FROM SEA FARMING EXPORT TO INTERNATIONAL HI-TECH INDUSTRY

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FROM SEA FARMING EXPORT TO INTERNATIONAL
HI-TECH INDUSTRY
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SINORs PROJECT IN SHAPING

1. One vertically integrated production unit
2. 10.000 t of yearly production
3. Norwegian Atlantic Salmon
4. Processing and total distribution logistics

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SINOR BACKGROUND

• Sinor has 22 years of experience of assisting
  European companies into the Chinese market
• Sinor has decided to concentrate from 2009 on
  establishing and managing companies in the
  seafood marked in China, based on Norwegian
  skills and state of the art technology
• Sinor has established crucial relationships with
  necessary official bodies in the Chinese seafood
  sector
• Sinor has established strategically alliances
  with Norwegian suppliers in the whole seafood
  chain

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FASE 1

• A STRATEGIC PLAN
• for
• DEVELOPMENT OF THE CHINEESE LAND BASED AQUA
  CULTURE INDUSTRY
• based on extensive
• SCANDINAVIAN RAS TECHNOLOGY,
• OPERATIONAL MANAGEMENT INDUSTRIAL COMPETANCE
• and deep
• CHINEES CULTURAL, STRUCTUAL MARKET
• KNOW-HOW

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2010 FACTS and FIGURES

• 2010 aqua culture production is 43 mill. ton at
  value of 63 bill. US
• China is no 1 in production with 20 mill. ton
  (almost 50 of total world production), but low
  sales value.
• China goal 2020 40 mill ton same as world
  production 2010 !!
• Norway has an annual production of 3 mill. ton
  out of which salmon represent 1.3 mill. tons, but
  high sales value.
• Aqua culture annual growth rate is 10 which is
  double of Norwegian present production,
• Sinor has delivered the world largest
  recirculation plant (RAS) to China in 2010 with
  capacity of 1000 tons annually.

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2012 BACKGROUND

• Development of world production of seafood
  divided into catch and farming
• Catch volume leveling off
• Farming significant growth, and outperform catch
  within few years
• Growing demands for sea food world wide and in
  China
• RAS (recirculation plant) technology now
  available in full scale.
• Feed technology and efficiency becomes green
  will boost further growth in industry.
• DNA and other fast growth and resistibility
  parameters continue to improve.

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BEFORE 2025 WORLD POPULATION 10 BILLION

• Depending on certain assumptions about affluence,
  diet composition and food waste, the calculations
  imply an increase in total food production of 70
  on current production level during the same
  period.
• The majority of this population will be
  urbanized.
• A significant part of the 70 must come from
  seafood.

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2020 FARMING IN DRIVERS SEAT2030 RAS PLANTS
DOMINATING
IN 1000 TONS (app. fig!)
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YEARLY CONSUMPTION OF SALMON
What if one third of Chinas population
approaches 1 kg/person ?
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THE PROSPECT OF THE BLUE ECONOMY

• Sea-caught fisheries will seek to maintain
  present levels of production.
• Aquaculture production will continue its ongoing
  trend to provide a larger proportion of total
  fish production.
• Total fish consumption per head will increase for
  health and demand reasons.
• The limitation in sea water locations due to both
  environmental and legislative reasons, will
  support and move the sea food farming from the
  sea to land based locations.
• Availability of water resources provides
  opportunities for R.A.S. independent of other
  parameters (R.A.S. cleans water, thus preventing
  diseases by providing a closed system that can be
  monitored in detail).

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OPPORTUNETIES CHINA

• Chinese potential value improvement/cost
  reduction by domestic production 60
• Landed price in China of Norwegian/UK/Chile air
  borne farmed salmon is more than 2.5 times
  production cost in Norway. (Import value (cost)
  for salmon products due to tolls, taxes and
  airway transportation of fish on ice)
• CO2 issue critical
• Cold shoulder policy from official China.
  Production in China can solve the problem
• UK/Chile has taken over leading import market
  position

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BASIC BUSINESS IDEA
Broad Norwegian competence after 40 years of tries and fails, improvements and development 1970 2010 Breeding Farming Pharmacology Technology Biology Operational Significantly improved Chinese skills and competence Chinese high demands and marked growth 2020
2012 Strong Norwegian market share, technology and skills, Next phase from export to internationalization 2012 Chinese production planning for high value increase Present Chinese competence to be improved
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CHINEESE SEA FOOD DEMANDS

• Market potentials are big. China goal 2020 40
  mill ton same as world production 2010 !!
• Product development needed
• High volume of fresh water farming necessary
• Need for improvements in present installations,
  feeds and breeding methodology
• Operational skills improvements
• Lacking functioning RAS technology,
• Local capital available
• Foreign capital triggers multiple funding
• RAS - Move from farming to advanced industry
• We have well established relationships with
  necessary official bodies

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BUSINESS CASE

• Establish a 10.000 MT per year Salmon/Trout
  production unit in Coastel City.
• Local government is facilitating.
• Production DESIGN based on latest RAS
  technology.
• Surround the production unit with service
  providers to RAS production by offering
  preferential policies.
• Develop new product segments and distribution
  network.

