Enviva begins trading on NYSE, provides update on pellet projects

By Erin Voegele | April 29, 2015

On April 29, Enviva Partners LP launched trading of its common units on the New York Stock Exchange under the ticker symbol “EVA.” The initial public offering (IPO) of 10 million common units representing limited partner interests was priced at $20 per common unit. According to information released by Enviva Partners, the company has granted underwriters a 30-day option to purchase an additional 1.5 million common units at the initial public offering price. The offering is expected to close May 4, subject to customary closing conditions.

Once the IPO closes, the public will own common units representing a 42 percent limited partner interest in the partnership, or 48.3 percent if the underwriters fully exercise their option to purchase additional common units. Enviva Holdings LP will own common units and subordinated units representing a 58 percent limited partner interest in Enviva Partners, or 51.7 percent if the underwriters fully exercise their option to purchase additional common units.

In a press release issued April 28, Enviva Partners said it intends to use the net proceeds from the offering to pay, together with borrowings under its new term loan facility, a distribution to Enviva Holdings, to repay intercompany indebtedness related to the acquisition of Enviva Partners’ Cottondale wood pellet production plant and for general partnership purposes, including future acquisitions. Enviva Partners also indicated the net proceeds from any exercise of the underwriters’ option to purchase additional common units will be used to pay a distribution to Enviva Holdings.

Barclays Capital Inc., Goldman, Sachs & Co., RBC Capital Markets LLC and Citigroup Global Markets Inc. are acting as joint book-running managers for the offering, and J.P. Morgan Securities LLC, Raymond James & Associates Inc., Mitsubishi UFJ Securities (USA) Inc., and U.S. Capital Advisors are acting as co-managers for the offering.

Enviva first filed a registration statement with the U.S. Securities and Exchange Commission for a proposed IPO in October 2014. 

An updated prospectus filed with the SEC on April 20 explains Enviva Partners currently owns and operates five pellet production plants in the U.S with a combined production capacity of approximately 1.74 million metric tons per year, along with a dry-bulk, deep-water marine terminal at the Port of Chesapeake. The pellet plants owned by Enviva Partners include a 110,000-metric-ton-per-year plant in Amory, Mississippi, a 110,000-metric-ton-per-year plant in Wiggins, Mississippi, a 370,000-metric-ton-per-year plant in Ahoskie, North Carolina, a 500,000-ton-per-year plant in Northampton, North Carolina, and a 650,000-ton-per year plant in Cottondale, Florida. Enviva Development Holdings LLC acquired the Cottondale plant from Green Circle Energy Inc. earlier this year and contributed it to Enviva Partners in April. 

A separate pellet plant located in Southampton, Virginia, is owned by Enviva Wilmington Holdings LLC, a joint venture between Enviva Partners’ sponsor Enviva Holdings LP, Hancock Natural Resources Group Inc. and certain other affiliates of John Hancock Life Insurance Co. That facility and its ownership are not part of the IPO.

The prospectus also explains the relationship between Enviva Partners and its sponsor Enviva Holdings. At the close of the IPO, Enviva Holdings will own approximately 16 percent of Enviva Partners’ common units, all of its subordinated units, all of the incentive distribution rights and its general partner, Enviva Partners GP LLC, a wholly owned subsidiary of Enviva Holdings.

In November 2014, Enviva Holdings entered into a joint venture with John Hancock to develop wood pellet plants and marine export terminals in the southeastern U.S.  In addition to owning the Southampton plant, the joint venture has commenced construction of a pellet plant in Sampson County, North Carolina, and a terminal at the Port of Wilmington, North Carolina. Two additional pellet plants are planned for development the region, including one in Richmond County, North Carolina. Documents published by the North Carolina State Ports Authority show the other pellet plant could be located in Laurens County, South Carolina. Together, the Sampson plant, Wilmington terminal and the two proposed pellet plants are referred to as the Wilmington projects. Each of the three pellet plants is expected to have an annual capacity of 500,000 metric tons. The Sampson plant and Wilmington terminal are expected to begin commercial operations early next year.

According to Enviva Partners, Enviva Holdings will grant it a five-year right of first offer to acquire the Southampton plant, the Wilmington plant and any other wood pellet production plants and associated deep-water marine terminals that it or the Hancock joint venture may develop or acquire and elect to sell.

Within the prospectus filed with the SEC, Enviva Parters also noted that in addition to the Wilmington projects, Enviva Holdings is pursuing the development of additional deep-water marine terminals and production plants. Enviva Holdings has entered into a memorandum of understanding (MOU) with the Mississippi Development Authority regarding the development of a terminal at the Port of Pascagoula, Mississippi, which would service new pellet plants, including one in Lucedale, Mississippi. A letter of intent has also been signed with the Port of St. Joe in Florida regarding the development of pellet export capacity.

Prior to its acquisition by Enviva, Green Circle had announced plans to develop a pellet plant in George County, Mississippi, which houses the city of Lucedale, and a pellet export facility at the Port of Pascagoula.

Morton Neraas, president and CEO of Green Circle, previously told Biomass Magazine the proposed projects were on hold pending the conclusion of the Enviva acquisition and noted their future was dependent on Enviva’s development plans and timing. Information included in the IPO prospectus seems to show Enviva Holdings is moving forward with the development of those projects.