Good morning, and welcome to this presentation of Salmon Evolution's results for the Q2 of 2021. My name is Hakon Andre Berg, and I'm the CEO of the company. And I will be giving this presentation together with our CFO, Trond Hakon's SKU 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, but I hope we managed to cover your needs for information through this digital presentation. Questions can be asked throughout the presentation via the chat, And after that 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 and also give some comments on our recent acquisition of Kuf Deluxe before we go through our approach to land based farming and our choice of technology. We then take a look at the operations in Norway and our newly established 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 we basically extend the ocean's potential by transferring the precondition offered by the sea to farm fish on land.
This is made possible through our chosen hybrid full through technology, where we create optimal living conditions for the salmon, while at the same time maintain a low operational risk and with a production cost that is competitive with conventional farming. Our first facility is under construction at in North of Molde on the west coast of Norway and will have a total production capacity of 31,500 tons hog weight 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 tanks in March 2022. Given that our technology is scalable beyond Norway, we also have strong international ambition.
And in March this year, we formalized a joint venture with the Korean seafood giant Dongwon Industries for the development and construction of its 16,800 tons production facility in South Korea, with first go out production targeted in 2024. As we look at the highlights from the Q2, 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 of the project since we started to build in May last year. During the quarter, we have come a long way on the assembly of the first fish tanks at our building sites, and we also have seen several buildings raised, which will house technical installation, fish handling equipment and also our operations center at the site. Another major highlight in this quarter was the closing of the 1st equity tranche in K Smart Farming, our joint venture with Dongmon Industries in South Korea.
This project is also progressing according to plan and we signed an agreement for an extended feasibility study for both the smolt and roll out facility in South Korea. We also secured and formalized debt financing for Inder Haraj during the quarter through a NOK 625,000,000 senior secured debt financing package. We are very happy with the terms and structure of this financing, and this ensures that we have a fully funded platform for our committed projects going forward. Another major milestone was reached immediately following the closing of the Q2 with a listing of our shares on the main list of Oslo Stock Exchange. We see this as a strong validation of our business plan and concept and are confident that this will be beneficial for our shareholders and help facilitating further growth.
And earlier this week, we also announced the acquisition of Kraftlags, a family owned small producer located in Dalsfjord, a little bit south of Indreharde. This acquisition is the result of a thorough process where we have evaluated a number of alternatives with respect to sourcing of smalt, and we firmly believe that we, through this acquisition, reduced risk and increase our operational flexibility at Indrejaraj, while at the same time doing so in a cost and CapEx effective manner. Gluft Lux has been a family owned company since the mid-90s and has for many years been recognized as a supplier of high quality smalt. After a thorough process where we have evaluated several potential small suppliers, we were confident that Kraftlox is a perfect match for Salmon Evolution. The reason for this is both the technological aspects as Kraft Clark's facility is based on the same concept as our HFS system, but also the excellent water sources the company has available as well as the quality of the management and organization.
And the purchase price for 100 percent of the shares is based on an enterprise value of NOK 70,000,000, which is 7 times the average EBITDA for the last 3 years. And as we have looked at the alternatives, we do see that this acquisition, together with future expansion opportunities secures a significant lower CapEx compared to a greenfield build out. At the same time, we do know that potential freshwater sources of the same quality is not available and thus we're very pleased with this acquisition. As part of the transactions, the sellers are reinvesting NOK 16,600,000 in Salmon Evolution at a price that is equal to the volume weighted average price for the last 20 days. Further, the transaction held a NOK 35,000,000 cash payment, while the rest of the purchase price is structured as a deferred payment.
Before we bring an update on our operations, we would like We'll spend some minutes to focus on our priorities related to land based farming and the potential for expansion into new markets. 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 in 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 do 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. And 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're proud to launch our first facility in the heart of the Norwegian agriculture cluster and also why we see it as natural Sinew to improve this facility as new faces will stand on the shoulders of the previous projects. We do also see the mathematics of cost and prices that exist in overseas markets, but also the complexity of the operations and lack of local experienced personnel. Thus, we're confident that a strong Norwegian based operation is the best way to ensure successful development in overseas markets. As a young company, we're 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 partner like Dongwon in South Korea.
As these projects require local knowledge about regulatory framework and trustworthiness when relating to local stakeholders, Our experience has been that time line can be shortened and the execution risk lowered when we team up with someone who understands the 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 chosen technology, the 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 been that when you increase the level of recirculations above 65% to 70%, you will get an exponential increase in risk as a biofilter and other water treatment elements are needed. Our approach is to 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 floater system, our only water treatment besides providing new seawater will be to add oxygen and aeronate for CO2, which is something that has been done for decades in the smalt industry. As we stay away from the risky and complex elements of water We can operate with a significant lower risk of unwanted events to occur. As we also have designed our system to have each tank as So completely in the individual biozone, we do reduce the effects of a potential event to the minimum as we never mix water from one tank with another. 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 hybrid solution internationally and our first international project in Korea is a great testament to this system. Yes, we do have to be located along the coastline And yes, there still are some areas in the world where we cannot build a facility with this system. 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 projects.
