Solar Foods is planning to go public

Solar Foods is a global leader in sustainable protein production, solving the global food production problem by offering a completely new alternative to existing animal and plant proteins. Solar Foods’ first product is the naturally occurring single-cell protein Solein®, which can be used as a food raw material with high protein content. In the long term, Solein production improves the global availability of protein and increases price and quality stability of food raw materials by disconnecting food production from agriculture. The main raw materials for production are carbon dioxide and electricity. Solein production uses fossil-free energy, which results in the lowest environmental impact and based on research the smallest carbon footprint compared to all other known protein sources. The Company has verified Solein’s functionality in a wide range of food categories, such as dairy, meat and egg substitutes. Solein is suitable for all diets and does not contain any known allergens.

The Company’s business model is to produce new food raw materials for the global market using both existing and new microbial strains under development. This requires investments in R&D, sales and marketing, as well as in the production capacity of Solein. As the Company has already scaled its production technology to demonstration scale, it also has the potential to license both hydrogen fermentation technology and production organisms for the food industry.

The purpose of the listing of Solar Foods is to enable the Company to grow its business to a global scale.

• Global growth strategy. The aim is to implement a growth strategy that includes scaling of production technology, launching factory projects based on it, introducing new production organisms and products to the market, and strategic acquisitions to accelerate technology development.
• Recognition and credibility. Solar Foods believes it is the first alternative protein technology company to seek public listing. The Company estimates that the listing will increase its credibility in the eyes of key stakeholders (customers, financiers, current and future personnel).

The Company already includes significant well-known investors such as Fazer, Lifeline Ventures, Bridford Group, Agronomics, CPT Capital, Voima Ventures (VTT Ventures), and significant family office investment companies.

With previous oversubscribed Springvest funding rounds, the Company has over 2,000 shareholders, enabling it to complete a technical listing.

In addition, the Company has strong public financial support. Of the EUR 110 million potential grant notified to the Company under the EU rule on State aid, approximately EUR 34 million has been granted through an existing grant decision, with EUR 76 million remaining subject to the submission and approval of a new grant application.

Target markets and growth drivers

Solar Foods is positioned as a revolutioniser of the global market for protein products, offering a completely new alternative to existing animal and plant proteins. Solar Foods’ customer base consists of food companies, which are under increasing pressure to find new sustainable, reliable and price-stable sources of food raw materials to meet their strategic environmental goals. In the Company’s view, Solein solves this problem, which creates a strong demand potential for it. The Company’s technology is a strategic platform technology that can be utilised to commercialise various products.

The Company believes the following megatrends support the Company's preconditions to create a completely new alternative to animal and plant proteins on the market for protein products:

• Climate change and biodiversity loss. As climate change progresses, the ability to produce food regardless of climatic conditions will become highlighted. A significant part of the world's surface area is already used for agriculture, and the land available for agriculture can no longer be sustainably expanded. On the contrary, there is pressure to reforest agricultural land to grow global carbon sinks. In addition to energy production, food production is the most significant environmental modifier and the main reason for biodiversity loss.
• Population growth. The world population is expected to grow to 10 billion by 2050. Solar Foods believes that providing a sufficiently nutritious diet for a growing population requires new solutions for food production already today.
• Change in consumer behaviour. Consumers are increasingly taking climate and environmental factors into account in their purchasing decisions and are striving to reduce the consumption of traditional products. Food companies need to find new sustainable protein sources that can not only replace animal proteins but also genuinely reform their food offering.
• Geopolitics. The importance of self-sufficiency in food production is emphasized due to geopolitical reasons. The global food supply chain is quite fragile and concentrated: For example, three countries account for over 80% of the world’s soy production, so even a small crisis will have a significant impact on global protein availability or at least the price. Prevailing geopolitical tensions have put food self-sufficiency at the top of many countries' list of priorities. In addition, countries are using legislation to find new solutions to tackle climate change, biodiversity loss and sustainable food production.

Solar Foods' strengths

Proven technology and product. The Company has concretely proven the functionality of its technology and production process for 5 years on a pilot scale. In addition, scaling production to industrial scale has been verified at Factory 01. Solein’s functionality in food products has been tested with product prototypes, some of which have been sold in Singapore. Foods that use Solein have also been extensively tested by consumers, and the taste profile and properties of the product are suitable for many foods.

