Good morning, everyone, and welcome to this status update from Andfjord Salmon. My name is Martin Rasmussen, and I am the CEO of the company. And together with me here today is our CFO, Bjarne Martinsen, and our project director, Jostein Nilsen. And today's webcast and physical presentation will be held in English only. And we will have a Q&A session after the presentation, and you can submit questions through the webcast solution. Today's agenda is first a brief introduction to Andfjord Salmon, and we will then look at the highlights from the third quarter. Jostein will provide you a status of the current build-out at Kvalnes. The deadline for providing feedback on the government's proposed new regulation for land-based aquaculture expired on November 21st, and we will review our feedback in today's presentation.
Bjarne will go through the financials, and we will end the presentation with a summary and a Q&A. Our objective is to build the world's most fish and environmentally friendly facility for Atlantic salmon, with the mission to serve salmon with a clear conscience, and the results demonstrated in our first production cycle confirm that this is possible. Our concept is based on taking the best from ocean-based salmon farming and combining this with the benefits of being on land, and this combination gives a fish-friendly environment and a sustainable aquaculture production. We are building the pools below sea level to avoid working against gravity. We don't want to lift the water unnecessarily, so this allows us to have a very energy-efficient production method with natural advantages because we are creating a cross-section of the Gulf Stream on land.
With the pools on land, we are protecting the fish against, for example, external factors like salmon lice, jellyfish, and we also are protecting the environment from having such a high biomass in one place. We have our own pattern and method to create a laminar water flow, and this allows us to get very good environments for the fish, and we get the waste products where we want them. The organic material is falling to the bottom of the floor, and we can then collect it with cleaning ROVs and utilize the sludge as a commercial resource. And the water can then go back to the ocean without having a negative impact on the environment. It's not a coincidence that we are located at Andøya, because Andøya is the land area in Norway that is closest to the Gulf Stream.
And the Gulf Stream is giving us a warmer water during the winter, which equals a better growth during the coldest time of the year, and it's also reducing the risk, for example, for winter ulcer. We have one production cycle behind us with very strong operational results. We had a survival rate on 97.5%, which demonstrated the concept is working very well on behalf of the fish and the biology. We have a feed conversion rate at 1.05, where we have demonstrated that we can produce with very low feed cost, a good growth, and we have also proven that we can produce with very low energy costs since we can produce with one kilo salmon within one kilowatt hour. So we have provided the building blocks for attractive financial results. So over to the highlights from the third quarter.
Our build-out is progressing as planned, and this applies to all work streams. And as announced in the beginning of November, the process or the progress on the waterways is close to completion, which we consider particularly important as this is the highest risk work stream in the project. We have a solid progress on the construction of the pools, and we have provided our response to the government's proposal for future framework conditions for land-based aquaculture. Now, over to the build-out at Kvalnes. And I will start with a short introduction before I leave the word over to Jostein. We are working on three different locations at Andøya. It's Kvalnes, Fiskenes, and Breivik, but it's on Kvalnes we are now in the construction phase, and an ongoing regulatory process on the other two sites. So we have a clear roadmap to reach annual production of 90,000 tons salmon.
First step to 8,000 tons HOG consists of four new pools, bringing the total to five pools. These new pools, including the shared infrastructure, will be ready for production in the middle of 2025. After this step, the area infrastructure will be ready, and we will then be able to produce four new pools each year and reach a capacity of 19,000 tons hog and secure full utilization of our salmon farming license during 2027. Production at Kvalnes will then increase gradually, and we aim to reach the full production capacity of 40,000 tons in 2030. And this drawing illustrates the current build-out phase at Kvalnes and also shows the next expansion phases at the site.
We have excavated the pool pits for 12 new pools that you can see in the center of the picture, and we are on track with our plan to have the four next pools ready in the middle of 2025. In parallel, we are developing inlet and outlet waterways and the harbor area, which will facilitate a future production capacity for 40,000 tons. We will then look at a movie from Andøya before Jostein will take over.
