Good morning and welcome to this presentation of Andfjord Salmon's first quarter. My name is Martin Rasmussen, and I am the CEO of the company. Today's webcast will be held in English only. Together with me here today is our CFO, Bjarne Martinsen, and we will have a Q&A session after the presentation. Please note that you can submit questions through our webcast solution, but you can also ask it here in the audience. The agenda is first a brief introduction to Andfjord Salmon. We will then look at the highlights from the first quarter and the subsequent events. We will go to the final report from Nofima before giving a brief status on the current sorry, a recap on the post-smolt strategy, and then we will go to the status of the Kvalnes build-out.
We will also inform about the private placement with new strategic investor. Bjarne will cover the financial, and we will end the presentation with a summary outlook and a Q&A. But before we are moving to the concept of Andfjord Salmon , we would like to show you a presentation from a video from Andøya.
Thank you. Our objective is to build the world's most fish- and environmentally friendly facility for Atlantic salmon. And with the first production cycle, we have proven that we are capable of doing this. The concept is based on the best from traditional salmon farming on land combined with the natural advantages in the sea. In the sea, we have access for seawater that we don't have to manipulate. It holds the perfect temperature. It is oxygen-rich, and it has a stabilized salinity, which means that we can have a very energy-efficient production of Atlantic salmon. On land, we don't have any issues with salmon lice because we're sourcing the water well below the depth where the salmon lice is living. The fish cannot escape, and we are in control of the organic waste.
This is a cross-section of the pool, and we have built all our pool below sea level to avoid working against gravity. This means that we can push the water through the pool instead of lifting it. This allows us to have a very low energy consumption. The first month with production, we had an electricity cost of NOK 10,000. So this is extremely energy-efficient. It is not a coincidence that we are located at Andøya because Andøya is the land area in Norway that is definitely closest to the Gulf Stream. And the Gulf Stream is giving us warmer water during the winter compared to what you have if you are a traditional salmon farmer. This gives us better growth and also reduces the risk, for example, of winter ulcer. We will go to the highlights from the first quarter.
The build-out is progressing as planned, on time and on budget. The excavation of the pool pits was completed one quarter ahead of schedule. We have initiated the production of the pool components, and we have proven fish-friendly farming where Nofima has documented the result from the first production cycle. We have launched a post-smolt strategy as a supplement to our human-grade production of salmon, and we successfully completed a private placement with support from strong industrial shareholders. So let us look at the first production cycle, but from a third-party perspective. We'll start with some key numbers from the production cycle, and we achieved a very high survival rate with 97.5%, a low feed conversion rate on 1.05%, which is 20%-30% below what you can expect if you are a traditional salmon farmer.
We achieved a 40% better growth compared to our initial production plan, and we have proven that we can produce salmon with very low energy consumption and produce 1 kilo salmon within 1 kWh. We have proven that we can produce salmon with low operational cost. On the other hand, we have also achieved a good superior share, which gave us a high price in the market. So low cost and high priced. We have, over many years, worked with a scientific approach and had extensive cooperation together with the Norwegian Food Research Institute, or Nofima. We have previously informed about the report from the first 6 months, but this final report is a very detailed and comprehensive documentation of the entire production cycle. Nofima has documented the conditions in the pool first without fish and thereafter closely monitored the entire production cycle.
Good water quality is the key to succeed with a good biology, and the report underlines healthy pool conditions. First, environmental factors. The water current speed is relatively low, and it's like a natural flow. And this, in combination with a large pool, the laminar water flow allows the fish to have a natural behavior in the pool. The fish is also creating current in the pool, which stimulates the fish to be more active in the pool. The temperature was more stable than expected, and we didn't have any issues on the lowest temperature with, for example, winter ulcer. No indicators that there would be an issue to increase the density of biomass. High growth in general, but also if we compare it to studies done on semi-closed systems. The survival rate is not the only indicator for good fish welfare.
We have also monitored the welfare parameters on the fish that is alive. So the report emphasizes strong fish welfare. The score is based on Laksevel, which is a standardized method to monitor salmon welfare. First, some points on the fish behavior. Good appetite during the entire period. And it's very encouraging to see also that we have a very strong growth during the coldest time of the year. Good consistent grouping structure. No erratic swimming. No dense clumping behavior. Stable distribution, which means that the fish is utilizing the entire pool area. When it comes to the fish welfare, I would emphasize the importance of good gill health and the natural flow in combination with the sedimentation of the organic waste. When the particles and organic waste are dropping to the bottom of the floor of the pool, it's creating clean water.
