aqualife i intro - a sustainable, technology-enabled revolution of the u.s. shrimp industry

Aqualife IA Sustainable, Technology-enabled Revolution of the U.S. Shrimp Industry

DECEMBER 2015

Executive Summary

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Sustainable Investing with a Healthy Cash Yield

PRIVILEGED & CONFIDENTIAL2

Aqualife I presents a unique opportunity for sustainably-minded investors to participate in a de-risked, yield-driven equity investment with attractive returns. An investment into Aqualife I also will facilitate entry into future Aqualife projects with substantial upside.

Expected Returns Summary Sustainability Benefits

Additional Upside from Ability to Participate in Aqualife II and HoldCo

Annual Dividend Yield1 >15% !

Total Annualized Return2,3 >35%

!

!

!

Locally sourced

Organic, non-GMO

Carbon neutral

Energy self-sufficient

! All water and waste recycled

• Net Zero is looking to close a large-ticket $480m financing for a 10m lbs. per year organic shrimp farm in Imperial, CA in mid-2016

• Aqualife I investors will be given a Right of First Refusal on equity raised for the Aqualife II project, irrespective of investment size in Aqualife I

• Additionally, Aqualife I equity holders are expected to have an opportunity to invest in an eventual 100m lbs./year Aqualife Holding Company to be formed in 2016/2017

1 No$dividend$in$Y1;$dividend$expected$to$increase$annually$from$Y2$forward

2 Assumes$exit$at$7x$EBITDA$multiple$in$Y33 Includes$returns$from$both$dividends$as$well$as$capital$appreciation

Overview of Aqualife I

Legal Name: Plant Growth Net Zero Aqualife I, LLC

Description: High-efficiency, closed-loop, sustainable indoor vertical shrimp farm producing 100% organic, non-GMO Pacific White Tiger Shrimp

Location: Imperial, California

Size: 1 million pounds of shrimp per year (U15-U20 size)

Cost: $35 million

Capital Raise:

Debt: $25 millionEquity: $10 million (including $3 million Sponsor’s Equity)

Financial Highlights:

• EBITDA positive from Year 1• EBITDA margins of 76% from Year 2

Status: Shovel ready; fully permitted; breaking ground Q1 2016


Investment Highlights

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Disruptive technology and approach that could revolutionize a $7.5 billion per year U.S. industry with limited existing domestic competition

Opportunity to achieve stringent sustainability criteria in a market with urgent unaddressed consumer demands for sustainable solutions

Proven technology already deployed in Germany; production costs below $3/lb; replicable and scalable assets to be integrated into the creation of a branded market leader

Highly cash generative with EBITDA margin of 76% in Y2; revenue secured by 10 year off-take agreement for 100% production at $11.75/lb

De-risked approach to project development, initial capital expenditure and product placement ensures high degree of visibility on cash flows


Net Zero’s rigorous risk management culture has instilled a deeply engrained and comprehensive approach to managing a wide range of risks typically faced by investors.

Technological

Pricing / Market Placement

Operational / Development

Financial / Payoff Profile

Political / Regulatory

• Replication of existing German facility• Commercially proven, profitable technology

• Off-take agreement in place for 100% of production

• High profile counterparties

• Not reliant on state aid• Business-friendly jurisdiction

• Fixed price EPC contract• Project interruption insurance for up to

80% of production

• Conservative assumptions with contingencies• Maximization of every resource stream• Scalable and replicable

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Investor Risk Aqualife Profile Risk Mitigated?

Aqualife Has Been Actively De-Risked


Shrimp: Leading Source of Sustainable ProteinConsistently a leading sea-based protein source for U.S. consumers. Additionally, with Aqualife shrimp needing a feed ratio of 1.2x per lb., it possesses a superior sustainability footprint relative to beef (7.5x), pork (3.5x) and chicken (2.5x).

