Venture capital companies have been eager to invest in salmon aquaculture technology lately, especially as the industry has consistent growth projections, according to Carl-Emil Kjolas Johannessen.
Johannessen, an investment banker at Oslo, Norway-based Pareto Securities, spoke recently at IFFO - The Marine Ingredients Organization’s annual meeting in Lisbon, Portugal, where he said investors have been looking closely at opportunities to back new technologies like offshore aquaculture and closed systems.
“Many private equity firms and infrastructure funds are looking for exposure to salmon,” Johannessen said.
Among the investors he cited were U.S. investment banking company Goldman Sachs and Australian investment banking firm Macquarie, both of which manage infrastructure investment funds. China has also made investments in aquaculture technology, as other industries like real estate have sagged.
According to Johannessen a main reason for the enthusiasm is that the global supply of salmon is projected to rise by 2 percent to 4 percent in the next two years.
Though these numbers represent a slowdown on growth levels of 10 percent to 15 percent seen in the previous decade, Johannsen said he expects to see faster output increases in the U.K., the Faroe Islands, and Norway in the short term. In the long term, he said he believes salmon production growth will inch back closer to last decade’s rates and demand will grow in line with them, lifting prices in the process.
Looking at 2025, Johannessen predicts prices will stabilize around EUR 8.00 (USD 8.64) per kilogram, “a price at which you can justify investments in volume increases.”
Capital is “less aligned” around traditional land-based operations, which only have the potential to increase production by 1 or 2 percent, according to Johannessen. Instead, the potential of new technology to increase volumes is more attractive to investors.
For example, profit margins from offshore facilities are much higher, according to Johannessen, who provided estimates of NOK 250 (EUR 21.80, USD 23.30) per kilogram compared to NOK 50 (EUR 6.70, USD 7.16) from traditional cage-based farming.
Even though investors are eager for exposure to the sector, the cost of capital for salmon producers remains high, with Johannessen providing the example that average interest rates charged by banks for land-based farming is twice the equivalent rate charged for real estate investments.
“This will change when the technologies are proven,” Johannessen said.
Longer term Johannsen said the industry needs political support for new production technologies, including offshore and closed system production, which Johannsen said he is confident will eventually come. As a domino effect, an embrace of the technology by governments would also assure investors who are keen to invest, he added.
