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The Honolulu Advertiser
Posted on: Wednesday, January 6, 2010

Ocean fish-farming firm selling its Isle operations


by Andrew Gomes
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Kona Blue Water Farms raises amberjack kampachi in open-ocean pens off the Big Island. It has started shifting production to Mexico.

ADVERTISER LIBRARY PHOTO | 2007

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The local company that pioneered raising amberjack in open-ocean pens off the Big Island plans to sell its offshore farming operations in Hawai'i.

Kona Blue Water Farms, which recently began shifting production to Mexico after running into financial difficulties, plans to sell its ocean farm operation to a San Francisco-based company led by two Mainland businessmen. Both men are involved in fishing and aquaculture industries.

The company has applied to reassign its 90-acre state ocean lease to Keahole Point Fish LLC, which has committed to continue raising amberjack with plans to modify operations to raise the fish more efficiently.

Under the proposed arrangement, Kona Blue would continue research and development work at the Natural Energy Laboratory of Hawaii Authority park near Kailua, Kona. It also would retain ownership of its shore-based hatchery and maintain sales and marketing of the fish it trademarked as Kona Kampachi.

The state Board of Land and Natural Resources is scheduled to consider approving the lease reassignment at a meeting scheduled for Friday.

Kona Blue's plan to sell its offshore farm follows a struggle by the company to profit from harvests, and the startup of new farm operations in Mexico.

The company, partially financed by state high-technology tax credits, has produced fish for commercial sale since 2005, and the product has won praise from chefs and consumers.

But last year Kona Blue reduced its staff and scaled back annual fish production from about 500 tons to 350 tons to trim losses attributed in part to shipping, feed and labor costs.

In November, the firm announced that it was temporarily ceasing local production through May and was starting development of a land-based hatchery and open-ocean cage farm in the Sea of Cortez off Mexico to produce the same fish for sale under the Kona Kampachi name.

An initial Mexico harvest was anticipated by the end of this year.

Kona Blue also said it was planning to replace its eight 3,000-cubic-meter submerged production pens in Hawai'i with two 7,000-cubic-meter surface pens as part of its efforts to improve operations.

Kona Blue officials could not be reached for comment yesterday about the proposed sale. Neither could representatives of Keahole Point Fish.

According to documents related to the lease reassignment that were submitted to the state, Keahole Point Fish was set up in November by Todd Madsen and Hugh Reilly.

Madsen is president of OceanSpar LLC, which develops marine aquaculture cages, and has worked with Kona Blue for the last two years. Madsen also is a manager at private equity investment firm Cavan Capital LLC, according to business registration records.

Reilly is listed as a manager at OceanSpar and has decades of experience in commercial fishing and seafood processing. Reilly is the primary investor in Keahole Point Fish, while Madsen is president.