This is extremely important to achieve good gill health. We have done this in the pool we have at Kvalnes. Except a few minor deviations, the mortality rate during the entire production cycle has been in the green area, which is very unique. To summarize the report, the concept is very good on behalf of the biology. We are very proud of the results, and it's very proud that this is confirmed by Nofima as a third party. Let's take a recap on the post-smolt strategy, which we launched in February this year. Simply explained, can we release more smolt into the pool and move some part of the batch to the sea after it reached a certain size? This allows us to utilize the pool capacity in the early phase of the production cycle better.
For the salmon farmer, they will receive a more robust smolt, and they can improve their MAB utilization. They will also reduce the biological risk. The salmon hasn't been exposed for salmon lice, jellyfish, or algae. For the local environment, we can collect organic waste and run longer with a circular economy. From a visionary perspective, we can achieve more sustainable growth with this model. To summarize, Andfjord Salmon will achieve an additional revenue stream by increasing the biomass turnover with 10%. The initial production plan is approved by the authorities. We have a strategic partnership in place with Eidsfjord Sjøfarm, or Holmøy Havbruk. We'll increase the EBIT with 15%-25%. From a sustainable perspective, this is very good coexistence together with the sea-based salmon farming. Now over to the build-out at Kvalnes. We are working on three different locations at Andøya.
It's Kvalnes, Fiskenes, and Brevik. We are in the regulatory process on Brevik and Fiskenes, where we have completed the zoning plan on Brevik, and we are now in the process to finalize the zoning plan on Fiskenes. On Kvalnes, we have started the operation, and we also are now in a very good process in the construction. We will have four new pools ready in 2025, which gives us a capacity of 8,000 tonnes HOG per year. And we aim to reach 40,000 tonnes production capacity in 2030. We have today a license of 10,000 tonnes MAB, and with the 10,000 tonnes MAB, you can have 19,000 tonnes unlimited production on this license. We'll also increase our license on Kvalnes. This is an illustration of the current build-out phase at Kvalnes. And we have finalized the excavation for the pool pits for all the 12 pools.
We have also very good progress on the tunnels and the harbor, which we'll come back to later, but this is infrastructure for the entire Kvalnes area on 40,000 tonnes. So we're talking about quite large dimensions on this infrastructure. The early completion of the pool pits allows us to start earlier on the installations of the pool. And we have our own concrete factory to produce the concrete elements, which means that we can have a very cost-efficient installation of the pool. So I'm very pleased that this workstream is going very well ahead of schedule. We are using our own masses from the pool pits as ingredients to the concrete. And this is both from a sustainable and from a cost perspective, very beneficial.
So we expect to have the first pools ready in the end of 2024 and beginning of 2025, which means that we can have a good phase with optimization before we are releasing the fish in the middle of 2025. I'd like to illustrate the dimensions on the tunnel with this picture to illustrate that this is a large infrastructure that will support the entire Kvalnes area. The waterways are on track, and the progress is highly relating to the quality of the bed rock. The quality is as expected. We are also on the timeline as where we expected to be. This is the overall timeline. We completed the excavation of the pool pits one quarter ahead of schedule. The concrete works on the pool have 8% completion. Remember, we have built our own concrete factory for the entire Kvalnes area also.
The waterway has 38% completion. We have also started the installation of the technical infrastructure one quarter ahead of schedule. The harbor and the port have 36% completion. Overall, we are on track to release the smolt next year, on time and on budget. Now over to the latest event, the successful private placement completed on the 22nd of May. The results from the first production cycle, the alternative revenue stream with the post-smolt, and the construction on time and budget have given us strong attention from investors during the last months. This opened up for the equity raise we completed last week, where we had a private placement and completed to raise NOK 350 million. I have mentioned many times the importance of having a strong shareholder balance with industrial and financial shareholders.