Sources: NOAA Annual Commercial Landing Statistics, LMIC.org, and the Global Aquaculture Alliance


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Mill

ion

of P

oun

ds

Year

US Consumption of Seafood

Shrimp Cod Salmon Tuna Crab

U.S. Shrimp Market: $7.5 Billion OpportunityToday’s domestic U.S. shrimp market represents a $7.5 billion opportunity, which has grown on average 13% annually since 2009.

Source: Import data derived from USDA economic research service; Aquaculture trade - All years and all countries*US data derived from NOAA Commercial Fishery Statistics


$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

2009 2010 2011 2012 2013 2014

Bill

ions

of D

olla

rs

Year

Imports US

Disease outbreak in Asia created

supply shortage

US-Based Indoor LBRF(Sun Shrimp, FL Aquaculture, Planet Shrimp)

100s of small operators focused on their local markets by selling direct to consumers

International Outdoor Farm Raised

Thailand, Vietnam, China, India, Mexico

Wild Catch

Gulf of Mexico, Argentina

US-Based Outdoor Farm Raised

(Aonori Aquafarms)

100s of small operators and a few large facilities

Fragmented Market is Ripe for DisruptionPrimary competition is from very small and generally low-tech U.S.-based aquaculture facilities representing less than 20% of the U.S. market.

+ ORGANIC, NON-GMO + VOLUME, PRICE

+ FLAVOR, NATURAL+ LOCAL

AqualifeLocal, High-Tech,

Scalable, Non-GMO, Organic, Sustainable


- SCALE, LOW-TECH - SAFETY, SUSTAINABILITY

- SCALE, LOW-TECH, SUSTAINABILITY - SCALE, SUSTAINABILITY

Nearly All U.S. Shrimp is Sourced OverseasIn 2014, more than 80% of the shrimp consumed in the United States was sourced from overseas. In dollar terms, imported shrimp represented 90% of the U.S. market.

Source: Import data derived from USDA economic research service; Aquaculture trade - All years and all countries*US & Aquaculture data derived from NOAA Commercial Fishery Statistics

80%

19%1%

2014 Shrimp Source; Quantity

Imported US Aquaculture

90%

9%1%

2014 Shrimp Source;Value

Imported US Aquaculture


Vast Majority of Imported Shrimp Sourced From Developing Countries With Poor RegulationAt least 88% of imported shrimp consumed in the U.S. originates from countries with food safety, environmental and labor standards well below those expected by U.S. consumers.

18.2%

16.2%

11.4%

19.1%

3.6%

12.9%

5.7%

12.9%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Indonesia

Ecuador

Thailand

India

Mexico

Vietnam

China (mainland)

All other countries

2014 Imported Shrimp Source, Volume

Source: Data derived from USDA economic research service; Aquaculture trade - All years and all countries


Sustainability Issues Plague Shrimp ImportsAs consumption and imports continue to rise, growing scrutiny of the safety, social and environmental practices of foreign shrimp producers raises major sustainability concerns.

“Costco Wholesale Corp. was sued for selling farmed shrimp from Thailand, where slave labor and human trafficking in the fishing industry are widespread, and allegedly misleading U.S. consumers about it.”

Costco Sued Over Claims Shrimp Harvested With Slave LaborAugust 19, 2015

“Federal inspectors have struggled to keep up with the volume [of Asian imports], looking at only 3.7 percent of the farmed seafood that arrives at American ports, and taking samples from less than 1 percent for testing at a Food and Drug Administration lab.”

Will Shrimp Safety Questions Pose Jumbo Problem For Trade Deal?June 11, 2015

“Shrimp ponds have become the most recognizable symbol of coastal degradation in Trang, a southwestern Thai province bordering the Andaman Sea. Shrimp thrive in brackish waters that are also home to mangroves, or ‘rainforests by the sea.’”

