Making Sound Investment Decisions in Aquaculture

Investing in aquaculture can be risky. As in traditional forms of animal husbandry, aquaculture operations are becoming increasingly intensive to enhance productivity, efficiency and competitiveness. Greater intensity, however, also introduces a corresponding increase in operational risk.

As an investor or lender to the sector, it is often difficult to evaluate the degree of risk in a given project based on a prospectus or business plan. In the attempt to secure financing, business plans tend to highlight the potential benefits of a project while suggesting that the risks are known and manageable.

Canadian Aquaculture Systems, Inc. (CAS) can facilitate the review process to help lenders and investors address this challenge. Our operational review process is applicable to a variety of culture systems and species, and provides a comprehensive and integrated assessment of biological, technological, managerial, governance, financial, market and regulatory factors.

Operational Review Coverage

Systems & Species We Evaluate

Systems
Species
  • Flow-Through Life Support Systems
  • Recirculation / Re-use (RAS)
  • Marine/Freshwater "Bag" Systems
  • Land-Based Culture Systems
  • Cage Culture Systems
  • Hatcheries to Grow-out
  • Aquaponics
  • Salmon / Steelhead / Trout
  • Arctic Charr
  • Tilapia
  • Halibut / Pompano / Yellowtail
  • Walleye / Sturgeon
  • Conch / Shellfish
  • Shrimp / Prawns / Crayfish
Biology

Aquaculture is agriculture; hence, the biological requirements and performance of the culture organisms are paramount. When considering the biological aspects of a business plan or an operating venture, CAS evaluates:

  • The culture environment (water quality, temperature profile, seasonal issues, etc.)
  • Production capacity
  • Bio-productivity and industry norms (growth rate, feed conversion, mortality, etc.)
  • Stock / strain comparisons
  • Fish health management records
  • Operational strategies (feeding, handling, grading, inventory management, etc.)
  • Biosecurity protocol

CAS develops comprehensive production models based on farm management inputs including water temperature, rearing density, cage/tank numbers and volumes, and stock characteristics — projecting the number and weight of fish that can be successfully reared in the facility.

Technology

The fundamental life support systems for fish and shellfish in intensive culture systems depend on efficient and effective technologies. When considering the technological aspects, CAS evaluates:

  • All aspects of facility design
  • Hydraulics (water supply systems) and water exchange rates
  • Oxygenation capacity and efficiency
  • Dissolved gas management (CO₂, N, etc.)
  • Pumping systems and efficiency
  • Filtration and water reconditioning processes
  • Effluent management systems
  • Emergency back-up and alarm systems

Based on our evaluations, CAS prepares detailed reports outlining the efficiency and effectiveness of operations and the economic costs associated with existing and alternative technologies for meeting production targets.

Management

Management is perhaps the single largest factor governing productivity, and yet a detailed assessment of the functional role of managers is often neglected in the review of business plans. When considering the managerial aspects, CAS evaluates:

  • Record-keeping & reporting (information management)
  • The design and implementation of operational routines (daily, weekly, monthly, seasonal)
  • Historical decision-making
  • Employee training and skills sets

CAS can provide effective schedules for daily, weekly, monthly and seasonal tasks designed to establish operational routines and minimize risk. CAS can also recommend curricula for skills upgrading and arrange for practical training on-site or via distance education.

Financial

Many aquaculturists define productivity as technical feasibility and then assume that this also translates into financial viability. Comparatively little effort is directed toward business management functions such as cost control, financial budgeting, and cash flow management. When considering the financial aspects, CAS evaluates:

  • Cost-volume-profit analysis
  • Financial controls, statements and cash flow position
  • Key liquidity, asset management, debt management and profitability ratios
    • Financial and operating leverage
    • Sensitivity analysis
    • Insurance coverage and claims

CAS provides comprehensive business planning services, including the preparation of capital budgets and 5-year monthly pro forma statements for income, cash flow and balance sheets. For operating ventures, CAS also engages in creditor relations and debt re-profiling services.

Governance

An organization requires the right skills at the governance table to be successful. Board members must have the necessary expertise to critique and advise on all areas of an organization's operations. When considering the corporate governance aspects, CAS evaluates:

  • Governance policies, structures and processes
  • The skills and expertise of Board members
  • The culture of the Board of Directors
  • The relationship between Management and the Board

CAS can assist with the definition of proper governance policies, structures and processes for the venture, tailored to minimize impediments to growth while maintaining proper controls. CAS can also serve in an advisory capacity to Boards of Directors of aquaculture companies.

Key Insight: A portion of the Board should always be composed of persons independent of the organization — this improves the chances of a successful outcome significantly.

Markets & Marketing

For the most part, aquaculture ventures are part of the North American food production system and must be competitive with other foodstuffs to secure a share of "stomach space." When considering the marketing aspects, CAS evaluates:

  • Industry & consumer trends
  • Price stability / volatility
  • Food safety issues
  • International trade issues and non-tariff barriers

CAS can provide market scanning reports and market strategies to enhance the competitiveness of aquaculture operations.

Legislation & Regulations

Aquaculture is governed by a complex federal/provincial regulatory framework that requires developers to obtain a number of permits, licenses and/or authorizations. When considering the legislative and regulatory aspects, CAS evaluates:

  • Licence, permit and authorization requirements
  • Compliance standards for the venture

CAS can also compile the necessary permit/licence applications on behalf of aquaculture clients and facilitate meetings between industry and government agencies.