Basic Economics of Land-Based Water Recirculating Aquaculture Systems Brian Vinci, Steven Summerfelt The Conservation Fund Freshwater Institute USA Trond W. Rosten, Kristian Henriksen, Erik Skontorp Hognes SINTEF Fisheries and Aquaculture Norway 1
Outline • Basic Economic Elements of Land-Based RAS • Capital Expense (CAPEX) • Operating Expense (OPEX) Working Capital • • Comparison of Land-Based RAS and Net-Pen Salmon Production Models • Capital Expense • Biological Production Model • Production Cost • Cash Flow • Net Present Value 2
Capital Expenses for Land-Based RAS (CAPEX) • Land • Rearing Tanks Buildings • • RAS Equipment Package • Water Supply System • Feeding System • Backup Generator System • Monitoring and Control System • Effluent Treatment/Solids Management • Processing Facility 3
Operating Expenses for Land-Based RAS (OPEX) Feed $0.09 $0.12 2% 3% Electric $0.11 $0.59 3% 15% Oxygen $0.15 4% $0.48 Labor 12% $1.96 49% Management Processing $0.16 4% $0.33 Depr & Maint 8% Eggs US $ per kg salmon produced (HOG) Bicarb 4
Working Capital Requirement • The business requires enough upfront cash reserve to cover the expenses throughout the initial production cycle until the first harvest generates sales revenue Atlantic Salmon – 24 months • Rainbow Trout/Steelhead – 12 months • • Tilapia – 6 months 5
Economic Comparison of Two Production Models Illustration: B. Stenberg Land-based RAS farm Model Net Pen farm Producing 3,300 M.tons HOG Atlantic Salmon Producing 3,300 M.tons HOG Atlantic Salmon 6
Capital Expense Model Net Pen farm (12.3 million US $): Model Land-based RAS farm (32 million US $ ) One production site Two production sites, each with six net pen cages. • ≈587,000 m 3 net-volume • 120,000 m 2 area footprint visible at sea Invested equipment: • 40,000 m 3 of rearing tank volume ≈179,000 m 2 area footprint incl. no thoroughfare zone • • 25,500 m 2 of building area • ≈463,000 m 2 area footprint incl. no fishing zone • 2,500 m 2 processing facility Invested equipment: • 885 m 3 /min of pumped RAS flow • 3 licences • Pumps and Piping • 12 Floating rings (157m Ø) • Screen filters • 24 nets (25 m deep) • 2 mooring systems • Biofilters • 2 boats • Gas Conditioning Filters • 1.08 – 1.26 kg feed per m 3 supply water • 2 feed barges (150 Mtons) • Feeding Systems • 12 camera systems • 12 feed distributors • Backup Generators • 12 power systems Investments in total: 32 M US $ - approximately 192 MNOK Investments in total: 72.9 MNOK – approximately 12.3 M US $ Maintenance and reinvestments set equal to the depreciations Maintenance and reinvestments set equal to the depreciations 7
Biological Production Model Net Pen farm: Model Land-based RAS farm • One production site for all life-stages • 2 production sites & 3 licences of 780 M.tons of maximum total biomass at sea. • Four cohorts per year • Two transfers of smolts to sea annually, to one site – S1 at 1 st of April, 100 grams, 520' smolts in three • Growth based on thermal growth coefficients from Freshwater cages Institute growout trials, adjusted down by 10%: – S0 at 1 st of August, 75 grams, 520' smolts in three • 1.1 for Fry cages • 1.25 for Smolt • 1.8 for Pre-growout • Growth based on the Skretting table, Specific Growth Rate • 2.2 for Growout (SGR), adjusted down by 12 %. • Mortality per generation 16% • Mortality per generation approximately 16.1 % (average in Mid-Norway in 2011) (Norwegian Food Safety Authority • Feed conversion ratios: 2011). • 0.75 for Fry • 0.90 for Smolt • Economic feed conversion ratio: 1.27 (average in Norway over • 1.0 for Pre-Growout the last ten years) (Directorate of Fisheries 2013). • 1.1 for Growout • Overall Feed to Whole Fish Produced (kg/kg): 1.09 8
