while ensuring long term environmental sustainability. Based on the results of the current study it is recommended that we embark on a path which provides both a more economically and environmentally sustainable alternative which can optimize both environmental protection and profitability. Two technologies were identified in the study that may provide such a solution. There is sufficient existing experience with land-based production to be able to site and design farms on the Great Lakes which are energy efficient and economical to operate.


Page 52

New floating containment technologies are now being tested and are projected to provide a high degree of reliability, energy efficiency and environmental protection. Implementing the proposed policy changes will give the industry an opportunity to meet short term market demands and will provide a framework to move towards a more environmentally sustainable industry. Significant sustained growth that meets the needs of a broad range of stakeholder groups will require the industry to start thinking “outside of the cage” and to look at the longer term development of more sustainable production technologies. It is important to recognize that the industry’s growth has not only been limited by an uncoordinated regulatory process, but by limited access to capital and a lack of good examples of sustainable production technologies. The IPSFAD initiative to develop a model recirculating farm based on the Danish experience of using model farms to demonstrate more sustainable environmental technologies is a good example of what can be done to encourage industry growth. A similar initiative may be required for the Great Lakes. A comparison of economic projections indicates that the profit potential for both closed containment and large land-based facilities is comparable with large cage operations, and could serve to substantially boost Ontario trout productions while significantly limiting the quantity of waste solids released to the ecosystem. The chief recommendation of this study is for the development of a research facility and a test site where new approaches to fish production can be tested and monitored; with the long term objective of facilitating the adoption of more sustainable technologies as the technology matures. The development of such a facility would require the contribution of industry and non-industry stakeholder groups. Potential partners may include the Northern Ontario Aquaculture Association, Aboriginal Communities, non-government Environmental Organizations such as the Georgian Bay Association, Great Lakes United, FedNor, MNR, MOE, OMAFRA, DFO, University of Guelph, industry operators and suppliers, and local communities. A good example of such an initiative is the Middle Bay Sustainable Aquaculture Institute in British Columbia. The Middle Bay Sustainable Aquaculture Institute was established to examine and assist in the development of closed-containment salmon rearing technologies. MBSAI has a marine site for research in Discovery Passage in Campbell River that has been licensed in conjunction with the Middle Bay Limited Partnership (MBLP) for closed-containment salmon aquaculture. MBLP is a limited partnership with the Comox Indian Band and other private investors as limited partners and with AgriMarine Industries Inc. as the general partner. A similar initiative in Ontario is recommended.


Page 53

6. CLOSING

This report has been prepared for the Ontario Ministry of the Environment. Any use of the information contained in this report by a third party, any reliance on the report, or decisions based upon the report, are the responsibility of those third parties unless authorized by WESA in writing. WESA accepts no responsibility for damages suffered by any unauthorized third party as a result of decisions made or actions taken based upon this report. Respectfully Submitted, WESA Inc. Gintas Kamaitis, B.Sc. (Hon.), B.Sc. (Eng.) C. Ronald Donaldson, M.Sc., P. Geo. Senior Associate Vice President


Page 54

7. REFERENCES Agrimarine Industries. 2008 direct communications re: Agrimarine Floating Containment System,

Richard Buchanan, http://www.sustainable-aquaculture.ca/ Aquatech Environmental Systems Ltd., 2009, RH Waste Retrieval System,

http://www.aquatechenvironmental.com/products/wasteretrieval.htm, Accessed 2009 Feb 21.

Aquaetreat, Unknown, Manual on effluent treatment in aquaculture - Science and Practice, site

access Jan 28, 2009, http://aquamedia.org/FileLibrary%5C10%5CAquaetreat_manual_web.pdf

Asche F, Guttormsen AG, Tveterås R. 1999. Environmental problems, productivity and

innovations in Norwegian salmon aquaculture. Aquaculture Economics & Management 3(1):19-29., http://www.informaworld.com.subzero.lib.uoguelph.ca/10.1080/13657309909380230 Accessed 2009 Feb 21.

Bolton, Jim; 2006; Aquaculture in Georgian Bay: An Emerging Threat, presentation to GBA &

GBA Foundation Cleveland Briefing, April 8, 2006 in Newbury, Ohio; http://www.georgianbay.ca/pdf/ClevelandFiles/Cleveland%20AquaCulture%20Presentation.pdf

Boyd, Claude E.; Schmittou, H. R.. "Achievement of sustainable aquaculture through

environmental management" Aquaculture Economics & Management 3.1 (1999). 21 Feb. 2009, http://www.informaworld.com.subzero.lib.uoguelph.ca/10.1080/13657309909380233


Page 55

Brinker, Alexander, 2007, Guar gum in rainbow trout (Oncorhynchus mykiss) feed: The influence of quality and dose on stabilisation of faecal solids, Aquaculture, Volume 267, Issues 1-4, Nutrition and Feeding of Fish - This Special Issue presents a small fraction of the presentations presented at the XII International Symposium on Fish Nutrition and Feeding held in Biarritz, France, May 28 to June 1, 2006., 3 July 2007, Pages 315-327, ISSN 0044-8486, DOI: 10.1016/j.aquaculture.2007.02.037, http://www.sciencedirect.com/science/article/B6T4D-4N5CX7K-1/2/95784e4517d623bdfdcde30be29bd60d)

Bristow, C. E., A. Morin, R. H. Hesslein, and C. L. Podemski, 2008, Phosphorus budget and

productivity of an experimental lake during the initial three years of cage aquaculture, Can. J. Fish. Aquat. Sci. 65: 2485–2495 (2008).

Canadian Aquaculture Systems. 2009. Aquaculture in Ontario: Situation Assessment & Industry

Outlook, Second Draft, report prepared for the Northern Ontario Aquaculture Association.

Canadian Aquaculture Systems. date unspecified. Canadian Model Farm Initiative: Technical and

Operational Assessment for the Canadian Model Aqua-Farm. Report prepared for Interprovincial Partnership for Sustainable Freshwater Aquaculture Development (IPSFAD).

Cantox Environmental, 2006, Review of the Environmental Effects Relating to Cage Aquaculture

Waste Products, Final Report, Report to the Ontario Ministry of the Environment. Chaves, P. A.; Sutherland, R. M.; Laird, L. M.. "An economic and technical evaluation of

integrating hydroponics in a recirculation fish production system" Aquaculture Economics & Management 3.1 (1999). 21 Feb. 2009, http://www.informaworld.com.subzero.lib.uoguelph.ca/10.1080/13657309909380235

Clarke, C., 1997, Coho growth test in SEA SystemTM bag in Departure Bay, AQUACULTURE

Update Pacific Biological Station, No. 79, September 16, 1997.


Page 56

Clark, Michael Louis, 2003, Comparison of Water Quality, Rainbow Trout Production, and Economics in Oxygenated and Aerated Raceways, Master's Thesis, Department Fisheries and Wildlife Sciences Advisory Committee, Virginia Tech, URN etd-12172003-113917.

Colt, John, Steve Summerfelt, Tim Pfeiffer, Sveinung Fivelstad, Michael Rust, Energy and resource

consumption of land-based Atlantic salmon smolt hatcheries in the Pacific Northwest (USA), Aquaculture, Volume 280, Issues 1-4, 1 August 2008, Pages 94-108, ISSN 0044-8486, DOI: 10.1016/j.aquaculture.2008.05.014, http://www.sciencedirect.com/science/article/B6T4D-4SJP79G-1/2/5da928f70cb41f02744593b97285e6b1

Dansk Aqvakulture, 2009, Design and Construction of Model Fish Farms in Denmark,

http://www.aquamedia.org/FileLibrary/10/Aquaetreat_Modelfishfarms_Design.pdf DFO, 2008, Potential Technologies for Closed-containment Saltwater Salmon Aquaculture, DFO

Can. Sci. Advis. Sec. Sci. Advis. Rep. 2008/001. Drakeford B, Pascoe S. 2008. SUBSTITUTABILITY OF FISHMEAL AND FISH OIL IN DIETS FOR

SALMON AND TROUT: A META-ANALYSIS. Aquaculture Economics & Management 12(3):155-175. < http://www.informaworld.com.subzero.lib.uoguelph.ca/10.1080/13657300802306079 >. Accessed 2009 Feb 22.

Dumas A., France J., Bureau D.P., 2007, Evidence of three growth stanzas in rainbow trout

(Oncorhynchus mykiss) across life stages and adaptation of the thermal-unit growth coefficient, Aquaculture, 267 (1-4), pp. 139-146.

Elliott, J. M., M. A. Hurley, 1995 , The Functional Relationship between Body Size and Growth

Rate in Fish, Functional Ecology, Vol. 9, No. 4 (Aug., 1995), pp. 625-627, http://www.jstor.org/stable/2390153


Page 57

Fredriksson, David W., Igor Tsukrov, Patrick Hudson, Engineering investigation of design procedures for closed containment marine aquaculture systems, Aquacultural Engineering, Volume 39, Issues 2-3, November 2008, Pages 91-102, ISSN 0144-8609, DOI: 10.1016/j.aquaeng.2008.08.002. (http://www.sciencedirect.com/science/article/B6T4C-4TDK6V7-1/2/8823b66c951cb14c93cf9a279b902233)

Georgian Bay Association, 2009, Environment – Aquaculture, GBA position on aquaculture in

Georgian Bay. http://www.georgianbay.ca/index.html. Harry Cummings and Associates Inc., 2007, Economic Impact of the Cage Culture Industry in

Ontario, study prepared for the Northern Ontario Aquaculture Association. Jobling, Malcolm, 1994, Fish and fisheries series: 13 Fish bioenergetics, London: Chapman & Hall,

(1995 printing). QL 639.1.J62 Johnson, H.M. & Associates, 2008, U.S. Market Opportunity Assessment Freshwater Trout,

Report to Department of Fisheries and Oceans, Office of Aquaculture Management Directorate.

Kamaitis, G., 2008, Closed containment aquaculture: There are alternatives to open netcage

aquaculture but they all have their problems, GBA Update Vol 18 No. 1, Spring 2008. Pg 1, 11-12.

Kamaitis, G., 1999, PRODPLAN, Excel Production Planning Spreadsheet for Production Modeling

and Scheduling of Salmonids, © 1991 - 1999. Kamaitis G., 2009, Operating experience with closed containment systems. Lawson, Thomas B., 1995, Fundamentals of Aquacultural Engineering, Chapman & Hall, New

York, NY.


Page 58

Leon-Munoz, Jorge; Tecklin, David; Farias, Aldo; Diaz, Susan, 2007, Salmon Farming in The Lakes of Southern Chile – Valdivian Ecoregion, Report to the Chilean Society of Limnology, http://www.wwf.cl/archivos_publicaciones/informe%20salmones%20lagos%20sur%20de%20Chile-restriccion.pdf .

Liu, Yajie; Sumaila, Ussif Rashid, 2007, "Economic Analysis of Netcage Versus Sea-Bag Production

Systems For Salmon Aquaculture In British Columbia" Aquaculture Economics & Management 11.4 (2007). 21 Feb. 2009, http://www.informaworld.com.subzero.lib.uoguelph.ca/10.1080/13657300701727235

Martin Mills, 2008, Current Farm Fish Feed Price List, Effective July 21 2008. Meredith, Dale D., 1975, Temperature effects on Great Lakes water balance studies, Journal of

the American Water Resources Association, 11(1) , pg. 60-68, http://dx.doi.org/10.1111/j.1752-1688.1975.tb00660.x

Moccia, R.D. and D.J.Bevan, 2007, Aquastats Ontario Aquacultural Production in 2006,

OMAFRA Factsheet 07-002. Mountjoy, Jeff, 2009, Personal communication from Jeff Mountjoy of Martin Mills Inc. Muir JF, Brugere C, Young JA, Stewart J. 1999. The solution to pollution? The value and

limitations of environmental economics in guiding aquaculture development. Aquaculture Economics & Management 3(1):43-57. http://www.informaworld.com.subzero.lib.uoguelph.ca/10.1080/13657309909380232 Accessed 2009 Feb 21.

Ontario Ministry of Natural Resources, 2009, Draft Coordinated Application, Review and

Decision Guidelines for Cage Aquaculture Sites in Ontario, http://www.mnr.gov.on.ca/en/Business/LetsFish/2ColumnSubPage/260166.html

Ontario Ministry of the Environment, 2009, Development Of A Coordinated Application And

Review Guide For Cage Aquaculture Sites In Ontario; Sediment DiscussionPaper; http://www.ene.gov.on.ca/envision/env_reg/er/documents/2009/010-5166.pdf


Page 59

ReThink Inc. & Canadian Aquaculture Systems Inc., 2006, Evaluation of Emerging Technologies for Waste Management in Land-Based and Open-Water (Cage) Aquaculture – THIRD DRAFT, Report to the Ontario Ministry of Agriculture and Food.

Stechey, D., J. Linquist, 2005, Wastewater Management and Best Practices of the Freshwater

Aquaculture Sector, Report to the Ontario Ministry of the Environment, March, 2005 Tracey, Karen, 2009, personal communication, Executive Director Northern Ontario Aquaculture

Association. Tweeten, Allan, 2009, personal communication, Aquatech Environmental Systems Ltd. Yan, N.D., 2004, Research needs for the management of water quality issues, particularly

phosphorus and oxygen concentrations, related to salmonid cage aquaculture in Canadian freshwaters, Environ. Rev. 13: 1–19 (2005).

Young, JA, Brugere C, Muir JF. 1999. Green grow the fishes-oh? Environmental attributes in

marketing aquaculture products. Aquaculture Economics & Management 3(1):7-17. Walker, S.L., S.C. Ribey, L. Trudel and E. Porter, 2003, Canadian Environmental Effects

Monitoring: Experiences with Pulp and Paper and Metal Mining Regulatory Programs, Environmental Monitoring and Assessment, Volume 88, Numbers 1-3 / October, 2003.

APPENDIX AAPPENDIX AAPPENDIX AAPPENDIX A

Economic Scenarios for OpenEconomic Scenarios for OpenEconomic Scenarios for OpenEconomic Scenarios for Open----Water Cage ProductionWater Cage ProductionWater Cage ProductionWater Cage Production

Income Projections

Aquaculture Financial Projections

Cage Production 230 Tonne Pro Forma Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 ($/kg)

Harvest (kg) 82,803 238,944 228,959 234,566 234,929 234,929 234,929 234,929 234,929 234,929 2,194,846 kg

Total Revenues $320,240 $924,115 $885,498 $907,183 $908,589 $908,589 $908,589 $908,589 $908,589 $908,589

Cost Of Production 10 Yr Total Yr 10%

Farmgate Opening Inventory $0 $149,175 $149,175 $152,662 $152,888 $152,903 $152,903 $152,903 $152,903 $152,903Electricity $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%Feed $246,625 $478,529 $458,372 $467,586 $468,183 $468,183 $468,183 $468,183 $468,183 $468,183 $2.03 $1.99 51.5%Fingerlings $85,500 $85,500 $85,500 $85,500 $85,500 $85,500 $85,500 $85,500 $85,500 $85,500 $0.39 $0.36 9.4%Fish Health $1,078 $1,918 $2,088 $2,087 $2,083 $2,083 $2,083 $2,083 $2,083 $2,083 $0.01 $0.01 0.2%Labour (& Benefits) $55,082 $55,082 $55,082 $55,082 $55,082 $55,082 $55,082 $55,082 $55,082 $55,082 $0.25 $0.23 6.1%Maintenance & Repairs $18,126 $36,251 $36,251 $36,251 $36,251 $36,251 $36,251 $36,251 $36,251 $36,251 $0.16 $0.15 4.0%Supplies $9,818 $18,126 $18,126 $18,126 $18,126 $18,126 $18,126 $18,126 $18,126 $18,126 $0.08 $0.08 2.0%Stock Insurance $6,218 $10,503 $11,624 $11,479 $11,449 $11,449 $11,449 $11,449 $11,449 $11,449 $0.05 $0.05 1.3%

$422,447 $835,085 $816,218 $828,773 $829,562 $829,577 $829,577 $829,577 $829,577 $829,577 $2.97 $2.88 74.5%Closing Inventory $149,175 $149,175 $152,662 $152,888 $152,903 $152,903 $152,903 $152,903 $152,903 $152,903 $0.65

Cost Of Production $273,272 $685,910 $663,556 $675,885 $676,659 $676,674 $676,674 $676,674 $676,674 $676,674 $2.90 $2.23

Gross Margin $46,968 $238,205 $221,942 $231,297 $231,929 $231,914 $231,914 $231,914 $231,914 $231,914 $0.97 $0.99 25.5%

Indirect CostsDepreciation $88,372 $75,491 $65,104 $56,539 $49,366 $43,291 $38,104 $33,649 $29,801 $26,463 $0.23 $0.21 5.4%Professional Services $18,000 $16,850 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $0.08 $0.08 2.0%Insurance $4,800 $4,900 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $0.02 $0.02 0.5%Interest $40,639 $37,534 $34,204 $30,633 $26,804 $22,698 $18,296 $13,575 $8,513 $3,085 $0.11 $0.11 3.0%Telecommunications $4,200 $4,226 $4,422 $4,566 $4,710 $4,854 $4,998 $5,142 $5,286 $5,430 $0.02 $0.02 0.5%Management $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $0.27 $0.26 6.6%Office Expense $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $0.03 $0.03 0.7%Lease $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $0.11 $0.10 2.6%Bank Charges $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $0.00 $0.00 0.1%Environmental Costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%

