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Enviva Partners, LP report financials for first quarter 2017 and reveal Wilmington Terminal drop-down

US-based Enviva Partners, LP, the world’s largest producer of wood pellets, has reported financial and operating results for the first quarter of 2017. It also revealed its intention to acquire the Enviva Port of Wilmington terminal from Enviva Wilmington Holdings, LLC and indicated that new production capacity is under development in the US to meet growing demand from core markets in Europe and Asia.

John Keppler, Chairman and CEO of Enviva Partners.

John Keppler, Chairman and CEO of Enviva Partners here seen addressing attendees at USIPA’s 2016 Exporting Pellets conference.

According to a statement, the company increased revenue through increased pellet sales and volume compared to the same period in 2016. The increase in sales was primarily due to higher sales volumes under an off-take contract with Danish energy major DONG Energy Thermal Power A/S, which was acquired in connection with the Sampson pellet plant drop-down transaction in December 2016.

Enviva delivered solid operating performance in what typically is our softest quarter. Combined with the benefit of our recently acquired Sampson plant and DONG Energy off-take contract, we are right on track, year over year, said Enviva’s Chairman, and CEO John Keppler.

Port of Wilmington drop-down

The statement also revealed that Enviva has agreed to purchase Enviva Port of Wilmington, LLC from Enviva Wilmington Holdings, LLC, a joint venture between Enviva and affiliates of John Hancock Life Insurance Company, for US$130 million. The deal is expected to close on or about October 2 subject to customary closing conditions.

Enviva Port of Wilmington owns a fully operational deep-water marine terminal in Wilmington, North Carolina (NC) capable of receiving pellets by rail and truck, has on-site storage for up to 90 000 tonnes, and loading up to Panamax-sized vessels. It utilizes state-of-the-art handling equipment and storage infrastructure designed to maintain product quality and safety with an annual throughput capacity of up to 3 million of wood pellets.

The terminal currently has long-term terminal services agreements to receive, store, and load a total of approximately 1 million tonnes-per-annum from Enviva’s Sampson, NC facility as well as a third-party production plant that is subject to deficiency penalties if minimum throughput requirements are not met.

Hamlet pellet plant to begin construction

Furthermore, the Enviva Port of Wilmington has a long-term terminal services agreement with the Hancock JV to receive, store, and load wood pellets from the planned 600 000 tonne-per-annum production plant in Hamlet, NC currently under development. The agreement also includes deficiency penalties if minimum throughput requirements are not met.

According to Enviva, the detailed design of the fully-financed Hamlet plant is being completed and site work and equipment procurement has begun. Full construction of the “build-and-copy” replica of the Sampson plant expected to begin later this year and completion anticipated for late 2018.

Production from the Hamlet plant is expected to supply MGT Power’s Teesside Renewable Energy Plant, which is currently under construction in the UK.

New capacity to meet core market demand

Several recent developments continue to underpin the significant growth in demand expected for wood pellets, especially in our core markets of Europe and Asia. Our sales strategy is to fully contract the production capacity of the Partnership. Our current capacity is matched with a portfolio of off-take contracts that have a weighted-average remaining term of 9.8 years from April 1, 2017, said Keppler.

Apart from MGT and the recent UK Department of Business, Energy, and Industrial Strategy (BEIS) study affirming low-carbon benefits of wood pellets sourced from the US southeast, Japan has been noted to be of particular interest.

The recent government reconfirmation of the targeted power source mix for 2030 includes 6.0 to 7.5 GW of biomass-fired capacity, representing a 15 to 20 million tonne per annum biomass demand. Enviva’s notes the announcement of Kansai Electric Power’s potential conversion of its Aioi power plant to pellets under a joint venture with Mitsubishi Corporation Power and Chubu Electric’s plan to build a new co-fired unit at its Taketoyo power facility.

We remain in active discussions with customers in Europe and Asia for long-term off-take contracts for the supply of wood pellets to be fulfilled directly by the Partnership and by new capacity under development by our sponsor throughout the Southeast United States, including at its sites in Lucedale, Mississippi and Abbeville, Alabama, as well as other sites positioned to take advantage of the existing terminal capacity at the Chesapeake and Wilmington terminals. In addition, our sponsor continues to evaluate its option to build and operate a marine export terminal at the Port of Pascagoula, Mississippi, which could support wood pellet production from a potential production plant in Lucedale, Mississippi and other potential facilities in the region, said Keppler.

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