FROM SEA FARMING EXPORT TO INTERNATIONAL HI-TECH INDUSTRY

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FROM SEA FARMING EXPORT

TO INTERNATIONAL

HI-TECH INDUSTRY

SINOR’s PROJECT IN SHAPING

1. One vertically integrated production unit

2. 10.000 t of yearly production

3. Norwegian Atlantic Salmon

4. Processing and total distribution logistics

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SINOR BACKGROUND

• Sinor has 22 years of experience of assisting European companies into the Chinese market

• Sinor has decided to concentrate from 2009 on establishing and managing companies in the seafood marked in China, based on Norwegian skills and state of the art technology

• Sinor has established crucial relationships with necessary official bodies in the Chinese seafood sector

• Sinor has established strategically alliances with Norwegian suppliers in the whole seafood chain

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FASE 1:

A STRATEGIC PLANfor

DEVELOPMENT OF THE CHINEESE LAND BASED AQUA CULTURE INDUSTRY

based on extensiveSCANDINAVIAN RAS TECHNOLOGY,

OPERATIONAL MANAGEMENT & INDUSTRIAL COMPETANCE

and deepCHINEES CULTURAL, STRUCTUAL & MARKET

KNOW-HOW

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2010 FACTS and FIGURES

• 2010 aqua culture production is 43 mill. ton at value of 63 bill. US $

• China is no 1 in production with 20 mill. ton (almost 50% of total world production), but low sales value. – China goal 2020: 40 mill ton – same as world

production 2010 !!• Norway has an annual production of 3 mill. ton out of which

salmon represent 1.3 mill. tons, but high sales value. • Aqua culture annual growth rate is 10 % which is double of

Norwegian present production,• Sinor has delivered the world largest recirculation

plant (RAS) to China in 2010 with capacity of 1000 tons annually.

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2012 BACKGROUND

• Development of world production of seafood divided into catch and farming:– Catch volume leveling off– Farming significant growth, and outperform catch within few

years

• Growing demands for sea food world wide and in China• RAS (recirculation plant) technology now available

in full scale.• Feed technology and efficiency becomes green; will

boost further growth in industry.• DNA and other fast growth and resistibility parameters

continue to improve.

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• Depending on certain assumptions about affluence,

diet composition and food waste, the calculations imply an increase in total food production of 70% on current production level during the same period.

• The majority of this population will be urbanized.

• A significant part of the 70% must come from seafood.

BEFORE 2025: WORLD POPULATION 10 BILLION

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2020: FARMING IN DRIVERS SEAT2030: RAS PLANTS DOMINATING

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10

20

30

40

50

60

70

80

90

100

1970 1980 1990 2000 2010E 2020E

farming

catch

IN 1000 TONS (app. fig!)

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YEARLY CONSUMPTION OF SALMON

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1

2

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5

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China USA France Norway

kg/person

What if one third of China’s population approaches 1 kg/person ?

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THE PROSPECT OF THE BLUE ECONOMY

• Sea-caught fisheries will seek to maintain present levels of production.• Aquaculture production will continue its ongoing trend to provide

a larger proportion of total fish production.• Total fish consumption per head will increase for health and demand

reasons.• The limitation in sea water locations due to both environmental and

legislative reasons, will support and move the sea food farming from the sea to land based locations.

• Availability of water resources provides opportunities for R.A.S. independent of other parameters (R.A.S. cleans water, thus preventing diseases by providing a closed system that can be monitored in detail).

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OPPORTUNETIES CHINA

• Chinese potential value improvement/cost reduction by domestic production: 60 %

• Landed price in China of Norwegian/UK/Chile air borne farmed salmon is more than 2.5 times production cost in Norway. (Import value (cost) for salmon products due to tolls, taxes and airway transportation of fish on ice)

• CO2 issue critical• Cold shoulder policy from official China. Production in

China can solve the problem • UK/Chile has taken over leading import market position

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BASIC BUSINESS IDEA Broad Norwegian competence after 40 years of tries and fails, improvements and development

1970 – 2010- Breeding- Farming- Pharmacology- Technology- Biology- Operational

•Significantly improved Chinese skills and competence •Chinese high demands and marked growth

2020

2012•Strong Norwegian market share, technology and skills,•Next phase; from export to internationalization

2012•Chinese production planning for high value increase•Present Chinese competence to be improved

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CHINEESE SEA FOOD DEMANDS

• Market potentials are big. China goal 2020: 40 mill ton – same as world production 2010 !!

• Product development needed• High volume of fresh water farming necessary • Need for improvements in present installations, feeds and

breeding methodology• Operational skills improvements• Lacking functioning RAS technology, • Local capital available• Foreign capital triggers multiple funding • RAS - Move from farming to advanced industry• We have well established relationships with necessary

official bodies

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BUSINESS CASE

• Establish a 10.000 MT per year Salmon/Trout production unit in Coastel City.

