Borregaard Risk: Alginor Plant Frozen, Impairment Likely

Borregaard ASA faces a likely impairment on its NOK 292 million investment in Alginor after the seaweed biochemicals company froze its demonstration plant and implemented temporary layoffs. Alginor cited raw material supply challenges, delayed product development and commercialisation, and additional cost overruns in the demonstration plant investment. The company is not positioned to realise the potential of that investment in its current state. To secure continued operations, Alginor has decided to freeze the demonstration plant investment and implement temporary layoffs. It will now use its pilot plant to investigate product development, commercialisation, and solutions for raw material supply and harvesting. A revised strategy is being developed, and its feasibility will be assessed. Borregaard, together with the largest shareholders, has made available an additional NOK 100 million in liquidity on subordinated terms under Alginor's convertible loan frame. This injection buys time while the revised strategy is evaluated.

Alginor's Plant Freeze and the NOK 100m Bridge

The decision to freeze the plant follows recurring challenges. Raw material supply has been unreliable. Product development and commercialisation have been delayed. Cost overruns have eroded the expected value of the demonstration plant. These factors together led management to conclude that the plant cannot be brought to its intended potential without a strategic reset. Temporary layoffs will reduce cash burn in the near term. Alginor will instead focus on pilot-scale work to prove its technology and supply chain. The NOK 100 million convertible loan from Borregaard and major shareholders provides liquidity during this reassessment. The loan is subordinated, meaning recovery in a downside scenario is uncertain.

Borregaard's NOK 292 Million Impairment Exposure

Borregaard's book value of its investment in Alginor stood at NOK 292 million as of March 31. Of that amount, NOK 110 million is in the convertible loan. The remaining NOK 182 million is equity. An impairment of that book value is likely, and Borregaard will disclose the exact charge at its second-quarter presentation on July 16. The impairment risk is material relative to Borregaard's equity. If the full amount is written down, it would hit earnings directly. The subordinated nature of the convertible loan means recovery in a downside scenario is uncertain. The July 16 presentation is the next formal catalyst for the stock.

What Would Limit or Widen the Writedown

Several factors will determine the size of the impairment. A successful revised strategy that demonstrates viable product development and commercialisation paths would limit the charge. Progress on raw material supply and harvesting at the pilot plant level could restore some confidence. If Alginor secures additional non-dilutive funding or a strategic partner, the writedown may be contained to a partial impairment. On the other hand, further cost overruns or delays in pilot plant work would increase the likelihood of a full writedown. Inability to secure raw material supply at scale would undermine the entire business model. If the temporary layoffs become permanent or if Alginor runs out of liquidity before the revised strategy is proven, Borregaard may need to write off the entire investment.

The NOK 100 million injection gives Alginor a few months of runway. The July 16 presentation will provide the first formal update on the impairment charge. Until then, Borregaard's stock may trade on uncertainty about the size of the writedown. The next decision point for investors is the Q2 presentation. At that point, Borregaard will specify the impairment charge and may provide insight into Alginor's revised strategy. Any pre-announcement or additional disclosure from Alginor regarding its pilot plant progress could shift the stock before that date.