In Thailand, Pollution from Shrimp Farms Threatens a Fragile EnvironmentMarch 20, 2008


Consumer Reports: “How Safe is Your Shrimp?”In April 2015, Consumer Reports released an in-depth study in to the safety issues rampant among the imported shrimp sources that dominate the U.S. market.

• FDA tested only 0.7% of foreign shrimp shipments in 2014

• Of above, ~80% were rejected• 16% of cooked, ready-to-eat

shrimp contained bacteria such as vibrio and E. coli

• 11 samples contained illegal antibiotics

• 7 samples included antibiotic-resistant superbug MRSA

• Non-traceability / misleading labeling

• Bought 342 packages of frozen shrimp (284 raw, 58 cooked)

• Sourced from large chain supermarkets, big-box stores and “natural food stores”

• 27 cities across the U.S.• Tested for bacteria and chemicals, including illegal

antibiotics and disinfectants

Source: Consumer Reports, How Safe Is Your Shrimp?, April 2015 and June 2015

Stud

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Key Findings


Source: 2015 Culinary Forecast by the National Restaurant Association Survey of nearly 1,300 professional chefs, who are members of the American Culinary Federation

Aqualife Meets Unfulfilled Market DemandsAqualife’s organic, Non-GMO and California-grown shrimp addresses multiple leading U.S. culinary trends that have been unaddressed by the existing U.S. shrimp market.

2015 Trends Identified by Survey of American Culinary Federation Chefs

#1

#8

#10

Locally Sourced Seafood

Environmental Sustainability

Sustainable Seafood

Farm / Estate Branded Items

Shrimp Imports Aqualife

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#

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Travel as much as 8,000 miles

Located near major U.S. markets of L.A. and Las Vegas

Damaging to health and environment

Organic / non-GMO / “net zero” resource footprint

Both imports and wild catch non-sustainable

Organic / non-GMO / “net zero” resource footprint

Non-traceable / misleading labels

Developing own brand with Whole Foods guidelines

#3

!


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The Aqualife I Solution: Sustainable, Profitable, Scalable

• Local, 100% organic, non-GMO• GREEN label certified by non-profit

Monterey Bay Aquarium• Only shrimp that meets Whole Foods'

Responsibly Farmed criteria fully

• Modular, closed-loop system• High efficiency• Low water and energy use• Low waste and emissions• Consistent, reliable production

• Proven, scalable processes• Team of aquaculture experts• Highest quality suppliers and partners


Colossal Pacific White

Shrimp(U15-U20)

Net Zero’s Closed-Loop Sustainability ApproachNet Zero Enterprises designed Aqualife as a closed-loop system to maximize food security and minimize production cost while maintaining sustainable operations. Multiple clean technologies are combined to minimize water consumption, grid energy use, and waste production.

FOOD:sustainable

shrimp

WATER: conserved,

filtered, reused

WASTE: conserved,

filtered, reused

ENERGY: conserved,

produced onsite

BUILDING: thermal

warehouse


Super-intensive stacked raceway farming technology has been studied at universities in the U.S. and around the world

A German farming family adapted the technology and engineered a successful process

German system has been in commercialoperations since 2007 with <5% mortality and no crop losses. Produces >500,000 pounds of shrimp per year.

The German farm’s jumbo Pacific White Tiger Shrimp have won multiple awards, are continuously sold out, and sell for €49/kg ($24/lb.)

Source:$Schäfer$FamilyTowned$shrimp$farm$in$Affinghausen,$Germany$(https://youtu.be/bhkKPaALqw4)$

Replication of a German-Engineered Process


Aqualife refines and builds on the success of an existing German engineered vertical indoor shrimp farming system. The technology is owned by Net Zero and licensed to the German facility. Many of the same individuals will be directly involved in Aqualife.

