Land-based salmon farm to seek out investors across US
June 12, 2013, 5:49 pm
A US land-based salmon producer which aims to grow coho salmon to three kilos in only a year is preparing a prospectus to take to investors next month.
SweetSpring, which farms coho in closed containment tanks in Washington state, has been selling to the supermarket chain Overwaitea Foods in Canada for four years, and founder Per Heggelund is planning to take his business plan to investors across the country with the issuance of a private placement in one month, he told Undercurrent News this week.
“The time is right now to reach out beyond the initial group of investors, which is really just family and friends — we have decided to retain an investment banker,” Per Heggelund, founder of SweetSpring, told Undercurrent News.
The company’s market position has improved handily in the past few months, as Atlantic salmon fillet prices to Miami have risen to $10 to $11, up from $6 to $7 last year. Although these are prices for Atlantic salmon, and SweetSprings’ product is coho, the price increase of Atlantic has nonetheless served to make SweetSprings a much more attractive company in investors’ eyes. Calls from investors have been streaming in more than ever since prices rose, Heggelund said.
“They didn’t expect prices to jump as far as they have,” Heggelund said, referring to investors.
Wholesale prices of Chilean coho also started bouncing back at Tokyo’s Tsukiji Fish Market in February, staging a surge of 15% from late last year.
With the help of the investment banker, Heggelund is preparing a prospectus, detailing his business plan, to issue with the company’s private placement in one month. It will be sent to investors across the company, marking the company’s first attempt to gain investor interest on a national scale.
Achieving its goals would ‘literally revolutionize the industry’
Since starting the company in 1988 under the name Aquaseed, Heggelund has been determined to bring land-based salmon to the masses, and his determination appears as strong.
The entrepreneur aims to get the grow-out time for his salmon, raised to a size of 3 kilos, down to one year – quicker than AquaBounty’s claims for its genetically modified (GM) Atlantic salmon, which uses a coho gene to speed up growth.
One year would also be much quicker than typical coho harvest rates. Coho naturally grows faster than Atlantic salmon, but SweetSprings’ special breed of coho has been developed for 40 years, with the speed of growth increasing each year through genetic selection.
“I would hope that in the next eight to 12 months we fulfill [the one-year grow-out goal], but in the meantime, we are selling fish, and we cannot produce enough for the market,” Heggelund said. “And when that happens, it will literally revolutionize the industry…because nobody can grow salmon at three kilos in 12 months – unless it’s GM…”
The cost savings from the shorter grow-out period help to offset the capital investments, he said.
In addition to the Scientific American, a range of magazines – from the Seattle Metropolitan to Eating Well have featured the company in their pages.
New investment would build on success the company has had in recent years, having established its contract with Overwaitea four years ago and won two grants from the Gordon and Betty Moore Foundation totaling $1.6 million, with the first granted in 2010.
“[At that point] they were the leading edge of the land-based salmon farming movement,” Ivan Thompson, program officer with the Wild Salmon Ecosystem Initiative for the foundation, told Undercurrent. “They were the experts.”
The company still is at the “bleeding edge” of land-based salmon farming, Heggelund said. “…and believe me, I’ve got scars from that…”
But, he notes, the company is doing quite well. It has revenues streaming in from its sales to Overwaitea as well as its continued sales of salmon eggs. As for its current investment, Heggelund has attracted enough interest from family, friends and regional investors that he is no longer the company’s majority owner.
Origins in Campbell Soup’s Domsea
The operation is a labor of love that started out in the hands of Domsea 40 years ago, when when the Campbell Soup-owned company began developing the breed of coho SweetSpring now uses.
Heggelund bought the stock of coho – consisting of thousands of fish and fish eggs – from Domsea in 1991 for a hefty sum of money at the time. It was the only purebred stock of coho that existed at the time, and the purchase was funded by Aquaseed’s profits.
At that point, Aquaseed had been in business for three years, and its earnings had come from its business supplying eggs – mostly coho but some Chinook as well – to farmers in the United States, Chile and Japan.
“So it was only natural for us to look at a superior stock of coho to add to our stock of eggs our availability of eggs,” Heggelund said.
One of the reasons he decided to buy the Domsea stock was because “it was a quarantined, verifiable stock”, Heggelund said. It was also branded.
Efficiency, efficiency, efficiency
The story he will tell investors is yet to be seen, but perhaps he will touch on the company’s efficiency, which he explains is key to its ability to keep costs down and compete with the rest of the salmon market.
First on that note is the company’s initial choice to breed coho.
“Coho grows quicker than Atlantic, and we have a special breed of coho,” Heggelund explained. “We control it, we own it – you just take the best performers every year.”
Getting the coho to harvestible size quickly may be the most important achievement SweetSpring has reached to date, but its quest is far from over.
“It really comes down to efficiency,” he said.
The costs of discarding waste, the tanks themselves and keeping water flowing through the system are just some of the extra costs that companies have to factor into their budgets.
Although the company has many costs that marine net pen operations do not — discarding waste and circulating water through the system, to name two – it also has savings they don’t have as well.
SweetSpring uses tanks with freshwater, where sea lice cannot grow, which means no need to control for sea lice. He also does not need to worry about the introduction of other diseases, such as ISA, that Atlantic salmon carry.
It also does not have the costs of concessions that salmon farmers in marine environments have to pay, which Heggelund pegged at $10 million for the market price of one concession in Norway. Norwegian concessions are given a maximum allowable biomass, which is the greatest amount of production allowed per farm, of 950 metric tons. If someone wants the same type of facility that Heggelund uses – a recirculating aquaculture system (RAS) – it too would cost $10 million.
“So the costs to start an operation are based on that number, which is about the same to what we project the land-based site will cost today,” Heggelund said.
While the cost of discarding waste is something open net pen salmon farmers do not have, these are nonetheless costs that must be incurred somewhere, Thompson points out.
“Here’s the problem,” he said. “If you’re going to just externalize your costs to the environment, it’s going to be cheaper…”
Perhaps land-based salmon farmers aren’t the only ones that should have to pay for the costs of disposing of their waste, he suggests.
“Right now, traditional aquaculture does not have to pay for any of the costs associated with pollution,” Thompson said. “Making a polluter pay would make economic sense.”
The soul of the company — sustainability
Although dollars and cents might be what investors are interested in, there is a niche of thought leaders in today’s society that are enchanted with SweetSpring’s claim to fame — its sustainability.
According to Geoffrey Shester, senior science manager for the Monterey Bay Aquarium’s Seafood Watch program, SweetSpring’s environmental advantages are significant.
“This is extremely exciting,” Shester told Scientific American in 2010, after the program gave the SweetSpring its first “SuperGreen” ranking. “It’s not an experimental science project. It is mature to the point where there is real potential to scale it up.”
The article also noted several environmental advantages over tranditional salmon farming.
“Environmental fall out from traditional, high density open pen salmon farming includes the transmission of parasites like sea lice to wild populations, escaped salmon, lack of waste management, releases of chemicals like antibiotics, wasted feed, and a high mortality rate.”