Geothermal Greenhouse Investment in Iceland


Navigator has begun work with an Icelandic investment group is planning to build the first large-scale geothermal energy-powered greenhouse in the world.


Iceland’s geothermal power sector provides over 50% of total energy consumed nationally. This is a cheap and continually-available energy source which combines electricity production with supplies of high purity cold and hot water and CO2. Cold water is abundant and of exceptional quality.


The project comprises investment of EUR 12.75 mln to construct a state-of-the-art frost-resistant, geothermally-powered, 50,000 m2 greenhouse area, with an annual production of 2,834 tonnes of tomatoes. Output will be exported to the UK to high-end supermarket chains using the same transport routes used for fresh fish exports: pilot testing has already been successful.


First tomato production within 2 months of cultivation start and will be ready in October/November 2014; maximum capacity is reached in 2014 with continuous growth. The products are sustainable: this will be one of the few zero-carbon large-scale greenhouses in the world. No pesticides are used: only biological control.


The greenhouse will be located near an existing geothermal Power Station, the second largest geothermal plant in the world with a capacity of 303 MW electricity and 133 MW hot water. The investment sponsors have a fixed-price 20-year contract for power purchase.


The tomatoes are exported in refrigerated containers to the UK. Total transport time is 3 days, equivalent to the time needed for tomato exports to reach the UK from Spain, Turkey or Italy.


The investment sponsors have arranged loan finance from a Nordic Development Bank at concessional rates of 1.5-2%, and seek an equity finance contribution of EUR 4,305,000, representing 71.20% of the total equity capital.


The potential for expanding the site to 20 hectares (200,000 m2) is available and can be implemented in two stages.


Products


Four varieties of tomatoes will be grown using monocrop methods. The initial output is divided equally between large, mini-plum, sunstream and cherry tomatoes on the vine: these products are designated for supermarket sales in the UK.


The growth time from seeding to harvest is approximately 10-12 weeks. All products are individually harvested based on their ripeness: this requires well-trained staff and managers capable of implementing a quality-first approach. The tomato varieties will be negotiated each year depending on UK demand.  A five-year sales agreement exists.


The tomatoes are pesticide-free due to their remote location, the cold weather (which makes propagation of insects difficult) and the distance between farms. Biological control is used in greenhouse operations.


The tomatoes have a zero carbon footprint: the geothermal energy is zero-carbon: carbon is used in the transport chain, but much less than equivalent exports from Spain, Italy, Greece or Turkey. CO2 used for growth stimulation is a bi-product from the Sorpa methane production plant. Hekla pumice (produced in Iceland) is used as a substrate in hydroponic growth of tomatoes, and is reusable following sterilisation in a steaming process.


Markets and Customers


The produce is intended for export to the UK. Vine tomatoes are becoming increasingly popular in the UK, and in 2010 accounted for 54% of total UK consumption. The UK grows less than 20% of total tomato consumption: 80% is imported, primarily from The Netherlands and southern Europe.


Two Icelandic container shipping lines serve the UK market: Eimskip and Samskip. Refrigerated containers take 3 days to arrive at Immingham, from which trans-shipment to the UK distributor’s warehouses and directly to supermarkets or supermarket distribution centres is assured.


Pilot test shipments were conducted successfully from December 2011 to April 2012. The produce included Elegance, Annamay, Picolo and Sun-stream. All four varieties were test grown and shipped, and met quality control standards.


The investment sponsors have already implemented a trial cultivation and implemented negotiations with a premium UK wholeseller/distributor, who is prepared to take 100% of the crop for placement in premium UK supermarkets such as Tesco, Marks & Spencer, Waitrose, Asda, Morrisons and Sainsbury.


Capital Expenditure


Total capital expenditure for Phase I is budgeted at EUR 10,427,460 for a 50,000 m2 area in Phase I. A tender process has already been implemented, and the majority of works will be sourced by contractors in Iceland who have prior experience in international cold-weather greenhouse production.


Please contact Philip Ammerman at pga@navigator-consulting.com for further information.