Total Indirect $246,611 $229,600 $217,129 $205,138 $194,280 $184,243 $174,798 $165,766 $157,000 $148,379 $0.88 $0.83 21.4%

PROFIT/(LOSS) before taxes ($199,643) $8,605 $4,813 $26,160 $37,650 $47,671 $57,116 $66,149 $74,915 $83,536 $0.09 $0.09 2.4%

Taxes $0 $0 $0 $0 $0 $0 $0 $8,006 $12,361 $13,783 $0.06 1.5%

PROFIT/(LOSS) after taxes ($199,643) $8,605 $4,813 $26,160 $37,650 $47,671 $57,116 $58,143 $62,554 $69,752 $0.09 $0.04 0.9%Retained Earnings ($199,643) ($191,038) ($186,225) ($160,066) ($122,416) ($74,745) ($17,629) $40,514 $103,068 $172,820

3/9/2009 Financial Report Template - 10 Year - 230 t Cage Production.xlsx 1

Cash Flow Projections


Cage Production 230 Tonne

Pro Forma Cash Flow Projections

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

OPERATING CASH FLOW

Cash ReceiptsHarvest (kg) 82,803 238,944 228,959 234,566 234,929 234,929 234,929 234,929 234,929 234,929 Sales $320,240 $924,115 $885,498 $907,183 $908,589 $908,589 $908,589 $908,589 $908,589 $908,589

$320,240 $924,115 $885,498 $907,183 $908,589 $908,589 $908,589 $908,589 $908,589 $908,589

Cash DisbursementsDirect Expenses ($422,447) ($685,910) ($667,043) ($676,111) ($676,674) ($676,674) ($676,674) ($676,674) ($676,674) ($676,674)Indirect Expenses ($158,239) ($154,110) ($152,026) ($148,599) ($144,914) ($140,952) ($136,694) ($132,117) ($127,199) ($121,915)(Increase) Decrease in Receivables ($26,687) ($50,323) $3,218 ($1,807) ($117) $0 $0 $0 $0 $0Increase (Decrease) in Payables $35,204 $21,955 ($1,572) $756 $47 $0 $0 $0 $0 $0

Taxes $0 $0 $0 $0 $0 $0 $0 ($8,006) ($12,361) ($13,783)

Total Cash Disbursements ($572,169) ($868,387) ($817,423) ($825,762) ($821,658) ($817,626) ($813,368) ($816,797) ($816,234) ($812,373)

Operating Cash Flow ($251,929) $55,728 $68,075 $81,421 $86,930 $90,962 $95,221 $91,791 $92,354 $96,216

Capital Expenditures Production Facility ($755,235) $0 $0 $0 $0 $0 $0 $0 $0 $0 Office Facilities $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Capital ($755,235) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($1,007,164) $55,728 $68,075 $81,421 $86,930 $90,962 $95,221 $91,791 $92,354 $96,216

Interest Accrued $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Interest Paid $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Interest $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Long Term Receivable $0 $0 $0 $0 $0 $0 $0 $0 $0

Funding SourcesEquity Investment $600,000 $600,000 $0 $0 $0 $0 0 0 0 0 0New Financing (Loan 1) $600,000 $557,041 ($46,065) ($49,395) ($52,965) ($56,794) ($60,900) ($65,302) ($70,023) ($75,085) ($80,513)New Financing (Loan 2) $0 $0 $0 $0 $0 0 0 0 0 0Feed Supplier Financing -$ $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Funding $1,157,041 ($46,065) ($49,395) ($52,965) ($56,794) ($60,900) ($65,302) ($70,023) ($75,085) ($80,513)

Increase (Decrease) in cash position $149,877 $9,664 $18,680 $28,456 $30,136 $30,062 $29,918 $21,769 $17,269 $15,703

CASH (Deficiency) at beginning of period $0 $149,877 $159,541 $178,221 $206,677 $236,813 $266,876 $296,794 $318,563 $335,832

CASH (Deficiency) at end of period $149,877 $159,541 $178,221 $206,677 $236,813 $266,876 $296,794 $318,563 $335,832 $351,535

Initial


Balance Sheet

Aquaculture Financial ProjectionsCage Production 230 Tonne Pro Forma Balance Sheet


ASSETSCurrent Assets Cash 149,877$ 159,541$ 178,221$ 206,677$ 236,813$ 266,876$ 296,794$ 318,563$ 335,832$ 351,535$ Accounts Receivable -$ 26,687$ 77,010$ 73,791$ 75,599$ 75,716$ 75,716$ 75,716$ 75,716$ 75,716$ 75,716$ Inventory Production 149,175$ 149,175$ 152,662$ 152,888$ 152,903$ 152,903$ 152,903$ 152,903$ 152,903$ 152,903$ Total Current Assets -$ 325,739$ 385,726$ 404,675$ 435,164$ 465,432$ 495,494$ 525,413$ 547,181$ 564,451$ 580,154$

Capital AssetsProduction Facility 666,863$ 591,372$ 526,268$ 469,730$ 420,364$ 377,073$ 338,969$ 305,320$ 275,520$ 249,056$

TOTAL ASSETS -$ 992,602$ 977,098$ 930,943$ 904,894$ 885,796$ 872,568$ 864,382$ 852,502$ 839,970$ 829,210$

LIABILITIES & SHAREHOLDERS EQUITY

Current Liabilities Accounts Payable and Accrued Liabilities -$ 35,204$ 57,159$ 55,587$ 56,343$ 56,390$ 56,390$ 56,390$ 56,390$ 56,390$ 56,390$

Total Current Liabilities -$ 35,204$ 57,159$ 55,587$ 56,343$ 56,390$ 56,390$ 56,390$ 56,390$ 56,390$ 56,390$

Long-Term LiabilitiesNew Financing (Loan 1) 600,000$ 557,041$ 510,976$ 461,582$ 408,617$ 351,823$ 290,923$ 225,621$ 155,598$ 80,513$ 0$ Feed Supplier Financing -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Total Long-Term Liabilities 600,000$ 557,041$ 510,976$ 461,582$ 408,617$ 351,823$ 290,923$ 225,621$ 155,598$ 80,513$ 0$

Total Liabilities 600,000$ 592,245$ 568,136$ 517,169$ 464,959$ 408,212$ 347,312$ 282,010$ 211,987$ 136,902$ 56,390$

Shareholder EquityEquity Investment 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ Investment Capital -$ -$ -$ -$ -$ Retained Earnings (Deficit) (199,643)$ (191,038)$ (186,225)$ (160,066)$ (122,416)$ (74,745)$ (17,629)$ 40,514$ 103,068$ 172,820$ Total Equity -$ 400,357$ 408,962$ 413,775$ 439,934$ 477,584$ 525,255$ 582,371$ 640,514$ 703,068$ 772,820$

TOTAL LIABILITES & EQUITY 600,000$ 992,602$ 977,098$ 930,943$ 904,894$ 885,796$ 872,568$ 864,382$ 852,502$ 839,970$ 829,210$

Initial Start-up


Capital Budget



Capital Budget Year 1

InfrastructureLand-base (feed, storage,etc.) $15,000Workshop and staff area $12,500Envriornmental Assessment and Permitting $60,000Engineering & Contingency (15%) $13,125

Sub-Total $100,625

Cage Culture SystemCages (50' x 50') - 8 cages $240,000Anchors, Mooring and Installation $80,000Marker Buoys & Anchors (8) $1,600Nets (for cages) $44,000Bird / Predator Nets $8,000Centre Float for Bird Nets $6,800Fingerling Nets $4,000Walkways and decking (12' wide, assume 150' long) $45,000Engineering & Contingency (15%) $64,410

Sub-Total $493,810

Fish Culture EquipmentMonitoring System with Alarms $2,000Hydraulic Harvesting System $0Tractor (4WD) & Trailer $12,000Tractor equiped with lifting forks $20,000Pick-up Truck $35,000Powered Feed Blower $20,000Back-up Genset $15,000Snow Blower $4,000Feed Monitoring System (Underwater Video) $6,000Oxygen Meters (handheld) $3,000Nets, Totes, Tools Etc. $12,000Contingency (20%) $25,800

Sub-Total $154,800

-$

Other EquipmentComputer & Office Equipment $5,000Contingency (20%) $1,000

Sub-Total 6,000$

Currency Exchange

Sub-Total 755,235$ Contingencies IncludedTOTAL 755,235$

3/9/2009 Initial Profit Loss Projections Page 4



Financial Performance Projections

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 10 YearAverage

RATIOSLiquidity



Debt ManagementDebt Ratio 56% 52% 50% 45% 40% 33% 26% 18% 10% 0%Times Interest Earned (3.91) 1.23 1.14 1.85 2.40 3.10 4.12 5.87 9.80 28.08

ProfitabilityGross Margin 14.7% 25.8% 25.1% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 25.5% 24.4%Return on Sales -22.1% 13.2% 11.8% 12.5% 12.5% 10.0% 10.5% 11.0% 11.5% 12.1% 8.3%Cash Earnings on Sales 46.8% 1.0% 2.1% 3.1% 3.3% 3.3% 3.3% 2.4% 1.9% 1.7% 6.9%ROI (cash-in - cash out) -33.3% 1.4% 0.8% 4.4% 6.3% 7.9% 9.5% 9.7% 10.4% 11.6% 2.9%

Other Ratios to ConsiderNPV -$324,334 at 7.0%FIRR -11.3%

Income Projections


Cage Production 460 Tonne NominalPro Forma Income Statement


Harvest (kg) 165,606 477,888 457,917 469,131 469,858 469,858 469,858 469,858 469,858 469,858 4,389,692 kg

Total Revenues $640,480 $1,848,231 $1,770,996 $1,814,365 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177


Farmgate Opening Inventory $0 $298,350 $298,350 $305,324 $305,776 $305,806 $305,806 $305,806 $305,806 $305,806Feed $487,538 $945,976 $906,129 $924,342 $925,523 $925,523 $925,523 $925,523 $925,523 $925,523 $2.01 $1.97 50.9%Fingerlings $153,900 $153,900 $153,900 $153,900 $153,900 $153,900 $153,900 $153,900 $153,900 $153,900 $0.35 $0.33 8.5%Fish Health $3,115 $5,336 $5,491 $5,480 $5,469 $5,469 $5,469 $5,469 $5,469 $5,469 $0.01 $0.01 0.3%Labour (& Benefits) $190,034 $198,297 $198,297 $198,297 $198,297 $198,297 $198,297 $198,297 $198,297 $198,297 $0.45 $0.42 10.9%Maintenance & Repairs $39,718 $39,718 $39,718 $39,718 $39,718 $39,718 $39,718 $39,718 $39,718 $39,718 $0.09 $0.08 2.2%Supplies $19,859 $19,859 $19,859 $19,859 $19,859 $19,859 $19,859 $19,859 $19,859 $19,859 $0.05 $0.04 1.1%

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%Stock Insurance $20,083 $31,737 $33,059 $32,688 $32,613 $32,613 $32,613 $32,613 $32,613 $32,613 $0.07 $0.07 1.8%

$914,247 $1,693,172 $1,654,801 $1,679,606 $1,681,155 $1,681,184 $1,681,184 $1,681,184 $1,681,184 $1,681,184 $3.03 $2.93 75.7%Closing Inventory $298,350 $298,350 $305,324 $305,776 $305,806 $305,806 $305,806 $305,806 $305,806 $305,806 $0.65

Cost Of Production $615,897 $1,394,822 $1,349,477 $1,373,830 $1,375,349 $1,375,378 $1,375,378 $1,375,378 $1,375,378 $1,375,378 $2.96 $2.28

Gross Margin $24,583 $453,409 $421,519 $440,535 $441,828 $441,799 $441,799 $441,799 $441,799 $441,799 $0.91 $0.94 24.3%

Indirect CostsDepreciation $128,580 $110,273 $95,301 $82,846 $72,360 $63,454 $55,840 $49,293 $43,639 $38,736 $0.17 $0.15 4.0%Professional Services $18,000 $16,850 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $0.04 $0.04 1.0%Insurance $4,800 $4,900 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $0.01 $0.01 0.3%Interest $54,185 $50,045 $45,605 $40,844 $35,739 $30,264 $24,395 $18,100 $11,351 $4,114 $0.07 $0.08 2.0%Telecommunications $4,200 $4,226 $4,422 $4,566 $4,710 $4,854 $4,998 $5,142 $5,286 $5,430 $0.01 $0.01 0.3%Management $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $0.14 $0.13 3.3%Office Expense $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $0.01 $0.01 0.3%Lease $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $0.05 $0.05 1.3%Bank Charges $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $0.00 $0.00 0.0%Vehicle Expenses & Travel $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $0.03 $0.03 0.8%

Total Indirect $315,365 $291,894 $273,727 $256,656 $241,209 $226,973 $213,632 $200,935 $188,676 $176,679 $0.54 $0.51 13.3%


Taxes $0 $0 $3,057 $30,340 $33,102 $35,446 $37,648 $39,742 $41,765 $43,745 $0.09 2.4%

PROFIT/(LOSS) after taxes ($290,781) $161,515 $144,735 $153,540 $167,517 $179,380 $190,519 $201,121 $211,358 $221,375 $0.37 $0.34 8.8%Retained Earnings ($290,781) ($129,266) $15,468 $169,008 $336,525 $515,905 $706,424 $907,545 $1,118,903 $1,340,277

3/9/2009 Financial Report Template - 10 Year - 460 tonne Cage.xlsx 1



Cage Production 460 Tonne Nominal



OPERATING CASH FLOW

Cash ReceiptsHarvest (kg) 165,606 477,888 457,917 469,131 469,858 469,858 469,858 469,858 469,858 469,858 Sales $640,480 $1,848,231 $1,770,996 $1,814,365 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177

$640,480 $1,848,231 $1,770,996 $1,814,365 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177

Cash DisbursementsDirect Expenses ($914,247) ($1,394,822) ($1,356,451) ($1,374,282) ($1,375,378) ($1,375,378) ($1,375,378) ($1,375,378) ($1,375,378) ($1,375,378)Indirect Expenses ($186,785) ($181,621) ($178,427) ($173,810) ($168,849) ($163,518) ($157,793) ($151,642) ($145,037) ($137,944)(Increase) Decrease in Receivables ($53,373) ($100,646) $6,436 ($3,614) ($234) $0 $0 $0 $0 $0Increase (Decrease) in Payables $76,187 $40,048 ($3,198) $1,486 $91 $0 $0 $0 $0 $0

Taxes $0 $0 ($3,057) ($30,340) ($33,102) ($35,446) ($37,648) ($39,742) ($41,765) ($43,745)

Total Cash Disbursements ($1,078,218) ($1,637,040) ($1,534,696) ($1,580,560) ($1,577,472) ($1,574,343) ($1,570,818) ($1,566,763) ($1,562,181) ($1,557,067)


Capital Expenditures Production Facility ($1,103,270) $0 $0 $0 $0 $0 $0 $0 $0 $0 Office Facilities $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Capital ($1,103,270) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($1,541,008) $211,190 $236,300 $233,805 $239,705 $242,834 $246,359 $250,414 $254,996 $260,110




Total Funding $1,542,721 ($61,419) ($65,859) ($70,620) ($75,725) ($81,200) ($87,070) ($93,364) ($100,113) ($107,350)


CASH (Deficiency) at beginning of period $0 $1,713 $151,484 $321,924 $485,109 $649,089 $810,723 $970,012 $1,127,062 $1,281,945

CASH (Deficiency) at end of period $1,713 $151,484 $321,924 $485,109 $649,089 $810,723 $970,012 $1,127,062 $1,281,945 $1,434,705

Initial


Balance Sheet

Aquaculture Financial ProjectionsCage Production 460 Tonne NominalPro Forma Balance Sheet


ASSETSCurrent Assets Cash 1,713$ 151,484$ 321,924$ 485,109$ 649,089$ 810,723$ 970,012$ 1,127,062$ 1,281,945$ 1,434,705$ Accounts Receivable -$ 53,373$ 154,019$ 147,583$ 151,197$ 151,431$ 151,431$ 151,431$ 151,431$ 151,431$ 151,431$ Inventory Production 298,350$ 298,350$ 305,324$ 305,776$ 305,806$ 305,806$ 305,806$ 305,806$ 305,806$ 305,806$ Total Current Assets -$ 353,437$ 603,853$ 774,832$ 942,083$ 1,106,326$ 1,267,960$ 1,427,249$ 1,584,299$ 1,739,182$ 1,891,942$


TOTAL ASSETS -$ 1,328,127$ 1,468,271$ 1,543,949$ 1,628,354$ 1,720,237$ 1,818,417$ 1,921,866$ 2,029,623$ 2,140,868$ 2,254,892$







Shareholder EquityEquity Investment 800,000$ 800,000$ 800,000$ 800,000$ 800,000$ 800,000$ 800,000$ 800,000$ 800,000$ 800,000$ Investment Capital -$ -$ -$ -$ -$ Retained Earnings (Deficit) (290,781)$ (129,266)$ 15,468$ 169,008$ 336,525$ 515,905$ 706,424$ 907,545$ 1,118,903$ 1,340,277$ Total Equity -$ 509,219$ 670,734$ 815,468$ 969,008$ 1,136,525$ 1,315,905$ 1,506,424$ 1,707,545$ 1,918,903$ 2,140,277$

