4.

September 2017

Ecomerden AS
Conceptual analysis

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Org.nr. NO 983 351 417 MVA
Content

1. EXCECUTIVE SUMMARY.................................................................3
2. ANALYSIS.....................................................................................3
3. PREREQUISITES AND ASSUMPTIONS............................................8
4. KEY RESULTS ANALYSIS 1—4.......................................................8
5. CONCLUSIONS..............................................................................9

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1. EXCECUTIVE SUMMARY
Atlantic salmon solely in the Ecomerd platform with the parameters given in this
report shows that during a 10 year period the following results are found:
 Each generation time is reduced by 14 weeks compare to standard open
cages
 Production cost is reduced by approx. NOK 5,82/kg live weight prior
harvest at 5 500 gram for the enclosed floating platform
 A total of 7,54 generations is brought to the market, equal to 41 366 MT
during 10 tyrs period
 Traditional net cage deliver approx. 5,91 generations equal to 27 067 MT
for same 10 yrs period
 Productivity for one illustrated ideal Ecomerd site for a 10 year period
exceeds traditional ring system productivity by approx. 14 299 ton live
weight
 This surplus biomass materialize in an improved operating margin ex.
finance of approx. 150 mill NOK/10 yrs. if average oper. margin per kg is
NOK 10,00,-
 In addition the listed cost saving of NOK 5,82/kg live for all biomass from
Ecomerd platform (41 366 MT for 10 yrs) represent additional oper.
margin of NOK 240 mill
 Overall performance in advance of net farming is approx. an additional
oper. margin of NOK 390 mill /10 yrs.
 Yield per released smolt is increased by approx. 900 grams/fish for the
Ecomerd platform
 This Ecomerd productivity is approx. 53 % higher compared to net based
salmon farming - allowing increased production at similar or less cost
without investing in more licenses. However such an increase require
additional operation costs
 MTB considerations for 1 mill smolt; The Ecomerd platform does only
have a slightliy increased peak biomass compare to traditional net cage;
5 486 MT (Ecomerden) and 4580 MT net cages. However this delta of 906
MT does represent only approx. 1,16x standard MTB
 Key element of the Ecomerd platform is the shorter generation time,
higher yield per smolt, lower unit production cost/kg salmon and reduced
fallow period length (4 weeks) between generations
 Current knowledge of the enclosed floating techniques as of today should
undergo further in-depth performance analysis, special for each identified
locations with its environmental, MTB and operations cost levels

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2. ANALYSIS
This report covers the key findings from the following scenarios:

Analysis 1 Combination of Ecomerd and traditional net cage production, 1 mill

smolt
 Production site set up with one Ecomerd and five rings (Ø157m). The initial
Ecomerd is not to exceed 1 000 000 individuals / 1 000 MT biomass, rings
are not to exceed 200 000 individuals/25 kg/m3.
 Start of production cycle: 1. of April smolt of 100 grams. 5 rings available for
later transfer of postsmolt from the Ecomerd as biomass in the Ecomerd
increased above set maximum dencity of 50kg/m3.
 When an individual postsmolt weight of ca. 1 kg is reached: transfer of all 1
000 000 postsmolt (1 kg) from Ecomerd to net cages for complete net cage
harvest growth.
 The whole combined site is served by 1 feed barge and 1 service boat.

Analysis 2 Combination of Ecomerd and traditional net cage production-

600 000 smolt
 Production site set up identical as for Analysis 1 with one Ecomerd and three
rings (Ø157m). However this case the Ecomerd is not to exceed 600 000
individuals
 Start of production cycle: 1. of April production smolt of 100 grams. 3 rings
available for later transfer of postsmolt from the Ecomerd as biomass in the
Ecomerd exceeds 50 mg/m3.
 After an individual weight of approx. 1 kg is reached: Transfer of
600 000 postsmolt (1 kg) from Ecomerd to net cages for complete harvest
growth.

Analysis 3 Total growth to harvest solely in traditional net cages.

Volume: 1 000 000 spring smolt a 100 grams in 5 net rings (Ø157m) each with
200 000 smolts. Set up includes feed barge and service boat.

Analysis 4 Total growth to harvest weight solely inside the Ecomerd. Starting
with 1 000 000 smolt (100 grams starting 1. of April). This full Ecomerd location
start up with one Ecomerd- later at week 23 expanded with additional
Ecomerds, assisted by feed barge and service boat. No traditional net
rings/cages in this set up. Analysis 4 starts up with one Ecomerd, further
expanded with Ecomerd no 2, 3 and later no 4 and 5. The monthly deprecition
cost for each Ecomerd in use is allocated to the inventory stock value.

