Good morning, and welcome to this presentation of Salmon Evolution's First Quarter 2021 Results. My name is Hakon Andre Baric, and I'm the CEO of the company. And I will be giving this presentation together with our CFO, Trund Hakon, SKYY Pettersson. As we have been used to after more than a year with social distancing and COVID regulations, we're not able to invite you to a physical presentation, And I hope we managed to cover your needs for information through this digital presentation. Questions can be asked throughout the presentation And after the presentation is ended, questions will be repeated for the entire audience and we will try to answer the best we can.
We will start this presentation by looking at some highlights for the quarter before we go through the main headlines of our approach to land based farming and our choice of technology. We then take a look at the operations in Norway and our new project in Korea before we go through the financials. We will end this presentation with some comments on outlook. Salmon Evolution was founded back in 2017 by a group of industry veterans. Their ambition was to build a state of the art land based salmon farming facility where you basically extend the ocean's potential by transferring the preconditions offered by the sea to farm fish on land.
This is made possible through our hybrid flow through technology where we create optimal living conditions for the salmon, while at the same time maintain low operational risk and with a production cost that is competitive with conventional farming. Our first facility is under construction at in Derhade, north of Molde on the West Coast of Norway and will have a total production capacity of 31,500 tons hog fully developed. The build out is divided into 3 phases with Phase 1 comprising a production capacity of 7,900 tons. The construction is well underway and we plan on releasing the first fish into the first tanks in March 2022. Given that our technology is scalable beyond Norway, we also have strong international ambitions.
And in March this year, we also formalized a joint venture with the Korean seafood giant, Dongwon Industries, for the development and construction of a 16,000 in 800 tons production facility in South Korea with 1st grow out production targeted in 2024. As we look at the highlights from last quarter, the main headline is that our ongoing building project has developed according to plan. With the progress within engineering, planning, contracting and building, we have seen a significant de risking of the project since we started to build in May 2020. During the quarter, we started to assemble the first fish tanks at our building site And we have also seen several buildings raised, which will house technical installations, fish handling equipment and also our operations center at the site. Another major highlight in this quarter was the establishment and formalization of K Smart Farming, our joint venture with Dongwon Industries in South Korea.
We signed a term sheet when we visited our partners in Korea in February and we were able to formalize the partnership by signing definitive agreements in March. This company will disrupt the salmon industry in Korea and East Asia, and we are convinced that the joint forces of Salmon Evolution and Dongwon Industries is sufficient to create a success story on the Korean East Coast. In the Q1, we were also able to secure sufficient equity funding to both our project at Inderharday and for KSMART Farming through a NOK 500,000,000 private placement that was completed in March. In this transaction, we saw strong interest from both Norwegian and international investors. We also decided in the Q1 to convert our company to a Norwegian ASSA and we have started the process for uplisting to ASSA stock exchange main list.
This process is expected to be finalized during the Q3 of 2021. Of significant post quarter events, We reached another milestone regarding financing when we in April were able to sign a committed term sheet with Nordea and SpiderMonkey Invest related to a debt financing package of DKK625 1,000,000. We will then take a look at our approach to land based farming and our concepts and technology. We call ourselves a conservative company in a disruptive industry, which may seem like a contrast in itself. For us though, this is actually rooted in our DNA and even our name, as we will always stay true to the fundamentals in salmon farming.
It's all about the salmon. We see what we do as a natural evolution of the salmon industry. And as all salmon farmers are aware, successful operations is all about providing excellent conditions for the fish to grow. This is the baseline behind the establishment of Salmon Evolution and we are convinced that excellent living conditions for the salmon directly affects our profitability and this is the very reason for our choice of technology. Our position in this area means that in our search for growth opportunities.
We are not willing to compromise on fish welfare and water quality as we know that this is the most fundamental parts of a successful land based operation. We also try to have a humble approach to the new challenges that come with land based farming. Even though our company is founded and developed by some of the most experienced people from the Norwegian industry, we still admit that the land based operation is complex and we need to develop our best practice together with strong partners and other industry players. This is why we are proud to launch our first facility in the heart of the Norwegian agriculture cluster and also why we see it as natural to continue to improve this facility as new faces will stand on the shoulders of the previous projects. We do also see the mathematics of costs and prices that exist in overseas markets, but also the complexity of the operations and lack of local experienced personnel.