TOTAL LIABILITES & EQUITY 800,000$ 1,328,127$ 1,468,271$ 1,543,949$ 1,628,354$ 1,720,237$ 1,818,417$ 1,921,866$ 2,029,623$ 2,140,868$ 2,254,892$

Initial Start-up


Capital Budget




InfrastructureLand-base (feed, storage,etc.) $15,000Workshop and staff area $50,000Environmental Assessment and Permitting $60,000Engineering & Contingency (15%) $18,750

Sub-Total $143,750


Sub-Total $723,120

Fish Culture EquipmentMonitoring System with Alarms $2,000Hydraulic Harvesting System $35,000Tractor (4WD) & Trailer $15,000Tractor equiped with lifting forks $20,000Pick-up Truck $35,000Powered Feed Blower $40,000Back-up Genset $15,000Snow Blower $6,000Feed Monitoring System (Underwater Video) $6,000Oxygen Meters (handheld) $3,000Nets, Totes, Tools Etc. $15,000Contingency (20%) $38,400

Sub-Total $230,400

-$


Sub-Total 6,000$

Currency Exchange

Sub-Total 1,103,270$ Contingencies IncludedTOTAL 1,103,270$






RATIOSLiquidity





Other Ratios to ConsiderNPV $173,162 at 7.0%FIRR 10.95%

Income Projections


Cage Production 1260 Tonne NominalPro Forma Income Statement


Harvest (kg) 455,416 1,314,191 1,259,273 1,290,111 1,292,110 1,292,110 1,292,110 1,292,110 1,292,110 1,292,110 12,071,653 kg

Total Revenues $1,761,321 $5,082,634 $4,870,238 $4,989,505 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237


Farmgate Opening Inventory $0 $820,463 $820,463 $839,642 $840,885 $840,966 $840,966 $840,966 $840,966 $840,966Feed $1,340,730 $2,601,435 $2,491,854 $2,541,940 $2,545,187 $2,545,187 $2,545,187 $2,545,187 $2,545,187 $2,545,187 $2.01 $1.97 50.9%Fingerlings $423,225 $423,225 $423,225 $423,225 $423,225 $423,225 $423,225 $423,225 $423,225 $423,225 $0.35 $0.33 8.5%Fish Health $22,129 $36,496 $35,798 $35,664 $35,611 $35,611 $35,611 $35,611 $35,611 $35,611 $0.03 $0.03 0.7%Fuel $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $0.01 $0.01 0.4%Labour (& Benefits) $272,658 $272,658 $272,658 $272,658 $272,658 $272,658 $272,658 $272,658 $272,658 $272,658 $0.23 $0.21 5.5%Maintenance & Repairs $87,597 $87,597 $87,597 $87,597 $87,597 $87,597 $87,597 $87,597 $87,597 $87,597 $0.07 $0.07 1.8%Supplies $43,798 $43,798 $43,798 $43,798 $43,798 $43,798 $43,798 $43,798 $43,798 $43,798 $0.04 $0.03 0.9%Stock Insurance $47,517 $71,134 $70,104 $69,401 $69,265 $69,265 $69,265 $69,265 $69,265 $69,265 $0.06 $0.05 1.4%

$2,255,654 $4,374,806 $4,263,496 $4,331,925 $4,336,227 $4,336,307 $4,336,307 $4,336,307 $4,336,307 $4,336,307 $2.79 $2.71 69.9%Closing Inventory $820,463 $820,463 $839,642 $840,885 $840,966 $840,966 $840,966 $840,966 $840,966 $840,966Cost Of Production $1,435,191 $3,554,343 $3,423,854 $3,491,040 $3,495,261 $3,495,341 $3,495,341 $3,495,341 $3,495,341 $3,495,341 $2.72 $2.71

Gross Margin $326,130 $1,528,291 $1,446,383 $1,498,465 $1,501,976 $1,501,896 $1,501,896 $1,501,896 $1,501,896 $1,501,896 $1.14 $1.16 30.1%

Indirect CostsDepreciation $252,780 $231,216 $202,806 $178,590 $157,781 $139,792 $124,165 $110,534 $98,604 $88,130 $0.13 $0.07 1.8%Professional Services $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $0.00 $0.00 0.1%Insurance $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $0.02 $0.02 0.5%Interest $155,505 $131,372 $105,495 $77,746 $58,075 $49,180 $39,641 $29,413 $18,445 $6,685 $0.06 $0.01 0.1%Telecommunications $4,200 $4,226 $4,422 $4,566 $4,710 $4,854 $4,998 $5,142 $5,286 $5,430 $0.00 $0.00 0.1%Management $72,000 $72,000 $72,000 $72,000 $72,000 $72,000 $72,000 $72,000 $72,000 $72,000 $0.06 $0.06 1.4%Office Expense $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $0.00 $0.00 0.1%Lease $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $0.02 $0.02 0.5%Bank Charges $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $0.00 $0.00 0.0%Vehicle Expenses & Travel $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $0.01 $0.01 0.3%Environmental Costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%

Total Indirect $560,085 $514,414 $460,323 $408,502 $368,166 $341,426 $316,404 $292,689 $269,936 $247,845 $0.31 $0.19 5.0%

PROFIT/(LOSS) before taxes ($233,955) $1,013,878 $986,061 $1,089,963 $1,133,810 $1,160,470 $1,185,492 $1,209,206 $1,231,960 $1,254,051 $0.83 0.83$ 21.5%

Taxes $0 $261,274 $325,400 $359,688 $374,157 $382,955 $391,212 $399,038 $406,547 $413,837 $0.32 8.3%

PROFIT/(LOSS) after taxes ($233,955) $752,604 $660,661 $730,275 $759,653 $777,515 $794,280 $810,168 $825,413 $840,214 $0.83 $0.51 13.2%Retained Earnings ($233,955) $518,649 $1,179,309 $1,909,584 $2,669,237 $3,446,752 $4,241,032 $5,051,200 $5,876,613 $6,716,827







OPERATING CASH FLOW

Cash ReceiptsHarvest (kg) 455,416 1,314,191 1,259,273 1,290,111 1,292,110 1,292,110 1,292,110 1,292,110 1,292,110 1,292,110 Sales $1,761,321 $5,082,634 $4,870,238 $4,989,505 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237

$1,761,321 $5,082,634 $4,870,238 $4,989,505 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237

Cash DisbursementsDirect Expenses ($2,255,654) ($3,554,343) ($3,443,034) ($3,492,283) ($3,495,341) ($3,495,341) ($3,495,341) ($3,495,341) ($3,495,341) ($3,495,341)Indirect Expenses ($307,305) ($283,198) ($257,517) ($229,912) ($210,385) ($201,634) ($192,239) ($182,155) ($171,331) ($159,715)(Increase) Decrease in Receivables ($146,777) ($276,776) $17,700 ($9,939) ($644) $0 $0 $0 $0 $0Increase (Decrease) in Payables $187,971 $108,224 ($9,276) $4,104 $255 $0 $0 $0 $0 $0

Taxes $0 ($261,274) ($325,400) ($359,688) ($374,157) ($382,955) ($391,212) ($399,038) ($406,547) ($413,837)




Total Capital ($2,433,245) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($3,193,689) $815,267 $852,711 $901,787 $916,964 $917,307 $918,444 $920,703 $924,017 $928,344



Funding SourcesEquity Investment $1,300,000 $1,300,000 $0 $0 $0 $0 0 0 0 0 0New Financing (Loan 1) $1,300,000 $1,206,922 ($99,806) ($107,021) ($114,758) ($123,054) ($131,950) ($141,488) ($151,716) ($162,684) ($174,444)New Financing (Loan 2) $0 $0 $0 $0 $0 0 0 0 0 0Feed Supplier Financing 1,072,584$ $831,825 ($258,163) ($276,825) ($296,837) $0 $0 $0 $0 $0 $0

Total Funding $3,338,748 ($357,969) ($383,847) ($411,595) ($123,054) ($131,950) ($141,488) ($151,716) ($162,684) ($174,444)


CASH (Deficiency) at beginning of period $0 $145,059 $602,357 $1,071,221 $1,561,413 $2,355,322 $3,140,679 $3,917,635 $4,686,622 $5,447,955

CASH (Deficiency) at end of period $145,059 $602,357 $1,071,221 $1,561,413 $2,355,322 $3,140,679 $3,917,635 $4,686,622 $5,447,955 $6,201,855

Initial


Balance Sheet

Aquaculture Financial ProjectionsCage Production 1260 Tonne NominalPro Forma Balance Sheet


ASSETSCurrent Assets Cash 145,059$ 602,357$ 1,071,221$ 1,561,413$ 2,355,322$ 3,140,679$ 3,917,635$ 4,686,622$ 5,447,955$ 6,201,855$ Accounts Receivable -$ 146,777$ 423,553$ 405,853$ 415,792$ 416,436$ 416,436$ 416,436$ 416,436$ 416,436$ 416,436$ Inventory Production 820,463$ 820,463$ 839,642$ 840,885$ 840,966$ 840,966$ 840,966$ 840,966$ 840,966$ 840,966$ Total Current Assets -$ 1,112,298$ 1,846,372$ 2,316,716$ 2,818,090$ 3,612,724$ 4,398,082$ 5,175,038$ 5,944,024$ 6,705,358$ 7,459,257$

Capital AssetsProduction Facility 2,180,466$ 1,949,250$ 1,746,444$ 1,567,854$ 1,410,073$ 1,270,282$ 1,146,117$ 1,035,583$ 936,978$ 848,849$

TOTAL ASSETS -$ 3,292,764$ 3,795,622$ 4,063,160$ 4,385,944$ 5,022,798$ 5,668,363$ 6,321,155$ 6,979,607$ 7,642,336$ 8,308,106$




Long-Term LiabilitiesNew Financing (Loan 1) 1,300,000$ 1,206,922$ 1,107,116$ 1,000,094$ 885,336$ 762,282$ 630,333$ 488,845$ 337,128$ 174,444$ 0$ Feed Supplier Financing 1,072,584$ 831,825$ 573,663$ 296,837$ 0$ -$ -$ -$ -$ -$ -$

Total Long-Term Liabilities 2,372,584$ 2,038,748$ 1,680,778$ 1,296,931$ 885,336$ 762,282$ 630,333$ 488,845$ 337,128$ 174,444$ 0$

Total Liabilities 2,372,584$ 2,226,719$ 1,976,974$ 1,583,851$ 1,176,360$ 1,053,561$ 921,611$ 780,123$ 628,407$ 465,723$ 291,278$

Shareholder EquityEquity Investment 1,300,000$ 1,300,000$ 1,300,000$ 1,300,000$ 1,300,000$ 1,300,000$ 1,300,000$ 1,300,000$ 1,300,000$ 1,300,000$ Investment Capital -$ -$ -$ -$ -$ Retained Earnings (Deficit) (233,955)$ 518,649$ 1,179,309$ 1,909,584$ 2,669,237$ 3,446,752$ 4,241,032$ 5,051,200$ 5,876,613$ 6,716,827$ Total Equity -$ 1,066,045$ 1,818,649$ 2,479,309$ 3,209,584$ 3,969,237$ 4,746,752$ 5,541,032$ 6,351,200$ 7,176,613$ 8,016,827$

TOTAL LIABILITES & EQUITY 2,372,584$ 3,292,764$ 3,795,622$ 4,063,160$ 4,385,944$ 5,022,798$ 5,668,363$ 6,321,155$ 6,979,607$ 7,642,336$ 8,308,106$

-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ RATIOSCurrent Ratio 5.92 6.23 8.07 9.68 12.40 15.10 17.77 20.41 23.02 25.61 Quick Ratio 1.55 3.46 5.15 6.79 9.52 12.21 14.88 17.52 20.13 22.72 Debt:Equity 2.09 1.09 0.64 0.37 0.27 0.19 0.14 0.10 0.06 0.04

Inventory Turnover (days) 209 84 90 88 88 88 88 88 88 88

Debt Ratio 62% 44% 32% 20% 15% 11% 8% 5% 2% 0%

Initial Start-up


Capital Budget




InfrastructureWharf Facilities $40,000Land-base (feed, storage,etc.) $60,000Field Office/Staff Room $80,000Environmental Assessment and Permitting $100,000Engineering & Contingency (15%) $42,000

Sub-Total $322,000

Cage Culture SystemSubmersible Cages (50' x 50') - 8 cages $950,000Anchors, Mooring, Rigging and Installation $60,000Marker Buoys & Anchors (8) $4,000Nets (for cages) $240,000Cover Nets $36,000Centre Float for Bird Nets $25,500Fingerling Nets $28,800Engineering & Contingency (15%) $201,645

Sub-Total $1,545,945

Boats & MotorsCrew Boat $18,000Feed Barges $18,000Service Boat $60,000Work Barge $50,000Engines $44,000Engineering & Contingency (15%) $28,500

Sub-Total $218,500

Fish Culture EquipmentMonitoring System with Alarms $2,000Hydraulic Harvesting System $35,000Tractor (4WD) & Trailer $30,000Tractor equiped with lifting forks $20,000Pick-up Truck $35,000Powered Feed Blowers $80,000Snow Blower $3,000Forklift $30,000Tractor (with bucket and hydrulic lift) $25,000Feed Monitoring System (Underwater Video) $6,000Oxygen Meters (handheld) $3,000Nets, Totes, Tools Etc. $15,000Contingency (20%) $56,800

Sub-Total $340,800

-$


Sub-Total 6,000$

Currency Exchange







RATIOSLiquidity




ProfitabilityGross Margin 18.5% 30.1% 29.7% 30.0% 30.1% 30.1% 30.1% 30.1% 30.1% 30.1% 28.9%Return on Sales 9.9% 27.1% 26.6% 27.0% 27.0% 26.0% 26.2% 26.4% 26.6% 26.9% 25.0%Cash Earnings on Sales 8.2% 9.0% 9.6% 9.8% 15.9% 15.7% 15.5% 15.4% 15.2% 15.1% 13.0%ROI (cash-in - cash out) -18.0% 57.9% 50.8% 56.2% 58.4% 59.8% 61.1% 62.3% 63.5% 64.6% 51.7%

Other Ratios to ConsiderNPV $2,809,817 at 7.0%FIRR 33.96%

APPENDIX BAPPENDIX BAPPENDIX BAPPENDIX B

Scenarios for Assessing the Economic Impact of Environmental Management Scenarios for Assessing the Economic Impact of Environmental Management Scenarios for Assessing the Economic Impact of Environmental Management Scenarios for Assessing the Economic Impact of Environmental Management

Alternatives for Cage ProductionAlternatives for Cage ProductionAlternatives for Cage ProductionAlternatives for Cage Production

Income Projections

Aquaculture Financial ProjectionsCage Production 460 Tonne with RH Waste Recovery SystemPro Forma Income Statement


Harvest (kg) 165,606 477,888 457,917 469,131 469,858 469,858 469,858 469,858 469,858 469,858 4,389,692 kg

Total Revenues $640,480 $1,848,231 $1,770,996 $1,814,365 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177


Farmgate Opening Inventory $0 $298,350 $298,350 $305,324 $305,776 $305,806 $305,806 $305,806 $305,806 $305,806Feed $487,538 $945,976 $906,129 $924,342 $925,523 $925,523 $925,523 $925,523 $925,523 $925,523 $2.01 $1.97 50.9%Fingerlings $153,900 $153,900 $153,900 $153,900 $153,900 $153,900 $153,900 $153,900 $153,900 $153,900 $0.35 $0.33 8.5%Fish Health $3,115 $5,336 $5,491 $5,480 $5,469 $5,469 $5,469 $5,469 $5,469 $5,469 $0.01 $0.01 0.3%Fuel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%Waste Treatment Supplies $33,414 $178,293 $170,783 $174,216 $174,438 $174,438 $174,438 $174,438 $174,438 $174,438 $0.37 $0.37 9.6%Labour (& Benefits) $190,034 $198,297 $198,297 $198,297 $198,297 $198,297 $198,297 $198,297 $198,297 $198,297 $0.45 $0.42 10.9%Maintenance & Repairs $39,718 $39,718 $39,718 $39,718 $39,718 $39,718 $39,718 $39,718 $39,718 $39,718 $0.09 $0.08 2.2%Supplies $19,859 $19,859 $19,859 $19,859 $19,859 $19,859 $19,859 $19,859 $19,859 $19,859 $0.05 $0.04 1.1%

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%Stock Insurance $20,083 $31,737 $33,059 $32,688 $32,613 $32,613 $32,613 $32,613 $32,613 $32,613 $0.07 $0.07 1.8%



Gross Margin ($8,831) $275,116 $250,736 $266,320 $267,390 $267,361 $267,361 $267,361 $267,361 $267,361 $0.54 $0.57 14.7%


Total Indirect $322,072 $313,699 $296,697 $279,953 $264,228 $249,285 $234,945 $221,060 $207,504 $194,159 $0.59 $0.56 14.5%

PROFIT/(LOSS) before taxes ($330,903) ($38,583) ($45,961) ($13,634) $3,162 $18,076 $32,416 $46,300 $59,857 $73,201 ($0.04) ($0.04) -1.2%

Taxes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 0.0%

PROFIT/(LOSS) after taxes ($330,903) ($38,583) ($45,961) ($13,634) $3,162 $18,076 $32,416 $46,300 $59,857 $73,201 ($0.04) ($0.04) -1.2%Retained Earnings ($330,903) ($369,486) ($415,448) ($429,081) ($425,919) ($407,843) ($375,427) ($329,127) ($269,271) ($196,069)