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All right. Thank you, Martin. As you can see from the film, our project at Kvalnes is moving along very well. Looking at the status for the tunnels, we are very pleased with where we are at. The dimension, as you saw, of the tunnels is a dimension for handling everything we would like to do at Kvalnes, including pools outside of the 12 pools that we currently are planning to build. So that is the main reason why we have such a big dimension of the tunnels that we built. The work stream on track for the tunnels, in the details, we see that we are around 90% complete. The outlet tunnel, we have 20 meters left, so meaning it's just the breakthrough into sea that is remaining there. On the inlet tunnel, we have approximately 450 meters left.
All tunnels below the pools, I will come a bit more into details back with that, are complete and done, especially the vertical shafts up against the pools have been critical for us to get completed, and as Martin also said, the progress and where we have come with the tunnels have significantly reduced the risk of the project. A bit more details on below the pools, as you can see, or that you saw from the film, we have built the tunnels below the pools using the cellar. I like to call it the cellar that we take advantage of using that because that means that we can compress the pools even more closer together, but as you see, we have both the main tunnel and the niche below each of the pools are done, and all the vertical shafts, both for the inlet and outlet, are complete.
This means that the interface between tunnel and concrete is okay now. We have reached that milestone, and I've said that earlier also in my presentations that interfaces are maybe my biggest challenge, making sure that the different entrepreneurs work well together. Having this in place, now that the tunnel part is done, so now it's really just back for the concrete work to be completed, is for us a big milestone. Also below the pools, we have had no issues with water coming in from the surroundings or weak geological issues either. The performance of the rocks below the pools has been very good. Then into the completion of the concrete work in the pools. The work stream, we're very pleased with where we are at.
And the concrete wall elements, I will come a bit back to that, about the details that we are using there. We are producing them locally at site. We use our own masses as add-ons to the concrete. And we are in the way of having those ready to be established. As you can see on the picture, you see that the columns and the supports and the preparation for adding these wall elements are well underway, and we are really ready to start assembling wall elements now. As we look a bit ahead, we are preparing for technical installations. So that is sort of the next interface that we will start working, and we have been working at, making sure that concrete and technical are well aligned with how to proceed. And then we are the walls we have now, we are using ultra-high performance concrete.
That is a layer that we are adding to the concrete wall elements instead of using coating. For those of you who are used to coating, and everywhere where you are using concrete, usually you have had to add on coating to get a slick surface protecting the fish. Our method using Ultra-High Performance Concrete is, you put that on in the factory, they guarantee that it's lasting for 100 years. So for those of you who know coating, you need to take care of the temperature and no rain, and you maybe have to start doing service and maintenance after four to seven years, and all that is something that we will avoid by having this Ultra-High Performance Concrete. We have lots of attention throughout the market now, especially within the concrete environment, looking at us now for how we are managing with this concept.
Yeah, as I mentioned now, coming this far with the concrete part, we are done with the detail engineering for concrete. So the interfaces now between the concrete workers and their technical vendors have now been going on for a long time, and that having the detail engineering in place is another good milestone for the project. The harbor area, we have come very well there as well. As you see, we are using the local masses from the tunnel and the pool pits to build the whole harbor. We are taking out some digging to make the harbor deeper. You can see that up on the left-hand side. So in the western part and the northern part, we need to take out a bit more masses to make the harbor deep enough.
Again, we are using the local masses, and we are very well on the way with the harbor area as well. Sustainability is one of the key areas that we would like to put in focus. We are using the masses for add-ons to concrete production. We are using masses, and I can just mention that if we hadn't been able to use the local masses, we would have had to transport more than 23,000 tons of masses to site. That is approximately 800 truckloads coming to site. In addition, being able to use the masses for the harbor area as well, we don't have to take away masses from site either. So having a mass balance for the project has been key to us as well, and we have a mass balance. Overall, I'm very pleased with where we are at with the progress of the project.
All the work streams are moving along very well. The pool pits was done earlier this year. The concrete work is more than 50% complete. The waterways, more than 90%, and now the main focus, technical, getting that running and getting alongside. We are installing high power electricity in December, having that at site, and all the infrastructure with OPI channels, is that what you call it in English? OPI. We have started to put that in the ground all over site as well, so the technical part is moving very well ahead. Yeah, in total, we look forward to get more momentum around technical and the concrete and working the interfaces there. That is key focus now as we move along. All right, and then I will leave the word back to Martin again.