Thus, we are confident that a strong Norwegian based operation is the best way to ensure successful development in overseas markets. As a young company, we are also aware of the timeline and risk connected when doing heavy infrastructure investments overseas. In this stage of the company's development, we are convinced that the best way to expand internationally is together with a strong local player like Dongbon in South Korea. As these projects require local knowledge about regulatory framework and trustworthiness when relating to local stakeholders, Our experience has been that the timeline can be shortened and the execution risk lowered when we team up with someone who understands the like local dynamics better than us. We will therefore continue to develop relationships with potential partners and look at this from both a financial and an industrial perspective.
When it comes to our technology, our hybrid flow through system is based on the experience from decades of smalt and post smalt production. Operations on the smolt side has shown that reuse of water is a cost effective way to increase productivity, But the experience has also shown that when you increase the level of recirculation above 65%, you will get an exponential risk increase in risk and complexity. This is much driven by the need for a biofilter, which is not part of our HFS system, but there are also other water treatment elements that are needed in a system that relies on intense level of recirculation. Our approach is to not reuse more than 65% of the water and thus we eliminate the need for a biofilter, but instead we use continuous supply of sufficient new seawater as our primary water treatment element. This dilutes all unwanted elements in the water and thus provide excellent growth conditions for the salmon.
In our hybrid flow through system, our only water treatment besides providing new seawater will be to add oxygen and air inate for CO2, which is something that has been done for decades in the smolt industry. As we stay away from the risky and complex elements of water treatment, We can operate with significant lower risk of unwanted events to occur. As we also have designed our system to have each tank As a completely individual biozone, we also reduced the effects of a potential event to the minimum as we never mix water from one tank with another. This model shows the flow of water in our hybrid filter system. And as you can see from the presentation, the system consists of 4 main subsystems.
First, we have the intake station where the water is filtered and goes through a UV disinfection unit before it is heated to the temperature that secures optimal growth for the salmon. After the water is heated, it is aeronated before it flows into the tanks. In the tanks, we constantly take out a flow of water for the reuse circuit. This water is aeronated for CO2 and we also add oxygen into the water before it flows back to the tank. To give a better understanding about different levels of recirculation or reuse, We can mention that a reuse level of 65% means that approximately 2 thirds of the water that flows into the tanks comes from the reuse circuits and approximately 1 third is fresh new seawater.
The water that flows out of the tank flows through a drum filter that collect the sludge and then the wastewater flows back to the sea. Again, we have to underline that this is an approach to land based farming that is tested every day on multiple small facilities along the Norwegian coastline and that is why we are so confident in this solution. By being dependent on significant amounts of seawater, we do accept that our hybrid system have some limitations when it comes to geography and potential locations. At the same time, we do see that our opportunity to use water from different depths makes this solution possible in areas that previously have not been suitable for salmon farming. By looking at ocean temperatures but also other parameters, We see a significant potential for our solution internationally and our first international project in Korea is a great testament to the hybrid system.
Yes, we do have to be located along the coastline. And yes, there are still some areas in the world where we cannot build a facility with this solution. But at the same time there are many locations where this system will work very well. Our focus again is to find optimal entry to the most attractive ones at the same time as we execute on our ongoing project. We will now take a look at our ongoing operations at our building site in Norway.
As mentioned earlier, so far we have developed our project according to plan and we are satisfied with our ongoing operations at building site. We have completed the most complex part of the groundworks and are now starting to see the first tanks, buildings and structures being raised. At this time, we have around 100 workers on-site and we will see an increase up to around 200 at maximum. The increase of workers has been challenging given the pandemic situation, but so far we have had no outbreak in our organization or among our suppliers. But we do see that the implemented routine is a challenge to productivity.
