Lighthouse Finance’s Roy Høiås IDs the biggest obstacle to RAS expansion

Published on
February 10, 2021

Recirculating aquaculture systems (RAS) are the “big new thing” in the seafood investment space, according to Roy Høiås, the owner and CEO of Lighthouse Finance.

Scores of new RAS projects have popped up around the world in the past year, and Lighthouse, which has around USD 250 million (EUR 208 million) in active assets, has invested in at least a half-dozen of them. Høiås said his firm has been involved financing for companies utilizing and advancing RAS technology since its earliest days, more than a decade ago.

“RAS as a technology is nothing new for us,” he told SeafoodSource. “We understand the challenge and opportunity of growing on land, and that has been one of the reasons why we have been quite involved in that part of the industry.”

Høiås said Lighthouse has financed a variety of RAS projects, including the Quality Salmon project in Sotenäs, Sweden, which when complete, will be Europe’s largest RAS project, along with others of varying sizes around the globe.

“Some of them are already listed companies, some are on the way, and some will never be listed,” Høiås said. “Land-based has biggest attention today generally from the market, but for Lighthouse it is business as usual. We are doing land-based activities, but when you look at the volume of financing, in total it’s around 35 to 40 percent of the total activity of aquaculture financing, and that’s just a portion of all the capital going into the seafood industry overall.”

Høiås said he sees several major opportunities for RAS technology that are still being developed or implemented: smolt growth to larger sizes, so-called “circular industry” projects, and shrimp farming.

Høiås said around five years ago, salmon-farming companies in Norway pioneered the use of RAS facilities to grow bigger smolt, increasing the size of smolts going into net-pens from 80 grams to 350 grams.

“It took them some years to understand and get good at that,” he said. “There obviously was a learning curve, but it was not a learning curve related to RAS tech, but rather to biomass.”

Once mastered, the advance “had a huge impact on operational risk,” according to Høiås, with grow-out timelines shortened by as much as a year, including eliminating a winter period when fish eat but don’t grow, and lessening the length of time that farmed fish are exposed to dangers such as disease, sea lice, red tides, escapes, and mammalian predation in net-pens.

One of Lighthouse’s clients, a Norway-based salmon farming company, has seen huge gains from the practice of using bigger smolts, increasing net-weight production by 30 percent in certain facilities, Høiås said.

Uptake of that technology now appears to be spreading throughout the industry, with land-based hatcheries popping up around the globe, with some net-pen farming companies making plans to grow out their salmon in RAS facilities to as large as 750 grams, and even up to one kilogram.

Regarding the circular industry model of RAS development, Høiås said the Quality Salmon project provides a blueprint of how land-based fish farming can be done more efficiently, cost-effectively, and sustainably.

“To reach all the goals that the industry has set out to achieve in coming years regarding production, CO2 emissions, waste reduction, and traceability, the circular industry concept is really the best way to go,” he said.

This year, while there have been nearly daily announcements of new RAS projects, most are standalone facilities, Høiås noted. He also said very few RAS shrimp facilities exist, which Høiås attributed to the industry not “cracking” the model for success yet.

“If shrimp farming successfully moves over to RAS technology, that will be a game-changer – at the very least for its environmental impact, but also in terms of ensuring quality,” he said.

Høiås is bullish overall on the future impact of RAS technology on the seafood industry, but issued a warning to entrepreneurs and investors looking to get involved in the sector.

“We expected that as soon as the finance market really understood the potential, we would see a huge increase in [investment] activity,” he said. “That means there is more capital available, but that is also one of the drawbacks. A lot of people are a little bit blindsided by the numbers. Too many are driven by the activity they’re seeing and have a lack of understanding of the reality that you need to have the technology and also the knowledge, the people to make the system work. You can buy the best solution and you can look at somebody else that did it and are farming very well, but that doesn’t necessarily mean you will have success unless have the people with the expertise needed to operate the system effectively.”

Høiås said he often tells the story of one of the first big movers on the RAS scene that struggled to staff up its facility.

“It took them many years and a lot of effort to get the numbers of qualified staff they have today. They had to convince a lot of people to move from Norway. So they understand challenge of training people to be good farmers, but they have taken a lot of people away from the market,” he said. “Everyone needs to understand that if you want to get into land-based farming, you’re competing in a limited market for the same human resources. There’s a limited number of people with the skills you need to operate. And it is also not enough to have just one guy who understands it – you need to have a team working 24-7 if you are doing 10,000-ton capacity farm. Then you’re talking 50 to 70 people.”

Even projects in Norway, where many of the experts are based, are now having trouble finding qualified personnel, Høiås said. And he said there are not enough educational programs in existence developing the skills the RAS sector workforce needs.

“It’s starting to get expensive to compete on salaries," Høiås said. "That’s where the money from investors is increasingly going to, and where you can lose money if you’re an investor or company hoping to make it as a RAS farmer, as it is now truly affecting the cost-per-kilogram equation.”

One of the first questions Lighthouse asks of company executives who come to it for financing is what their plan is for staffing.

“That part is where lighthouse finance is very careful,” Høiås “First and foremost, it is, ‘Do they have first of all the right understanding and expertise?’ It’s not like we expect everyone we talk to is a farmer, but they need to convince us they understand the nature of the business and that they are focusing on getting the right people in, who have the right knowledge, training, education, and experience. When we see a type of communication of, ‘Yes, we will hire people,’ we get concerned, because our response is, ‘At what price?’ The people who have done all the wrong things and learned from them just aren’t available in great numbers. And those who are available mostly live in northern Europe, and you can’t get 50 people of them to move to China without great expense. So I think that is the single biggest challenge out there right now [for RAS] projects.”

Høiås had one more word of advice for prospective RAS farmers – make sure your contract with your equipment and systems supplier includes a service agreement.

“Don’t go into buying a solution without ensuring the contract includes comprehensive service for your facility for next three to five years. It’s not enough to provide a solution. They need to provide their clients with the knowledge and capacity to support the solution,” he said. “It will take time to get the facility up and running, and more time to get it stable. Understanding biomass and complexity of biomass and technology – that’s where you’re going to have your exposure.”

AquaMaof is an example of an RAS solutions provider that is willing to provide comprehensive service, Høiås said, because its executives realized successful projects reflected well on both parties.

“They were one of first out there not talking about selling RAS system, but talking about being part of the farming team,” he said. “They even put money into buying a position of equity into the project, becoming a shareholder, because they wanted to ensure that responsibility was managed. They realized that by putting more of their own resources into ensuring the farm was being operated correctly, it was a win-win for everyone.”

While RAS is a promising new branch of the seafood industry, Høiås is careful to put it in perspective.

“For me, it’s very important Lighthouse is seen as a seafood company not just focused on RAS. Even if RAS is the hype- and attention-getter these days, it’s important for me to be very clear that we are there for every part of seafood industry. RAS is just one solution we work with. We also think more traditional parts of the industry, such as fishing vessels, wellboats, service vessels, feed factories, and so on are also important investments for companies to make,” he said. “But RAS is a big thing and the right thing for the future of industry. We do believe land-based is an important piece of how we develop the seafood industry to be more sustainable and have less of an environmental impact, and how we improve animal welfare, all while continuing to grow the amount of protein we can offer the planet. With RAS as a piece of the puzzle, the seafood industry has one of best positions to really make a difference in global food production.”

Photo courtesy of Roy Høiås

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