Enviva releases first quarter results, responds to criticism

Enviva Partners LP has released first quarter financial results, reporting the revenues of $114.3 million on a pro forma basis. The company closed its initial public offering (IPO) on May 4.  

“We are pleased with the solid performance demonstrated by the partnership in the first quarter of 2015,” stated John Keppler, chairman and CEO. “Our results during the quarter demonstrate the stability of cash flows generated by our geographically diversified base of operating assets and reflect our ability to deliver strong financial results even amid slightly higher than expected seasonality.”

During an investor call, William Schmidt, executive vice president, general counsel and secretary of Enviva, explained that the operating assets that comprise the current Enviva Partners entity were contributed to it following the close of the first quarter. As such, the financial statements included in the company’s earnings release reflect the first quarter of operations and financial position of Enviva LP, which is Enviva Partners’ predecessor entity. Schmidt also explained that the financial statements exclude the Cottondale, Florida, plant, which was contributed to Enviva Partners in April. The financial statements also include the Southampton, Virginia, plant, which Enviva Partners’ predecessor contributed to a joint venture controlled by Enviva Partners’ sponsor in April. He also specified that the financial statements do not reflect a credit agreement Enviva Partners’ entered into in April, or the effects of the Enviva Partners’ IPO. However, Schmidt also said that Enviva Partners has provided supplemental information in its earnings release as to the pro forma results of operations of Enviva Partners for the operating assets that currently comprise the public entity.

On a pro forma basis, the entity reported adjusted gross margin of $19.8 million for the quarter, up from $15.11 million during the same period of 2014. Income from operations was $8.32 million, up from $5.04 million. Net income was $5.6 million for the first quarter, compared to a $4.8 million loss for the same three-month period of the prior year. Adjusted EBITDA was $16.06 million, up from $12.34 million. During the quarter, the entity sold 583,000 metric tons of product, up from 523,000 metric tons during the first quarter of the previous year.

For the full year, Enviva Partners currently expects net income to be in the range of $17 million to $21 million, with adjusted EBITDA to range from $61 million to $65 million.

During the investor call, Keppler briefly discussed the assets and activities of Enviva Partners’ sponsor, Enviva Holdings LP. The sponsor currently owns and operates the Southampton plant. According to Keppler, while Enviva Partners has not received formal notice, the sponsor has indicated an interest in selling the 500,000 plant in the fourth quarter of this year. The sponsor is also constructing an additional 500,000 pellet plant along with a deep-water export terminal in the Wilmington, North Carolina, region. Construction on those projects remains on target, with both facilities expected to be operational in the first quarter of 2016.

During the question and answer segment of the investor call, Keppler also responded to a recent article published in the Washington Post criticizing Enviva’s operations and the environmental issues surrounding wood pellet production. Keppler noted that as a market leader in U.S. pellet production, Enviva should expect healthy scrutiny into its activities. He also noted that the company prides itself on being transparent and addressed Enviva’s sustainable forestry practices and best management practices for harvesting. He said it was unfortunate that the Post article did not check its facts with Enviva and did not take the opportunity to visit the company’s sites. Rather, the author of the article followed a slanted narrative and flawed model that doesn’t reflect credible peer-reviewed research. Keppler also noted that Enviva has been hampered in its ability to communicate externally on the issue of carbon accounting and sustainability given quiet period restrictions in place during the IPO. With those restrictions now behind the company, he said Enviva will begin the process of more strategically engaging with policy makers to build a far more prominent public case extoling the benefits of the wood pellet industry.