Cermaq has terminated the purchase of 689 tons of MAB worth NOK 134 million in response to the Norwegian government’s opening of the possibility of returning the permits purchased at fixed prices in 2022. This action had its origin in the proposed income tax on aquaculture resources in the northern country. “We will terminate the purchase because we do not have sufficient overview of the impact the proposal will have on future valuation and profitability,” said Chief Sustainability Officer in Cermaq Group, Lars Galtung.
“We fear that reduced investments and projects on hold will result in lower activity and risk of layoffs in the supplier industry”, he added.
For him, “the proposed resource rent tax on salmon farming has created considerable uncertainty among both fish farming companies and in the supplier industry sector. Reduced investments and projects on hold will result in lower activity and a risk of layoffs in the supplier industry. This will affect jobs in many coastal municipalities and will become reality for the aquaculture industry unless there are changes to the resource tax proposal.”
Freezes investments of NOK 4 billion
Cermaq bought its share of the offered capacity increase based on the traffic light system. The company paid MNOK 134, money that was to be transferred to the Aquaculture Fund which is distributed to municipalities with farming sites.
Now, Cermaq Norway is putting investments of up to four billion NOK on hold due to the proposal for a resource rent tax. “Since 2016, we have invested more than five billion NOK in Northern Norway and had plans for investments of up to four billion NOK in the next few years. Now we need to get an overview of the consequences of the resource rent tax before any projects can be implemented”, he concluded.
La company freezes investments as resource tax will set Norway back
One day before of these statements, Cermaq reported that the company will freeze investments in Norway as a consequence of the proposal for resource rent tax. “We will wait for more clear understanding of the announcement of last week and the final proposal for the resource rent tax and associated regulations”, stated CEO Steven Rafferty.
For Rafferty, there is little doubt the current resource tax proposal will lead to less investment in Norway and more outside of the country.
From Cermaq said the company does not concur with comments by the Norway Finance Minister that the salmon producers “did not pay for the old licenses.” The owner of Cermaq – Mitsubishi Corporation – acquired the company in 2014 from the principal shareholder, the Norwegian Government, at a market price.
Most of the price paid was for the valuation of the licenses. Further growth of Cermaq has been through the license auctions also at market price, only 2 years ago, where the auction price was calculated the current tax regime.
“On acquisition of foreign owned companies, it is often appropriate to factor in a country risk within the acquisition price where there is a volatile economy or a politically unstable environment, where Norway is seen as the opposite. It is hard to believe with hindsight that Mitsubishi should have incorporated a country risk for an economy such as Norway”, stated Rafferty.
Invested the profits
The majority of profits made in Cermaq Norway since 2014 have been reinvested in their operations, they explain. Though Cermaq has large operations also in Canada and Chile, the majority of the funds have been invested in Norway.
For many years, this country has been the leader in research and development and innovation and also by addressing sustainability and lower carbon emissions through new technologies and large investments in this area.
“There is little doubt the current resource tax proposal will lead to less investment in Norway and more outside of the country. The new regulations if implemented would severely damage the position of Norway as a global leader. After many years working in the global salmon industry, I have referred to Norway as a role model for other salmon countries to follow. This cannot be the case going forward if the proposal is mandated. There are many details of the proposal that will impact Norway’s competitive position as a frontrunning salmon region negatively. It is a pity that a consultation process could not have taken place prior to the announcement of the new tax”, said Rafferty.