Enviva Partners acquires Southampton pellet plant
Enviva Partners recently announced it has acquired a 510,000-ton-per-year pellet plant located in Southampton County, Virginia. The facility was developed by its sponsor, Enviva Holdings LP, under a joint venture with affiliates of John Hancock Life Insurance Co.
According to information published by Enviva, the Southampton facility began operations in November 2013. It is one of five pellet plants owned by Enviva prior to the initial public offering filed by Enviva Partners in October 2014.
At that time, Enviva operated five pellet plants, including those in Wiggins Mississippi; Amory, Mississippi; Ahoskie, North Carolina; Northampton, North Carolina; and Southampton, Virginia. At the time the IPO was filed, the company indicated Enviva Holdings LP would retain ownership of the Southampton facility. When Enviva Partners LP began trading on the New York Stock Exchange in April 2015, the company noted Enviva Holdings would grant it a five-year right of first offer to acquire the Southampton plant.
According to Enviva’s website, Enviva Partners LP currently owns pellet plants in Wiggins, Mississippi; Amory, Mississippi; Ahoskie, North Carolina; Northampton, North Carolina; and Cottondale, Florida, in addition to the newly acquired Southampton facility. Enviva Partners LP also owns port operations at the Port of Chesapeake, Virginia, and holds long-term leases on port operations at Port Panama City, Florida, and Port of Mobile, Alabama. Enviva Wilmington Holdings LLC, the joint venture between Enviva Holdings LP and affiliates of John Hancock Life Insurance Co., currently owns a pellet plant in Sampson County, North Carolina, and port operations at Port of Wilmington, North Carolina. With the acquisition, Enviva Partners LP now has 2.2 million metric tons per year of pellet production capacity.
Information released by Enviva notes the acquisition of the Southampton facility includes a 10-year take-or-pay off-take contract (385,000 metric tons in the first year), and a matching 10-year shipping contract. Collectively, the transaction is known as the “Southampton drop-down.” The $131 million purchase price for the Southampton drop-down was financed with $36.5 million in debt, $15 million in equity issued to the partnership’s sponsor, and cash on hand.
“We are excited to announce our first drop-down transaction with our sponsor. The fully-contracted Southampton plant is a world-class facility that fits seamlessly into our core business and will significantly increase our production capacity and the tenor of our contracted cash flows,” said John Keppler, chairman and CEO of Enviva Partners LP. “The acquisition, which is expected to be immediately accretive to the partnership’s distributable cash flow per unit, provides the opportunity to substantially increase our distribution while still maintaining conservative coverage ratios.”
Earlier this month, Enviva Partners LP announced the execution of a new take-or-pay off-take contract for the supply of wood pellets to the European market. According to the company, deliveries under the U.S. dollar denominated contract will begin in 2017, ramp up to 450,000 metric tons per year in 2018, and continue until 2027.