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Enviva Partners, LP report financials for second quarter 2017 and reveal major Japanese MoU

US-headed Enviva, the world’s largest producer of wood pellets, has released its financial statement for the second quarter 2017. It reveals continued cash flow growth, current "capacity matched with a portfolio of off-take contracts" and a Memorandum of Understanding (MoU) for a take-or-pay off-take contract as the "sole source supplier" of 650 000 tonnes per annum of wood pellets to Japan.

John Keppler, Chairman and CEO of Enviva Partners.

“We’re pleased to announce our 8th consecutive distribution increase. In order to extend our leadership in a rapidly growing industry, we implemented several process improvements that temporarily reduced plant utilization. With those enhancements largely in place, and given the robust fundamentals of the business, we remain on track,” said John Keppler, Chairman, and CEO of Enviva Partners, here seen at the USIPA 2016 Exporting Pellets conference.

Enviva said that it expects to begin deliveries later this year to two new customers under previously-announced off-take contracts and that it is in “active negotiations” for other long-term off-take contracts in “this rapidly expanding market” to be fulfilled directly by Enviva and by new capacity under development throughout the Southeast United States.

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 has a weighted-average remaining term of 9.8 years from July 1, 2017, said Keppler.

Breakthrough Japanese off-take MoU

The statement also revealed that the company has signed a 650 000 tonnes-per-annum “take-or-pay off-take” sole source supplier Memorandum of Understanding (MoU) to the “largest dedicated biomass project” announced to date in Japan. The MoU is subject to definitive agreement documentation and certain conditions. However, assuming these are met, deliveries under the US$ denominated contract would commence in 2022 and continue for at least fifteen years.

The announcement is of particular significance given that the volume represents almost a doubling of total wood pellet imports to Japan in 2016, around 350 0000 tonnes none of which originated from the US whereas 75 percent came from Canada according to figures discussed during a conference in Tokyo in May this year.

Owned by Gas & Power, a subsidiary of Osaka Gas, the Nakayama Nagoya Kyodo Hatsuden Co. Ltd coal-fired power plant began co-firing wood pellets at ≈ 5% rate in the 149 MWe unit 1 (left) in 2015. The newly built 110 MWe unit 2, currently under commissioning (right), will co-fire pellet at ≈ 30%. Total combined annual pellet consumption ≈ 155 000 tonnes.

Owned by Gas & Power, a subsidiary of Osaka Gas, the Nakayama Nagoya Kyodo Hatsuden Co. Ltd coal-fired power plant began co-firing wood pellets at ≈ 5% rate in the 149 MWe unit 1 (left) in 2015. The newly built 110 MWe unit 2, currently under commissioning (right), will co-fire pellet at ≈ 30%. Total combined annual pellet consumption ≈ 155 000 tonnes.

Enviva’s statement highlights several developments in Europe and Asia that it says continues to “demonstrate the significant growth” expected in long-term demand for wood pellets:

  • In Japan, major energy companies continue to announce biomass projects as the country is targeting 6.0 to 7.5 GW of biomass-fired capacity, which represents demand for 15 to 20 million tonnes per annum of biomass, as part of its expected power source mix for 2030. In June, demand for the 2017 feed-in tariff (FIT) program for projects fueled by imported biomass significantly exceeded expectations as applications were submitted for more than 15 GWs of biomass-fired capacity. Tokyo Electric Power (TEPCO) commenced co-firing biomass with coal at its 2 GW Hitachinaka power plant.
  • In South Korea, policymakers have proposed that the renewables portfolio standard (RPS) requires large energy companies to source at least 28 percent of their power from renewable sources by 2030, up from 10 percent in 2023. This is consistent with the new President’s proposal that South Korea will generate at least 20 percent of its power from renewable sources by 2030, and is expected to significantly increase the adoption of renewable power generation. In addition, Korea South-East Power (KOEN) has announced the full conversion of a 125 MW unit at one of its coal-fired power plants, and the intention to convert another unit, to biomass fuel.
  • In the Netherlands, the first round of applications for the 2017 renewable incentive program concluded, where biomass projects are expected to receive a portion of the EUR 6.0 billion in available funding. The second round of applications for 2017 starts in October for an additional EUR 6.0 billion in available funding. RWE has announced its intention to fully convert its 1,500 MW Eemshaven and 600 MW Amer coal-fired power plants to wood pellets, subject to additional government support. Both plants have already received Dutch government funding for co-firing of wood pellets, and if fully converted to biomass, would represent more than 8 million tonnes per annum of total demand for wood pellets.
  • In Denmark, DONG Energy, the largest power producer in the country, has received state aid approval from the European Commission (EC) to convert its Asnæs combined heat and power (CHP) facility to biomass, which is in line with the company’s plan to completely eliminate the use of coal in its generation of power and heat by 2023. DONG Energy’s coal-to-biomass conversion program is expected to require approximately 2 million tonnes per annum of wood pellets by 2020.

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