Despite this, we are still planning to release our first smolt in the facility in March 2022 and to harvest our first salmon from Indelhara around year end the same year. As we have experienced from other presentations, a picture can say more than a 1000 words. So here is the visible update from the construction of the first zone of 4 tanks with corresponding technical rooms and infrastructure. As you can see, the first tank is already assembled and the work is ongoing on tank number 2. As of today, we have assembled the 2 first tanks and are working on tank number 3.
The cylinder in the center of the tanks are the center column and the size of the structure is easier to understand from a picture like this. The diameter of the tanks are 28 meters and each tank will hold around 5,000 cubic meters of water. This picture shows the intake station which has its foundation 5 meters below sea level. The water intake has 100% redundancy as both intake pipes have the capacity to supply the facility with sufficient water on a standalone basis. And we will now take a look at the main headlines for our involvement in KSMART Farming in Korea.
The main points in the arrangement with Dongwon is the agreement to establish Kmart Farming, a company that will build and operate a land based salmon farm on the East Coast of South Korea. The facility will be developed in 2 phases with a production capacity of 8,400 tons jetted weight from each phase. Salmon Evolution holds 49% ownership in the company, the local company Dongwon holding 51%. As we have looked into the foundation for doing salmon farming in Korea, we see that this is an area which highly benefits our low risk concept. Temperatures are not optimal on the surface, but at different depths, we have access to unlimited amounts of water, which gives us the opportunity to create a business that can supply the Korean and Asian markets with high quality salmon in relevant weight classes and with the true salmon taste.
We also see that we should be able to set up an even more energy efficient production in Korea than we have in Norway as temperatures are more stable throughout the year. From Salmon Evolution's viewpoint, this is a very attractive project, where we're able to scale our competence within salmon farming. We will capitalize on the experience and knowledge gained from our ongoing project and utilize Dongwon's strong position in South Korea. As mentioned earlier, we do see the partnership model as an effective way to fast track our international expansion at the same time as we lowered the execution risk significantly. And as Don Hakan will tell you on the next slides, There are some attributes in the Korean and Asian markets and in the structure of our joint venture that we believe will highly benefit our shareholders as we initiate our international mentioned.
Thank you, Hakon. We are also very excited about the South Korea being the 1st market in our international expansion. South Korea is a highly attractive market in many ways. First of all, you have over 50,000,000 people living in a fairly small geographical area, which makes inland logistics very efficient. Secondly, South Korea is a high growth market with double digit growth for many years, and we think this growth will continue.
The last data points for Norwegian exports to Korea show that the growth is even gaining further momentum going into 2021. South Korea is also a high paying market, which has consistently outperformed the overall market for many years. In fact, over the last 7 years, the average Korea premium has been around NOK 10 per kilo, measured on an Oslo price basis. South Korea is also mainly a fresh market With basically everything being flown in from Norway via airfreight, so you have high freight costs going into the market. By producing locally in Korea, we will avoid the high airfreight cost.
Pre COVID, that was typically around NOK 50 per kilo, but in today's market, you are closer to NOK 20 per kilo. This means that we will have a Price advantage of over NOK 25 per kilo relative to the normal Oslo market price. And this makes us very confident that we will have a strong relative price achievement and a solid potential for value creation in the coming years. Looking more in details on the CapEx and key figures of KSMART. We estimate a total project cost of around NOK 1,600,000,000 for Phase 1.
Through our agreement with Dongwon, they will facilitate 75% debt financing of KSMART at what we deem are very attractive terms. And by this, we expect our total capital contribution into KSMART for 49 percent of the equity to be around NOK 200,000,000 on a fully funded basis. Our equity contribution is also divided into milestone driven tranches over the course of the project, And we closed the 1st tranche of about SEK 27,500,000 earlier now in May. The SEK 200,000,000 in equity also includes Phase 2 as the plan is to finance this through local debt financing and retained earnings in KSMART. For us, this partnership model is attractive in many ways.