Executing the Plan and Defining the Vision20

16

Q1 2016: Break ground on Aqualife I

Q3 2016: First shipments from Aqualife I

Q3 2016: Finalize Aqualife II financing

Q4 2016: Break ground on Aqualife II

2017

Q2 2017: First shipments from Aqualife II

Q3 2017: Finalize Aqualife TopCo

2017

-202

0 Establish Aqualife facilities near key major U.S. markets such as San Francisco, Houston, Seattle, New York and Philadelphia/DC

Expand marketing and distribution platform nationwide

2020

+ Potential exit event via sale to strategic buyer and / or I.P.O.

Aqualife I and II represent the initial phases of a medium-term strategy to place similar facilities near major U.S. markets and develop an in-house brand (PureShrimp™). Assets will eventually integrate into a holding company to maximize valuation in an exit.

The Plan The Vision


Major Milestones to Date

2007: First vertical indoor shrimp farm developed by the Schaefer family in Germany

2008: German facility reaches production capacity of 454,392 lbs. of shrimp selling at €49/kilogram

2012: Technology transfer and licensing agreement signed by NZE for use outside of Germany

2012: Aqualife starts plans to build a facility in California

2014: Aqualife signs major offtake agreement with seafood distributor to market shrimp production to retailers and end-users


Who is Net Zero Enterprises?

• Independent, privately-held sustainable infrastructure developer and investor

• Founded in Stockholm in 1982; relocated headquarters to United States in 2012

• Merger of three companies with specialties in green building (TK Real Estate, 1982), renewable energy and waste investments (Energia Alap, 1991) and Front End Loading project planning (Plant Growth AB, 2005)

• Majority owner of a portfolio of operating companies/assets

• Proprietary asset development model that combines multiple commercially proven clean technologies to realize “net zero” operations

WASTE ENERGY WATER FOOD BUILDINGS

Focu

s Se

ctor

sH

istor

y an

d Ba

ckgr

ound

Stra

tegy

and

D

irect

ion Asset

developer and project finance advisor

Value-added minority investor in projects

Control-oriented financial sponsor

Past Present Future


2015

Kim ForssellChairman & CEO

• Serial entrepreneur with over 20 years of infrastructure development, including with Ericsson

• Prior to forming Net Zero Enterprises, Kim was an advisor as well as an investment board member for Vattenfall, one of the largest asset developers in Europe

• Member, Board of Directors of Energia Alap• BS in industrial engineering from Sweden’s Royal Institute of

Technology MS in industrial engineering from Virginia Tech and an MBA in Strategic Planning from Harvard/Heriot-Watt

Anders LennartssonPresident, Americas

• Diverse background spanning from multinational Commercial Management at Ericsson Inc. to Real Estate Investment and Land Development

• Founder of Net Zero Construction and Net Zero Renewable Energy division of Net Zero Enterprises

• Member, Board of Directors of Energia Alap• BA in International Business/Information Systems from the

University of San Diego

Net Zero Enterprises Senior Management


Douglas ErnstTechnical Advisor

• Recognized world leader in aquaculture systems research, development and engineering

• Previously, a co-founder and technical lead at NaturalShrimp• BS in Molecular Biology from the University of Oregon, a Masters

of Agriculture from Oregon State and a Ph.D. in Aquaculture Engineering from Oregon State

Brinson LingenfelterGeneral Manager

• Nearly 10 years of experience designing and operating sustainable aquaculture systems

• Extensive experience designing and building vertical shrimp farms• Designed and built proprietary technology for a large crawfish

farm and seafood distribution company• Holds a BS in Fisheries and Allied Aquaculture from Auburn

University, a MS in Fisheries and Mariculture from Texas A&M and an MBA from the University of Southern California

Aqualife Management & Advisors


Contact Information Net Zero Enterprises, LLC

San Diego Office:127 Lomas Santa Fe DriveSolana Beach, CA 92075netzeroenterprises.comt: +1 858-999-7399

Kim Forsselle: [email protected]

Anders Lennartssone: [email protected]

t: +1 858-353-3707


aqualife i intro - a sustainable, technology-enabled revolution of the u.s. shrimp industry

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