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Salmon Evolution inks joint venture with Dongwon Industries. Salmon Evolution Holding AS– a leading land-based salmon farming business with its first production facility under construction at Indre Harøy in western Norway – has signed a Joint Venture Term Sheet with Dongwon Industries, a leading seafood company based in South Korea, for the establishment of a 49/51 joint venture, to be named K Smart Farming.

Key highlights

  • 20,000 tons LWE production facility in South Korea using Salmon Evolution’s HFS technology, developed in two phases of 10,000 tons each
  • Ownership through joint venture structure with seafood giant Dongwon Industries where Salmon Evolution will hold 49% ownership
  • Project cost for phase 1 is estimated to about NOK 1.6bn, which will be funded by financial institutions as well as Dongwon Industries and Salmon Evolution
  • Salmon Evolution expects to finance its equity contribution within the Company’s already communicated equity funding plan

The purpose of the joint venture is to develop, construct and operate a land-based salmon farming facility with an annual capacity of 20,000 tonnes LWE in South Korea using Salmon Evolution’s hybrid flow through technology (“HFS”), including necessary upstream and downstream facilities and operations. The project will be developed in two phases, with each phase to achieve an annual capacity of 10,000 tonnes. Salmon Evolution and Dongwon target construction start during 2022 with commencement of grow out production in 2024.

Project cost for phase 1 including capital expenditure, project management and working capital build up, is estimated to NOK 1.6 billion. In accordance with the Joint Venture Term Sheet, Dongwon Industries will facilitate debt financing for K-Smart. Salmon Evolution will hold a 49% ownership interest in K Smart and expects to finance its equity interest in K Smart within the Company’s already communicated equity funding plan following strong project execution and cost control at Indre Harøy combined with the Company’s demonstrated ability to attract non-equity funding.

Mr Håkon André Berg, CEO of Salmon Evolution comments:

“We are honoured to team up with a well reputed and experienced partner like Dongwon. Thiscollaboration is in accordance with Salmon Evolution’s overall strategy for international expansion, leveraging our in-house experience and HFS competence in developing close-to-market salmon production in collaboration with local first-class partners.”

Mr Yun Ki Yun, CFO of Dongwon Industries comments:

“This Joint Venture Term Sheet marks a major milestone in the relationship between Salmon Evolution and Dongwon. K Smart is of strategic importance for Dongwon and we are confident that Salmon Evolution’s low risk HFS technology coupled with its highly competent organization, will help facilitate a successful project and revolutionize how fresh Atlantic salmon is sold and distributed in South Korea.”

Salmon Evolution’s equity contribution will be split in tranches, reflecting the overall progress of the project. Initially the parties expect to make a moderate capital contribution which will be used to fund:

  • design and engineering,
  • site evaluation and permitting, and
  • general corporate purposes.

The parties’ subsequent equity contributions will be paid in tranches subject to certain milestones being met, including final technical, operational, and financial review of the project and K Smart receiving the necessary permits.

As part of the collaborations, the parties shall cooperate to establish branding and marketing of premium, land-based Atlantic salmon from K Smart and Salmon Evolution in the Korean market. K Smart will be responsible for all development costs and investments related to the project. The Joint Venture Term Sheet also contains a comprehensive set of corporate governance principles, aimed at serving as a solid foundation for a long-term partnership between Salmon Evolution and Dongwon.

The chairman of the Board of Salmon Evolution Mr Tore Tønseth, comments:

“We are thrilled about entering the Korean market together with a tier 1 seafood player like Dongwon. Through K Smart we will be able to serve the highly attractive and fast-growing Korean market with Atlantic salmon of superior quality and unmatched freshness 52 weeks a year. The joint venture structure with Dongwon also ensures a strong local credibility for the project and offers Salmon Evolution a capital efficient and accretive model for growing our business.”

The parties expect to enter into definitive agreements during Q2 2021.