From a financial perspective, it Clearly, a very capital efficient way to increase our operations, and we also see this as a solid demonstration as to our ability to leverage our human capital. On the cost side, for KSMART, we expect Slightly higher production costs compared to Indrahare in Norway. This is mainly related to somewhat higher Feed costs compared to Norway as you don't have local feed supply, which again requires import and storage. On the other side, we also see cost savings in Korea compared to Norway in areas such as energy due to the water temperature profile in Korea. But to sum up, the operating costs in Korea are very acceptable and combined with the expected strong price achievement, We see a solid potential for highly attractive operating margins and strong return on invested equity given the high leverage we are able to obtain in this project.
I will now go over the financials and give a little bit more information on that. A few weeks ago, we also announced that we have signed a committed term sheet with Nordea and Spartan Bank Invest for a debt financing package of NOK 625 1,000,000. We are now in the process of finalizing the loan for this debt financing package, and we expect closing of the facilities during the Q2. Together with the equity we have raised, we are now fully funded for both Indrahare Phase 1 and our investment in Korea. When it comes to the debt financing package, this is structured as a senior secured construction facility of NOK 525 1,000,000, which we will draw upon during the construction period to fund construction CapEx.
At completion of Phase 1 at Indra Harre, this construction facility will then be converted into a senior secured long term loan with a 15 year repayment profile and a final maturity 5 years after completion of Phase 1. In addition, we have also agreed an overdraft facility of up to NOK 100,000,000, which will be used to finance working capital here under biomass and receivables. We are obviously very pleased with being able to attract Bank debt financing at what we believe are very competitive commercial terms, both when it comes to leverage, cost and covenant structure. We are also very happy about being able to agree on a structure where the full loan amount can be drawn during the construction period, which we think is quite unique for Salmon Evolution. When it comes to our P and L, there is nothing special to report from the Q1.
We are scaling up our organization and our P and L mainly consists of personnel and other G and A costs. For the Q1, our profit for the period ended at minus NOK 5.6 Melianok, which was in line with expectations. Over the past 6 to 9 months, we have had a lot of focus on building the organization and we now have a full management team in place. Also, as we are planning for the 1st smolt release About 10 months from now, we will, throughout 2021, further scale up our organization and hire on more and more operating personnel in due time before production start. We are also putting a lot of resources into building up various systems, including quality systems, obtaining the relevant certifications and establishing a digital infrastructure in advance of our production start.
We see a strong potential in data collection and how this data can be applied to optimize our production, and this will be a key focus area going forward. We also have quite ambitious plans for our downstream activities and will, over the coming quarters, further intensify our activities in this space. When it comes to CapEx at Indre Hadri, as Hakon mentioned, things are proceeding according to plan. The construction progress has now started to become very visible and especially now with the assembly of the fish tanks As shown earlier in the presentation, you now get a real sense of the magnitude of our project. In Q1, the total CapEx amounted to NOK114,000,000, which mainly related to the turnkey project deliveries from Artec Aqua.
Capitalized personnel and shared costs amounted to NOK 4,300,000 during the quarter. And as of 31st March, the accumulated CapEx from project initiation back in 2019 amounted to NOK 334,000,000. As communicated earlier, our project is a turnkey deliverance with Artec Aqua as our main contractor. We have a very good cooperation with Artec Aqua and we feel that the combination of having a very solid and competent Internal project management organization combined with Artec Aqua's long time experience is a very good match. Arteglakva has been building land based facilities in Norway for 2 decades, which again provides us with valuable experience in securing a successful completion of Phase 1 at the Indrehare.
The turnkey agreement we have with them also includes a clause for financing reservations until the financing is secured. This means that we will not be committed to contracts made with subcontractors until the financing reservations are lifted on our side. Obviously, now with the financing Being in place for Samuel Evolution, this clause is of less importance, but still it gives us the necessary control to align the progress with our overall funding. During the Q1 of 2021, Salmon Evolution committed contracts for NOK 114,000,000 mainly related to precast Concrete Elements, Energy Solutions and Fish Feeding Systems. And accumulated financial commitments as per end of March amounted to SEK 411 1,000,000.