Patented technology and strong competition protection. The Company believes it is the only player in the world to commercialize a completely new food protein and a technology platform for its production, hydrogen fermentation based on its own hydrogen production. The Company has filed over 160 patent applications, of which 28 have been granted so far. Strong patent protection, R&D investments, demanding construction of a commercial-scale production facility, and challenging food licensing processes make the barriers to entry into the industry very high.

The Solein product can be endlessly replicated. The Company expects to be able to replicate and expand its production without reliance on individual raw material suppliers or the limited availability of some raw materials. Furthermore, the Company’s fermentation technology is not based on utilising any critical element. By disconnecting food production from agriculture, Solar Foods improves the price and quality stability and availability of food raw materials.

The product has competitive features compared to other protein sources. The Company estimates that Solein has the lowest carbon footprint compared to all other known protein sources if fossil-free energy is used in production. The production of Solein does not require arable land, and it can be produced anywhere where renewable energy is available, such as in the desert or in space. In large-scale production, the Company estimates that Solein’s cost will be competitive with any other protein.

Prerequisites for a highly profitable business. Solar Foods aims to build a highly profitable business based on the technology platform it has developed. This can be achieved by scaling production capacity, reducing production Solein's costs and ensuring premium pricing through product categories with strong brands and high price points. After the technology development phase, the Company estimates that the commercial factories will generate strong and predictable cash flow, as production is not dependent on long raw material supply chains or their strategic supply risks. The working capital tied up in the process is low.

Solar Foods' strategy for the next few years

After the successful deployment of demonstration factory Factory 01, the Company's next strategic phase will prepare for global scale-up and commercialization of production.

Securing new food approvals is critical to commercialization. The Company has a valid novel food authorisation in Singapore. The Company expects to achieve so-called self-affirmed GRAS (Generally Recognized as Safe) status in the United States during 2024, which will enable sales to start in the United States. The Company aims to start sales in the United States from the second half of 2024. This is expected to have significant benefits in similar approval processes in other markets. The Company is currently undergoing a novel food authorisation process in the EU and the UK. In the EU, the Company expects to obtain novel food authorisation in 2026. In addition, the Company is continuously assessing launching novel food authorisation processes for new products.

Alongside the food approval processes, the Company is preparing strategic launch and partnership agreements with major food and biotechnology companies. The aim is to develop Solein products together with customers and commercialise them in different markets. Through food approvals and strategic partnerships, the Company aims to implement an investment in Factory 02. This facility will have a profitable production scale.

The Company’s growth over the next few years is primarily based on two factory projects:

• Demonstration plant. The planned capacity of Factory 01, which was commissioned in 2024, is approximately 160 tons per year for Solein. The factory’s production will be sold to customers’ test marketing campaigns and to pilot new products. The Company assessed that the implementation of these steps is a prerequisite for obtaining sales contracts for Factory 02. The actual investment of the plant was over EUR 40 million.
• Commercial scale production facility. Factory 02’s production capacity for Solein is estimated to be over 50-100 times higher than Factory 01, which the Company estimates would generate net sales of EUR 80-200 million. The Company estimates that the production cost of Solein on the Factory 02 scale excluding depreciation and financing costs is currently around EUR 4.3–5.2 per kilogram and estimates that it will fall further in the future thanks to technological developments. The investment cost of Factory 02 is estimated to be EUR 150-420 million depending on the production capacity and the country of investment. Investment costs will be specified as planning progresses. The Company expects that investment decisions will be made by 2026 at the latest.

After the implementation of the first profitable industrial-scale production plant, the Company aims to continue global scaling of production. The Company is also developing new products alongside the current Solein. As part of its strategy, the Company will also assess the possibility of licensing its technology to potential partners. In licensing agreements, the Company’s net sales would be based on a license fee based on the customer’s production. This business model would not tie up capital and would improve the Company's profitability.

Financial information

The Company's equity ratio was 48% at the end of 2023 (2022: 23%) and net debt was EUR 11.9 million (15.9). At the end of 2023, the Company’s cash assets amounted to EUR 16.4 million (9.5) and approximately EUR 24 million on 30 June 2024. In 2023, the Company had not yet launched the commercialisation of its product. In 2023, Solar Foods' operating loss (EBIT) was EUR 6.8 million (3.2) and net sales was EUR 4,987 (0.0).