Enviva announces new contracts, plans to increase capacity

By Erin Voegele | August 08, 2019

Enviva Partners LP released second quarter 2019 financial results on Aug. 8, reporting solid operating performance and a 25 percent increase in adjusted EBITDA. The company also announced new contracts for more than 1 million tons of wood pellets.

Enviva said its sponsor has gained new long-term off-take contracts with existing and new customers in Japan totaling an additional 1.01 million metric tons per year, commencing between 2022 and 2024. The partnership has also executed a firm, two-year take-or-pay off-take contract with Albioma Le Moule, a renewable energy generator in Guadeloupe to supply a power plant currently being converted from coal to biomass. Deliveries under the contract are expected to begin next year, with volumes of 130,000 metric tons per year of wood pellets. During an earnings call, John Keppler, chairman and CEO of Enviva, noted the new contract with Albioma is the company’s second contract to a Caribbean island nation. “While Europe and Asia are our two largest current markets, this new contract is proof that replacing fossil fuels with biomass for baseload power generation is a model that can be replicated in many different forms around the world,” he said.

In order to fill the company’s long-term contract demand, Keppler said Enviva and its sponsor are continuing to add new pellet production capacity. Expansions are currently underway at the company’s Northampton and Southampton facilities he said, while the recently acquired Hamlet plant is now operating. Collectively, he said these projects are expected to increase Enviva Partners’ production capacity to approximately 4 million metric tons per year. The company expected to supply approximately 6.5 metric tons per year of pellets by 2025. The increase is expected to come from the sponsor’s currently operating Greenwood plant, the recently announced Lucedale plant and two additional plants to be built around the deep water terminal under development at the Port of Pascagoula.

According to Enviva, the Hamlet plan is expected to reach a run rate of approximately 500,000 metric tons per year by the end of 2019, and to reach its nameplate capacity of 600,000 metric tons per year in 2021. Construction on the expansion projects at the Northampton, North Carolina, and Southampton, Virginia, facilities is expected to be complete during the first half of 2020 with startup thereafter, subject to receiving necessary permits. The two expansion projects are expected to increase the combined capacity of the plants by 400,000 metric tons per year. An Enviva joint venture is continuing to invest incremental capital in its Greenwood, South Carolina, pellet plant. The capacity of that facility is expected to increase from 500,000 metric tons per year to 600,000 metric tons per year subject to receiving necessary permits. The air permit for the Lucedale, Mississippi, plant was recently approved, with construction expected to begin soon. Enviva said its sponsor is continuing to evaluate potential wood pellet plants in Epes, Alabama, along with other sites in Alabama and Mississippi.

Enviva generated net revenue of $168.1 million for the second quarter up 24 percent from the same period of 2018. Included in net revenue were product sales of $167.2 million on 869,000 metric tons of wood pellets sold during the second quarter of 2019, up from $133.2 million on 699,000 metric tons sold during the same quarter of 2018.

For the second quarter, Enviva generated a gross margin of $16.5 million, down from $19.8 million during the same period of 2018. Adjusted gross margin was $28 million, up from $25.6 million. Adjusted gross margin per metric ton was $32.26 for the second quarter, down from $36.63 for the second quarter of 2018.

Net loss for the quarter was $3.8 million, compared to a net income of $3.5million for the second quarter of 2018. Adjusted net income was $7 million, up from $2.7 million. Adjusted EBITDA was $27 million, up from $21.1 million during the same period of last year.