09/03/2009 Financial Report Template - 10 Year - 460 tonne Cage with Waste Recovery.xlsx 1


Aquaculture Financial ProjectionsCage Production 460 Tonne with RH Waste Recovery SystemPro Forma Cash Flow Projections


OPERATING CASH FLOW


$640,480 $1,848,231 $1,770,996 $1,814,365 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177


Taxes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0




Total Capital ($1,444,070) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($1,912,438) $44,970 $67,948 $90,216 $98,387 $103,842 $109,568 $115,718 $122,324 $129,417



Funding SourcesEquity Investment $1,100,000 $1,100,000 $0 $0 $0 $0 0 0 0 0 0New Financing (Loan 1) $1,000,000 $942,721 ($61,419) ($65,859) ($70,620) ($75,725) ($81,200) ($87,070) ($93,364) ($100,113) ($107,350)New Financing (Loan 2) $0 $0 $0 $0 $0 0 0 0 0 0Feed Supplier Financing -$ $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Funding $2,042,721 ($61,419) ($65,859) ($70,620) ($75,725) ($81,200) ($87,070) ($93,364) ($100,113) ($107,350)

Increase (Decrease) in cash position $130,284 ($16,449) $2,088 $19,595 $22,662 $22,642 $22,498 $22,354 $22,210 $22,066



Initial


Balance Sheet

Aquaculture Financial ProjectionsCage Production 460 Tonne with RH Waste Recovery SystemPro Forma Balance Sheet


ASSETSCurrent Assets Cash 130,284$ 113,835$ 115,923$ 135,518$ 158,180$ 180,822$ 203,321$ 225,675$ 247,885$ 269,952$

Accounts Receivable -$ 53,373$ 154,019$ 147,583$ 151,197$ 151,431$ 151,431$ 151,431$ 151,431$ 151,431$ 151,431$

Inventory Production 298,350$ 298,350$ 305,324$ 305,776$ 305,806$ 305,806$ 305,806$ 305,806$ 305,806$ 305,806$

Total Current Assets -$ 482,007$ 566,204$ 568,830$ 592,492$ 615,417$ 638,060$ 660,558$ 682,912$ 705,123$ 727,189$

Capital AssetsProduction Facility 1,308,783$ 1,176,705$ 1,058,434$ 952,291$ 856,912$ 771,146$ 693,993$ 624,575$ 562,108$ 505,893$

TOTAL ASSETS -$ 1,790,790$ 1,742,908$ 1,627,264$ 1,544,782$ 1,472,329$ 1,409,205$ 1,354,551$ 1,307,488$ 1,267,231$ 1,233,082$




Long-Term LiabilitiesNew Financing (Loan 1) 1,100,000$ 942,721$ 881,302$ 815,443$ 744,822$ 669,097$ 587,897$ 500,827$ 407,464$ 307,350$ 200,000$

Feed Supplier Financing -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Total Long-Term Liabilities 1,100,000$ 942,721$ 881,302$ 815,443$ 744,822$ 669,097$ 587,897$ 500,827$ 407,464$ 307,350$ 200,000$

Total Liabilities 1,100,000$ 1,021,693$ 1,012,395$ 942,712$ 873,864$ 798,248$ 717,048$ 629,979$ 536,615$ 436,502$ 329,151$

Shareholder EquityEquity Investment 1,100,000$ 1,100,000$ 1,100,000$ 1,100,000$ 1,100,000$ 1,100,000$ 1,100,000$ 1,100,000$ 1,100,000$ 1,100,000$

Investment Capital -$ -$ -$ -$ -$

Retained Earnings (Deficit) (330,903)$ (369,486)$ (415,448)$ (429,081)$ (425,919)$ (407,843)$ (375,427)$ (329,127)$ (269,271)$ (196,069)$

Total Equity -$ 769,097$ 730,514$ 684,552$ 670,919$ 674,081$ 692,157$ 724,573$ 770,873$ 830,729$ 903,931$


Initial Start-up


Capital Budget

Aquaculture Financial ProjectionsCage Production 460 Tonne with RH Waste Recovery System



Sub-Total $143,750


Sub-Total $723,120

Fish Culture EquipmentMonitoring System with Alarms $2,000Hydraulic Harvesting System $35,000Tractor (4WD) & Trailer $15,000Tractor equiped with lifting forks $20,000Pick-up Truck $35,000Powered Feed Blower $40,000Back-up Genset $15,000Snow Blower $6,000

Feed Monitoring System (Underwater Video) $6,000Oxygen Meters (handheld) $3,000Nets, Totes, Tools Etc. $15,000Oxygen storage (pad, fencing, gates, etc.)Contingency (20%) $38,400

Sub-Total $230,400

Solid Waste Recovery System Unit Cost UnitsSludge Collection Diapers 25,000$ 8 $200,000Air-lift pumps 750$ 8 $6,000Solids Filter 45,000$ 1 $45,000Polymer Addition System 15,000$ 1 $15,000Service Barge (with Building and Power) 120,000$ - $0Biofiltration 40,000$ $0Compressor 3,000$ 1 $3,000Solid Waste Collection Bag 30,000$ - $0Piping & Misc $15,000Engineering & Contingency (20%) $56,800

340,800$

Other EquipmentComputer & Office Equipment $5,000Pick-upTruckInterior preparation (carpeting, painting, decorating)Installation labour and miscellaneous costsContingency (20%) $1,000

Sub-Total 6,000$

Currency Exchange



Aquaculture Financial ProjectionsCage Production 460 Tonne with RH Waste Recovery SystemFinancial Performance Projections


RATIOSLiquidity

Current Ratio (times) 6.10 4.32 4.47 4.59 4.77 4.94 5.11 5.29 5.46 5.63

Quick Ratio 2.33 2.04 2.07 2.22 2.40 2.57 2.75 2.92 3.09 3.26


Debt ManagementDebt Ratio 53% 51% 50% 48% 45% 42% 37% 31% 24% 16%

Times Interest Earned (5.11) 0.23 (0.01) 0.67 1.09 1.60 2.33 3.56 6.27 18.79

ProfitabilityGross Margin -1.4% 14.9% 14.2% 14.7% 14.7% 14.7% 14.7% 14.7% 14.7% 14.7% 13.1%

Return on Sales -22.1% 7.8% 6.7% 7.3% 7.4% 5.7% 6.0% 6.4% 6.7% 7.1% 3.9%

Cash Earnings on Sales 20.3% -0.9% 0.1% 1.1% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 2.8%

ROI (cash-in - cash out) -30.1% -3.5% -4.2% -1.2% 0.3% 1.6% 2.9% 4.2% 5.4% 6.7% -1.8%

Other Ratios to ConsiderNPV -$894,388 at 7.0%

FIRR -21.60%

Income Projections

Aquaculture Financial ProjectionsCage Production 1260 Tonne with RH Waste RecoveryPro Forma Income Statement


Harvest (kg) 455,416 1,314,191 1,259,273 1,290,111 1,292,110 1,292,110 1,292,110 1,292,110 1,292,110 1,292,110 12,071,653 kg

Total Revenues $1,761,321 $5,082,634 $4,870,238 $4,989,505 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237


Farmgate Opening Inventory $0 $820,463 $820,463 $839,642 $840,885 $840,966 $840,966 $840,966 $840,966 $840,966Feed $1,340,730 $2,601,435 $2,491,854 $2,541,940 $2,545,187 $2,545,187 $2,545,187 $2,545,187 $2,545,187 $2,545,187 $2.01 $1.97 50.9%Fingerlings $423,225 $423,225 $423,225 $423,225 $423,225 $423,225 $423,225 $423,225 $423,225 $423,225 $0.35 $0.33 8.5%Fish Health $22,129 $36,496 $35,798 $35,664 $35,611 $35,611 $35,611 $35,611 $35,611 $35,611 $0.03 $0.03 0.7%Fuel $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $0.01 $0.01 0.4%Waste Treatment Supplies $91,889 $178,293 $170,783 $174,216 $174,438 $174,438 $174,438 $174,438 $174,438 $174,438 $0.14 $0.14 3.5%Labour (& Benefits) $327,189 $327,189 $327,189 $327,189 $327,189 $327,189 $327,189 $327,189 $327,189 $327,189 $0.27 $0.25 6.5%Maintenance & Repairs $140,322 $140,322 $140,322 $140,322 $140,322 $140,322 $140,322 $140,322 $140,322 $140,322 $0.12 $0.11 2.8%Supplies $70,161 $70,161 $70,161 $70,161 $70,161 $70,161 $70,161 $70,161 $70,161 $70,161 $0.06 $0.05 1.4%Stock Insurance $47,517 $71,134 $70,104 $69,401 $69,265 $69,265 $69,265 $69,265 $69,265 $69,265 $0.06 $0.05 1.4%

$2,481,163 $4,686,719 $4,567,899 $4,639,761 $4,644,285 $4,644,365 $4,644,365 $4,644,365 $4,644,365 $4,644,365 $3.04 $2.94 76.1%Closing Inventory $820,463 $820,463 $839,642 $840,885 $840,966 $840,966 $840,966 $840,966 $840,966 $840,966

Cost Of Production $1,660,700 $3,866,256 $3,728,257 $3,798,875 $3,803,319 $3,803,399 $3,803,399 $3,803,399 $3,803,399 $3,803,399 $2.97 $2.94

Gross Margin $100,621 $1,216,378 $1,141,981 $1,190,629 $1,193,918 $1,193,837 $1,193,837 $1,193,837 $1,193,837 $1,193,837 $0.90 $0.92 23.9%


Total Indirect $773,242 $697,768 $626,445 $558,022 $501,739 $459,647 $419,780 $381,620 $344,709 $308,642 $0.42 $0.24 6.2%

PROFIT/(LOSS) before taxes ($672,621) $518,610 $515,536 $632,607 $692,179 $734,190 $774,057 $812,218 $849,128 $885,196 $0.48 0.48$ 12.3%

Taxes $0 $0 $59,652 $208,760 $228,419 $242,283 $255,439 $268,032 $280,212 $292,115 $0.23 5.8%

PROFIT/(LOSS) after taxes ($672,621) $518,610 $455,884 $423,847 $463,760 $491,907 $518,618 $544,186 $568,916 $593,081 $0.48 $0.25 6.5%Retained Earnings ($672,621) ($154,011) $301,873 $725,720 $1,189,480 $1,681,388 $2,200,006 $2,744,192 $3,313,108 $3,906,189

09/03/2009 Financial Report Template - 10 Year - 1260 tonne Cage - with waste recovery.xlsx 1


Aquaculture Financial ProjectionsCage Production 1260 Tonne with RH Waste RecoveryPro Forma Cash Flow Projections


OPERATING CASH FLOW


$1,761,321 $5,082,634 $4,870,238 $4,989,505 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237


Taxes $0 $0 ($59,652) ($208,760) ($228,419) ($242,283) ($255,439) ($268,032) ($280,212) ($292,115)


Operating Cash Flow ($1,024,732) $718,656 $764,976 $701,768 $716,690 $717,765 $720,240 $724,419 $730,233 $737,637


Total Capital ($3,897,845) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($4,922,577) $718,656 $764,976 $701,768 $716,690 $717,765 $720,240 $724,419 $730,233 $737,637




Total Funding $4,977,889 ($423,227) ($453,822) ($486,629) ($203,512) ($218,224) ($234,000) ($250,915) ($269,054) ($288,504)


CASH (Deficiency) at beginning of period $0 $55,312 $350,740 $661,894 $877,032 $1,390,210 $1,889,751 $2,375,991 $2,849,495 $3,310,674

CASH (Deficiency) at end of period $55,312 $350,740 $661,894 $877,032 $1,390,210 $1,889,751 $2,375,991 $2,849,495 $3,310,674 $3,759,807

Initial


Balance Sheet

Aquaculture Financial ProjectionsCage Production 1260 Tonne with RH Waste RecoveryPro Forma Balance Sheet


ASSETSCurrent Assets Cash -$ 55,312$ 350,740$ 661,894$ 877,032$ 1,390,210$ 1,889,751$ 2,375,991$ 2,849,495$ 3,310,674$ 3,759,807$



Total Current Assets -$ 1,022,551$ 1,594,756$ 1,907,389$ 2,133,710$ 2,647,612$ 3,147,153$ 3,633,394$ 4,106,897$ 4,568,077$ 5,017,210$

Capital AssetsProduction Facility 3,489,481$ 3,128,083$ 2,807,610$ 2,522,897$ 2,269,516$ 2,043,658$ 1,842,036$ 1,661,803$ 1,500,485$ 1,355,929$

TOTAL ASSETS -$ 4,512,032$ 4,722,839$ 4,714,999$ 4,656,606$ 4,917,128$ 5,190,811$ 5,475,430$ 5,768,700$ 6,068,562$ 6,373,139$




Long-Term LiabilitiesNew Financing (Loan 1) 2,150,000$ 1,996,064$ 1,830,999$ 1,654,002$ 1,464,210$ 1,260,698$ 1,042,473$ 808,474$ 557,558$ 288,504$ 0$

Feed Supplier Financing 1,072,584$ 831,825$ 573,663$ 296,837$ 0$ -$ -$ -$ -$ -$ -$

Total Long-Term Liabilities ` 2,827,889$ 2,404,662$ 1,950,839$ 1,464,210$ 1,260,698$ 1,042,473$ 808,474$ 557,558$ 288,504$ 0$

Total Liabilities 3,034,653$ 2,726,850$ 2,263,126$ 1,780,886$ 1,577,648$ 1,359,423$ 1,125,424$ 874,508$ 605,454$ 316,950$



Retained Earnings (Deficit) (672,621)$ (154,011)$ 301,873$ 725,720$ 1,189,480$ 1,681,388$ 2,200,006$ 2,744,192$ 3,313,108$ 3,906,189$

Total Equity -$ 1,477,379$ 1,995,989$ 2,451,873$ 2,875,720$ 3,339,480$ 3,831,388$ 4,350,006$ 4,894,192$ 5,463,108$ 6,056,189$

TOTAL LIABILITES & EQUITY -$ 4,512,032$ 4,722,839$ 4,714,999$ 4,656,606$ 4,917,128$ 5,190,811$ 5,475,430$ 5,768,700$ 6,068,562$ 6,373,139$

-$ -$ -$ -$ -$ -$ -$ -$ -$ -$

RATIOSCurrent Ratio 4.95 4.95 6.11 6.74 8.35 9.93 11.46 12.96 14.41 15.83 Quick Ratio 0.98 2.40 3.42 4.08 5.70 7.28 8.81 10.30 11.76 13.18 Debt:Equity 2.05 1.37 0.92 0.62 0.47 0.35 0.26 0.18 0.11 0.05


Debt Ratio 63% 51% 41% 31% 26% 20% 15% 10% 5% 0%

Initial Start-up


Capital Budget

Aquaculture Financial ProjectionsCage Production 1260 Tonne with RH Waste Recovery



Sub-Total $322,000




Sub-Total $218,500

Fish Culture EquipmentMonitoring System with Alarms $2,000Hydraulic Harvesting System $35,000Tractor (4WD) & Trailer $30,000Tractor equiped with lifting forks $20,000Pick-up Truck $35,000Powered Feed Blowers $80,000Snow Blower $3,000Forklift $30,000Tractor (with bucket and hydrulic lift) $25,000Feed Monitoring System (Underwater Video) $6,000Oxygen Meters (handheld) $3,000Nets, Totes, Tools Etc. $15,000Oxygen storage (pad, fencing, gates, etc.)Contingency (20%) $56,800

Sub-Total $340,800

Solid Waste Recovery System Unit Cost UnitsSludge Collection Diapers 30,000$ 30 $900,000Air-lift pumps 750$ 30 $22,500Solids Filter 45,000$ 1 $45,000Polymer Addition System 15,000$ 1 $15,000Service Barge (with Building and Power) 120,000$ 1 $120,000Biofiltration 40,000$ 1 $40,000Compressor 3,000$ 1 $3,000Solid Waste Collection Bag 30,000$ 2 $60,000Piping & Misc $15,000Engineering & Contingency (20%) $244,100

1,464,600$ 31250


Sub-Total 6,000$

Currency Exchange



Aquaculture Financial ProjectionsCage Production 1260 Tonne with RH Waste RecoveryFinancial Performance Projections


RATIOSLiquidity


Quick Ratio 0.98 2.40 3.42 4.08 5.70 7.28 8.81 10.30 11.76 13.18



Times Interest Earned (2.16) 3.81 4.35 6.22 8.21 10.03 12.81 17.70 28.84 81.07

ProfitabilityGross Margin 5.7% 23.9% 23.4% 23.9% 23.9% 23.9% 23.9% 23.9% 23.9% 23.9% 22.0%

Return on Sales -2.9% 20.9% 20.3% 20.8% 20.8% 19.2% 19.5% 19.9% 20.2% 20.6% 17.9%

Cash Earnings on Sales 3.1% 5.8% 6.4% 4.3% 10.3% 10.0% 9.7% 9.5% 9.2% 9.0% 7.7%

ROI (cash-in - cash out) -31.3% 24.1% 21.2% 19.7% 21.6% 22.9% 24.1% 25.3% 26.5% 27.6% 18.2%

Other Ratios to ConsiderNPV $334,165 at 7.0%

FIRR 9.69%

Income Projections

Aquaculture Financial ProjectionsCage Production 230 Tonne with Improved Feed ManagementPro Forma Income Statement