An overview of the Analysis 1-4 is illustrated below;

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Principles and analysis setup
The Postsmolt production in Analysis 1 is taking place in a modern 6 square
mooring system where the Ecomerd itself is one of the units, covering 1/6 of
total fixed cost for the location.

All analysis have a cost basis defined from the average net cage cost structure
in 2015 based upon an average net cage cost of live starved swimming before
harvest at NOK 27,09/kg (Fisk.Dir. lønnsomhetsundersøkelse). Our analysis
shows approx. NOK 25,96/kg live – equal to approx. NOK 26,74 starved.

It is to be noted that the average procution cost for the next year – 2016-
shows preliminary increase of NOK 3,93/kg for Norway, at a startved fish
conditions. This new costplatform is not included in this preliminary report. The
typical net and cage cost elements and sea lice mitigations costs which actually
represent a huge cost factors is avoided when the Ecomerd platform is in use,
however these are replaced by Ecomerd specific costs such as higher
depreciation costs, oxygen- and electricity- costs.

All production (Ecomerd and net cages) takes place in West coast Norway with
local seawater temperature profiles, deeper water inlet during wintertime allows
for a higher temperature profile for the Ecomerden with similar growth
promoting effects.

All Ecomerd costs and yields is based upon the assumption that there is no sea
lice infection, no starvation nor any loss nor quality downgrading related to
treatments. All cage production for a complete 18-month cycle is assumed to
have 10 modern, latest mechanical treatment methods applied to the
generation with standard cost elements.

Sea lice treatment costs are based upon external services, national average
cost of service boats, service team, medicated costs, and an 18 MT biomass
capacity per hour when freshwater treatment in well boat is applied.

Sealice treatment losses/starvation/quality downgrading are managed

as:
 No treatment losses for in-feed medicated treatments
 0,5% treatment loss for all tarp and well boat setups
 4 days starvation for all none in-feed treatments
 1% quality downgrading each time mechanical treatments is applied

Growth calculations
Standard Skretting growth table is applied for all net cage production. For all
Ecomerd growth the same daily rates are applied, however increased by an
additional 5% per day.

Net cage mortality

This analysis assumes that basic mortality is approx. 11% excluding all sea lice
treatment losses for a whole cycle 100 grams to 5 500 grams for net cage

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production. Additional treatment mortality will be apply based on the chosen
sea lice treatment method. Overall national mortality level is in the range of 18
– 20 % including sea lice effects.

Ecomerd mortality
Similar as for the net cages, Ecomerd mortality is evenly distributed throughout
the respective generation times, however only a 2% basic mortality level is
incorporated.

Biological - bFCR
For net cage production a 1,07 bFCR is applied, for Ecomerd production the
bFCR is 0,82. All morts for each production setup is showing increased eFCR
above these bFCR levels.

Smolts
All smolts are managed as 100 grams 1st of April at a cost of NOK 16,00/each.

Electricity
Demand for electricity for the Ecomerd irrespective of the standing biomass is
per Ecomerd set as constant 50 kWh at a cost of NOK 0,72/kWh. This cost is
independent of the biomass in the Ecomerd.

Oxygen
Demand is from the latest available reports showing a demand of 0,35 kg
oxygen per kg fish produced at a NOK 2,60/kg O2. Therefore, this cost is
production dependant and reflects the produced biomass in the Ecomerd for
Analysis 1 and 4.

Depreciation
Traditional net cage structure including all nets, moorings, cages, land based
machinery, barges and service boats are given full costs. Barge and service
boats are given 15 years depreciation. All other assets has 5 years. The
Ecomerd is defined as an investment of NOK 30 mill with depreciation over a 15
years period.

Key operating costs elements

All nets are netwashed up to 6 times annual at a cost of NOK 20 000 per
washing. Net service, antifouling and transportation are given commercial cost
level. Maintenance of barge, boat, diving, fishvet, in- and outbound transport is
included in fixed costs. Cost of staff is considering shift system, salary per full
man-year including pension, social expenses, travel and sick leave.

Fish insurance
All fish is having an insurance premium per year of 1,5% of its insurance value.
The insurance value is calculated from an individual fish value of NOK
10,00/fish and a biomass value contributed by a NOK 17,00/kg. This premium
is applied to all stocks in the whole analysis.

Growth
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All generations are farmed until a live bodyweight of 5 500 grams is reached.
This implies that different growth and impact of starvation results in different
generation time.

Feed cost is set at NOK 11,50/kg.

