Deep Sea Supply and Marine Harvest ASA (Marine Harvest) have entered into a Heads of Agreement to establish a 50/50 owned aquaculture shipping joint venture (the "JV") that is to build, own and operate aquaculture vessels. The JV represents a unique opportunity for Deep Sea Supply to capitalize on the Company's experience from the OSV sector to enter into a new and attractive market together with an industry leading partner.
Accordingly, Deep Sea Supply and Marine Harvest aims to significantly reduce costs related to vessel services through establishing the JV. Over the past few years aquaculture vessels have increasingly become an integrated part of the value chain. Marine Harvest charters today 44 vessels with a combined cost of approximately EUR 100 million per year, making Marine Harvest the industry's largest charterer of such vessels.
The JV expects to enter into contracts for the construction of aquaculture vessels which will be chartered by Marine Harvest upon delivery. Current discussions indicate a substantial reduction in newbuilding cost compared to solutions provided by alternative aquaculture providers. The JV entity will be Marine Harvest's preferred provider of aquaculture vessels. The intention of the JV is to also compete for external contracts. Deep Sea Supply will enter into management agreements with the JV covering all necessary management services, including technical management, ship management and other corporate services.
The aquaculture shipping industry is fragmented and characterised by lack of competition. Through the JV, Deep Sea Supply and Marine Harvest aim to consolidate the industry to achieve economies of scale. The JV will explore any opportunity that may improve building cost or operating cost, including taking advantage of the current imbalance in the offshore service vessel market through potentially convert surplus offshore vessels into aquaculture vessels if project economics are favourable.
Deep Sea Supply sees the establishment of the JV together with Marine Harvest as an attractive opportunity for the Company to expand its business into a related industry where we can benefit from long term charters at attractive rates.