And from the industrial side, the largest shareholder in the company, Jerónimo Martins, one of the largest companies on the stock exchange in Lisbon. They have almost 6,000 stores in Portugal, Poland, and Colombia. They are world-leading in sustainability and have a deep insight in the consumer market. So they, of course, contribute with the finance, but they also contribute on the operational side. A new investor, High Liner Foods, a North American processor and supplier of seafood listed on the stock exchange in Toronto. And the investor like High Liner from North America, of course, opened up possibilities to explore and opened up possibilities in North America. And we are extremely proud of having a new strong shareholder supporting the company. And also, Eidsfjord Sjøfarm, Holmøy Havbruk, they continue to support the company.
Remember that this is one of the best farmers in the world when it comes to operational KPIs. So to have them as a shareholder is a very strong stamp of credibility.
Okay, then we'll, Bjarne, go through the financials.
Thank you, Martin. I will give a brief presentation of the financial results in the first quarter and the financial status at the end of March. As you may know, we did a restructuring of the company structure at the end of last year. So we established a holding parent company and daughter company. And the figures we report here are the consolidated financial statements for the group as a whole. The financial reporting is not too exciting at the moment, but it still provides some information that should be of interest. The income statement reflects the phase that the company currently is in.
We don't have fish in the pools, and we don't have any significant income. What we see from the income statement is operational expenses of NOK 17 million, of which NOK 6 million is depreciation. This reflects the current phase. It will be at a relatively stable level until we start preparing for operations with five pools and smolt release next year. We might see towards the end of this year and early next year a slight increase in operational costs due to the preparation for operations. The financial income is, of course, related to the interest income from cash deposits. When it comes to financial costs related to the financing of the construction project, this is capitalized as part of the investment in the facility. It will not be visible in the income statements.
The balance sheet shows high investment activity with quite a strong increase in property, plant, and equipment compared to our previous reporting at the end of 2023. Apart from investments, we can also highlight cash deposits of NOK 51 million. This is before opening of the construction loan of NOK 825 million. And we also have an unused credit facility of NOK 20 million, which does not show here. And the capital increase we did last week is, of course, not included in the Q1 figures. There are no major changes to equity and liabilities. The bank debt at this point is related to the previous financing from SpareBank 1 Nord-Norge and Innovation Norway before opening of the construction loan of NOK 825 million. And we also see the equity ratio remains high, and it will be even higher with the capital increase from last week.
This picture will, of course, change with the use of the construction loan in the coming periods. The cash flow statement also reflects the high construction activity. In the coming months, it will be even higher with strong progress within concrete, waterways, harbor, and technicals. There will be a lot of activities going on in parallel. The next couple of months and next quarters will be busy in the construction. The cash flow from operations will reflect stable operational expenses. As I said, this will be the case until we start preparing for operations with increased capacity. There's been no financing activities during Q1. This will, of course, change from Q2 with the capital increase and also forward with the use of the construction loan. We have really good progress on the build-outs.
We are on step one of five steps to reach a capacity at 40,000 tonnes at Kvalnes. The project is on budget and on time. As Martin showed, we plan to release smolt mid-2025. Then we will have four new pools ready. Together with the first pool that we had operation last year, we will have a capacity of 8,000 tonnes from mid-2025. This first step in the construction of Kvalnes includes four new pools. Even more importantly, it includes infrastructure to support the entire area. We build waterways to support 40,000 tonnes, harbor to support 40,000 tonnes. Also in this first step, we have excavated the rock pits for step one and step two for 12 new pools.
With this infrastructure in place in the first step, the investments will be relatively lower from step two and forward to step five, as you see on the left side here on the slide. At the end of the first quarter, the investments in step one amounted to NOK 589 million. The budget for this phase is NOK 1.65 billion. So we're really pleased with where we are, and we are well within budget and also with really good progress, as Martin showed. So with that, I leave the word back to Martin.
Thank you, Bjarne. We move over for the summary and thereafter to the Q&A. The build-out is progressing as planned. We completed the excavation of the pool pits one quarter ahead of schedule. We have initiated the production of the pool components. We have proven a fish-friendly farming when Nofima has documented results from the first production cycle. We launched a post-smolt strategy as a supplement to our human-grade production of salmon. We successfully completed a private placement with support from strong industrial shareholders. With that, we open up for questions. You can ask questions here in the audience with a microphone. You can also submit questions through the webcast solution. We will have help from Endre to read up the questions.
Yeah. While the audience is getting ready, we'll start with a question from the webcast. I think it's probably to you, Bjarne. Does the post-smolt strategy also mean that you get earlier/faster cash flow in addition to the overall volume increase?
