In the United States (US), global wood pellet industry major Enviva Inc. (Enviva), has announced that it has signed a Memorandum of Understanding (MoU) with the company's first US-based customer and revealed plans to accelerate the doubling of production capacity over the next five years to 13 million tonnes-per-annum."We are extremely excited about the growth in Enviva’s business and our first MoU with a US customer,” said John Keppler, Chairman, and CEO at Enviva.
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“We are extremely excited about the growth in Enviva’s business and our first MoU with a US customer,” said John Keppler, Chairman, and CEO at Enviva, here seen addressing delegates at the 2018 US Industrial Pellet Association’s (USIPA) exporting pellets conference.
According to Enviva, its plans to significantly accelerate its capital expansion timeline are due to recent commercial momentum with power and heat generators and with industrials in hard-to-abate sectors.
Efforts around the world to decarbonize in order to meet net-zero by 2050 continue to accelerate, giving companies like ours the tremendous opportunity to grow even more rapidly and expand the global supply chain as necessary to continue to facilitate the energy transition and mitigate the greenhouse gas emissions profile of hard-to-abate industries such as steel, cement, lime, and biofuels, including sustainable aviation fuels, said John Keppler.
Advance domestic biofuels
Enviva announced the signing of an MoU with an unnamed US-based cleantech company to co-develop a supply chain strategy for advanced, low-carbon transportation fuels, including sustainable aviation fuel (SAF), with a focus on the customer’s operations in the US Southeast and potentially California (CA).
Under the MoU, the customer’s refining process will convert Enviva’s woody biomass into a drop-in replacement for crude oil used for producing aviation fuel.
Enviva’s current operations and numerous potential development sites in the US Southeast position it to co-develop alongside the SAF refining capacity the customer intends to construct in the region.
California is another jurisdiction where Enviva is evaluating plans to build one or more facilities with the intent of utilizing low-grade wood fiber from high-hazard zones in the state both to mitigate devastating wildfire risk in the region and tackle the negative effects of climate change globally.
We are very proud to now be in a position to not only export the sustainable, renewable energy and low-carbon feedstock we produce in the Southeastern United States but to combat both climate change and devastating wildfire risks by expanding the long-term contracted use of our products and growing our customer and production footprint right here at home in the broader US, said John Keppler.
Second industrial agreement
This latest MoU represents not only the second industrial agreement Enviva has recently signed but also Enviva’s second agreement related to SAF, which the company believes “underscores the demand momentum for low-carbon transportation fuels.”
This includes its first shipment to Germany to serve the emerging industrial market including steel and cement, and other adjacent use cases such as lime, a key input in cement manufacturing that is progressing through the phases of design, development, and application, as industrial companies pursue not only their own net-zero goals but also fulfill the increasing demand for greener products from their own customers.
Accelerate doubling of production capacity
To capitalize on this momentum, Enviva will accelerate its plans to double production capacity from 6.2 million tonnes per annum (tpa) to approximately 13 million tpa.
The new target is to achieve this over the next five years by broadening and deepening its development capabilities and leveraging relationships with key equipment suppliers and construction partners to enable it to build and commission two plants per year, up from its historical rate of one plant per year.
Enviva plans to continue utilizing its “build and copy” approach to plant design while increasing the nameplate production capacity of its new plants to approximately 1.1 million tpa, up roughly 45 percent from the previous standard of 750 000 tpa.
The company expects its previously announced “Multi-Plant Expansions” to be completed by year-end 2022. In addition, Enviva also expects its plant in Lucedale, Mississippi (MS), which is the first plant in its Pascagoula cluster, to ramp production throughout 2022, exiting the year at its designed run-rate of 750 000 tpa.
The fully-permitted 300 000 tpa expansion of the Lucedale plant is planned to commence already during 2023, which will increase its nameplate production capacity to approximately 1 million tpa.
Additionally, in the first half of 2022, Enviva plans to commence construction of the fully contracted plant in Epes, Alabama (AL), the second plant in the Pascagoula cluster.
“Contract then build” model
Enviva’s business model of fully contracting pellet plants before commencing construction remains unchanged. Given the current pace of contracting with customers, Enviva plans to accelerate the construction of a third wood pellet production plant in its Pascagoula cluster in 2023, along with other proposed plants in the Savannah and mid-Atlantic regions.
In 2024, it plans to place both the proposed third and fourth Pascagoula cluster plants in service and begin construction on two additional plants expected to be located in its Savannah, Georgia (GA), and Wilmington, North Carolina (NC) clusters respectively.
In 2025, it expects all of the Pascagoula cluster plants will be operating at their full run rate, in addition to having the new Savannah cluster plant in service, while the construction of its proposed Wilmington cluster plant and Chesapeake cluster plant is underway.
In 2026, it expects to have both proposed Wilmington and Chesapeake plants in service, with the proposed Savannah plant and Lucedale expansion ramping to full run rate by the end of 2026.
In total, Enviva plans to place six plants in service over the next five years and expect that the construction and commissioning of new plants with a nameplate capacity of 1.1 million tpa will take up to 18 months, on average, and cost between US$200 million and US$250 million, with total capital expenditures spanning nine quarters.
Each plant is designed to run 24 hours a day, seven days a week, for an average of 350 days per year when accounting for scheduled maintenance days
Contracted order backlog worth US$21 billion
As of January 1, 2022, Enviva’s total weighted-average remaining term of executed long-term take-or-pay off-take contracts is approximately 14.5 years, with a total contracted revenue backlog of over US$21 billion. This contracted revenue backlog is complemented by a customer sales pipeline exceeding US$40 billion, which includes contracts in various stages of negotiation.
Enviva’s customer sales pipeline consists of the US-based MoU, the previously announced J-Power MoU, and other long-term off-take opportunities in its “traditional markets” for biomass-fired power and heat generation.
These are in geographies ranging from the United Kingdom (UK) to the European Union (EU) including emerging opportunities in Germany and Poland, to Asia including incremental demand in Japan, emerging potential in Taiwan, and maturing opportunities in South Korea, as well as in developing industrial segments across the globe including steel, cement, lime, chemicals, SAF, and renewable diesel.
