Business and a sustainable environment. Is it possible that the two will get along?

A month ago on 11 November, New Zealand King Salmon (NZKS) (ASX: NZK) secured approval to commence New Zealand’s first open ocean farming, the Blue Endeavour project. This was an occasion worth celebrating after six years of hard work in research and waiting for Council approval. Unfortunately, the relief did not last very long. The salmon farming company stumbled upon a new roadblock posed by the Department of Conservation (DOC) and sustainability-focused policy researcher the McGuinness Institute, who had filed appeals against the project within the first week of December.

NZKS itself claimed that it will enter mediation with the DOC, the McGuinness Institute, and any other interested parties in the New Year. 

Following a hearing in Blenheim which started last year, the Marlborough District Council announced on 11 November the decision by three commissioners to approve NZKS’s application to commence the Blue Endeavour project, 7km away from land in the Cooks Strait. Open ocean farming is an aquaculture practice where farms are located in deeper, less sheltered, high energy surface waters with stronger currents. 

Claimed as the best practice to achieve better environmental, social, and economic outcomes, open ocean is also a part of the company’s long-term strategy, but the current focus remains on the company’s inshore farming production. The project will allow 12 surface hectares of salmon farm space to be made, 10,000 metric tonnes of harvest annually, and the harvesting can be done as early as 2024. 

Though NZKS General Manager of Aquaculture, Grant Lovell, says open ocean farming makes logical sense for both the environment and for species in the long term, the McGuinness Institute does not agree with this. This is not the first time the two parties crossed paths. Their history began all the way back in 2012, when the McGuinness Institute submitted plan changes request and resource consents to the Environmental Protection Authority (EPA) after NZKS applied for additional water space to house nine new salmon aquaculture farms. 

The Institute also released a working paper in 2021 titled “The Role of Ocean Water Temperature in Climate Change Policy”, using NZKS as a case study. The working paper raised the issue about a rise in water temperature drawing on a recent consent hearing of NZKS’ application to establish a new salmon farm within a 1,000 ha site 5 km north of Cape Lambert, which began in October 2021. In short, the working paper highlights that the New Zealand salmon farming industry is both a victim and a villain in terms of climate change, and NZKS is no exception as it has been creating a significant carbon footprint. 

The DoC has signaled that it does not oppose the granting of the consent of the Blue Endeavour application. The official statement from the McGuinness Institute regarding this appeal is yet to be released, but it can be predicted what it will be about based on the history between the two parties. 

For the six months ended 31 July 2022, NZKS incurred a net loss of $24.5m, primarily impacted by summer mortality with a higher mortality expense, lower harvest and a decline in biomass at sea. On the positive side, price increases have been successfully implemented in all markets, enabling the company to keep a flat revenue at ~$80m. The Company completed a $60.1 million pro rata rights offer from February to July and the proceeds were used to repay debt. As of 31 July 2022, company net cash position is at $15.6m in addition to $6.5m a revolving debt facility which remains undrawn.