Powerpoint Presentation originally delivered to: Kawaihae Harbor Community Management Committee

Date of Presentation: Sunday, October 14th, 2007

Kona Blue :
Pioneering the development of Sustainable Open Ocean Fish Farming – overview, update, and expansion plans
Presentation by: Neil Anthony Sims, M.Sc. President, Kona Blue

email: neil@kona-blue.com

Kona Blue's mission is to expand the environmentally sound production of the ocean’s finest fish.
Pioneering and promoting sustainable aquaculture; Producing and selling nutritious marine fish; and Building Kona Blue as the world’s leading brand of premium farmed fish.

We, as an industry, are at the inflexion point in U.S. and global markets: Seafood demand is growing:
– U.S. seafood consumption worth over $55 billion p.a. – Per capita seafood consumption is increasing

We, as an industry, are at the inflexion point in U.S. and global markets: • The difference between demand and wild fish supply is growing:
– U.S. seafood imports worth $10.1 billion (2000) – U.S. seafood imports growing at 12% p.a.

U.S. SEAFOOD SUPPLY AND DEMAND: PAST AND PROJECTED
(Round Weight)
Million MT 16

14

Demand based on new dietary guidelines: 2 (4 oz.) seafood meals per week
12

10

8

Demand = Per capita consumption x population

6

U.S. Harvest
4

2

U.S. Supply = Harvest - Exports
0 1985 1990 1995 2000 2005 2010 2015 2020 2025

We, as an industry, are at the inflexion point in U.S. and global markets: •

Wild seafood supplies cannot sustain greater demand :
– Study by Worm, et al. (2006) highlights the long-term trends in wild-stock fisheries sustainability

We, as an industry, are at the inflexion point in U.S. and global markets:

Increased aquaculture production is the only way of meeting this greater demand :
• – wild caught supply is flat since 1990 – 75% of wild caught fish are either over-fished or at sustainable limit
140

120

Millions of Metric Tons

100

80 Aquaculture Capture Fisheries

60

40

20

0 2000

2005

2010

2015

2020

2025

2030

2035

We, as an industry, are at the inflexion point in U.S. and global markets: •

Most of this greater demand will be for high value marine finfish :
Aquaculture: – average annual growth of 9.2% since 1970; now 42% of all seafood – $50B global market, projected to double by 2030 (FAO)

Open ocean aquaculture offers:
• Minimal conflicts with other user groups • Submersible cages – protected from storms • Deeper water – minimal environmental impacts • Improved water quality – healthy, high-quality fish

= The opportunity to culture superb products in pristine waters

Three essential requirements :
• Offshore site

• Hatchery technology • Cage and operational technology

= The opportunity to culture superb products in pristine waters

• Offshore

site

• Hatchery technology • Cage and operational technology

Site selection criteria: Regional scale
North and North-West Winter Storm surf

Prevailing North-east trade winds Honolulu

The Kona Coast

INITIAL PLAN : 6 CAGES IN CENTRAL GRID

Kona Blue site attributes :
1. 200 - 220 ft of water
0.5 MILE OFFSHORE

2. 2600 ft offshore (0.8 km) 3. Outside of fishing grounds 4. Beyond diving range 5. Clear of fringing reef 6. Strong currents 7. Sand bottom

14 ANCHORS AND MOORING LINES

N

6 CAGES IN CENTRAL GRID

A protracted, transparent permit process, with extensive public input :
1997-98: Revising Hawaii’s ocean
0.5 MILE OFFSHORE

leasing legislation

2000: First public meetings with
Kona community
14 ANCHORS AND MOORING LINES

2003: Filed permit applications 2004: All Federal and State permits
in hand

2005 : First cage deployment

N

Our response to community concerns about over-feeding :

Feeding is always actively monitored (by divers or video cameras) to ensure no wasted feed falls through the cage

Our response to community concerns about water quality, and access to data : Water quality sampling and analysis by third party – local company Water quality data at repository at harbor Water quality results (raw data and graphs) available on Kona Blue’s website. www.kona-blue.com

• Offshore site • Hatchery

technology

• Cage and operational technology

Hatch-to-harvest … The key to sustainability,
scalability and quality Egg – 8-cell stage

Egg – late embryo Larva – day 1

Larva – day 10

Hatch-to-harvest …
The key to sustainability, scalability and quality

Fingerlings, Day 21 Nursery culture Day 30 – Day 60

Fingerlings, Day 40

Innovative technology allows hatchery culture of high-value species

Mahimahi

Moi

Ulua

Opakapaka

Innovative technology allows hatchery culture of high-value species

Peacock grouper (roi)

Flame angelfish

Kona Kampachi™ … Seriola rivoliana
Native deepwater species No commercial fishery Amenable to hatchery culture Excellent growth rates Highly efficient feed conversion ratios Tastes great: Superb sashimi Versatile cooked fillets

The fish of the future …

• Offshore site • Hatchery technology

• Cage and operational technology

Plan View: mooring array for initial six SS3000 cages. Designed by Ocean Spar (Net Systems, Inc.) Finite modeling by University of New Hampshire

Two additional SS3000 cages later added on separate array to East of grid (replacing surface cages).

Steel embedment anchors are preferable in high current sites; These each weigh 7,500 lbs, and are 10 ft in length

Steel buoys support the corners of submerged grids

Kona Blue’s grid is set at 30 ft depth

Grid design allows Sea Stations™ to be raised to half-emerged.

Sea Station cages are usually submerged around 30 ft below the surface, in the “silent world”.

Recently deployed invertible Sea Station : allows sun/wind dry-cleaning of both halves of cage.

Innovative engineering …

Eight submersible Sea Station cages are now on site (the two surface net pens have been removed).

