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Enviva Partners completes Sampson drop-down acquisition

By Enviva Holdings LP | December 15, 2016

Enviva Partners LP has completed the previously announced acquisition of the Sampson plant and associated off-take contracts from Enviva Holdings LP’s (the “Sponsor”) joint venture with affiliates of John Hancock Life Insurance Co.

“We are pleased to announce that the Sampson acquisition, our second drop-down transaction since our IPO last year, was completed ahead of schedule,” said John Keppler, chairman and CEO. “The acquisition adds a world-class asset to our production fleet and further diversifies our customer base, and the related financing activities provide significant financial flexibility as we plan for continued long-term growth.”

Sampson Acquisition

The Sampson acquisition includes a wood pellet production plant in Sampson County, North Carolina, a 10-year, 420,000 metric tons per year (MTPY) off-take contract with an affiliate of DONG Energy Thermal Power A/S, a 15-year, 95,000 MTPY off-take contract with the Hancock JV, and matching third-party shipping contracts. The acquired off-take contracts extend the weighted average remaining term of the Partnership’s portfolio of off-take contracts to 9.7 years and increase the product sales backlog to $5.7 billion, each as of January 1, 2017.

The Sampson plant is expected to produce approximately 500,000 MTPY of wood pellets in 2017 and to reach its full production capacity of approximately 600,000 MTPY in 2019. The Sampson plant is expected to generate incremental net income and adjusted EBITDA of approximately $2.3 million and $22.0 million, respectively, for 2017, increasing to approximately $6.5 million and $27.0 million, respectively, once full production capacity is achieved. The Partnership’s previously disclosed full-year 2017 guidance for ranges of net income of $31.0 million to $35.0 million and adjusted EBITDA of $110.0 million to $114.0 million include the incremental net income and adjusted EBITDA expected from the Sampson acquisition.

Financing Activity

The consideration for the $175.0 million purchase price for the Sampson acquisition, adjusted in accordance with the terms of the contribution agreement for estimated working capital at the time of the transaction, was financed with the issuance of 1,098,415 common units representing limited partner interests in the Partnership to affiliates of John Hancock Life Insurance Company at approximately $27.31 per unit, resulting in a value of $30.0 million, and a portion of the $300.0 million in proceeds from the previously announced issuance of the partnership’s senior unsecured notes due 2021 (the “senior notes”). The remainder of the proceeds from the senior notes was used to repay $158.1 million of outstanding term loan indebtedness, plus accrued interest, under the partnership’s senior secured credit facilities. In connection with the repayment of term loan indebtedness, the partnership’s revolver capacity under its senior secured credit facility increased from $25.0 million to $100.0 million.

Evercore served as exclusive financial advisor and Andrews Kurth Kenyon LLP served as legal counsel to the conflicts committee of the board of directors of the Partnership’s general partner. Vinson & Elkins L.L.P. served as legal counsel to the Hancock JV.