Salmon Evolution, Dongwon confirm joint venture to build land-based salmon farm in South Korea

Dongwon Industries signed a joint venture term sheet with Salmon Evolution on Friday, 26 February, formalizing their previously-announced cooperative agreement to build a land-based Atlantic salmon farm in South Korea.

Seoul, South Korea-based Dongwon, one of the world’s largest seafood companies and owner of StarKist, purchased a minority stake in the Romsdal, Norway-based aquaculture firm in July 2020. In September 2020, they announced a plan to build a land-based salmon farm on an 11,500-square-meter site in Yangyang, Gangwon-do, in the northeast corner of South Korea.

The latest announcement formalizes the creation of the joint venture, named K Smart Farming. Dongwon will own 51 percent of the JV and Salmon Evolution will own 49 percent. The project calls for the construction of a 20,000-metric-ton farm using Salmon Evolution’s hybrid flowthrough (HFS) farming technology, to be completed in two stages of 10,000 metric tons each. Salmon Evolution and Dongwon have targeted a construction start of 2022, grow-out production to begin in 2024.

“This joint venture term sheet marks a major milestone in the relationship between Salmon Evolution and Dongwon,” Dongwon Industries Chief Financial Officer Yun Ki Yun said in a press release. “K Smart is of strategic importance for Dongwon and we are confident that Salmon Evolution’s low-risk HFS technology, coupled with its highly competent organization, will help facilitate a successful project and revolutionize how fresh Atlantic salmon is sold and distributed in South Korea.”

The cost for the first phase, including project management and working capital build-up costs, was estimated by Dongon and Salmon Evolution at NOK 1.6 billion (USD 186.3 million, EUR 154.6 million). Financing for the project will be provided by Dongwon and by third-party financial institutions. Salmon Evolution said it expects to finance its equity interest in K Smart through “strong project execution and cost-control” at its land-based farm at Indre Harøy, Norway, “combined with the company’s demonstrated ability to attract non-equity funding.” Agreements finalizing the financing of the project will be signed in Q2 2021, Salmon Evolution CEO Håkon André Berg said.

“We are honored to team up with a well-reputed and experienced partner like Dongwon,” Berg said. “This collaboration is in accordance with Salmon Evolution’s overall strategy for international expansion, leveraging our in-house experience and HFS competence in developing close-to-market salmon production in collaboration with local first-class partners.”

Both Dongwon and Salmon Evolution will make an initial capital contribution to get the project off the ground, funding design and engineering plans, site evaluation, permitting, and other initial corporate expenses. Subsequently, equity contributions will be paid in tranches subject to certain milestones being met, including final technical, operational, and financial review of the project and K Smart receiving permitting for the project, the companies said.

The agreement also calls for cooperation between the two entities “to establish branding and marketing of premium, land-based Atlantic salmon from K Smart and Salmon Evolution in the Korean market.” The JV term sheet also includes corporate governance principles “aimed at serving as a solid foundation for a long-term partnership between Salmon Evolution and Dongwon,” the companies said.

“We are thrilled about entering the Korean market together with a tier-one seafood player like Dongwon,” Salmon Evolution Board Chair Tore Tønseth said. “Through K Smart, we will be able to serve the highly attractive and fast-growing Korean market with Atlantic salmon of superior quality and unmatched freshness 52 weeks a year. The joint venture structure with Dongwon also ensures a strong local credibility for the project and offers Salmon Evolution a capital efficient and accretive model for growing our business.”

Photo courtesy of Salmon Evolution