Production of 5000 - 10000 MT of Black Tiger Prawns by the use of a movable processing factory vessel from 150 - 200 prawn farms along the coastline of the Philippines.
1. The Opportunity
Currently, only about 10,000 tons/year of Black Tiger Prawns are raised on the central islands of the Philippines, while pond capacity is estimated at about 60,000/year. Finding a way to utilize the free capacity at the prawn ponds is a major opportunity to capitalize on a plentiful, attractively priced and sought after product.
2. How to Capitalize on this Opportunity
GVS will deploy a vessel-based processing plant, thereby enabling processing, packaging and freezing prawns within hours of harvesting, thus maximizing product quality and value, as well as allowing for time and cost efficient logistics.
The world market for black tiger prawns has grown from 500,000 tons in 2006 to about 750,000 tons in 2012.
4. Sales and Marketing
At least half of the production volume is pre-sold at prevailing market prices under a purchase contract with major American wholesaler.
a. Capital Requirements and Use of Funds.
A total of USD 15.6 million is needed to realize this opportunity, where USD 13 million will be invested in hard assets, primarily in vessel acquisition and its conversion to a prawn processing factory, and the balance covering start-up costs and initial negative cash flow.
b. Net Earnings
( After Taxes) -1 720 000 560 581 8 983 224 13 386 680 17 965 145 23 471 062 29 824 073
6. Vessel and Operations
GVS LLC is negotiating a MoA to purchase MS Arctic Warrior for USD 7.5 million. For comparison, to build a similar vessel today would cost an estimated USD 25 million.
She is suitable for our purposes, including partly usable processing factory, freezers and storage. However, conversion works for about USD 5 million is needed in order to be ready for duty.
Plans for the conversion are made, and preliminary agreement with shipyard has been entered into. Cost of conversion will be USD 5 million.
How to Capitalize on this Opportunity
To circumvent the lack of infrastructure, our company - GVS - will deploy a vessel-based processing plant, thereby enabling processing, packaging and freezing prawns within hours of harvesting, thus maximizing product quality and value,
as well as allowing for time and cost efficient logistics.
Prawns will be collected at the various ponds by high-speed landing craft carrying storage containers and ice, allowing for quick, clean and cold storage and transport to the mother vessel.
Agreements with prawn farmers are in place, guaranteeing a minimum supply of 5,000 tons of prawns for GVS’ first year of operations.
Also, GVS has the option to enter into a long-term off-take agreement with an American wholesaler for more than half of its output.
Besides circumventing the local infrastructure issues, a vessel-based processing plant has several additional risk-reducing benefits:
• Source prawns from a much larger area than a land-based plant, thus increasing security of supply
• A “closed” operating environment allows for much better control and management of operational risk factors; hygiene, staff training, absenteeism, theft, security, etc.
• The plant is absolutely self-sufficient in every respect, and less susceptible to adverse weather conditions than a land-based plant.
• The asset is movable as well as saleable, not only as a processing plant but also a hotel vessel
The world market for black tiger prawns has grown from 500,000 tons in 2006 to about 855,000 tons in 2012, with some volatility of price levels due on the one hand to macro-economic conditions in major markets, one the other due to variations in supply.
Social Responsibility, Community Impact and Involvement
The Central Visayas Islands of the Philippines are characterized by high unemployment, poverty and low economic growth.
GVS will directly employ 120 – 150 individuals, and indirectly another estimated 200, all of whom will receive advances training in their fields and a steady, comparatively good salary.
In addition, prawn farms will significantly increase their activity levels and their profitability as well as their farming competence.
As a consequence, GVS will cause a major and positive impact on the local community, both in terms of a sustainable economic development and as an educational force.
To further strengthen this impact, GVS will donate 5% of its earnings to local organizations involved in community development work.
This project also has the attention and enjoys the support of the Philippine Bureau of Fisheries and Aquatic Resources (BOFAR) as well as the Philippine Export/Import Agency (PHILEXIM).
Risk Factors and their Mitigation
Asset Protection and Corporate Structure
In order to safeguard hard assets from political risk and to facilitate effective asset management, ownership of such assets – primarily the vessel – will be organized in a holding company domiciled in Panama.
Operations will be organized and executed within a Philippine corporation in order to comply with local legislation and benefit from a six year tax holiday.
Intellectual property will be held by GVS LLC, domiciled in the USA.
Sales and Marketing may be organized in a separate trading company domiciled in Hong Kong or Andorra, motivated by tax planning considerations and as a hedge against eventual changes in tax policies in GVS’ other locations.
Assets remain under GVS control in case of commercial failure in the Philippines. The Vessel will operate under Philippine flag (secondary); Panama flag will always take precedence (primary) since the vessel is bare-boat chartered to GVS.
Hence the vessel can be removed from Philippine territorial waters at any time in accordance with the Charter Agreement.
Clients will deal with a company located in a jurisdiction (Hong Kong or Andorra) which provides predictable legal, commercial and cultural framework.
Local suppliers, labor force, regulatory bodies will deal with a local company thus minimizing perceived risks of «foreign devils» and allows demonstrability of local involvement.
Biological/Prawn Health Risks
It is in the interest of GVS to assist farmers in operating their ponds in such a way as to minimize risk of disease and at the same time optimize productivity.
To achieve this GVS will employ world leading expertise on farming prawn and have agreements with farmers that allow GVS to effectively interact and impact operations.
GVS will also implement relevant guidelines for farming operations.
CAPITAL REQUIREMENT/USE OF FUNDS USD
Vessel Acquisition 7 500 000
Crewing & Relocation to shipyard 500 000
Conversion Cost 5 000 000
Small Assets' Acquisition 510 000
Pre-Op Expenditures 1 720 000
Further Cumulative Negative Cash Flow 346 831
TOTAL 15 576 831
The founders are open for discussions and negotiations with potential investors with very few restrictions and an open mind.
The main objective for us is to see the project become a reality.