Harvest (kg) 82,803 238,944 228,959 234,566 234,929 234,929 234,929 234,929 234,929 234,929 2,194,846 kg

Total Revenues $320,240 $924,115 $885,498 $907,183 $908,589 $908,589 $908,589 $908,589 $908,589 $908,589


Farmgate Opening Inventory $0 $149,175 $149,175 $152,662 $152,888 $152,903 $152,903 $152,903 $152,903 $152,903Electricity $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%Feed $234,294 $454,603 $435,454 $444,206 $444,774 $444,774 $444,774 $444,774 $444,774 $444,774 $1.93 $1.89 49.0%Fingerlings $85,500 $85,500 $85,500 $85,500 $85,500 $85,500 $85,500 $85,500 $85,500 $85,500 $0.39 $0.36 9.4%Fish Health $1,078 $1,918 $2,088 $2,087 $2,083 $2,083 $2,083 $2,083 $2,083 $2,083 $0.01 $0.01 0.2%Labour (& Benefits) $55,082 $55,082 $55,082 $55,082 $55,082 $55,082 $55,082 $55,082 $55,082 $55,082 $0.25 $0.23 6.1%Maintenance & Repairs $19,134 $38,267 $38,267 $38,267 $38,267 $38,267 $38,267 $38,267 $38,267 $38,267 $0.17 $0.16 4.2%Supplies $10,364 $19,134 $19,134 $19,134 $19,134 $19,134 $19,134 $19,134 $19,134 $19,134 $0.08 $0.08 2.1%Stock Insurance $6,218 $10,503 $11,624 $11,479 $11,449 $11,449 $11,449 $11,449 $11,449 $11,449 $0.05 $0.05 1.3%

$411,670 $814,182 $796,324 $808,418 $809,177 $809,192 $809,192 $809,192 $809,192 $809,192 $2.88 $2.79 72.2%Closing Inventory $149,175 $149,175 $152,662 $152,888 $152,903 $152,903 $152,903 $152,903 $152,903 $152,903 $0.65

Cost Of Production $262,495 $665,007 $643,661 $655,530 $656,274 $656,289 $656,289 $656,289 $656,289 $656,289 $2.81 $2.14

Gross Margin $57,745 $259,108 $241,836 $251,653 $252,314 $252,300 $252,300 $252,300 $252,300 $252,300 $1.06 $1.07 27.8%

Indirect CostsDepreciation $96,772 $82,211 $70,480 $60,840 $52,806 $46,043 $40,306 $35,410 $31,210 $27,591 $0.25 $0.22 5.8%Professional Services $18,000 $16,850 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $0.08 $0.08 2.0%Insurance $4,800 $4,900 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $0.02 $0.02 0.5%Interest $40,639 $37,534 $34,204 $30,633 $26,804 $22,698 $18,296 $13,575 $8,513 $3,085 $0.11 $0.11 3.0%Telecommunications $4,200 $4,226 $4,422 $4,566 $4,710 $4,854 $4,998 $5,142 $5,286 $5,430 $0.02 $0.02 0.5%Management $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $0.27 $0.26 6.6%Office Expense $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $0.03 $0.03 0.7%Lease $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $24,000 $0.11 $0.10 2.6%Bank Charges $600 $600 $600 $600 $600 $600 $600 $600 $600 $600 $0.00 $0.00 0.1%Environmental Costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%

Total Indirect $255,011 $236,320 $222,505 $209,439 $197,720 $186,996 $177,000 $167,527 $158,409 $149,506 $0.89 $0.84 21.8%


Taxes $0 $0 $0 $0 $0 $1,149 $12,424 $13,987 $15,492 $16,961 $0.07 1.9%

PROFIT/(LOSS) after taxes ($197,266) $22,788 $19,331 $42,214 $54,594 $64,155 $62,875 $70,785 $78,399 $85,833 $0.17 $0.09 2.4%Retained Earnings ($197,266) ($174,478) ($155,147) ($112,933) ($58,339) $5,816 $68,691 $139,476 $217,874 $303,707

09/03/2009 Financial Report Template - 10 Year - 230 t Cage Production - Feed Control.xlsx 1


Aquaculture Financial ProjectionsCage Production 230 Tonne with Improved Feed ManagementPro Forma Cash Flow Projections


OPERATING CASH FLOW


$320,240 $924,115 $885,498 $907,183 $908,589 $908,589 $908,589 $908,589 $908,589 $908,589

Cash DisbursementsDirect Expenses ($411,670) ($665,007) ($647,149) ($655,756) ($656,289) ($656,289) ($656,289) ($656,289) ($656,289) ($656,289)Indirect Expenses ($158,239) ($154,110) ($152,026) ($148,599) ($144,914) ($140,952) ($136,694) ($132,117) ($127,199) ($121,915)(Increase) Decrease in Receivables ($26,687) ($50,323) $3,218 ($1,807) ($117) $0 $0 $0 $0 $0Increase (Decrease) in Payables $34,306 $21,111 ($1,488) $717 $44 $0 $0 $0 $0 $0

Taxes $0 $0 $0 $0 $0 ($1,149) ($12,424) ($13,987) ($15,492) ($16,961)



Capital Expenditures Production Facility ($797,235) $0 $0 $0 $0 $0 $0 $0 $0 $0 Office Facilities $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Capital ($797,235) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($1,039,285) $75,787 $88,054 $101,738 $107,313 $110,198 $103,181 $106,195 $109,608 $113,423




Total Funding $1,157,041 ($46,065) ($49,395) ($52,965) ($56,794) ($60,900) ($65,302) ($70,023) ($75,085) ($80,513)




Initial


Balance Sheet

Aquaculture Financial ProjectionsCage Production 230 Tonne with Improved Feed ManagementPro Forma Balance Sheet





Total Current Assets -$ 293,618$ 373,663$ 412,591$ 463,397$ 514,048$ 563,346$ 601,225$ 637,398$ 671,921$ 704,832$


TOTAL ASSETS -$ 994,081$ 991,916$ 960,364$ 950,330$ 948,174$ 951,429$ 949,002$ 949,764$ 953,078$ 958,398$




Long-Term LiabilitiesNew Financing (Loan 1) 600,000$ 557,041$ 510,976$ 461,582$ 408,617$ 351,823$ 290,923$ 225,621$ 155,598$ 80,513$ 0$




Shareholder EquityEquity Investment 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ 600,000$ 600,000$


Retained Earnings (Deficit) (197,266)$ (174,478)$ (155,147)$ (112,933)$ (58,339)$ 5,816$ 68,691$ 139,476$ 217,874$ 303,707$

Total Equity -$ 402,734$ 425,522$ 444,853$ 487,067$ 541,661$ 605,816$ 668,691$ 739,476$ 817,874$ 903,707$

TOTAL LIABILITES & EQUITY 600,000$ 994,081$ 991,916$ 960,364$ 950,330$ 948,174$ 951,429$ 949,002$ 949,764$ 953,078$ 958,398$

Initial Start-up


Capital Budget

Aquaculture Financial ProjectionsCage Production 230 Tonne with Improved Feed Management


InfrastructureLand-base (feed, storage,etc.) $15,000Workshop and staff area $12,500Envriornmental Assessment and Permitting $60,000Engineering & Contingency (15%) $13,125

Sub-Total $100,625


Sub-Total $493,810

Fish Culture EquipmentMonitoring System with Alarms $2,000Hydraulic Harvesting System $0Tractor (4WD) & Trailer $12,000Tractor equiped with lifting forks $20,000Pick-up Truck $35,000Powered Feed Blower $20,000Back-up Genset $15,000Snow Blower $4,000Feed Monitoring System (Underwater Video) $41,000Oxygen Meters (handheld) $3,000Nets, Totes, Tools Etc. $12,000Contingency (20%) $32,800

Sub-Total $196,800

-$


Sub-Total 6,000$

Currency Exchange



Aquaculture Financial ProjectionsCage Production 230 Tonne with Improved Feed ManagementFinancial Performance Projections


RATIOSLiquidity


Quick Ratio 4.21 4.05 4.82 5.68 6.60 7.50 8.20 8.86 9.49 10.09





Return on Sales -18.7% 15.4% 14.0% 14.7% 14.8% 12.3% 12.7% 13.2% 13.8% 14.4% 10.7%




FIRR -4.6%

Income Projections



Harvest (kg) 165,606 477,888 457,917 469,131 469,858 469,858 469,858 469,858 469,858 469,858 4,389,692 kg

Total Revenues $640,480 $1,848,231 $1,770,996 $1,814,365 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177



$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%Stock Insurance $20,083 $31,737 $33,059 $32,688 $32,613 $32,613 $32,613 $32,613 $32,613 $32,613 $0.07 $0.07 1.8%



Gross Margin $48,960 $500,708 $466,825 $486,752 $488,104 $488,075 $488,075 $488,075 $488,075 $488,075 $1.01 $1.04 26.9%


Total Indirect $315,365 $291,894 $273,727 $256,656 $241,209 $226,973 $213,632 $200,935 $188,676 $176,679 $0.54 $0.51 13.3%


Taxes $0 $0 $22,359 $37,966 $40,738 $43,082 $45,283 $47,378 $49,401 $51,380 $0.11 2.8%

PROFIT/(LOSS) after taxes ($266,405) $208,814 $170,739 $192,131 $206,158 $218,020 $229,160 $239,762 $249,998 $260,015 $0.47 $0.44 11.3%Retained Earnings ($266,405) ($57,590) $113,149 $305,279 $511,437 $729,457 $958,617 $1,198,379 $1,448,377 $1,708,392

09/03/2009 Financial Report Template - 10 Year - 460 tonne Cage with Improved Feeding.xlsx 1




OPERATING CASH FLOW


$640,480 $1,848,231 $1,770,996 $1,814,365 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177


Taxes $0 $0 ($22,359) ($37,966) ($40,738) ($43,082) ($45,283) ($47,378) ($49,401) ($51,380)




Total Capital ($1,163,270) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($1,578,663) $256,579 $262,470 $272,320 $278,341 $281,475 $284,999 $289,055 $293,637 $298,751




Total Funding $1,592,721 ($61,419) ($65,859) ($70,620) ($75,725) ($81,200) ($87,070) ($93,364) ($100,113) ($107,350)


CASH (Deficiency) at beginning of period $0 $14,059 $209,218 $405,829 $607,529 $810,144 $1,010,419 $1,208,349 $1,404,039 $1,597,563

CASH (Deficiency) at end of period $14,059 $209,218 $405,829 $607,529 $810,144 $1,010,419 $1,208,349 $1,404,039 $1,597,563 $1,788,964

Initial


Balance Sheet



ASSETSCurrent Assets Cash 14,059$ 209,218$ 405,829$ 607,529$ 810,144$ 1,010,419$ 1,208,349$ 1,404,039$ 1,597,563$ 1,788,964$



Total Current Assets -$ 365,782$ 661,588$ 858,736$ 1,064,503$ 1,267,381$ 1,467,656$ 1,665,586$ 1,861,276$ 2,054,800$ 2,246,201$

Capital AssetsProduction Facility 1,022,691$ 902,818$ 799,837$ 710,847$ 633,572$ 566,185$ 507,200$ 455,391$ 409,738$ 369,392$

TOTAL ASSETS -$ 1,388,473$ 1,564,405$ 1,658,573$ 1,775,350$ 1,900,953$ 2,033,842$ 2,172,786$ 2,316,667$ 2,464,539$ 2,615,593$




Long-Term LiabilitiesNew Financing (Loan 1) 825,000$ 742,721$ 681,302$ 615,443$ 544,822$ 469,097$ 387,897$ 300,827$ 207,464$ 107,350$ 0$






Retained Earnings (Deficit) (266,405)$ (57,590)$ 113,149$ 305,279$ 511,437$ 729,457$ 958,617$ 1,198,379$ 1,448,377$ 1,708,392$

Total Equity -$ 558,595$ 767,410$ 938,149$ 1,130,279$ 1,336,437$ 1,554,457$ 1,783,617$ 2,023,379$ 2,273,377$ 2,533,392$


Initial Start-up


Capital Budget




Sub-Total $143,750


Sub-Total $723,120


Sub-Total $290,400

-$


Sub-Total 6,000$

Currency Exchange





RATIOSLiquidity


Quick Ratio 0.91 3.23 5.06 6.86 8.68 10.49 12.28 14.04 15.79 17.52





Return on Sales -13.1% 20.0% 18.9% 19.5% 19.5% 17.9% 18.2% 18.5% 18.9% 19.3% 15.8%



Other Ratios to ConsiderNPV $390,598 at 7.0%

FIRR 15.21%

Income Projections



Harvest (kg) 455,416 1,314,191 1,259,273 1,290,111 1,292,110 1,292,110 1,292,110 1,292,110 1,292,110 1,292,110 12,071,653 kg

Total Revenues $1,761,321 $5,082,634 $4,870,238 $4,989,505 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237



$2,194,125 $4,250,242 $4,144,412 $4,210,336 $4,214,475 $4,214,556 $4,214,556 $4,214,556 $4,214,556 $4,214,556 $2.70 $2.61 67.5%Closing Inventory $820,463 $820,463 $839,642 $840,885 $840,966 $840,966 $840,966 $840,966 $840,966 $840,966


Gross Margin $387,658 $1,652,855 $1,565,468 $1,620,054 $1,623,728 $1,623,647 $1,623,647 $1,623,647 $1,623,647 $1,623,647 $1.24 $1.26 32.5%


Total Indirect $577,112 $528,231 $471,809 $418,378 $376,522 $348,110 $321,751 $296,967 $273,358 $250,583 $0.32 $0.19 5.0%

PROFIT/(LOSS) before taxes ($189,454) $1,124,624 $1,093,659 $1,201,676 $1,247,205 $1,275,537 $1,301,896 $1,326,680 $1,350,289 $1,373,064 $0.92 0.92$ 23.8%

Taxes $0 $313,282 $360,907 $396,553 $411,578 $420,927 $429,626 $437,804 $445,595 $453,111 $0.35 9.1%






OPERATING CASH FLOW


$1,761,321 $5,082,634 $4,870,238 $4,989,505 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237


Taxes $0 ($313,282) ($360,907) ($396,553) ($411,578) ($420,927) ($429,626) ($437,804) ($445,595) ($453,111)


Operating Cash Flow ($700,670) $885,072 $938,315 $986,870 $1,001,281 $1,001,086 $1,001,782 $1,003,688 $1,006,720 $1,010,821


Total Capital ($2,535,245) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($3,235,915) $885,072 $938,315 $986,870 $1,001,281 $1,001,086 $1,001,782 $1,003,688 $1,006,720 $1,010,821




Total Funding $3,297,156 ($345,061) ($370,006) ($396,753) ($123,054) ($131,950) ($141,488) ($151,716) ($162,684) ($174,444)


CASH (Deficiency) at beginning of period $0 $61,242 $601,253 $1,169,562 $1,759,679 $2,637,906 $3,507,042 $4,367,336 $5,219,308 $6,063,344

CASH (Deficiency) at end of period $61,242 $601,253 $1,169,562 $1,759,679 $2,637,906 $3,507,042 $4,367,336 $5,219,308 $6,063,344 $6,899,721

Initial


Balance Sheet



ASSETSCurrent Assets Cash 61,242$ 601,253$ 1,169,562$ 1,759,679$ 2,637,906$ 3,507,042$ 4,367,336$ 5,219,308$ 6,063,344$ 6,899,721$




Capital AssetsProduction Facility 2,262,066$ 2,014,530$ 1,798,668$ 1,609,634$ 1,443,497$ 1,297,020$ 1,167,508$ 1,052,695$ 950,669$ 859,801$

TOTAL ASSETS -$ 3,290,546$ 3,859,798$ 4,213,725$ 4,625,990$ 5,338,805$ 6,061,465$ 6,792,247$ 7,529,406$ 8,271,415$ 9,016,924$




Long-Term LiabilitiesNew Financing (Loan 1) 1,300,000$ 1,206,922$ 1,107,116$ 1,000,094$ 885,336$ 762,282$ 630,333$ 488,845$ 337,128$ 174,444$ 0$

Feed Supplier Financing 1,018,955$ 790,234$ 544,979$ 281,995$ 0$ -$ -$ -$ -$ -$ -$





Retained Earnings (Deficit) (189,454)$ 621,888$ 1,354,640$ 2,159,762$ 2,995,390$ 3,850,000$ 4,722,270$ 5,611,145$ 6,515,838$ 7,435,792$

Total Equity -$ 1,110,546$ 1,921,888$ 2,654,640$ 3,459,762$ 4,295,390$ 5,150,000$ 6,022,270$ 6,911,145$ 7,815,838$ 8,735,792$


-$ -$ -$ -$ -$ -$ -$ -$ -$ -$



Debt Ratio 61% 43% 30% 19% 14% 10% 7% 4% 2% 0%

Initial Start-up


Capital Budget




Sub-Total $322,000




Sub-Total $218,500


Sub-Total $442,800

-$


Sub-Total 6,000$

Currency Exchange





RATIOSLiquidity


Quick Ratio 1.14 3.59 5.69 7.74 10.86 13.96 17.02 20.05 23.05 26.02





Return on Sales 13.4% 29.5% 29.0% 29.4% 29.4% 28.5% 28.6% 28.8% 29.1% 29.3% 27.5%



