Enviva enters contract to supply wood pellets to Japanese plant

On Feb. 22, Enviva Partners LP released fourth quarter financial results and announced it has entered into a firm 10-year take-or-pay offtake contract with Marubeni Corp. to supply 100,000 metric tons per year of wood pellets to a new power plant in Japan, starting in 2022.

Net revenue for the quarter reached $161 million, up 27.3 percent when compared to fourth quarter of 2016. Included in net revenue were product sales of $156.1 million on a volume of 805,000 metric tons of wood pellets, compared to $121.2 million on a volume of 632,000 metric tons of wood pellets during the fourth quarter of 2016.

Gross margin for the fourth quarter reached $25.7 million, up from $19.2 million during the same quarter of the previous year. Adjusted gross margin per metric tons was $47.43 for the quarter, up from $42.95 during the fourth quarter of 2016. Net income for the quarter was $7.9 million, compared to a net loss of $9.6 million.

For the full year, Enviva reported net revenue of $543.2 million, up 17 percent from 2016. Included in net revenue were product sales of $522.3 million on a volume of 2.72 million metric tons of wood pellets, compared to $444.5 million on a volume of 2.35 million metric tons in 2016.

Gross margin for 2017 reached $78.8 million, up from $76.8 million during 2016. Adjusted gross margin per metric tons was $45.38, down from $45.55 in 2016. The company generated net income of $14.4 million in 2017, up from $13.5 million in 2016.

Enviva also released updated information on its contracting activities. Enviva Partners and Enviva JV Development Co. LLC, the sponsor’s new joint venture with affiliates of John Hancock, have converted the previously announced memorandum of understanding into long-term take-or-pay offtake contracts for the supply of 630,000 metric tons per year of wood pellets. The partnership and the second Hancock JV entered into contracts to supply 180,000 metric tons per year of wood pellets and 450,000 metric tons per year of wood pellets, respectively.

The partnership also entered into a long-term take-or-pay offtake contract with Marubeni Corp. to supply 100,000 metric tons per year of wood pellets to a new power plant in Japan. Under the contract, deliveries will be made for 10 years, starting in 2022.

Enviva also said the partnership recently entered into two additional agreements with ENGIE to sell 90,000 metric tons in 2018 and 585,000 metric tons in the aggregate from 2019 to 2023. In addition, the partnership has entered into an agreement with Orsted for the supply of 200,000 metric tons in the aggregate from late 2018 through mid-2021, incremental to the volumes under the existing off-take contract.

During an investor call, John Keppler, chairman and CEO of Enviva, provided an overview of recent developments in Europe and Asia that are driving increased demand for wood pellets. In Europe, he said the European Union recently voted to increase the share of renewable energy generation to 35 percent by 2030, up from an earlier goal of 20 percent by 2020. Dispatchable and baseload biomass-fired generation and combined-heat-and-power have proven to be effective, lower-cost complements to intermittent sources of renewable power, Keppler said, which would make them valuable options as the mandates become stronger and more intermittent sources of renewable power are used.

Keppler noted Germany has announced plans to significantly reduce coal-fired generation in order to meet 2030 targets. In the U.K., Drax has announced plans to move forward with plans to convert a fourth unit from coal to biomass. Keppler also said that Enviva recently executed contracts to deliver several shipments of wood pellets to the operator of a district heating loop in Paris.

In Japan, Keppler said the government is targeting 6 to 7.5 gigawatts of biomass-fired capacity by 2030, which represents 15 to 20 million metric tons per year of pellet demand. He also said the Japanese government has already approved 13 gigawatts of biomass-fired generation from the 2017 feed-in tariff applications, well in excess of expectations.