• Local government is facilitating.• Production DESIGN – based on latest RAS

technology.• Surround the production unit with service

providers to RAS production by offering preferential policies.

• Develop new product segments and distribution network.

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PURPOSE, GOALS AND SCOPE

• The purpose is to invite Scandinavian capital to invest in local RAS production in China.

• Sinor thru newco NORSI:– The goal is to play a significant role in the development

of industrial RAS based seafood market in China

• First investment will be a salmon RAS factory in a Chinese province where all licenses will be provided.

• Licenses will be released when a 500 mill project introduces and approves in Qingdao.

INITIATORS

• SINOR AS: Morten Tangen, Xiao Ying Gao

• WIROJA AS: Willy Roger Jacobsen

• KABI AS: Asbjørn Birkeland

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BASIC MODELFounders and Initiators: SINOR,……………..,

NORSI AS

NORASI AS

Production Company A

Production and Sales Company B

CO-INVESTORS / JV

CO- INVESTORS /JV

INVESTORS ADVISORS AND INVESTMENT BANKING

STRATEGIC ALLIENCES

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IMPLEMENTATION

• Localisation Licence – OK by local government• Local company with acquired land & water licence &

certificates – local company initiated with registered capital of RMB 10 mill. Land & water identified and reserved at a value of RMB 20 mill. Sinor will indirectly hold the shares of local company.

• Foreign investment NOK 500 mill – will trigger local borrowing at least 3 times the investment.

• Total investment case estimated to NOK 500

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COST OF PLANT

• RAS production plant depends on cleaning technology :– What type of recirculation is required, i.e. how many m3 of used

water is exchanged with fresh water per time unit. – the Feed Conversion Rate (Efficiency: Feed/Biomass)– It is assumed that in the planned factory, a consumption of 400 l/kg

produced salmon will be sufficient.

– Total estimated cost for the 10.000 T plant including hatchery, purging , butchering and processing as well as civil work and total plant in-door: NOK 500mill.

– The investment will be accumulated over 36 months. First income/revenue starts after 6 months.

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KEY NUMBERS 1 • INVESTMENTS

– Infrastructure NOK 90 mill– Plant NOK 410 mill (20% is procured locally)

• COST ESTIMATES:– FIXED COST total year

• Maintenance, operation: 5 mill• Manpower will build up over 36 months from 20 man/year to 35 man/year

NOK 2.0 mill to 3.5 mill • First year 2 foreigners x 1.5 mill: 3 mill

Second year onwards 1 foreigner: 2 mill– VARIABLE COST (per kilo)

• Smolt NOK 1• Feed NOK 11• Power NOK 4• Other costs NOK 3• Butch/packing NOK 3

– TOTAL VARIABLE NOK 22

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KEY NUMBERS 2• Production volume full capacity SALMON: 10.000 T/year• Production volume SMOLT: 8 mill per year of which 5 mill is sold to

local farmers at a price of NOK 15 per pc.• Fixed income per year on SMOLT only: NOK 75 mill. First SMOLT

can be sold 6 months after start up.• Selling price:

– Live Salmon is generating NOK 150 per kg– Butchered / Head on ice NOK 90 per kg

• Transport og sales costs:Selling cost per kg NOK 1

• Distribution: – NOK Live NOK 3, – Butchered NOK 1 – Existing technology is mini RAS equipment mounted on trucks. Duration

of transport limited to 18 hours. New technology pending increases transportation time to 50 hours. For butchered products existing distribution system is operating.

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KEY (CONSERVATIVE) NUMBERS FULL YEARLY PRODUCTION

SALES: 10Mkg x 90 kr/kg: 900 MNOK

VAR.COST: 10Mkg x 22kr/kg: - 220 MNOK

FIXED COST x 10!: - 100 MNOK

CAPITAL COST 10%: - 50 MNOK

SELLING & DISTRIBUTION: - 40 MNOK

UNCERTAINTY 20 %! - 180 MNOK

EARNINGS 34 %: 310 MNOK

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EXCLUSIVE COOPERATION AGREEMENTS & PARTNERS- * SKRETTING ASIA- * Nofitech AS, RAS design- - Kaldnes Brûgge, RAS installations/water filter- * Aqualine AS, lake & sea water installation.- - Billund Aquaservice AS – world leader RAS technology- - Aquasearch AS, Denmark – eggs for trout- * SalmoBreed AS, eggs for Atlantic salmon- - VEOLIA Ltd, China – water treatment and turn key

solutions, pending- -NOFIMA AS, aquatic consultants (world class)- - AquaResearch AS, genetic consulting, owned by Nofina

* signed agreements.