Enviva announces new contracts, continues to expand capacity

Enviva Inc. released second quarter financial results on Aug. 3, reporting increased net revenue for the three-month period. The company also announced four new customer contracts and discussed progress with plans to increase production capacity.

 “For the second quarter of 2022, Enviva delivered results at the top end of our expectations, and I’m pleased to report that many of the short-term challenges we experienced in the first half of the year are proving either transitory or manageable over time,” said John Keppler, chairman and CEO. “While the broader energy markets continue to demonstrate volatility and uncertainty, we are excited to highlight the success we are realizing in near-term, higher priced sales, and converting new customer opportunities into long-term, take-or-pay supply contracts with durable pricing increases, including terms and conditions that should enable us to extend our track record of delivering stable cash flows that grow sustainably well into the future. As a result, we are not only on track to deliver a very strong back half of the year, but, as previously described, we see material margin expansion for the business not only in 2023, but also in 2024 and beyond.”

Keppler continued, “The sheer volume and size of market opportunities with high-quality counterparties across a range of use cases, from renewable energy generation to displacement of fossil fuel-based carbon in hard-to-abate industries, is creating an unprecedented pace of contracting for us, which in turn is underwriting the acceleration of our capacity expansions. We have recently commenced construction of our plant in Epes, Alabama, we are making swift progress on our plans to start construction of a new plant in Bond, Mississippi, and we have recently filed for a permit for a highly accretive expansion of our Ahoskie, North Carolina plant. The growth in our production volume outlook, coupled with the strong pricing environment for biomass, is driving our expectations for an adjusted EBITDA compound annual growth rate of over 25% from 2022 to 2024. This tremendous, fully contracted growth profile, combined with the strong, stable dividend we are paying, makes us well positioned to continue our track record of generating significant returns for our investors, even in an environment of potential economic contraction.”

Net revenue for the second quarter of 2022 reached $293.3 million, up from $286 million and $285 million for the same period of 2021 on a recast and non-recast basis, respectively. The increase was primarily driven by higher average per-ton sales prices. The company noted that second quarter net revenue was damped given the shift of two shipments from June to July, which also drove higher-than-average finished product inventory at the end of the period.

Adjusted gross margin was $54.8 million for the second quarter of 2022, as compared to $51.7 million and $56.1 million for the second quarter of 2021 on a recast and non-recast basis, respectively. Adjusted gross margin per metric ton the second quarter of 2022 was $42.94, as compared to $37.80 and $41.02 per metric ton for the second quarter of 2021 on a recast and non-recast basis, respectively. Enviva sold 1.275 million metric tons of pellets during the quarter, compared to 1.367 million metric tons during the same period of last year.

Enviva announced four new contracts in its second quarter report. The first is a conversion of a memorandum of understanding (MOU) with an industrial products customer to a take-or-pay off-take contract, with a tenor of 15 years and deliveries starting in 2023. Volumes under that contract are expected to ramp up to approximately 600,000 metric tons per year by 2031. The second is the conversion of a letter of intent (LOI) with a German manufacturer to a take-or-pay off-take contract, with a tenor of 10 years and deliveries starting in the third quarter of this year. Volumes are expected to be approximately 60,000 metric tons per year under that contract. The third is a take-or-pay off-take contract with a new German customer that delivers wood pellets into the European thermal heating market, with a contract tenor of 5 years and deliveries expected to begin before the end of 2022. Volumes under that contract are expected to ramp up to approximately 150,000 metric tons per year. Finally, Enviva announced a new tranche of contracted deliveries to a longstanding EU-based customer that is expected to total 720,000 incremental metric tons through 2027.

Enviva also announced progress with its plan to more than double its wood pellet production capacity over the next five years, from 6.2 million metric tons per year to approximately 13 million metric tons per year. The company announced that its plant in Lucedale, Mississippi, is continuing to ramp up production and is on track to reach nameplate capacity of 750,000 metric tons per year by the end of 2022. Construction is also underway on the 1.1 million metric ton per year plant in Epes, Alabama. The Lucedale and Epes plants are the first and second facilities developed as part of Enviva’s planned Pascagoula cluster. Plans are also underway to develop a third plant in that cluster. That proposed facility, located in Bond, Mississippi, is undergoing permitting. Enviva also noted it plans to accelerate the timing of a fourth plant in the cluster and anticipates selecting a location for that facility before the end of the year.

In addition, Enviva reported that plans are progressing for an accretive expansion at its plant in Ahoskie, North Carolina. Subject to receiving the necessary permits, Enviva plans to increase capacity at that facility from 410,000 metric tons per year to 600,000 metric tons per year.

Plans are also underway to add a facility to its Savannah cluster. The company said it is in the process of securing sites in both Georgia and South Carolina for the planned facility and will continue the evaluation process during the coming months to determine with site is most suitable for the proposed plant.

A full copy of Enviva’s second quarter earnings release is available on the company’s website.