Extruded Fish Feed Mill in South America.

Challenge

The sponsor's growout farms had grown to consume 140,000 t/year of extruded feed, all sourced from two third-party suppliers whose pricing had become the single largest variable cost line. A dedicated mill would secure supply, control feed conversion ratio (FCR) formulation, and hedge against continued raw-material volatility — provided the CAPEX and working capital could be financed prudently in a moderately volatile local currency.

Strategy

Multi-contract was chosen because the sponsor's PMO had prior extrusion experience and the wrap premium for a single-source turnkey was estimated at 14% — too rich for the return profile. A two-country supplier corridor was designed for extruders and coating equipment; raw-material handling was contracted locally. FX exposure was explicitly addressed as a design-level decision, not a treasury afterthought.

• Multi-contract to avoid a 14% wrap premium
• Two-country corridor for extruders + coaters
• Local sourcing for raw-material handling to reduce FX exposure
• Working-capital sized against 90-day cash conversion cycle

Working-capital sizing followed the logic behind the Working Capital calculator.

Supplier selection

Five extruder manufacturers were evaluated across the two corridor countries. Three passed documentary shortlisting; two passed reference-site visits. The winner combined the strongest technical fit for the sponsor's salmonid formulation with an acceptable 20-year installed base. Global B2B Group remained supplier-neutral.

• 5 → 3 → 2 → 1 funnel with documented scoring
• Reference sites visited by both nutritionist and process engineer
• 10-year spares availability contractually guaranteed
• Second-source qualification retained on coating equipment

Financing

Commercial project finance was arranged by two regional banks — no ECA involvement, since supplier corridor countries did not fit the sponsor's preferred lender group. The banks required an independent lender's engineer and a formal FX hedging program covering all imported-equipment payments over a 12-month horizon at 90% ratio. DSCR at base case ran 1.85x.

The FX architecture is the applied version of the Currency & Payment Risk framework. Structural context on the Project Finance pillar.

Execution

The mill was built as a single wave — no staged commissioning was justified given the volume-hungry captive offtake. FAT on the extruder and coater was owner-witnessed; three NCRs on the coater were closed at supplier cost. Commissioning was completed 11 days ahead of plan. First commercial batch shipped to the sponsor's own growout farm inside 18 months from FEED start.

• Single-wave commissioning aligned to captive offtake
• FAT closed 3 coater NCRs pre-shipment
• Commissioning 11 days ahead of 18-month plan
• FCR improved 4% vs prior third-party feed in first 6 months

Lessons learned

• Building the mill inside the growout footprint removed a substantial logistics cost that had been hidden in third-party feed pricing.
• The 90% FX hedge ratio over 12 months was the single biggest lender comfort item — worth the hedging cost.
• Second-source qualification on coating equipment paid off when a supplier certification issue disrupted parts availability in month 22.
• Multi-contract worked because the sponsor's PMO had extrusion experience — a generalist PMO would likely have paid the 14% wrap premium anyway.
• The captive-offtake business case was more defensible than a merchant business case would have been — lender diligence moved faster as a result.

Executive takeaways

• Captive-consumption business cases are typically easier to finance than merchant plays — structure the demand story explicitly.
• Design FX exposure at CAPEX architecture stage, not at treasury cleanup stage.
• Hedge ratios and horizons should be lender-endorsed, not improvised per deal.
• Second-source qualification on wear parts and consumables can matter as much as second-source on capital equipment.

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