MTB position
Position A This report is managing the MTB challenge as follows:
We are reporting biomass, production and productivity based first upon the fact
that there is 1 month fallow period for enclosed floating production and a 2
months fallow period for net cage setup. This means that there is no production
taking place in fallow periods. This is in this report referred to as the site bound
productivity.

Position B here all cages and all Ecomerds and assets are assumed to be fully
integrated to several sites belong to the farming company, and therefore in B
there is a constant productivity for all assets. This implies that both the
Ecomerd and the net cages will have surplus production in 4 weeks compare to
Position A.

3. PREREQUISITES AND ASSUMPTIONS

Cost base
It is vital to update these costs calculation with the latest reported press release
from the Fisk.Dir 08 august 2017, with the fact that the average production
cost in Y2016 (starved) has increased from NOK 27,09 (2015 calendar year) to
NOK 31,02 for Y2016.

MTB assumptions
The combined net & Ecomerd, single nets, single Ecomerd here is reported with
peak biomass of respective 4 755 MT (combined platform), 4 580 MT (solely
traditional cage structure) and 5 486 MT (only Ecomerd platform). These levels
are fairly comparable.

Other
3 vital elements are not covered by this analysis
 Multiple smolt entry: all smolts are for simplification released once and
with an identical smoltweight of 100 grams
 There is no size grading prior to harvest
 None financiala nor central admin cost is included

4. KEY RESULTS ANALYSIS 1—4

The illustration above shows how the analysis is performed;

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Kg yield per released spring smolt 1st of April at 100 gram for the various
analysis
Analysis 1 and 2: Ecomerd + net cage combination 4,755 kg
Analysis 3: Net cage full growth 4,590 kg
Analysis 4: Ecomerd full growth 5,490 kg

Biomass produced per generation for the various platforms; (1 000 000 spring
smolt), and generation time including fallow period of 1 and respective 2
months, number of complete generations for a 10 yrs. period with fallow
periods are also indicated;
MT harvest Weeks n gen
Analyse 1 ECOMERD + cage combination 4 756 MT live weight 82 6,34
Analyse 2 ECOMERD + cage combination 2 853 MT live weight 82 6,34
Analyse 3 Net cage full growth 4 580 MT live weight 88 5,91
Analyse 4 ECOMERD full growth 5 486 MT live weight 69 7,54

Total cost NOK /kg live prior harvest - only for platforms stocked with 1 000
000 smolts at 100 grams in Spring;
Analyse 1 ECOMERD + net age combination NOK 20,99/kg live weight
Analyse 2 ECOMERD + net cage combination NOK 24,06
Analyse 3 Net cage full growth NOK 25,96
Analyse 4 ECOMERD full growth NOK 20,14

For 1 mill smolts a 10 yrs. period and these generation time, the overall
productivity for a 120 months period including fallow periods are;
MT kg live weight ratio
Analyse 1 ECOMERD + net cage combination 30 151 111 % of cage
Analyse 3 Net cage full growth 27 067 100 % of cage
Analyse 4 ECOMERD full growth 41 366 153 % of cage
These productivity figures are based upon a “site locking” of the assets.

5. CONCLUSIONS
The Ecomerd concept shows the following key results:
 Used as the only platform for harvested growth, the Ecomerd shows a
high increase in the productivity, shorter generation time and minimum
fallow period. This maximizes the overall generations produced for a 10
year period and indications shows here that this strategy should surpass
traditional cage platform productivity up to approx. 53% in productivity
 Environmental elements and fish welfare are improved

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 o Less environmental footprint
o Less sea lice treatments
o Improved yield
o Improved growth
o Improved bFCR
o Higher turnover of investment and lower unit cost NOK/kg at
harvest
 The investments seems to be fully reliable and feasible; for a 10 years
production period Ecomerd indicates and additional volume of 14 299 MT
compared to traditional net cages
 A cost saving of NOK 5,82 per kg HOG for the farmed Ecomerd biomass
 Oxygen and electricity costs for the Ecomerd are minor cost contributors
to the overall production cost, and are by far exceeded by the avoided
sea lice management practised today
 A major factor explaining the improved productivity by the none sea lice
platform is that a much higher proportion of the generation reaches
harvest weight, making fixed costs to be diluted, avoid extra ordinary
starvation and treatment losses and finally result in a larger sales volume
with improved operating margin
 Enclosed farming strategy allows for a heavy improved environmental
footprint where management, energy and resources are allocated to
actual net farming productivity instead as of today where sea lice
mitigation efforts creates heavy disturbances where the genetic and the
actual growth potential available in the genes and in the modern fish feed
are not being fully exploited

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