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PURPOSE, GOALS AND SCOPE

• The purpose is to invite Scandinavian capital to
  invest in local RAS production in China.
• Sinor thru newco NORSI
• The goal is to play a significant role in the
  development of industrial RAS based seafood
  market in China
• First investment will be a salmon RAS factory in
  a Chinese province where all licenses will be
  provided.
• Licenses will be released when a 500 mill project
  introduces and approves in Qingdao.

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INITIATORS

• SINOR AS Morten Tangen, Xiao Ying Gao
• WIROJA AS Willy Roger Jacobsen
• KABI AS Asbjørn Birkeland

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BASIC MODEL
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IMPLEMENTATION

• Localisation Licence OK by local government
• Local company with acquired land water licence
  certificates local company initiated with
  registered capital of RMB 10 mill. Land water
  identified and reserved at a value of RMB 20
  mill. Sinor will indirectly hold the shares of
  local company.
• Foreign investment NOK 500 mill will trigger
  local borrowing at least 3 times the investment.
• Total investment case estimated to NOK 500

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COST OF PLANT

• RAS production plant depends on cleaning
  technology
• What type of recirculation is required, i.e. how
  many m3 of used water is exchanged with fresh
  water per time unit.
• the Feed Conversion Rate (Efficiency
  Feed/Biomass)
• It is assumed that in the planned factory, a
  consumption of 400 l/kg produced salmon will be
  sufficient.
• Total estimated cost for the 10.000 T plant
  including hatchery, purging , butchering and
  processing as well as civil work and total plant
  in-door NOK 500mill.
• The investment will be accumulated over 36
  months. First income/revenue starts after 6
  months.

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KEY NUMBERS 1

• INVESTMENTS
• Infrastructure NOK 90 mill
• Plant NOK 410 mill
  (20 is procured locally)
• COST ESTIMATES
• FIXED COST total year
• Maintenance, operation 5 mill
• Manpower will build up over 36 months from 20
  man/year to 35 man/yearNOK 2.0 mill to 3.5 mill
  
• First year 2 foreigners x 1.5 mill 3
  millSecond year onwards 1 foreigner 2 mill
• VARIABLE COST (per kilo)
• Smolt NOK 1
• Feed NOK 11
• Power NOK 4
• Other costs NOK 3
• Butch/packing NOK 3
• TOTAL VARIABLE NOK 22

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KEY NUMBERS 2

• Production volume full capacity SALMON 10.000
  T/year
• Production volume SMOLT 8 mill per year of which
  5 mill is sold to local farmers at a price of NOK
  15 per pc.
• Fixed income per year on SMOLT only NOK 75 mill.
  First SMOLT can be sold 6 months after start up.
• Selling price
• Live Salmon is generating NOK 150 per kg
• Butchered / Head on ice NOK 90 per kg
• Transport og sales costs Selling cost per kg
  NOK 1
• Distribution
• NOK Live NOK 3,
• Butchered NOK 1
• Existing technology is mini RAS equipment mounted
  on trucks. Duration of transport limited to 18
  hours. New technology pending increases
  transportation time to 50 hours. For butchered
  products existing distribution system is
  operating.

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KEY (CONSERVATIVE) NUMBERS FULL YEARLY PRODUCTION

• SALES 10Mkg x 90 kr/kg 900 MNOK
• VAR.COST 10Mkg x 22kr/kg - 220 MNOK
• FIXED COST x 10! - 100 MNOK
• CAPITAL COST 10 - 50 MNOK
• SELLING DISTRIBUTION - 40 MNOK
• UNCERTAINTY 20 ! - 180 MNOK
• EARNINGS 34 310 MNOK

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EXCLUSIVE COOPERATION AGREEMENTS PARTNERS

• SKRETTING ASIA
• Nofitech AS, RAS design
• - Kaldnes Brûgge, RAS installations/water filter
• Aqualine AS, lake sea water installation.
• - Billund Aquaservice AS world leader RAS
  technology
• - Aquasearch AS, Denmark eggs for trout
• SalmoBreed AS, eggs for Atlantic salmon
• - VEOLIA Ltd, China water treatment and turn
  key solutions, pending
• -NOFIMA AS, aquatic consultants (world class)
• - AquaResearch AS, genetic consulting, owned by
  Nofina signed agreements.