Over the next quarters, CapEx will gradually increase and is expected to peak at around NOK 225,000,000 in the 3rd Q4 of 2021. And from then on, it will gradually decrease towards project completion. And then I will leave the word over to Hakan for some final remarks.
Thank you, Trondahl. And as he mentioned, we will now give some comments on our plans going forward and then some commentary on outlook. Before we summarize with some words on outlook, we want to give a clear understanding of our goals for development of harvest volumes. The facility at Insojada is divided into 3 phases where Phase 1 construction is ongoing. We see a double value in this project as it both functions as our main contribution to harvest volumes in the years to come, but also in how we will seek to develop this as our best practice facility, where we'll have the opportunity to continuously develop our concept and our technological platform as well as our operations.
By doing this, we will be able to contribute with supreme experience in future projects, which should enable us to execute both the building phase and operations at a very high standard. We expect our facility in Korea to start construction in 2022 and from there we have a great foundation for future scaling our Korea and Asia operations. We thus see that we have a very tangible pipeline to a production capacity of around 24,000 tons in 2024, which will continue to grow in the years following that. As we are summing up, we see that as we've been building and developing our project at In Derhade, we have a clear understanding that the project has been through an important phase of de risking and our estimates has shown reliable. We are developing according to plan and we are satisfied with the ongoing production at building sites.
We are also executing on our international strategy and we're very pleased to launch K Smart Farming together with Dongbon. The potential in this joint venture is very high and we are confident that the owners' combined strength will be sufficient to create a success story. As of now, Salmon Evolution is a fully funded company for all the projects we have taken on. We have secured more than NOK1.1 billion in equity and debt in 2021 so far and we have sufficient funding for both our involvements in Case Mark and for Phase 1 at Inderhade. We are also convinced that the ESG challenges that all industries and sectors are facing will continue to drive disruption and new business models.
Our hybrid filter system is by default solving all major ESDG challenges that the sea based industry is facing. And as we move our production overseas, the challenge regarding the industry's carbon footprint for the supply of fresh salmon is sold. So this was all for today. We thank you for the interest in this presentation and in our company, and we will now be answering your questions.
Yes. Thank you, Hakan. We have received one question here from Karl Mihl at Pareto, Hakan will answer that. How are The travel restrictions for foreign workers impacting the work at Indrahare.
It's an interesting question in these times, of course. And I think we're glad to say that, yes, we do have A good number of international workers on our building site. Most of them, almost all, have been in the country for Quite a long time and are not affected by the travel restrictions coming into Norway. But the few that we have had Coming in has been mainly related to the assembly of the 3 tanks and there we have seen a very strong cooperation with both local Authorities and also the border authorities are connected to that. This is building of food supply for Norway and also internationally.
That gives us the flexibility that we need to bring the workers to the site.
Thank you. We also have one additional question, which I think you also can answer, Hakan. Are you planning to continue to build Phase 2 at Indrahare directly after Phase 1 is finalized? And are you still planning to build a smolt facility in this phase?
Yes. As an overall answer, I think I can say that our plans have not changed. So the timeline for development of the project at Indra Waray is the same as it has been. So in that sense, yes, we do We plan to continue to move into Phase 2 when Phase 1 is coming towards completion. At the same time, of course, it's very important for us to underline that Phase 2 is a completely separate investment decision from us In terms of our relationship with our contractors, nothing has been negotiated or signed on in any way.
And Phase 1 is a completely independent facility that can operate. So the kind of the legal commitment to enter into Phase 2 is expected to be taken in around half year 2022. And then, of course, we do have the flexibility to time that decision when we see it optimal. And I think the same thing is working for the Smalt facility, but we do see Smalt as a very strategic resource for us. And we are mapping out different opportunities for smog supply in the long run and the plan A is still to build with a
Thank you, Hakan. We will down wait a little bit in case there are any more questions. So please feel free to submit questions.
As there seems to be no more questions coming in, Again, I think I would like to thank you all for the interest in this presentation and in our company. And the reports and the presentation is available on our website. And we wish you all a pleasant day.