Other Ratios to ConsiderNPV $3,264,189 at 7.0%

FIRR 36.61%

Income Projections


Cage Production 460 Tonne with FallowingPro Forma Income Statement


Harvest (kg) 165,606 477,888 457,917 469,131 469,858 469,858 469,858 469,858 469,858 469,858 4,389,692 kg

Total Revenues $640,480 $1,848,231 $1,770,996 $1,814,365 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177



$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%Stock Insurance $20,083 $31,737 $33,059 $32,688 $32,613 $32,613 $32,613 $32,613 $32,613 $32,613 $0.07 $0.07 1.8%



Gross Margin $16,321 $445,147 $421,519 $432,273 $433,566 $433,536 $433,536 $433,536 $433,536 $433,536 $0.89 $0.92 23.9%


Total Indirect $315,365 $291,894 $273,727 $256,656 $241,209 $226,973 $213,632 $200,935 $188,676 $176,679 $0.54 $0.51 13.3%


Taxes $0 $0 $330 $28,977 $31,739 $34,083 $36,284 $38,379 $40,402 $42,381 $0.09 2.3%

PROFIT/(LOSS) after taxes ($299,044) $153,253 $147,461 $146,641 $160,618 $172,481 $183,620 $194,222 $204,458 $214,475 $0.35 $0.33 8.4%Retained Earnings ($299,044) ($145,791) $1,670 $148,311 $308,929 $481,409 $665,030 $859,251 $1,063,710 $1,278,185

3/9/2009 Financial Report Template - 10 Year - 460 tonne Cage - FAllowing.xlsx 1



Cage Production 460 Tonne with Fallowing



OPERATING CASH FLOW


$640,480 $1,848,231 $1,770,996 $1,814,365 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177 $1,817,177


Taxes $0 $0 ($330) ($28,977) ($31,739) ($34,083) ($36,284) ($38,379) ($40,402) ($42,381)




Total Capital ($1,294,860) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($1,740,172) $202,928 $238,338 $227,594 $232,806 $235,935 $239,460 $243,515 $248,097 $253,211




Total Funding $1,742,721 ($61,419) ($65,859) ($70,620) ($75,725) ($81,200) ($87,070) ($93,364) ($100,113) ($107,350)


CASH (Deficiency) at beginning of period $0 $2,549 $144,058 $316,536 $473,510 $630,591 $785,326 $937,716 $1,087,867 $1,235,851

CASH (Deficiency) at end of period $2,549 $144,058 $316,536 $473,510 $630,591 $785,326 $937,716 $1,087,867 $1,235,851 $1,381,712

Initial


Balance Sheet

Aquaculture Financial ProjectionsCage Production 460 Tonne with FallowingPro Forma Balance Sheet


ASSETSCurrent Assets Cash 2,549$ 144,058$ 316,536$ 473,510$ 630,591$ 785,326$ 937,716$ 1,087,867$ 1,235,851$ 1,381,712$ Accounts Receivable -$ 53,373$ 154,019$ 147,583$ 151,197$ 151,431$ 151,431$ 151,431$ 151,431$ 151,431$ 151,431$ Inventory Production 298,350$ 298,350$ 305,324$ 305,776$ 305,806$ 305,806$ 305,806$ 305,806$ 305,806$ 305,806$ Total Current Assets -$ 354,273$ 596,427$ 769,444$ 930,484$ 1,087,828$ 1,242,563$ 1,394,953$ 1,545,104$ 1,693,088$ 1,838,949$

Capital AssetsProduction Facility 1,149,709$ 1,024,392$ 915,429$ 820,171$ 736,528$ 662,815$ 597,641$ 539,853$ 488,478$ 442,693$

TOTAL ASSETS -$ 1,503,982$ 1,620,820$ 1,684,873$ 1,750,655$ 1,824,356$ 1,905,378$ 1,992,594$ 2,084,957$ 2,181,566$ 2,281,643$







Shareholder EquityEquity Investment 900,000$ 900,000$ 900,000$ 900,000$ 900,000$ 900,000$ 900,000$ 900,000$ 900,000$ 900,000$ Investment Capital -$ -$ -$ -$ -$ Retained Earnings (Deficit) (299,044)$ (145,791)$ 1,670$ 148,311$ 308,929$ 481,409$ 665,030$ 859,251$ 1,063,710$ 1,278,185$ Total Equity -$ 600,956$ 754,209$ 901,670$ 1,048,311$ 1,208,929$ 1,381,409$ 1,565,030$ 1,759,251$ 1,963,710$ 2,178,185$


Initial Start-up


Capital Budget





Sub-Total $195,500


Sub-Total $862,960


Sub-Total $230,400

-$


Sub-Total 6,000$

Currency Exchange







RATIOSLiquidity





Other Ratios to ConsiderNPV $38,565 at 7.0%FIRR 7.82%

Income Projections


Cage Production 1260 Tonne with FallowingPro Forma Income Statement


Harvest (kg) 455,416 1,314,191 1,259,273 1,290,111 1,292,110 1,292,110 1,292,110 1,292,110 1,292,110 1,292,110 12,071,653 kg

Total Revenues $1,761,321 $5,082,634 $4,870,238 $4,989,505 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237



$2,275,646 $4,394,798 $4,283,489 $4,351,918 $4,356,219 $4,356,300 $4,356,300 $4,356,300 $4,344,939 $4,356,300 $2.81 $2.72 70.3%Closing Inventory $820,463 $820,463 $839,642 $840,885 $840,966 $840,966 $840,966 $840,966 $840,966 $840,966Cost Of Production $1,455,184 $3,574,336 $3,443,847 $3,511,032 $3,515,253 $3,515,334 $3,515,334 $3,515,334 $3,503,973 $3,515,334 $2.74 $2.72

Gross Margin $306,137 $1,508,299 $1,426,391 $1,478,472 $1,481,984 $1,481,903 $1,481,903 $1,481,903 $1,493,264 $1,481,903 $1.13 $1.15 29.7%


Total Indirect $575,144 $528,262 $473,026 $420,117 $378,741 $351,000 $325,010 $300,352 $276,674 $253,671 $0.32 $0.20 5.1%

PROFIT/(LOSS) before taxes ($269,007) $980,036 $953,364 $1,058,355 $1,103,242 $1,130,903 $1,156,893 $1,181,551 $1,216,589 $1,228,232 $0.81 0.81$ 20.9%

Taxes $0 $238,195 $314,610 $349,257 $364,070 $373,198 $381,775 $389,912 $401,475 $405,317 $0.31 8.1%


3/9/2009 Financial Report Template - 10 Year - 1260 tonne Cage - Fallowing.xlsx 1






OPERATING CASH FLOW


$1,761,321 $5,082,634 $4,870,238 $4,989,505 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237 $4,997,237

Cash DisbursementsDirect Expenses ($2,275,646) ($3,574,336) ($3,463,026) ($3,512,276) ($3,515,334) ($3,515,334) ($3,515,334) ($3,515,334) ($3,503,973) ($3,515,334)Indirect Expenses ($310,692) ($286,326) ($260,367) ($232,465) ($212,619) ($203,525) ($193,764) ($183,286) ($172,041) ($159,972)(Increase) Decrease in Receivables ($146,777) ($276,776) $17,700 ($9,939) ($644) $0 $0 $0 $0 $0Increase (Decrease) in Payables $189,637 $108,224 ($9,276) $4,104 $255 $0 $0 $0 ($947) $947

Taxes $0 ($238,195) ($314,610) ($349,257) ($364,070) ($373,198) ($381,775) ($389,912) ($401,475) ($405,317)




Total Capital ($2,593,095) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($3,375,252) $815,226 $840,658 $889,672 $904,825 $905,180 $906,364 $908,705 $918,802 $917,561




Total Funding $3,435,168 ($361,808) ($387,963) ($416,009) ($127,787) ($137,024) ($146,930) ($157,552) ($168,941) ($181,154)


CASH (Deficiency) at beginning of period $0 $59,916 $513,334 $966,029 $1,439,692 $2,216,730 $2,984,885 $3,744,319 $4,495,473 $5,245,333

CASH (Deficiency) at end of period $59,916 $513,334 $966,029 $1,439,692 $2,216,730 $2,984,885 $3,744,319 $4,495,473 $5,245,333 $5,981,741

Initial


Balance Sheet

Aquaculture Financial ProjectionsCage Production 1260 Tonne with FallowingPro Forma Balance Sheet


ASSETSCurrent Assets Cash 59,916$ 513,334$ 966,029$ 1,439,692$ 2,216,730$ 2,984,885$ 3,744,319$ 4,495,473$ 5,245,333$ 5,981,741$ Accounts Receivable -$ 146,777$ 423,553$ 405,853$ 415,792$ 416,436$ 416,436$ 416,436$ 416,436$ 416,436$ 416,436$ Inventory Production 820,463$ 820,463$ 839,642$ 840,885$ 840,966$ 840,966$ 840,966$ 840,966$ 840,966$ 840,966$ Total Current Assets -$ 1,027,155$ 1,757,349$ 2,211,524$ 2,696,369$ 3,474,132$ 4,242,287$ 5,001,722$ 5,752,875$ 6,502,736$ 7,239,143$

Capital AssetsProduction Facility 2,328,643$ 2,086,707$ 1,874,047$ 1,686,395$ 1,520,272$ 1,372,797$ 1,241,551$ 1,124,485$ 1,019,852$ 926,153$

TOTAL ASSETS -$ 3,355,798$ 3,844,056$ 4,085,571$ 4,382,764$ 4,994,404$ 5,615,084$ 6,243,273$ 6,877,360$ 7,522,587$ 8,165,296$




Long-Term LiabilitiesNew Financing (Loan 1) 1,350,000$ 1,253,342$ 1,149,697$ 1,038,559$ 919,388$ 791,601$ 654,576$ 507,646$ 350,095$ 181,154$ 0$ Feed Supplier Financing 1,072,584$ 831,825$ 573,663$ 296,837$ 0$ -$ -$ -$ -$ -$ -$



Shareholder EquityEquity Investment 1,350,000$ 1,350,000$ 1,350,000$ 1,350,000$ 1,350,000$ 1,350,000$ 1,350,000$ 1,350,000$ 1,350,000$ 1,350,000$ Investment Capital -$ -$ -$ -$ -$ Retained Earnings (Deficit) (269,007)$ 472,835$ 1,111,589$ 1,820,686$ 2,559,859$ 3,317,564$ 4,092,682$ 4,884,321$ 5,699,436$ 6,522,351$ Total Equity -$ 1,080,993$ 1,822,835$ 2,461,589$ 3,170,686$ 3,909,859$ 4,667,564$ 5,442,682$ 6,234,321$ 7,049,436$ 7,872,351$


-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ RATIOSCurrent Ratio 5.42 5.90 7.66 9.21 11.86 14.48 17.07 19.64 22.27 24.71 Quick Ratio 1.09 3.15 4.75 6.34 8.99 11.61 14.20 16.77 19.39 21.84 Debt:Equity 2.10 1.11 0.66 0.38 0.28 0.20 0.15 0.10 0.07 0.04


Debt Ratio 62% 45% 33% 21% 16% 12% 8% 5% 2% 0%

Initial Start-up


Capital Budget





Sub-Total $408,250




Sub-Total $218,500


Sub-Total $340,800

-$


Sub-Total 6,000$

Currency Exchange







RATIOSLiquidity




ProfitabilityGross Margin 17.4% 29.7% 29.3% 29.6% 29.7% 29.7% 29.7% 29.7% 29.9% 29.7% 28.4%Return on Sales 8.8% 26.7% 26.2% 26.6% 26.6% 25.6% 25.8% 26.0% 26.4% 26.5% 24.5%Cash Earnings on Sales 3.4% 8.9% 9.3% 9.5% 15.5% 15.4% 15.2% 15.0% 15.0% 14.7% 12.2%ROI (cash-in - cash out) -19.9% 55.0% 47.3% 52.5% 54.8% 56.1% 57.4% 58.6% 60.4% 61.0% 48.3%

Other Ratios to ConsiderNPV $2,591,132 at 7.0%FIRR 30.84%

APPENDIX C

Economic Scenarios for Large-Scale Aquaculture Operations (Closed Containment and Pump Ashore)

Income Projections

Aquaculture Financial ProjectionsFour Tank Closed Containment System (1,900 tonnes)Pro Forma Income Statement


Harvest (kg) 373,439 1,176,324 1,747,915 1,853,511 1,914,346 1,914,346 1,914,346 1,914,346 1,914,346 1,914,346 16,637,268 kg

Total Revenues $1,444,276 $4,549,434 $6,760,061 $7,168,452 $7,403,735 $7,403,735 $7,403,735 $7,403,735 $7,403,735 $7,403,735

Cost Of Production 10 Yr Total Yr 10% Farmgate

PriceOpening Inventory $0 $596,700 $928,200 $1,060,800 $1,060,800 $1,060,800 $1,060,800 $1,060,800 $1,060,800 $1,060,800Electricity $23,191 $35,281 $45,440 $46,701 $47,465 $47,587 $47,465 $47,465 $47,465 $47,587 $0.03 $0.02 0.6%Feed $1,048,942 $2,428,539 $3,428,335 $3,543,599 $3,656,011 $3,656,011 $3,656,011 $3,656,011 $3,656,011 $3,656,011 $1.95 $1.91 49.4%Fingerlings $463,178 $688,242 $729,820 $753,774 $753,774 $753,774 $753,774 $753,774 $753,774 $837,527 $0.44 $0.44 11.3%Fish Health $3,590 $7,116 $9,753 $10,137 $10,320 $10,320 $10,320 $10,320 $10,320 $10,320 $0.01 $0.01 0.1%Fuel $2,400 $3,000 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $0.00 $0.00 0.0%Labour (& Benefits) $246,048 $652,786 $944,812 $989,066 $1,020,985 $1,020,985 $1,020,985 $1,020,985 $1,020,985 $1,020,985 $0.54 $0.53 13.8%Maintenance & Repairs $65,710 $65,710 $65,710 $65,710 $65,710 $65,710 $65,710 $65,710 $65,710 $65,710 $0.04 $0.03 0.9%Supplies $32,855 $32,855 $32,855 $32,855 $32,855 $32,855 $32,855 $32,855 $32,855 $32,855 $0.02 $0.02 0.4%Stock Insurance $12,450 $22,608 $30,235 $31,271 $31,709 $31,709 $31,709 $31,709 $31,709 $31,709 $0.02 $0.02 0.4%

$1,898,365 $4,532,836 $6,218,760 $6,537,512 $6,683,230 $6,683,353 $6,683,230 $6,683,230 $6,683,230 $6,767,105 $3.03 $2.98 77.1%Closing Inventory $596,700 $928,200 $1,060,800 $1,060,800 $1,060,800 $1,060,800 $1,060,800 $1,060,800 $1,060,800 $1,060,800


Gross Margin $142,611 $944,797 $1,602,101 $1,691,740 $1,781,305 $1,781,182 $1,781,305 $1,781,305 $1,781,305 $1,697,430 $0.90 $0.93 24.1%

Indirect CostsDepreciation $136,521 $254,565 $222,166 $197,270 $177,351 $160,927 $147,078 $135,205 $124,889 $115,831 $0.10 $0.09 2.4%Professional Services $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $0.01 $0.01 0.2%Insurance $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $0.00 $0.00 0.1%Interest $182,830 $162,495 $140,690 $117,309 $92,238 $71,878 $57,937 $42,988 $26,959 $9,770 $0.05 $0.05 1.2%Telecommunications $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $0.00 $0.00 0.1%Management $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $0.04 $0.03 0.8%Office Expense $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $0.00 $0.00 0.0%Lease $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%Vehicle Expenses & Travel $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000Environmental Measures $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%

Total Indirect $424,350 $522,060 $467,857 $419,580 $374,590 $337,805 $310,015 $283,193 $256,848 $230,602 $0.21 $0.19 4.9%

PROFIT/(LOSS) before taxes ($281,739) $422,737 $1,134,244 $1,272,160 $1,406,715 $1,443,377 $1,471,290 $1,498,112 $1,524,457 $1,466,828 $0.68 $0.68 17.7%

Taxes $0 $23,265 $374,301 $419,813 $464,216 $476,315 $485,526 $494,377 $503,071 $484,053 $0.25 6.5%

PROFIT/(LOSS) after taxes ($281,739) $399,472 $759,944 $852,347 $942,499 $967,063 $985,764 $1,003,735 $1,021,386 $982,775 $0.68 $0.43 11.1%Retained Earnings ($281,739) $117,734 $877,677 $1,730,024 $2,672,524 $3,639,586 $4,625,351 $5,629,086 $6,650,472 $7,633,247

09/03/2009 Financial Report Template - 10 Year - Four Tank Closed Containment.xlsx 1


Aquaculture Financial ProjectionsFour Tank Closed Containment System (1,900 tonnes)Pro Forma Cash Flow Projections


OPERATING CASH FLOW


$1,444,276 $4,549,434 $6,760,061 $7,168,452 $7,403,735 $7,403,735 $7,403,735 $7,403,735 $7,403,735 $7,403,735

Cash DisbursementsDirect Expenses ($1,898,365) ($3,936,136) ($5,290,560) ($5,476,712) ($5,622,430) ($5,622,553) ($5,622,430) ($5,622,430) ($5,622,430) ($5,706,305)Indirect Expenses ($287,830) ($267,495) ($245,690) ($222,309) ($197,238) ($176,878) ($162,937) ($147,988) ($131,959) ($114,770)(Increase) Decrease in Receivables ($120,356) ($258,763) ($184,219) ($34,033) ($19,607) $0 $0 $0 $0 $0Increase (Decrease) in Payables $158,197 $169,814 $112,869 $15,513 $12,143 $10 ($10) $0 $0 $6,990