Thank you, Jostein. And now we will go over to the new proposed regulation for land-based salmon farming and Andfjord Salmon's response on the proposal from the authorities. After the authorities have had a hard time processing land-based aquaculture permits for human-grade salmon in almost two years, we're now seeing progress in the process of establishing a revised framework for land-based aquaculture facilities. The authorities have made a proposal that has been out for public hearing with a deadline of November 21st. And since the proposal was published, we have been working on our point of view. First, the proposal letter states that the proposal will not affect facilities that have already been granted permission for land-based aquaculture. And Andfjord Salmon has a license already at Kvalnes, and development under this license will be our main focus until 2027.
The new proposed regulatory change confirmed that Andfjord Salmon, what Andfjord Salmon always have said, our facility is undoubtedly on land. And regarding the proposed disinfection requirements, Andfjord Salmon has always taken flexibility into account in our design to adapt any change in the future functional requirements. And so last week, we submitted our response to the proposal from the authorities. And we have been spending a lot of time assessing the proposal and gone through all available research. And our main concern is that the authorities make a number of claims whose scientific basis and documentations are limited. Our view is that there is no need for a universal disinfection requirement, and partly because prevention of infection to surrounding aquaculture facility is already taken care of by current distance requirements between land-based discharge points and surrounding facilities.
but also because a knowledge gap exists regarding the connection between fish welfare, biosecurity, and the seawater's natural microbiological composition, and this void must be addressed before the authorities implement functional requirements that will significantly influence how fish is produced on land, and given this lack of knowledge, it is clear that a definitive and universal requirement for disinfection of intake water for all technical solutions for land-based aquaculture is an excessive one-size-fits-all approach, so we believe it is unwise to establish a framework condition that limits the meaning of sustainable production to solely a contamination topic, which in practice will become at the expense of other vital sustainability parameters. We see that a large number of industry players agree with our viewpoint, and we can only assume that the industry's input from the public hearing will be taken into account in the final set of regulation.
That said, it is important to underline that Andfjord Salmon already have a license in place for Kvalnes, and the current build-out phase will therefore not be affected by the new regulation according to the proposal from the authorities. And now over to Bjarne, who will cover the financials.
Thank you, Martin. I will, as usual, give a brief overview of the financial results in the third quarter and also the financial position at the end of the quarter. Looking at the income statement, this reflects the phase we're in. As said with the previous quarters, we can expect stable operating expenses during the construction phase where we focus on construction, and we have stable operations, and this is also the case in the third quarter. In total, we have total operating expenses of 16 million NOK in the third quarter. This includes depreciation, so if you look at the total of salary expenses and other operating expenses, it's around 10 million NOK in the quarter. And that's a little bit below previous quarters, but within the range we can expect, so here, the third quarter is compared to the third quarter last year.
Be aware that last year we had operations in the pools. We did the harvest of the first production cycle in the third quarter of 2023. That was a different phase for the company. I can also comment a little bit on the financial results. We have some financial income related to the bank deposits that we've held during the quarter. But when it comes to interest expenses related to the financing of the construction projects, this is capitalized as part of the investment in the balance sheet. This will not be visible in the income statements. The balance sheet also reflects high construction activity. We see the property plant and equipment now at 1.8 billion NOK, an increase of 950 million NOK so far this year compared to the end of last year. This reflects what Jostein just presented.
We've had really good progress, and on some of the major work streams, we are ahead of schedule, so this is also reflected in the financial statements, the strong progress that we've had, and we have a cash balance at the end of the quarter of 162 million NOK. It's also worth noticing there that other current assets here can basically be considered as cash because this is VAT receivables that we get paid back every second month, so I would say that total cash available is 200 million NOK. And this, of course, does not include an undrawn construction loan of 270 million NOK and also an unused credit facility of 20 million NOK, so total available liquidity at the end of the quarter is 490 million NOK. The equity in the group is 1.27 billion NOK at the end of the third quarter, which gives an equity ratio of 62%.
We can see here that borrowing has increased during the year, and the first part of the project was financed by equity, and we started drawing on the construction loan in the second quarter, so in this phase now, we will see that investments are covered by borrowings, so that's why borrowings are increasing and will continue to increase in line with investments in this phase, and when it comes to cash flow, this is, of course, strongly linked to the income statement and the balance sheet. And we can also see here the cash flow from investments are NOK 443 million in the third quarter, and the cash flow from financing will follow this figure as investments, as we go along, are covered by the construction loan.