For Salmon Evolution, operation can, at this point, be divided into 4 main areas. First, we are working with strong partners to continuously develop all the systems and solutions that make up our chosen hybrid flow through concept. 2nd, we spent time and resources to identify and evaluate new projects where our technology is adequate. 3rd, we are now actually in the early engineering phase of our first facility in South Korea. But still most importantly though, we are managing a complex building project at Inder Haroy together with our main contractor, Artec Aqua.
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 now see 7 out of 12 grow out tanks at the site and also buildings and technical rooms are raised simultaneously as the Tanks have been assembled. The first process equipment has been installed and the coming months we will see equipment and pipes fill out the empty space in our rooms. At this time, we have around 130 workers on-site and we will see an increase during this fall up to around 250 at maximum. The increase of workers has been challenged in giving the pandemic situation, but so far no outbreak at the construction site and we do hope that the worst days are behind us when it comes to the pandemic situation.
As it has Seen from the beginning, our plan is to release the 1st smalt in the facility in March 2022 and to harvest our first salmon from Indore Harder around year end the same year. Here is an update from the construction where we can see the 7 tanks that are raised with corresponding technical rooms and infrastructure. We expect that all 12 tanks that make up Phase 1 in our facility will be assembled by the end of November. The diameter of the tanks are 28 meters and each tank will hold around 5,000 cubic meters of water, which make the total tank volume close to 60,000 cubic meters for Phase 1 alone. We have compared a drone picture taken around 10 days ago with a picture from taken in the middle of April.
And here we do really see how the construction have been progressing the last 100 days. The inlet pipes have arrived at the building site and we do expect to install them during this fall. These pipes are 425 meters and 180 meters long and will ensure water supply from 25 meters 90 meters. We will now bring a status update from the project we are doing together with Dongwon in South Korea. We did our initial investment in the JV company, KSMART Farming, during the Q2, and thus we have now established the ownership structure of the company as Salmon Evolution owns 49% and Dongwon holds the remaining 51%.
In June, we signed an agreement with Arctic Aqua for an standard feasibility study for both the smolts and grow out facilities. We are now in close dialogue with Korean engineering and project management companies to secure a strong local presence in the project at the same time as we continue to work closely with Arctic Aqua. We will continue to allocate more Norwegian resources to this project as we do see a need to have a close dialogue with both Pung1 and the engineering firms from day 1. After some months of close work with this project, we are encouraged by the dedication and effort that we experienced from our partner, Dongmon, and we are convinced that it will provide an excellent platform for growth and value creation for Salmon Evolution in the very attractive Asian market. And with this, I will give the word to our CFO, Torbjorn Hockenskaertesen, We will bring more insight into both this project and the overall finances for Salmon Evolution.
Thank you, Hakon. We are also very happy about 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, making inland logistics very efficient. 2nd, South Korea is a high growth market with double digit growth for many years And we think this growth will continue.
Year to date data points for Norwegian exports to Korea even show that This growth is gaining further momentum so far in 2021. South Korea is It's 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 a slow 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 air freight costs.
Pre COVID, that was typically around NOK 50 per kilo, But in today's market, you are closer to NOK 20 per kilo. In sum, 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. If we look more in detail 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 Dong 1, they will facilitate 75% debt financing of Ksmart at what we deem are very attractive terms.
And by this, we expect that our total capital contribution into Ksmart for 49% of the equity to be around NOK 200,000,000 on a fully funded basis. Our equity contribution is divided into milestone driven tranches over the course of the project and we closed the first tranche of about NOK 27,500,000 earlier now in May. The NOK 200,000,000 NOK in total equity contribution 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 is Clearly, a very capital efficient way to increase our operations and we see this as a solid demonstration as to our ability to leverage our human capital.
Looking on the cost side for KSMART, we expect Slightly higher production costs compared to Indrehade. This mainly relates to somewhat higher Feed cost compared to Norway as you don't have a 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 over there. But to sum up, the operating cost in Korea is very acceptable And also combined with the strong price achievement, we see a solid potential for highly attractive Operating margins and a strong return on invested equity given the unique leverage that we're able to obtain in this project. I will now go over the financials for the quarter.