Taxes $0 ($23,265) ($374,301) ($419,813) ($464,216) ($476,315) ($485,526) ($494,377) ($503,071) ($484,053)


Operating Cash Flow ($704,077) $233,589 $778,160 $1,031,098 $1,112,387 $1,128,000 $1,132,832 $1,138,940 $1,146,276 $1,105,596


Total Capital ($3,650,568) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($4,354,645) $233,589 $778,160 $1,031,098 $1,112,387 $1,128,000 $1,132,832 $1,138,940 $1,146,276 $1,105,596



Funding SourcesEquity Investment $2,000,000 $2,000,000 $0 $0 $0 $0 0 0 0 0 0New Financing (Loan 1) $1,900,000 $1,763,963 ($145,871) ($156,416) ($167,723) ($179,848) ($192,849) ($206,790) ($221,739) ($237,769) ($254,957)New Financing (Loan 2) $0 $0 $0 $0 $0 0 0 0 0 0Feed Supplier Financing 839,153$ $693,898 ($155,756) ($167,016) ($179,089) ($192,036) $0 $0 $0 $0 $0

Total Funding $4,457,861 ($301,627) ($323,432) ($346,813) ($371,884) ($192,849) ($206,790) ($221,739) ($237,769) ($254,957)

Increase (Decrease) in cash position $103,216 ($68,038) $454,728 $684,285 $740,503 $935,151 $926,042 $917,201 $908,507 $850,639

CASH (Deficiency) at begining of period $0 $103,216 $35,177 $489,905 $1,174,190 $1,914,693 $2,849,844 $3,775,886 $4,693,086 $5,601,593


Initial


Balance Sheet

Aquaculture Financial ProjectionsFour Tank Closed Containment System (1,900 tonnes)Pro Forma Balance Sheet


ASSETSCurrent Assets Cash 103,216$ 35,177$ 489,905$ 1,174,190$ 1,914,693$ 2,849,844$ 3,775,886$ 4,693,086$ 5,601,593$ 6,452,232$


Inventory Production 596,700$ 928,200$ 1,060,800$ 1,060,800$ 1,060,800$ 1,060,800$ 1,060,800$ 1,060,800$ 1,060,800$ 1,060,800$

Total Current Assets -$ 820,272$ 1,342,497$ 2,114,044$ 2,832,361$ 3,592,471$ 4,527,622$ 5,453,664$ 6,370,864$ 7,279,371$ 8,130,010$


TOTAL ASSETS -$ 4,334,319$ 4,601,978$ 5,151,359$ 5,672,406$ 6,255,164$ 7,029,388$ 7,808,352$ 8,590,348$ 9,373,965$ 10,108,772$


Current Liabilities Accounts Payable and Accured Liabilities -$ 158,197$ 328,011$ 440,880$ 456,393$ 468,536$ 468,546$ 468,536$ 468,536$ 468,536$ 475,525$


Long-Term LiabilitiesNew Financing (Loan 1) 1,000,000$ 1,763,963$ 1,618,092$ 1,461,676$ 1,293,953$ 1,114,105$ 921,256$ 714,465$ 492,726$ 254,957$ 0$

Feed Supplier Financing 839,153$ 693,898$ 538,141$ 371,125$ 192,036$ -$ -$ -$ -$ -$

Total Long-Term Liabilities 1,839,153$ 2,457,861$ 2,156,233$ 1,832,802$ 1,485,989$ 1,114,105$ 921,256$ 714,465$ 492,726$ 254,957$ 0$

Total Liabilities 1,839,153$ 2,616,058$ 2,484,245$ 2,273,682$ 1,942,381$ 1,582,641$ 1,389,802$ 1,183,001$ 961,262$ 723,493$ 475,525$



Retained Earnings (Deficit) (281,739)$ 117,734$ 877,677$ 1,730,024$ 2,672,524$ 3,639,586$ 4,625,351$ 5,629,086$ 6,650,472$ 7,633,247$

Total Equity -$ 1,718,261$ 2,117,734$ 2,877,677$ 3,730,024$ 4,672,524$ 5,639,586$ 6,625,351$ 7,629,086$ 8,650,472$ 9,633,247$


Initial Start-up


Capital Budget


Four Tank Closed Containment System (1,900 tonnes)


InfrastructureManure Storage Tank $150,000Manure Pump (Mixing & Loading) $20,000Water Supply (Well Servicing) $8,000Washrooms and Septic $12,500Field Office $20,000Site Refurbishment $5,000Backup Generator Set $150,000Electical Service $80,000Environmental Assessment & Permits (PTTW, C of A) $210,000Engineering & Contingency (15%) $98,325

Sub-Total $753,825

Fish Culture SystemTanks with anchoring hardware $1,250,000Pumps & Controls $250,000Controls Engineering & Contingency (15%) $352,823


Oxygen Injection SystemOxygen Generators $450,000Back-up Liquid Oxygen Storage Tank

Monitoring Package (DO/Termp/CO2/ORP)

Motor Control PanelTechnical Assitance w InstallationEngineering & Contingency (15%) $67,500

Sub-Total $517,500

Fish Culture EquipmentFeeders $5,600Feed Storage $2,000Feed Cart (motorized) $5,000Totes $20,000Fingerling Nets $14,000Mechanized grader $100,000Pnuematic Feeders $120,000Fish Pumps $125,000Nets, Totes, Tools Etc. $15,000Contingency (20%) $81,320

Sub-Total $487,920

Waste Handling SystemHydrotech Drum microscreen $150,000High-Pressure Rinse SystemPipingSludge Pumps and Controls

Installation labour and miscellaneous costs $15,000Engineering & Contingency (15%) $24,750

$189,750

Other EquipmentOffice equipment (photocopier, fax, phone system, etc.) $5,000Pick-upTruck $30,000Contingency (10%) $3,500

Sub-Total 38,500$

Currency Exchange



Aquaculture Financial ProjectionsFour Tank Closed Containment System (1,900 tonnes)Financial Performance Projections


RATIOSLiquidity


Quick Ratio 1.41 1.26 2.39 3.88 5.40 7.40 9.38 11.33 13.27 14.87





Return on Sales 2.6% 18.5% 22.1% 22.1% 22.6% 21.7% 21.9% 22.1% 22.3% 21.4% 19.7%




FIRR 20.28%

Income Projections

Aquaculture Financial ProjectionsLarge 8 Tank Pump Ashore Facility (3,500 tones)Pro Forma Income Statement


Harvest (kg) 373,439 1,146,956 2,052,919 2,410,330 3,533,567 3,478,375 3,478,375 3,478,375 3,478,375 3,478,375 26,909,088 kg

Total Revenues $1,444,276 $4,435,852 $7,939,665 $9,321,953 $13,666,071 $13,452,617 $13,452,617 $13,452,617 $13,452,617 $13,452,617

Cost Of Production 10 Yr Total Yr 10Farmgate

PriceOpening Inventory $0 $596,700 $1,060,800 $1,491,750 $1,963,279 $2,212,512 $2,212,512 $2,212,512 $2,212,512 $2,212,512Electricity $163,754 $215,908 $311,631 $373,664 $481,243 $482,853 $481,243 $481,243 $481,243 $482,853 $0.15 $0.14 3.6%Feed $944,047 $2,213,173 $3,748,533 $4,393,076 $6,202,780 $6,202,780 $6,202,780 $6,202,780 $6,202,780 $6,202,780 $1.80 $1.78 46.1%Fingerlings $451,614 $808,337 $949,068 $1,391,342 $1,369,610 $1,369,610 $1,369,610 $1,369,610 $1,369,610 $1,521,789 $0.44 $0.44 11.3%Fish Health $3,588 $7,357 $12,089 $14,832 $19,713 $19,713 $19,713 $19,713 $19,713 $19,713 $0.01 $0.01 0.1%Fuel $2,400 $3,000 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $3,600 $0.00 $0.00 0.0%Labour (& Benefits) $155,399 $410,033 $713,061 $836,413 $1,202,917 $1,193,621 $1,194,396 $1,194,396 $1,194,396 $1,194,396 $0.35 $0.34 8.9%Maintenance & Repairs $68,541 $68,541 $68,541 $68,541 $68,541 $68,541 $68,541 $68,541 $68,541 $68,541 $0.03 $0.02 0.5%Supplies $34,271 $34,271 $34,271 $34,271 $34,271 $34,271 $34,271 $34,271 $34,271 $34,271 $0.01 $0.01 0.3%Stock Insurance $12,450 $23,690 $38,103 $47,261 $61,185 $61,185 $61,185 $61,185 $61,185 $61,185 $0.02 $0.02 0.5%

$1,836,066 $4,381,009 $6,939,698 $8,654,750 $11,407,139 $11,648,687 $11,647,851 $11,647,851 $11,647,851 $11,801,641 $2.80 $2.76 71.3%Closing Inventory $596,700 $1,060,800 $1,491,750 $1,963,279 $2,212,512 $2,212,512 $2,212,512 $2,212,512 $2,212,512 $2,212,512


Gross Margin $204,910 $1,115,643 $2,491,717 $2,630,481 $4,471,444 $4,016,441 $4,017,277 $4,017,277 $4,017,277 $3,863,488 $1.15 $1.27 32.7%

Indirect CostsDepreciation $382,164 $348,742 $322,337 $300,106 $280,578 $262,967 $246,840 $231,939 $218,100 $205,208 $0.10 $0.08 2.1%Professional Services $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $0.01 $0.01 0.1%Insurance $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $4,800 $0.00 $0.00 0.0%Interest $327,063 $290,695 $251,698 $209,882 $165,044 $128,624 $103,677 $76,926 $48,242 $17,484 $0.06 $0.05 1.2%Telecommunications $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $0.00 $0.00 0.0%Management $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $0.04 $0.03 0.7%Office Expense $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $0.00 $0.00 0.0%Site Lease $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $0.02 $0.01 0.3%Vehicle Expenses & Travel $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $0.01 $0.00 0.1%Environmental Measures $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0.00 $0.00 0.0%

Total Indirect $896,227 $826,437 $761,035 $696,989 $632,621 $578,591 $537,516 $495,865 $453,342 $409,692 $0.23 $0.18 4.6%

PROFIT/(LOSS) before taxes ($691,317) $289,206 $1,730,682 $1,933,492 $3,838,823 $3,437,851 $3,479,761 $3,521,412 $3,563,936 $3,453,796 $0.91 $0.91 23.6%

Taxes $0 $0 $529,880 $638,053 $1,266,812 $1,134,491 $1,148,321 $1,162,066 $1,176,099 $1,139,753 $0.33 8.5%

PROFIT/(LOSS) after taxes ($691,317) $289,206 $1,200,801 $1,295,440 $2,572,011 $2,303,360 $2,331,440 $2,359,346 $2,387,837 $2,314,043 $0.91 $0.58 15.1%Retained Earnings ($691,317) ($402,111) $798,690 $2,094,130 $4,666,141 $6,969,501 $9,300,941 $11,660,287 $14,048,124 $16,362,167

09/03/2009 Financial Report Template - Large Pump Ashore 3500 tonnes.xlsx 1


Aquaculture Financial ProjectionsLarge 8 Tank Pump Ashore Facility (3,500 tones)Pro Forma Cash Flow Projections


OPERATING CASH FLOW


$1,444,276 $4,435,852 $7,939,665 $9,321,953 $13,666,071 $13,452,617 $13,452,617 $13,452,617 $13,452,617 $13,452,617

Cash DisbursementsDirect Expenses ($1,836,066) ($3,784,309) ($5,878,898) ($7,163,000) ($9,443,860) ($9,436,175) ($9,435,339) ($9,435,339) ($9,435,339) ($9,589,129)Indirect Expenses ($514,063) ($477,695) ($438,698) ($396,882) ($352,044) ($315,624) ($290,677) ($263,926) ($235,242) ($204,484)(Increase) Decrease in Receivables ($120,356) ($249,298) ($291,984) ($115,191) ($362,010) $17,788 $0 $0 $0 $0Increase (Decrease) in Payables $153,005 $162,354 $174,549 $107,009 $190,072 ($640) ($70) $0 $0 $12,816

Taxes $0 $0 ($529,880) ($638,053) ($1,266,812) ($1,134,491) ($1,148,321) ($1,162,066) ($1,176,099) ($1,139,753)


Operating Cash Flow ($873,203) $86,903 $974,753 $1,115,835 $2,431,417 $2,583,474 $2,578,210 $2,591,285 $2,605,937 $2,532,067


Total Capital ($6,346,418) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($7,219,621) $86,903 $974,753 $1,115,835 $2,431,417 $2,583,474 $2,578,210 $2,591,285 $2,605,937 $2,532,067



Funding SourcesEquity Investment $3,400,000 $3,400,000 $0 $0 $0 $0 0 0 0 0 0New Financing (Loan 1) $3,400,000 $3,156,566 ($261,032) ($279,902) ($300,136) ($321,833) ($345,099) ($370,046) ($396,797) ($425,481) ($456,239)New Financing (Loan 2) $0 $0 $0 $0 $0 0 0 0 0 0Feed Supplier Financing 1,500,000$ $1,240,353 ($278,417) ($298,544) ($320,125) ($343,267) $0 $0 $0 $0 $0

Total Funding $7,796,919 ($539,449) ($578,446) ($620,262) ($665,101) ($345,099) ($370,046) ($396,797) ($425,481) ($456,239)

Increase (Decrease) in cash position $577,298 ($452,546) $396,307 $495,574 $1,766,317 $2,238,375 $2,208,164 $2,194,489 $2,180,456 $2,075,828

CASH (Deficiency) at begining of period $0 $577,298 $124,752 $521,059 $1,016,632 $2,782,949 $5,021,325 $7,229,488 $9,423,977 $11,604,433


Initial


Balance Sheet

Aquaculture Financial ProjectionsLarge 8 Tank Pump Ashore Facility (3,500 tones)Pro Forma Balance Sheet


ASSETSCurrent Assets Cash 577,298$ 124,752$ 521,059$ 1,016,632$ 2,782,949$ 5,021,325$ 7,229,488$ 9,423,977$ 11,604,433$ 13,680,262$

Accounts Receivable -$ 120,356$ 369,654$ 661,639$ 776,829$ 1,138,839$ 1,121,051$ 1,121,051$ 1,121,051$ 1,121,051$ 1,121,051$

Inventory Production 596,700$ 1,060,800$ 1,491,750$ 1,963,279$ 2,212,512$ 2,212,512$ 2,212,512$ 2,212,512$ 2,212,512$ 2,212,512$



TOTAL ASSETS -$ 7,258,607$ 7,170,717$ 7,967,622$ 8,749,808$ 10,846,791$ 12,804,412$ 14,765,736$ 16,728,286$ 18,690,641$ 20,561,261$


Current Liabilities Accounts Payable and Accured Liabilities -$ 153,005$ 315,359$ 489,908$ 596,917$ 786,988$ 786,348$ 786,278$ 786,278$ 786,278$ 799,094$


Long-Term LiabilitiesNew Financing (Loan 1) 3,400,000$ 3,156,566$ 2,895,533$ 2,615,631$ 2,315,495$ 1,993,661$ 1,648,563$ 1,278,517$ 881,720$ 456,239$ 0$

Feed Supplier Financing 1,500,000$ 1,240,353$ 961,936$ 663,393$ 343,267$ -$ -$ -$ -$ -$

Total Long-Term Liabilities 4,900,000$ 4,396,919$ 3,857,470$ 3,279,024$ 2,658,762$ 1,993,661$ 1,648,563$ 1,278,517$ 881,720$ 456,239$ 0$

Total Liabilities 4,900,000$ 4,549,924$ 4,172,829$ 3,768,932$ 3,255,679$ 2,780,650$ 2,434,911$ 2,064,795$ 1,667,998$ 1,242,517$ 799,094$



Retained Earnings (Deficit) (691,317)$ (402,111)$ 798,690$ 2,094,130$ 4,666,141$ 6,969,501$ 9,300,941$ 11,660,287$ 14,048,124$ 16,362,167$

Total Equity -$ 2,708,683$ 2,997,889$ 4,198,690$ 5,494,130$ 8,066,141$ 10,369,501$ 12,700,941$ 15,060,287$ 17,448,124$ 19,762,167$


Initial Start-up


Capital Budget


Large 8 Tank Pump Ashore Facility (3,500 tones)


InfrastructureManure Storage Tank $150,000Manure Pump (Mixing & Loading) $20,000Water Supply (Well Servicing) $8,000Washrooms and Septic $12,500Field Office $20,000Site Refurbishment $5,000Backup Generator Set $450,000Electical Service $80,000Environmental Assessment & Permits (PTTW, C of A) $210,000Engineering & Contingency (15%) $143,325


Fish Culture SystemTanks with anchoring hardware $1,756,000Pumps & Controls $250,000Piping and Intake $1,000,000Engineering & Contingency (15%) $637,223


Oxygen Injection SystemOxygen Generators $450,000Back-up Liquid Oxygen Storage Tank

Monitoring Package (DO/Termp/CO2/ORP) $120,000Motor Control PanelTechnical Assitance w InstallationEngineering & Contingency (15%) $85,500

