Enviva reports Q1 challenges, accelerates capacity expansions

By Erin Voegele | May 09, 2022

Enviva Inc. released first quarter 2022 financial results on May 4, reporting that labor, production and logistics challenges negatively impacted operations during Q1. The company is accelerating greenfield developments, however, in response to significant commercial demand momentum.

“As I have often said, although we have been insulated from so many of the logistics, supply chain, pandemic, and now geopolitical-related challenges facing the broader global economy, we are not immune,” said John Keppler, chairman and CEO of Enviva. “As we previewed during our last earnings call in March, the first quarter of 2022 likely was going to be a challenge for us, as our seasonally softest quarter was also impacted by dampened production due to Omicron-related absenteeism at our plants and labor-related and other pressures experienced by our rail and trucking providers. Although the effects were more impactful than we originally anticipated, we believe that the pandemic-related issues are largely behind us and are optimistic that the efforts that our logistics partners are making will soon put their challenges firmly in the rear-view mirror as well.”

 “Notwithstanding the short-term operational headwinds we’ve experienced, the growth opportunities in our business have never been stronger, and we are very pleased to announce today not only our first MOU with a large German power producer, but also an LOI to serve a completely new industrial vertical for us, and an agreement to develop incremental downstream infrastructure capabilities and accretive investment opportunities in partnership with a German logistics company,” Keppler continued.

The MOU referenced by Keppler was signed with a large German utility. Enviva’s wood pellets will displace coal usage in one of the utility’s power plants in Germany, with delivered volumes expected to be at least 1 million metric tons per year. The MOU, which is for a 10 to 15-year tenor, is for a take-or-pay fuel supply agreement and is expected to convert to a firm contract within the next 12 months, with initial deliveries projected to start as early as 2024, according to Enviva.

The LOI was signs with a German industrial customer that plans to use Enviva’s wood pellets to phase out fossil fuels and generate process heat in manufacturing facilities in Germany. The LOI is for a 10-year take-or-pay, fuel supply agreement and is expected to convert to a firm contract during the second half of this year. Delivered volumes are expected to be about 100,000 metric tons per year, with initial deliveries starting as early as 2023.

Enviva also announced it is parting with Regenus Group, a logistics service provider in Germany, to facilitate the delivery of wood pellets to German customers.

Enviva is also continuing work towards its goal to expand capacity to 13 million metric tons per year over the next five years. The company’s newly constructed plant in Lucedale, Mississippi, has commenced production and is expected to reach nameplate production capacity of 750,000 metric tons per year by the end of this year. Enviva also said it expects to begin making shipments from its terminal at the Port of Pascagoula during the second quarter of this year.

Construction on the company’s 1.1-million-metric-ton-per-year pellet plant in Epes, Alabama, is expected to start soon. The Epes plant is the second plant in the company’s Pascagoula cluster. The third plant in the Pascagoula cluster is planned for development in Bond, Mississippi. That facility will have a capacity of more than 1 million metric tons per year. Construction is expected to begin in early 2023. Enviva is currently evaluating site locations for a fourth plant in the cluster and said it expects to make a final decision before the end of the year.

Enviva reported revenue for the first quarter of 2022 of $233.0 million as compared to $241.6 million and $241.0 million for the first quarter of 2021 on a recast and non-recast basis, respectively. During the first quarter of 2022, several factors contributed to lower year-over-year net revenue results, including plant level labor-related absenteeism associated with the Omicron variant of COVID-19, which lowered plant availability and reduced produced volumes, and supply chain labor-related and other challenges, which led to curtailed production at the company’s plants when rail cars and trucks were not available to transport finished product to port terminals, according to Enviva. Likewise, the delayed in-service date of the Lucedale, Mississippi plant to the end of March 2022, was a result of labor-related and supply chain issues faced by construction contractor, the company added.

Enviva reported a net loss of $43.5 million for the first quarter, compared to $23.2 million for the first quarter of 2021. Adjusted EBITDA was $36.6 million, compared to $21.7 million.