So these figures will follow each other, and the total cash position at the end of the period will not change significantly in the phase we're in now. So talking about the development at Kvalnes, we have divided the build-out, the plan for the build-out at Kvalnes is divided into five steps, as we've shown previously. You can see the table here on the left-hand side. So we're now in the first step of the development at Kvalnes. This first step includes four new pools ready for production in mid-2025, but also infrastructure to the entire site. So waterways for 40,000 tons, harbor to support the production of 40,000 tons, rock pits for 12 new pools, which is all pools included in step one and step two.
So the investments here are front-loaded, and investments in step two and forward will be relatively lower as we then can utilize the infrastructure that we now put in place during step one, and as Jostein also said, Martin, the project is on time and on budget. Of course, we have some major work streams now close to completion, and this, of course, also affects what we see from the financial figures, and we have invested now above NOK 1.3 billion in the project, and in addition to these major work streams that are close to completion, this also includes technical materials that we have acquired and are ready to put in place. It has been important for Andfjord Salmon to attract industrial investors, and we have succeeded quite well with that during the last couple of years, so this shows our top 10 shareholder list at the moment.
The biggest shareholder is Jerónimo Martins from Portugal, one of the biggest companies on the stock exchange in Lisbon, revenues in 2023 of EUR 30 billion. And they have made a huge contribution to Andfjord Salmon since they first invested in 2022. And then during this last year, High Liner Foods has also invested in the company and are now among the biggest shareholders. This is a North American processor and distributor of seafood. And of course, this gives opportunities for Andfjord Salmon to distribute products in the market and also explore other opportunities together with High Liner. And we can also see Eidsfjord Sjøfarm, also one of our biggest shareholders, part of the Holmøy Group. This is a large local salmon producer, and the cooperation with them gives us access to expertise, experience, infrastructure, and we can cooperate operationally with slaughter, smolt, post-smolt.
So it's a huge advantage for Andfjord Salmon to be in an area with several big salmon farmers and to have this cooperation with Eidsfjord Sjøfarm. So with that, I leave the word back to Martin. Thank you. Now over to a quick summary of today's presentation. Our build-out is progressing as planned, and this applies to all work streams. As announced in the beginning of November, the waterways is close to completion. We have a very solid progress on the construction of the pools, and we have submitted our response to the proposal from the authorities regarding new framework for land-based farming. And then we are ready for the Q&A, and you can ask questions here in the audience. We have a microphone, or you can send your question through our webcast solution. So Andrea, I'm not sure if you want to take the audience first or the.
Yeah, we'll start with the audience if there are any questions here. If not, we have a couple of questions from the webcast. So I don't see any hands. There are a couple of questions about density in the pool. You had relatively low density in the first production cycle. Is there room to increase density in the pools? And if yes, by how much?
Yeah. Of course, we are very conservative in our approach regarding how much fish we will use in the pools. And of course, the capacity is much higher. In our production plan, we have a peak on 40 kilos of salmon per cubic meter, and this is around half of what you see is what other land-based salmon farmers have. But of course, we know that it's possible to increase the density gradually. But we are very satisfied that the concept is very strong also on the low densities. So I think that this is a very good approach to have a conservative profile in the start and then ramp it up gradually. But we are also designing the pools and all the equipment, the infrastructure to handle a much higher density at the later stage.
So in the start, we will be conservative, and then we will gradually increase as we see it beneficial for developing.
Okay. Any questions from the audience? Oh, if not, then we'll continue with questions from the webcast. Have you received any feedback from the authorities when they will have the new framework or regulation for land-based fish farming available?
I'm not sure. The early indication from the authorities has been that this should have been for several months ago, so for me to assume when we can expect something from the authorities is a difficult task, and I don't want to use time on speculation, but we can expect something probably during the first half or maybe in the first quarter, but the feedback from the authorities has been very good on behalf of our suggestion. Many of the different authorities' sections see that there's a lack of competence and knowledge regarding the new suggested disinfection requirements.
Okay. Thank you. There is a question about the next build-out plan. Can you please elaborate a little more on the build-out plan for 2025 to 2027? Is it four additional pools operational in 2026 and another four in 2027?
Do you want me to start and you can support the supply?
