Christmas greetings from Andfjord Salmon – A successful year

21 December 2023

Dear Andfjord Salmon shareholders, friends, business partners, neighbours, and colleagues.

Now that 2023 is drawing to a close, I would like to take the opportunity to summarise some of this year’s many achievements, which would not have been possible without your support.

Firstly, let me say that I am so incredibly proud of everything the Andfjord Salmon team has achieved this year. We have met all the main targets we set out at the beginning of the year. I believe a key reason is that we have developed a culture where careful planning and testing has become an integrated part of our day-to-day operations. We do not believe in coincidences. We are continuously working hard to identify and minimise risk in every aspect of our operations.

Successful first production cycle

In many ways, 2023 was a year of two halves. During the first half of the year, our main focus was to deliver a successful first production cycle. The second half was all about the construction work at Kvalnes. Nevertheless, the two halves were closely related as a successful first production cycle was vital to enabling the ongoing build-out at Kvalnes.

Industry-leading survival rate of 97.5 percent

In mid-2022, approximately 193,000 smolt were released in Andfjord Salmon’s first land-based pool at Kvalnes, Andøya, Norway. Fast forward 12 months, and 97.5 percent of the fish had survived the first production cycle, including the transportation to the processing facility. This is an industry-leading survival rate that we were very proud of achieving. In addition, a large majority (91%) of the salmon was sold at superior price level, meaning that the quality of the fish was exceptionally high.

Another key takeaway from the first production cycle is that the fundamental elements to creating solid financial results are now in place. These prerequisites include good biological conditions, a low feed conversion ratio, as well as low energy consumption and cost. Although we have essentially recreated an ocean net pen on land, our production method allows us to have a 20 percent lower feed consumption per kilo produced fish compared to the industry average. Moreover, the energy efficiency advantages of our flow-through system mean that we only consume 1 kWh/kg salmon produced, which translates to an energy cost of approximately NOK 0.50 per kilo salmon.

Strong biological results

Perhaps most importantly, the results from the first production cycle proved that we avoided exposing the fish to unnecessary stress factors, and that the spacious pool allowed them to enjoy healthy, natural behaviour. The strong biological results, in combination with low energy use, brings us another step closer to our objective of developing the world’s most sustainable and fish-friendly farming facility.

The high-quality of our salmon was echoed by our customers, who provided very positive feedback – especially on the colour of the fish. This underlines the many advantages of Andfjord Salmon's salmon farming method. Our main goal for the first batch of fish was to reach the 'right' buyers. The fact that buyers were coming back after the first shipment wanting to pay extra for the next delivery was encouraging.

Financing

Our strategy has always been to complete a full production cycle, and then use the results as a catalyst to secure competitive financing for the next build-out stage at Kvalnes, Andøya.

A key factor to Andfjord Salmon's success is that we have a good balance between financial and industrial shareholders that wish to provide competence and expertise in addition to capital. The combination of a proof-of-concept for our flow-through technology and the know-how of our leading shareholders has been instrumental in obtaining the trust of Norwegian banks.

In June this year, a consortium of Norwegian banks therefore committed NOK 825 million to fund the next step of our expansion plans at Kvalnes. This was followed by a successful private placement of new shares that raised NOK 615 million in further capital for Andfjord Salmon. Several of our largest shareholders participated in the private placement.

In June, with the financing in place, we could finally unveil the specifics of our expansion plans at Kvalnes, targeting a total production capacity of 40,000 tonnes (HOG) through a gradual increase between 2025 and 2030. An initial volume of 8,000 tonnes (HOG) production capacity, equivalent to five pools, is anticipated for 2025. In the first construction phase, Andfjord Salmon will also establish major infrastructure such as waterways and a port area to support 40,000 tonnes of production at Kvalnes.

It's important for my colleagues and I to emphasise that we are very grateful for the robust support of our banks and shareholders. We do not take your support for granted, and we are highly committed to making the Kvalnes build-out a success for everyone involved.

Construction work in full momentum

The timing of the harvest in June/July was chosen to mitigate project execution risk for our expansion plans at Kvalnes. Today, six months later, this has proven to be a wise decision as we expect the excavation of pool pits for the current build-out to be completed in Q1 of 2024 - a full quarter ahead of schedule. Such a great start to the project means that we are likely to initiate concrete work on the next four pools earlier than planned. In sum, this helps to de-risk the project and reduces the probability of unwanted cost overruns for the Kvalnes build-out.

The construction work for the shared infrastructure workstreams – harbour area and waterways – is also progressing well. As of late November, progress for these workstreams stood at 20% and 5% completion, respectively, which is in line with our plans.

I am also pleased with the mass balance approach that our team has identified and adopted, as this underscores Andfjord Salmon’s sustainability profile. By mass balance we mean that excavated masses from pool pits and waterways are used in the development of a new harbour at Kvalnes. This considerably reduces operating costs and CO2 emissions associated with our build-out.

An exciting 2024 lies ahead

Andfjord Salmon is first and foremost a fish farmer. However, construction will be our main focus over the next 18 months. The construction team, led by our project director Jostein Nilsen, frequently impresses me with their immaculate attention to detail and ability to identify cost-efficient solutions. The strong progress we have seen so far is down to their detailed plans and dedicated efforts to do things as smartly, safely, and efficiently as possible.

New and exciting opportunities

The coming year will undoubtedly bring new and exciting challenges and opportunities, and I look forward to tackling them together with the Andfjord Salmon team. The start of the construction work has been great, and we will continue to update you regularly about our progress at Kvalnes.

Construction activity at Kvalnes will be slightly lower during the Christmas period as the people involved enjoy a well-earned break together with friends and family. We look forward to ramping up activity in early January and to the many exciting milestones we are aiming to achieve in 2024.

Finally, I would like to wish you and your family a peaceful and merry Christmas and a happy, land-based New Year. 

Season's Greetings,

Martin Rasmussen, CEO, Andfjord Salmon