Enviva discusses plans to expand pellet capacity in Q1 results

By Erin Voegele | May 09, 2019

Enviva Partners LP discussed plans to increase production capacity during a first quarter 2019 earnings call held May 9. Permitting is underway for the Port of Pascagoula and a new pellet plant in Lucedale, Mississippi.

“Our plant and port facilities delivered operating and financial results consistent with our expectations for what is historically our most seasonally challenging quarter,” said John Keppler, chairman and CEO of Enviva in a statement released May 8. “As we progress through the second quarter and into the back half of the year, we are excited about the opportunity to bring our new Hamlet plant online and for our sponsor to begin construction on the next set of fully contracted assets in our Port of Pascagoula cluster. With its confidence in the underlying business and the Partnership’s growth trajectory, the Board declared a distribution of $0.645 per unit, our 15th consecutive quarterly increase since our IPO.”

During the earnings call, Keppler said the partnership is well positioned to grow production and throughput capacity over the next few years.

From a broad market perspective, he said several recent developments highlight the clear growth and demand for wood pellets. He said with the REDII finalized in the European Union last December, EU member states have until June 2020 to adopt binding goals and targets. The resulting national policies are expected to provide further impetus for new biomass demand, he said. In Japan, renewable energy requirements are also creating demand for pellets.

Enviva is taking action to expand it production capabilities. According to Keppler, Enviva Partners’ sponsor has received its final permit for the Port of Pascagoula and expects its draft permit for the Lucedale pellet plant to become final early this summer. In the meantime, he said the sponsor has ordered major equipment and executed other key contracts. Keppler said the sponsor is also continuing to evaluate additional development locations in Alabama and Mississippi to fill out the cluster around the Pascagoula terminal as well as sites near Enviva’s existing terminals in the Ports of Chesapeake and Wilmington. The company expects these assets will be made available to the partnership for dropdown acquisitions.

Kepper also discussed ongoing expansion work at the company’s Northampton and Southampton pellet plants. He said the expansion projects are progressing with detailed engineering nearing completion and major equipment on order. Subject to the issuance of final permits, he said the company expects the expansions to be complete in the first half of 2020, with startup occurring shortly thereafter.

Construction is being finalized at the Hamlet pellet plant, with commissioning beginning. The facility is expected to reach commercial operations in June and achieve its full 600,000 metric ton per year production capacity in 2021.

Enviva generated revenue net review of $158.4 million for the quarter, up 26.4 percent when compared the same period of 2018. Included in net revenue were product sales of $156.6 million on 843,000 metric tons of wood pellets sold during the first quarter of 2019, as compared to $122.3 million on 648,000 metric tons of wood pellets sold during the same period of last year. Net loss was $8.9 million for the quarter, compared to a net loss of $19.3 million during the first quarter of 2018. Adjusted EBITDA was $21.6 million, compared to $17.6 million.