Yeah, that's a good point. That's really important, especially in the startup of the ramp-up of the biomass. So of course, when we release smolt in 2025, if we can sell post-smolt already after five or six months, that will give an earlier cash flow and will be really important for the, especially for the build-up period.
Any questions from the audience?
Yeah. Simon Brun, ABG Sundal Collier. Just to follow up on the post-smolt question, you've announced a partnership with Eidsfjord . Will their demand sort of cover your initial production of post-smolt, or do you look for alternative offtake channels? Can you say anything about the interest from other farmers for your post-smolt?
The interest for post-smolt is very large. In the start, we had daily contact with many farmers, of course. But of course, the post-smolt strategy is also securing the value chains for Andfjord Salmon , which allow us to have access to smolt. And when it comes to the post-smolt strategy, it's important that this is not like a post-smolt license. This requires a partnership together, a long-term partnership together with the salmon farmer in the sea to execute this plan. So we say that this is a very long-term cooperation together with Eidsfjord Sjøfarm Holmøy. And they have smolt access, and they also are investing in more smolt capacity.
So given the sort of lead time from when you sort of initiate a partnership, you need some sort of visibility on your production plants as well. Is it fair to assume that we will see some partnership being announced before you release the fish into the pools? So let's say within 6 months or 9 months?
From a general perspective, we are always looking to have good partnerships. And of course, we have good dialogues with many strong industrial players when it comes to the post-smolt.
Thank you.
Question from the webcast. From a production strategy viewpoint, given production capacity of 8,000 tonnes from 2025, what is your current thinking about actual production in 2026?
Yeah. Of course, we will gradually increase the production or release the smolt in the middle of, from the middle of 2025. So as I said, the actual production plan will be presented at a later stage. So we are now highlighting the capacity we have. And we are now working to finalize the production plan, which will demonstrate how much we can utilize our capacity both from 2025 and also from 2026. So we'll come back to the numbers.
Any more questions from the audience?
Yes. Thank you for a very good presentation. I noticed that you will introduce an underwater feeding system. Can you please elaborate on the benefits compared to a more traditional feeding system?
Yeah. This is a result of an, as I said, extensive cooperation together with the supplier of the feed system, but also together with our feed supplier Skretting. We have now developed a system where we can have a very efficient transport of the feed from the feed tanks to the pool. You avoid the friction. You also have a much more, say, stabilized feeding regime. Also the impact when you dry feeding, it has an impact on the pipes, especially. So we see that when you're working with things in the ground, it's much more beneficial to move the feed with water.
Any further questions from the audience? We have one more from the webcast. Can you please update us on your thinking regarding the new land-based regulations? I assume that's from the Norwegian authorities. Yes, Martin, has this been a factor in the private placement being perhaps larger than the expected equity requirement that you previously announced?
Yeah. I can answer first on the license. We have had a very close dialogue with the authorities in many years. And if you look at the numbers that we have, this is the license to operate with very strong biological results. We have very low environmental impact. So on behalf of the Norwegian seafood salmon industry, this is supported by the government. And we expect that there will come something from the authorities now in the second half of 2024. And as I said, we have had a very close dialogue all the time. And we expect that it will be you need to have a better documentation both on behalf of the animal and also on the environment before you are starting when you apply for the license. So the requirements related to the analysis you have to prepare in front will be larger, we expect.
Yeah. When it comes to the question about the capital increase, this is not related to licensing or those processes. The financing up to this point has been focused on the investment and the construction project. And now we're within one year of the startup of the production. And we will buy salt, and we will buy feed. And with the strong interest around the company, it makes sense to capitalize on that and to prepare also for the operations. So that's more the reason for the financing.
Thank you. Question to you, Martin. How resistant do you view your system against stinging jellyfish?
Yeah. If you imagine that you have a tunnel opening in a very slope and in a rock, in a mountain, it's like just a small hole in a current. It means that if this, in combination, that the hole is at 40 m, it's a very preventive and efficient method against jellyfish. We haven't had any issues with that in the first production cycle. So I'm very confident on behalf of the biology when it comes to both salmonids, jellyfish, and the algae because of this.
More questions from the audience? No? And there are no more questions from the webcast. So with that, we can conclude today's session.
Please take contact with us if you have any comments or questions. We will thank you, everyone, for the attention today. Thank you.