South Korean joint land-based salmon venture agreed. Norwegian land-based salmon farmer, Salmon Evolution, says that definitive agreements have been signed for the formalisation of the joint venture and the subscription for 49% of the shares in K Smart.
Earleir this year, Salmon Evolution revealed that it had 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.
Salmon Evolution’s total equity contribution into K Smart is estimated to NOK 200m on fully funded basis. The equity contribution from the parties is split in three milestone driven tranches and Salmon Evolution expects to execute its first tranche of close to NOK 30 million during April 2021. Together with Dongwon’s initial equity investment into K Smart, the proceeds will be used to finance:
- Design and engineering
- Site evaluation and permitting
- Acquisition of an existing and operating smolt facility in Jeongseon of which closing has already taken place
- General corporate purposes
The key highlights in the agreements and for the partnership are as follows:
- 20,000 tons LWE production facility in South Korea using Salmon Evolution’s HFS technology, developed in two phases of 10,000 tonnes LWE each.
- Ownership through joint venture structure with seafood giant Dongwon where Salmon Evolution will hold 49% ownership.
- Salmon Evolution’s minority position is well protected though a comprehensive set of corporate governance principles that ensures transparency and creates mutual influence and balance in the partnership structure.
- Project cost for phase 1 is estimated to about NOK 1.6bn.
- Funding structure of 25% equity and 75% debt, where Dongwon will facilitate debt financing in K Smart at attractive cost levels.
- Equity contribution from Salmon Evolution is estimated to NOK 200 mill for the whole project including phase 2 which is planned financed by operating cash flow and debt.
- Joint effort to maximize the values of K Smart including cooperation to establish branding and marketing of premium, land-based Atlantic salmon from K Smart and Salmon Evolution in the Korean market.
Mr Håkon André Berg, CEO of Salmon Evolution comments:
“Following the JV announcement in late February, we are very pleased with being able to formalize our joint venture with Dongwon in an effective manner. After seeing the impressive magnitude of Dongwon’s operations in South Korea first-hand and witnessing the Korean authorities’ solid backing for the project on both a national and local level, we are confident that we have found the perfect partner for our international expansion into one of the most interesting salmon markets globally. The natural characteristics of the South Korean coastline and water temperature profile represent an ideal fit for our HFS technology and we see a huge economic and strategic potential in K Smart in the coming years.”
Salmon Evolution is already well underway in the recruitment of key personnel for the project, which together with resources from the Company’s existing organisation will play a key role in K Smart and leveraging the experiences and knowledge developed through Salmon Evolution’s existing project at Indre Harøy in Norway