Yeah, it's actually very simple. We will have four pools ready in 2025. And including the first pool, we will then have a capacity of 8,000 tons. We will have four new pools in 2026 and then four new pools available in 2027. And then we also aim to work on the regulatory process so that we can also have four new pools in the expansion phase the year after and so on, both on Kvalnes and other locations at Andøya.
Yeah, and of course, we would like to have momentum on the build-out. We would like continuously just to keep building out, so the intention is not to have a stop and a demobilization of the entrepreneurs. We plan to just continuously build pools at Kvalnes and Andøya, and wherever.
I think since we have the infrastructure like tunnels, harbor, and groundwork available, and we also have the knowledge and the experience from the first construction phase, so this allows us to have a very cost-efficient and time-efficient construction of the next pools. But it's also important that four new pools, it's actually a very high capacity increase. And we see it beneficial and smart to have a very sustainable growth in also the biomass. So it's not all about the construction. You also think about what is the most rational when it comes to ramping up your biology growth.
Thank you. There is a question here. I think it's for Jostein. From a technical perspective, what are the key risks over the coming six months?
As I said already, it's covering interfaces. We have very solid entrepreneurs and technical actors involved in the project. So for me, the main focus is to make sure they cover the interfaces in between the parties. And for sure, gaining more momentum on all the different work streams is a continuous focus for us. We have been working very well with the plan to avoid weather dependencies. So that's why we build our concrete element walls inside the factory. That's why we are now planning the harbor in a way that we can work in a protected environment throughout the whole winter. So we have lots of good measures in place to avoid weather dependencies, knowing that we are working at Andøya.
Again, supply on that, because when you have a complexity in the project, it's so important to have the best companies, the best suppliers working on the project, handling unforeseen events. For example, LNS, experts on tunnels in Arctic areas. So to have companies like this as suppliers has been extremely important.
Yeah. And the same with the Contur that previously was Kruse Smith Anlegg. Very good on concrete. You have had being so good at mass balance and the harbor part. So really having all these national entrepreneurs on board, really working and working this together. And that's really why we are doing this as a cooperation. We don't have a fixed contract. We are working this together. So we have meetings continuously covering the interfaces that evolve with the project.
Okay. There is a question here about, you've covered this already in the presentation, Martin, about inlet water and disinfection. But the question is, have you heard anything more about mandatory disinfection of inlet water? And I think you can probably just refer to what you've responded to the authority's suggestion on that.
Yeah. The proposal from the authorities is that it will be a disinfection on new license for inlet water. And as we said in the presentation, we see it unwise to have a disinfection on a flow-through technology. If you have a technical solution where we are reusing the water or we have a raw system, it can be wise to have a disinfection because you have a totally different technology and location. But when we are working with the closest salmon farming is 20 km away, we have a 100% flow-through system. And the only thing we achieve with disinfection in the inlet water is that you also take away the good microbiology. And I remember the time my family was most sick was after the society opened up after the COVID. The good microbiology is also important to develop the immune system for the fish.
So working with biology is complex. So I think the government has a very simplified approach to how they will understand what they're trying to achieve with the new requirements, but they will not achieve the result with this requirement.
Any questions from the audience? No? Then we'll continue. We have a couple of more questions. Question to you, Jostein. What security measures do you have on site to avoid espionage and sabotage? I guess the sabotage is probably the most relevant.
Yeah. We have a 24/7 operation ongoing with people outside continuously. And we have gates that are closed when there are no workers there, meaning never. But I think, yeah, you never know. With the drones or whatever that should be, you probably can't take height for everything. But I think the way we have gated the worksite is sufficient.
Thank you. Question to you, Bjarne. I think, yeah, based on how inflation has been within the construction industry and your know-how from stage one of the build-out, so the current build-out, do you still feel confident about the NOK 1.1 billion CapEx on stage two?
Yes, I do. So as we have said previously, we have also included buffers in the budgets, and that includes buffers for inflation. And so this is well-known. So we are satisfied with the budgets and estimates we have given on this.
Thank you. There are no further questions on the webcast unless someone raises their hand in the audience. I think we'll conclude today's Q&A session.
Thank you very much for the attention, everyone, and please take contact with us and also invite you to visit us at Andøya, so we can show you one of the largest tunnels in our area. Okay. Thank you very much for the attention. Yeah.