At the end of the second quarter, We announced that we closed our debt financing package with Nordea, Spartanqvist and Innovation Norway for a total amount of NOK 625,000,000. This means that together with the equity we have raised, We are now fully funded for both Indrahare Phase 1, our investment in Korea and the recently announced acquisition of Graflux. The debt financing package 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. The first drawdown of NOK 50,000,000 was done in July, which was used to refinance our existing NOK 40,000,000 NOK bank debt. At completion of Phase 1 at Indrehare, this construction facility will then be converted into a Senior secured long term loan with a 15 year repayment profile.
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. When it comes to the acquisition of Kraftlags, our initial cash payment of NOK 35,000,000 was made using Existing available funds. We do, however, see significant leverage potential in Kraftlags, both on the fixed asset side and also on the biomass. 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 are a couple of items worth Commenting on for the Q2. First, the Board remuneration approved at our general meeting in May is in full Expensed in the Q2 under personal expenses. Going forward, we will allocate this evenly throughout the year. The Q2 also include one off costs of about SEK 3,200,000 relating to the establishment of our Korean joint venture and the uplisting to the main list at the Oslo Stock Exchange. These costs are included under Other operating expenses.
We also had a positive unrealized ARGO of about NOK 3,500,000 relating to a cash deposit in euro, which is held for hedging purposes due to underlying euro exposure in our building project at Indrahare. Loss for the quarter was NOK 10,000,000, which was in line with expectations when adjusting for 1 off costs. We are actively preparing for our 1st smolt release, which is now only 7 months away. The acquisition of Kraftlaks is naturally a very important milestone in this context and we will immediately start working on integrating this business into the group. In parallel, we are also in the process of recruiting more and more operating personnel So that they are in place well ahead of our production start at the Indre Hare.
We are also putting a lot of resources Sinta 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, for the remainder of the year, further intensify our activities in this space. When it comes to CapEx at Indrehade, as Hako mentioned, things are proceeding according to plan. The construction progress has really started to become very visible and especially now with the assembly of the first salmon fish tanks as shown earlier in the presentation, you get a real sense of the magnitude of our project.
In Q2, the total CapEx amounted NOK2 million, which mainly related to the turnkey project deliveries from Artagakwa. Capitalized personnel and shared costs amounted to NOK 3,800,000 during the quarter. And as of June 30, the accumulated CapEx from project initiation back in 2019 amounted to NOK506 million. We now have a very high activity level at the building site and this will continue for the remainder of the year. Focus will be centered around completion of concrete works for buildings, structures and fish tanks And the first process equipments and pipes have also arrived at the building site and installation work started now in August.
We expect CapEx to peak at around NOK 225,000,000 in the 3rd Q4 this year. And from then on, it will gradually decrease towards project completion. And then I leave the word over to Hakon for some Final remarks.
Thank you, Trond Hakon. As we are summing up, we will look at our project pipeline going forward and then give some comments on outlook. The facility at Indrejaro 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 will have the opportunity to continuously develop our concept and 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.
As mentioned earlier, 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 Asian operations. We thus see that with a very tangible pipeline, we will have a production capacity at around 24,000 tons in 2024, which will continue to grow in the years following that. As we have been building and developing our project at Indre Hore, We have a clear understanding that the project has been through an important phase of de risking and our estimates have shown reliable. We are developing according to plan and are satisfied with the ongoing production at building sites. We are executing on our international strategy and are very pleased to have formalized and established KSMART Farming together with Dongbo.
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 in South Korea and East Asia. Through the acquisition of Kraft Blocks, Salmon Evolution has secured in house sourcing of smalt from a well managed and renowned facility from day 1. We are convinced that the ESG challenges that all industries and sectors are facing will continue to drive disruption and new business models. Our chosen hybrid filter system is by default solving all major ESG 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 solved.
Final remarks is that Salmon Evolution is a fully funded company for all the projects we have taken on. We have secured more than NOK 1,100,000,000 in equity and debt during the 1st 6 months of 2021 and have sufficient funding for both our involvement in KSMART Farming, Phase 1 at Indelhardre and the acquisition of Kjaflaks. And with this, we thank you for the interest in this presentation and in our company, and we will now be answering your questions.
Yes. I see that we have one question here from Hi, this is Denmark at Pareto Securities. I think you can answer this Hakon. Can you say something about if you have done any changes to the design at the production facility in Norway during construction?
I think there are of course small changes that are done as So you go into sort of execution of the drawings, but for all major parts of the facility, we established The base engineering and the overall design and have been building according to that.
Yeah. We can leave the Q and A chat open for a little bit longer in case there are any more questions. That seems to be all for today. So, and again, we want to thank you for attending this presentation. I look forward to see you next time.
Have a good day.