Monitoring – critical validation of environmentally sound aquaculture So far, over 600,000 fish stocked in offshore cages Ongoing monitoring of : • fish health (Universities, State, Federal government), • water quality (private third-party labs, State, Federal government), • seafloor and adjacent coral reef (fishes, benthos)
(private third-party labs, museums, Universities, State, Federal government),

• marine mammal interactions (State, Federal government).
To date: No detectable environmental impacts at any level of significance, except for some enrichment of the sand underneath the net pens (primarily due to algae on nets) and some bottlenose dolphins now occasionally visit the site

Monitoring – critical validation of environmentally sound aquaculture
Kona Blue water quality monitoring sampling sites : Effluent site: Immediately downcurrent
of the cage with highest biomass, one hour after feeding

Prevailing current

Control site: 4,000 ft upcurrent of cages

N

Monitoring – critical validation of environmentally sound aquaculture
Turbidity At Surface (Octobe r 2005)
0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0

Surface Water

NT U

Turbidity at Midwater(October 2005)
10/25/2005 CONTROL 1 CONTROL 2 EFFLUENT

0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0

Midwater

TURBIDITY (NTUs)

NT U

10/25/2005 CONTROL 1 CONTROL 2 EFFLUENT Turbidity at Bottom(October 2005)
0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 10/25/2005 CONTROL 1 CONTROL 2 EFFLUENT

Bottom Water

No detectable environmental impacts at any level of significance

NT U

Producing healthful, high-end fish
• Fish diet controlled from hatch-to-harvest

•No risk of internal parasites or ciguatera
(such as found in wild kahala)

•Undetectable levels* of Mercury
(* = at sensitivity levels of 50 times FDA’s allowable limits)

Fat levels of over 30 % (dry weight)

Heart-healthy omega-3 fatty acids higher than almost any other fish (e.g. mackerel, sardines, tuna)

Producing healthful, high-end fish

Striving to set up natural/sustainable/organic certification

“Organic/sustainable/natural” attributes of open ocean fish farming : 1. Superior water quality 2. Low density culture 3. Hatchery origin of stock 4. Controlled feed

Now harvesting over 25,000 lbs per week. On track to be harvesting 30,000 lbs per week by mid 2008.

Now available across America ...

Through 70 distributors nationwide

Restaurants … Oceanaire Seattle, the French Laundry, Roy’s, and various Four Seasons Resorts

High-end retail outlets … Whole Foods (California, Florida, soon nationwide?)

Now available at Kona COSTCO!

The exemplar of all that ocean culture could be …. ….and should be!

CONTRIBUTIONS TO ECONOMIC DEVELOPMENT
… SO FAR … Total of $14 m in investment 49 full-time employees, at professional and highly-skilled levels Projected sales for 2007 of around $4 million Demonstration of sustainable, innovative diversified, high-value primary production system in Hawaii Demonstration of growing demand for healthful, high-value fish

ONGOING DEMAND FOR HEALTHFUL, HIGH QUALITY KONA KAMPACHI® COMPELLS EXPANSION
OPTION 1. Feb, 2006: Initial proposal : Second site, of 12 x 6,000 cu m pens, to be located 1.5 miles N of existing site OPTION 2. Feb, 2007 : Modified proposal: instead, add an additional 4 x 6,000 cu m pens on inside of existing lease OPTION 3. August, 2007 : Final revised plan: Convert all the 8 existing 3,000 cu m net pens to 8 net pens each to be 6,000 cu m

Advantages of Option 3: Final revised plan (i.e. conversion of all of the 8 existing 3,000 cu m net pens to 6,000 cu m net pens) - no additional net pens – still only 8 pens - consolidation of current 2 grids into one single grid - minimal expansion of lease area (only to allow wider spread of anchors, not more cages) - the two net pens nearest to shore will be moved further offshore

Expansion site selection criteria : 1. 2. 3. 4. 5. 6. 7. Deep water (less impact) Offshore (avoid boat traffic) Outside of fishing grounds Beyond diving range Clear of fringing reef Strong currents Sand bottom

Existing farm site – cage area < 5 acres

North North

Lease area (90 acres)

Distance from shoreline to cages = 0.5 m

Numbers on chart show Numbers on chart show depths, inin fathoms fathoms depths,

Feb, 2006: Initial proposal : Expand to second site, of 12 x 6,000 cu m net pens, 1.5 miles north of existing site

North

Original proposed expansion area

Existing lease area

Proposal revised, as sub-bottom profile survey revealed rock substrate, inadequate for anchoring

Feb, 2007: Modified proposal : Plans were then modified to add an additional 4 x 6,000 cu m net pens on inside (East) of existing lease

North

Existing lease area

Revision – reduced to 4 x SS6000 cages inshore of existing grid

Feb, 2007: Modified proposal : Plans for an additional 4 x 6,000 cu m net pens East of existing lease

Feb, 2007: Modified proposal : Plans for an additional 4 x 6,000 cu m net pens East of existing lease

This proposal was again revised, as the community expressed concerns about encroachment closer to shoreline

August, 2007 : Final revised plan: Convert existing 8 x 3,000 cu m net pens to 8 x 6,000 cu m net pens

No additional net pens. Minimal expansion of lease area to allow wider spread of anchors.

August, 2007 : Final revised plan: Convert existing 8 x 3,000 cu m net pens to 8 x 6,000 cu m net pens

August, 2007 : Final revised plan: Convert existing 8 x 3,000 cu m net pens to 8 x 6,000 cu m net pens

Two net pens nearest to shore now to move further offshore.

Kona Blue – overview, update, and expansion plans
Draft Environmental Assessment available now at www.kona-blue.com. We welcome questions, or suggestions how to improve this plan, or our consultative process. Please contact Neil, at 331 1188 ext 201, or neil@kona-blue.com

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