Sub-Total $655,500

Fish Culture EquipmentFeeders $5,600Feed Storage $2,000Feed Cart (motorized) $5,000Totes $20,000Fingerling Nets $14,000Mechanized grader $100,000Pnuematic Feeders $120,000Fish Pumps $125,000Nets, Totes, Tools Etc. $15,000Contingency (20%) $81,320

Sub-Total $487,920

Waste Handling SystemHydrotech Drum microscreen $150,000High-Pressure Rinse SystemPipingSludge Pumps and ControlsTreatment Wetland $180,000Installation labour and miscellaneous costs $33,000Engineering & Contingency (15%) $54,450

$417,450

Other EquipmentOffice equipment (photocopier, fax, phone system, etc.) $10,000Contingency (10%) $3,500

Sub-Total 43,500$

Currency Exchange



Aquaculture Financial ProjectionsLarge 8 Tank Pump Ashore Facility (3,500 tones)Financial Performance Projections


RATIOSLiquidity


Quick Ratio 4.56 1.57 2.41 3.00 4.98 7.81 10.62 13.41 16.18 18.52





Return on Sales 1.2% 20.9% 29.0% 26.2% 31.4% 27.5% 27.7% 27.9% 28.1% 27.2% 24.7%




FIRR 23.07%

APPENDIX DAPPENDIX DAPPENDIX DAPPENDIX D

Economic Economic Economic Economic Scenario for Model RecScenario for Model RecScenario for Model RecScenario for Model Recirculationirculationirculationirculation Aquaculture System Aquaculture System Aquaculture System Aquaculture System

Income Projections

Aquaculture Financial ProjectionsModel Canadian Aqua‐FarmPro Forma Income Statement


Harvest (kg) 32,700 130,800 130,800 130,800 130,800 130,800 130,800 130,800 130,800 130,800

Total Revenues $129,762 $519,048 $519,048 $519,048 $519,048 $519,048 $519,048 $519,048 $519,048 $519,048

Cost Of ProductionOpening Inventory $0 $140,132 $112,823 $111,376 $111,299 $111,299 $111,299 $111,299 $111,299 $111,299Feed $113,475 $219,125 $219,125 $219,125 $219,125 $219,125 $219,125 $219,125 $219,125 $219,125Fingerlings/Eggs $44,437 $44,437 $44,437 $44,437 $44,437 $44,437 $44,437 $44,437 $44,437 $44,437Electricity $50,224 $50,224 $50,224 $50,224 $50,224 $50,224 $50,224 $50,224 $50,224 $50,224Heating $9,653 $9,653 $9,653 $9,653 $9,653 $9,653 $9,653 $9,653 $9,653 $9,653Labour $31,200 $31,200 $31,200 $31,200 $31,200 $31,200 $31,200 $31,200 $31,200 $31,200Maintenance & Repairs $4,725 $9,259 $9,259 $9,259 $9,259 $9,259 $9,259 $9,259 $9,259 $9,259Supplies $11,813 $23,148 $23,148 $23,148 $23,148 $23,148 $23,148 $23,148 $23,148 $23,148Stock Insurance $4,475 $6,319 $5,821 $5,795 $5,793 $5,793 $5,793 $5,793 $5,793 $5,793

$270,002 $533,497 $505,690 $504,217 $504,138 $504,138 $504,138 $504,138 $504,138 $504,138Closing Inventory $140,132 $112,823 $111,376 $111,299 $111,295 $111,295 $111,295 $111,295 $111,295 $111,295

Cost Of Production $129,870 $420,674 $394,314 $392,918 $392,843 $392,843 $392,843 $392,843 $392,843 $392,843

Gross Margin ($108) $98,374 $124,734 $126,130 $126,205 $126,205 $126,205 $126,205 $126,205 $126,205

Indirect CostsDepreciation $153,704 $110,316 $79,780 $58,253 $43,042 $31,246 $22,826 $16,675 $12,181 $8,899Professional Services $15,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000Insurance $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400Interest $31,902 $29,464 $26,850 $24,047 $21,041 $18,234 $15,426 $12,619 $9,811 $7,004Telecommunications $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400Management $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Office Expense $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200Lease $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Marketing and DistributionVehicle Expense $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000

Total Indirect $212,606 $160,780 $127,630 $103,300 $85,083 $70,480 $59,252 $50,294 $42,993 $36,903

PROFIT/(LOSS) before taxes ($212,714) ($62,406) ($2,896) $22,830 $41,122 $55,725 $66,953 $75,911 $83,212 $89,302

Taxes $0 $0 $0 $0 $0 $0 $0 $0 $11,177 $14,735

PROFIT/(LOSS) after taxes ($212,714) ($62,406) ($2,896) $22,830 $41,122 $55,725 $66,953 $75,911 $72,036 $74,567Retained Earnings ($212,714) ($275,120) ($278,016) ($255,186) ($214,064) ($158,339) ($91,386) ($15,474) $56,561 $131,129

09/03/2009 Financial Report Template - 10 Year - Model Canadian Aqua-Farm.xlsx 1


Aquaculture Financial ProjectionsModel Canadian Aqua‐FarmPro Forma Cash Flow Projections


OPERATING CASH FLOW


$129,762 $519,048 $519,048 $519,048 $519,048 $519,048 $519,048 $519,048 $519,048 $519,048

Cash DisbursementsDirect Expenses ($270,002) ($393,365) ($392,867) ($392,841) ($392,839) ($392,839) ($392,839) ($392,839) ($392,839) ($392,839)Indirect Expenses ($58,902) ($50,464) ($47,849) ($45,047) ($42,059) ($38,992) ($36,188) ($33,381) ($30,573) ($27,766)(Increase) Decrease in Receivables ($43,254) $0 $0 $0 $0 $0 $0 $0 $0 $0Increase (Decrease) in Payables $33,033 ($856) ($233) ($242) ($242) ($242) ($242) ($242) ($242) ($242)

Taxes $0 $0 $0 $0 $0 $0 $0 $0 $0 $0



Capital Expenditures Production Facility ($693,080) $0 $0 $0 $0 $0 $0 $0 $0 $0 Processing Facility $0 $0 $0 $0 $0 $0 $0 $0 $0 Office Facilities $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Capital ($693,080) $0 $0 $0 $0 $0 $0 $0 $0 $0

NET CASH ($902,443) $74,363 $78,099 $80,918 $83,908 $86,975 $89,779 $92,586 $95,394 $98,201



Funding SourcesEquity Investment $471,000 $471,000 $0 $0 $0 $0 $0 $0 $0 $0 $0New Financing (Loan 1) $471,000 $437,277 ($36,161) ($38,777) ($41,578) ($44,583) ($47,390) ($50,198) ($53,005) ($55,813) ($58,620)New Financing (Loan 2) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Feed Supplier FinancingTotal Funding $908,277 ($36,161) ($38,777) ($41,578) ($44,583) ($47,390) ($50,198) ($53,005) ($55,813) ($58,620)


CASH (Deficiency) at begining of period $0 $5,834 $44,036 $83,358 $122,698 $162,023 $201,608 $241,189 $280,770 $320,351


Initial


Balance Sheet

Aquaculture Financial ProjectionsModel Canadian Aqua‐FarmPro Forma Balance Sheet



Accounts Receivable 43,254$ 43,254$ 43,254$ 43,254$ 43,254$ 43,254$ 43,254$ 43,254$ 43,254$ 43,254$


Total Current Assets 189,220$ 200,113$ 237,988$ 277,251$ 316,572$ 356,157$ 395,738$ 435,319$ 474,900$ 514,481$


TOTAL ASSETS 728,595$ 629,173$ 587,268$ 568,278$ 564,557$ 572,896$ 589,651$ 612,557$ 639,957$ 670,639$


Current Liabilities Accounts Payable and Accured Liabilities 33,033$ 32,177$ 31,944$ 31,702$ 31,444$ 31,444$ 31,444$ 31,444$ 31,444$ 31,444$

Total Current Liabilities 33,033$ 32,177$ 31,944$ 31,702$ 31,444$ 31,444$ 31,444$ 31,444$ 31,444$ 31,444$

Long-Term LiabilitiesNew Financing (Loan 1) 437,277$ 401,117$ 362,342$ 320,764$ 276,181$ 228,791$ 178,593$ 125,588$ 69,775$ 11,155$

Feed Supplier Financing -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Long-Term Liabilities 437,277$ 401,117$ 362,342$ 320,764$ 276,181$ 228,791$ 178,593$ 125,588$ 69,775$ 11,155$

Total Liabilities 470,310$ 433,294$ 394,286$ 352,466$ 307,625$ 260,235$ 210,037$ 157,032$ 101,219$ 42,599$

258,285$ 195,879$ 192,982$ 215,812$ 256,932$ 312,661$ 379,614$ 455,526$ 538,738$ 628,040$


Investment Capital -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Retained Earnings (Deficit) (212,715)$ (275,121)$ (278,018)$ (255,188)$ (214,068)$ (158,339)$ (91,386)$ (15,474)$ 56,561$ 131,129$

Total Equity 258,285$ 195,879$ 192,982$ 215,812$ 256,932$ 312,661$ 379,614$ 455,526$ 527,561$ 602,129$

TOTAL LIABILITES & EQUITY 728,595$ 629,173$ 587,268$ 568,278$ 564,557$ 572,896$ 589,651$ 612,557$ 628,780$ 644,728$



Debt Ratio 60% 64% 62% 56% 49% 40% 30% 21% 11% 2%


Capital Budget

Aquaculture Financial ProjectionsModel Canadian Aqua‐Farm

Capital BudgetBudget

InfrastructureManure Pond Excavation $0Water Supply (Well Servicing) $2,500Water Heater $3,500Purge Tank Shelter $21,000Site Refurbishment $5,000Electical Service $10,000Engineering & Contingency (10%) $4,200

Sub-Total $46,200

Raceway and Purge TanksExcavation $15,000Forms $43,000Concrete Work $78,000Purge Tank (2-8'x60'x6' raceways) $19,000Purge Tank Circulation / Aeration $2,500Engineering & Contingency (10%) $15,500

Sub-Total $173,000

Water Reconditioning SystemFRP Drop Sump Assembly $2,700Drum Filter (Hydrotech Model 1607) $53,000High-Pressure Rinse System $4,500CO2 Stripper (16' x 4') $11,600CO2 Pumps (v - 150) $9,900

Biofilter Media (MB3) $96,600Biofilter Retaining Screens $7,500Biofilter Aeration Grids $8,400Biofilter Aeration Blowers & Accessories $8,000LHO (316 SS) $9,500Oxygen Generator $22,500Ozone Generator $25,000Recirculation Pumps $37,200Monitoring Package (DO/Termp/CO2/ORP) $18,000

Motor Control Panel $13,000Technical Assitance w Installation $10,000Engineering & Contingency (10%) $33,740

Sub-Total $371,140

Fish Culture EquipmentFeeders $5,600Dividers $2,000Fish Grader Screen $5,000Nets, Totes, Tools Etc. $15,000Contingency (10%) $2,760

Sub-Total $30,360

Other Equipmentetc.) $5,000Back-up Generator (60kW) $30,000Manure Handling EquipmentPick-upTruckContingency (10%) $3,500

Sub-Total 38,500$

Currency Exchange 33,880$



Capital Budget

Aquaculture Financial ProjectionsModel Canadian Aqua‐Farm

Capital BudgetBudget

InfrastructureManure Pond Excavation $0Water Supply (Well Servicing) $2,500Water Heater $3,500Purge Tank Shelter $21,000Site Refurbishment $5,000Electical Service $10,000Engineering & Contingency (10%) $4,200

Sub-Total $46,200

Raceway and Purge TanksExcavation $15,000Forms $43,000Concrete Work $78,000Purge Tank (2-8'x60'x6' raceways) $19,000Purge Tank Circulation / Aeration $2,500Engineering & Contingency (10%) $15,500

Sub-Total $173,000

Water Reconditioning SystemFRP Drop Sump Assembly $2,700Drum Filter (Hydrotech Model 1607) $53,000High-Pressure Rinse System $4,500CO2 Stripper (16' x 4') $11,600CO2 Pumps (v - 150) $9,900

Biofilter Media (MB3) $96,600Biofilter Retaining Screens $7,500Biofilter Aeration Grids $8,400Biofilter Aeration Blowers & Accessories $8,000LHO (316 SS) $9,500Oxygen Generator $22,500Ozone Generator $25,000Recirculation Pumps $37,200Monitoring Package (DO/Termp/CO2/ORP) $18,000

Motor Control Panel $13,000Technical Assitance w Installation $10,000Engineering & Contingency (10%) $33,740

Sub-Total $371,140

Fish Culture EquipmentFeeders $5,600Dividers $2,000Fish Grader Screen $5,000Nets, Totes, Tools Etc. $15,000Contingency (10%) $2,760

Sub-Total $30,360

Other Equipmentetc.) $5,000Back-up Generator (60kW) $30,000Manure Handling EquipmentPick-upTruckContingency (10%) $3,500

Sub-Total 38,500$

Currency Exchange 33,880$



Aquaculture Financial ProjectionsModel Canadian Aqua‐FarmFinancial Performance Projections


RATIOSLiquidity


Quick Ratio 1.49 2.71 3.96 5.23 6.53 7.79 9.05 10.30 11.56 12.82



Times Interest Earned (5.67) (1.12) 0.89 1.95 2.95 4.06 5.34 7.02 9.48 13.75

ProfitabilityGross Margin -0.1% 19.0% 24.0% 24.3% 24.3% 24.3% 24.3% 24.3% 24.3% 24.3% 21.3%

Return on Sales -20.9% 14.9% 20.0% 20.3% 20.3% 16.8% 17.3% 17.8% 18.4% 18.9% 14.4%


ROI (cash-in - cash out) -45.2% -13.2% -0.6% 4.8% 8.7% 11.8% 14.2% 16.1% 15.3% 15.8% 2.8%


FIRR -4.3%

APPENDIX E

Glossary of Terms

1

Appendix E Glossary of Terms Financial Terms

Term Significance Calculation Net Present Value (NPV)

The present value of an initial investment and series of future cash flows at a given interest rate

t - the time of the cash flow i - the discount rate (the rate of

return that could be earned on an investment in the financial markets with similar risk.)

Rt - the net cash flow (the amount of cash, inflow minus outflow) at time t (for educational purposes, R0 is commonly placed to the left of the sum to emphasize its role as (minus the) investment)

Current Ratio

An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is

= Current Assets / Current Liabilities

Quick Ratio

Also known as the acid-test it measures the ability of a company to use its near cash or quick assets to immediately meet its current liabilities

=( Current Assets – ( Inventories + Prepayments )) / Current Liabilities

Inventory Turnover

The ratio of a company's annual sales to its inventory; or the fraction of a year that an average item remains in inventory. Low turnover is a sign of inefficiency.

= (Inventory / Cost of Sales) x 365 days

Debt Ratio

The ratio shows the percent of debt that current cash flow can retire. A cash debt coverage ratio of 1:1 (100%) or greater shows that the company can repay all debt within one year.

= (cash flow from operations - dividends) / total debt.

Financial Internal Rate of Return

The FIRR is an indicator to measure the financial return on investment of an income generation project and is used to make the investment decision.

The FIRR is obtained by equating the present value of investment costs (as cash out-flows) and the present value of net incomes (as cash in-flows) and thus finds out the break-even interest rate, i*

Ratio of NPV to Equity

The net present value in relation to the equity invested

= NPV / Shareholders Equity

2

Appendix E Glossary of Terms Financial Terms

Term Significance Calculation Gross margin

Gross margins reveal how much a company earns taking into consideration the costs that it incurs for producing its products

= Revenue – Cost of Sales

Return on Sales

A measure of a company's profitability, equal to a fiscal year's pre-tax income divided by total sales

= Pre-tax Income / Total Sales

Cash Earnings on Sales

Cash revenues minus cash expenses. This differs from earnings in that it does not include non-cash expenses such as depreciation.

= Cash Revenues – Cash Expenses

Return on Equity

The amount of net income returned as a percentage of shareholders equity. Return on equity measures profitability by revealing how much profit a business generates with the money shareholders have invested.

= Net Income / Shareholders Equity

3

Appendix E Glossary of Terms Technical Terminology Open Cage (Aquaculture) Fish production in net pens hung from some

type of floating pock or frame, with passive water exchange due to current flowing through cage

Pump Ashore

Tanks or raceways located on land near a large water body with a pumped water supply and solids separation and removal

Closed Containment

An aquaculture system where fish are contained within a secure tank or bag with pumps supplying water flow to the fish culture unit and solids separation and removal. For the purposes of this report the containments are assumed to be located in water.

RAS – Recirculation Aquaculture System

An aquaculture system where the most of the water utilized for fish production is reused. The system filters water to remove solids, and uses biofiltration to remove ammonia, the process can also include oxygenation or aeration, CO2 stripping and pH control

Fingerlings

Small trout normally 5 to 75 grams that are stocked into a growout facility. Fingerlings are generally raised in separate facilities where the water quality is very high and the environment closely controlled

Growout

The growout stage is the production phase where fingerlings are stocked into a facility to be grown to a marketable size. At this stage the fish are generally less vulnerable to disease and can do well in surface waters

Land-based

Any farm located on land. Traditionally these have been utilized water from relatively pristine streams, springs and wells.

Sustainable

In the context of this study sustainability is defined as the ability to maintain the state of environmental, social and economic processes for the long-term future.