Biological Production Model Net Pen farm: Model Land-based RAS farm • Rearing Density • Rearing Density • 25 kg/m 3 maximum • 80 kg/m 3 maximum • Harvesting: • Harvesting: – Time from first feeding to first harvest: 24–31 months – Time from first feeding to first harvest: 21 months – Harvest every week of the year – Time at sea before first harvest: 16 months – Each cohort harvested over 13 weeks – Harvest 8 months of the year – Harvest S1 from July to October – One grisle harvest at ~1.2 kg for 50% of males – Harvest in total: 3,947 M.tons LWE; 3,300 M.tons HOG – Harvest S0 from November to February (5 % purge loss / 12 % HOG loss) – Harvest in total: 3,975 M.tons LWE; 3,299 M.tons HOG (5 % purge loss /12 % HOG loss) – Initial harvest weight (whole fish): 4.5 kg – Average harvest weight (whole fish): 5.1 kg – Average harvest weight (whole fish) : 4.5 kg • No downtime in the bioplan • Two months of fallowing between production cycles 9
Biomass Model Land-based RAS farm Model Net Pen farm 2,500,000 2,500,000 2,000,000 2,000,000 Biomass in kg Biomass in kg 1,500,000 1,500,000 1,000,000 1,000,000 500,000 500,000 - 0 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 jan apr jul okt jan apr jul okt jan apr jul okt jan apr jul okt 2013 2014 2015 2016 Month - Year Year - Month 10
Feeding Model Land-based RAS farm Model Net Pen farm 700,000 700,000 600,000 600,000 Feed demand in kg Feed Demand in kg 500,000 500,000 400,000 400,000 300,000 300,000 200,000 200,000 100,000 100,000 0 0 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 jan apr jul okt jan apr jul okt jan apr jul okt jan apr jul okt 2013 2014 2015 2016 Month - Year Year - Month 11
Harvest Model Land-based RAS farm Model Net Pen farm 1,400 1,400 1,200 1,200 Harvest of salmon i M.tons Harvest in metric tonnes 1,000 1,000 800 800 600 600 400 400 200 200 - 0 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 jan apr jul okt jan apr jul okt jan apr jul okt jan apr jul okt 2013 2014 2015 2016 Month - Year Year - Month 12
Production Cost (at steady state), USD/HOG Feed cost $0,34 $0,38 Feed $0.12 8% 9% $0.09 $0.59 3% 2% Smolt cost 15% Electric $0.11 $0,42 3% 10% Insurance cost $0.15 Oxygen 4% $2.22 Labor 52% Salary $0.48 $1.96 12% Management 49% Well boat cost $0,15 Processing 4% $0.16 Other operating cost 4% $0.33 Depr & Maint $ 0,48 $ 0,03 $0,22 8% 11% 1% 5% Depreciations Eggs Bicarb Cost of primary processing Model Land-based RAS farm Model Net pen farm Total estimated production cost per kilo HOG: Total estimated production cost per kilo HOG: 3.98 US $ 4.24 US $ – Uses 0.05 US $ / kWh; Comparative Norway is 0.17 US $ / kWh 13
Comments: EFCR, mortality & utilization: Model Net Pen Farm • Not a optimal utilization of three licences! • It's possible to harvest as much as 1,600 – 1,700 M.tons per licence (~2 x Model) • Requires a more large-scale operation • Average EFCR used in the calculation is high: 1.27 • It's possible to achieve an EFCR more closely to 1.00 • Top 25 % EFCR in Norway over the last ten years is 1.14 • Top 10 % EFCR in Norway over the last ten years is 1.04 • Average mortality at 16.1 % is high • Some sites in Norway are now achieving only 2 – 4 % mortality Then on the other side, some sites have mortality at over 30 % - mostly due to • disease. 14
Use of "best-practice" inputs • EFCR: 1.14 4 US$/Kg Feed cost • Mortality: 8 % per generation Smolt cost $0,42 $0,38 11% $0,33 • Gives a production cost of 4 US $/kg HOG 10% 8% Insurance cost (Compared to 4.24 US $/kg) • Reduction in feed cost $2,03 Salary 51% • Reduction in smolt cost Well boat cost $0,15 4% Model Net Pen Yield per smolt: 3.44 kg Other operating • $0,3 $0,44 $0,22 1% cost 11% 6% • Model Net Pen Base Case: 3.17 kg Depreciations • Model RAS Yield Per Smolt: 3.97 kg HOG Cost of primary processing 15
Market and Price • Initial test marketing in the Vancouver area and in the Washington DC area indicated that product sold at premium pricing (30% or more). • Basis of premium was different in different markets – sustainable (BC) and local (DC) • Land-based RAS produced salmon is a premium product that is being sold into an incremental market that currently doesn’t buy net pen salmon (Kuterra data). • Most major retailers have sustainable seafood purchasing policies that land-based RAS produced salmon will be able to meet. 16
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