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Enviva Partners Q2/2019 financials reveal over 1 million tonnes in new contracts

US-based Enviva Partners, LP (Enviva) the world’s largest producer of wood pellets, has released its financial statement for the second quarter of 2019. Amongst other things, it reveals over 1 million tonnes per annum of new off-take contracts to Japan as well as production capacity increases. Combining the weighted average of all contract volumes would increase the remaining term and sales backlog to 13.2 years and increase the current value to US$17.9 billion.

According to a statement, Enviva’s current production capacity is matched with a portfolio of firm off-take contracts that has a total weighted-average remaining term of 10.4 years and a total product sales backlog of US$9.6 billion as of August 5, 2019.

Assuming all volumes under the firm and contingent off-take contracts held by the company’s sponsor and the Greenwood facility in South Carolina (SC) – the Hancock JV which currently produces pellets for Enviva under a take-or-pay off-take contract were included – the total weighted-average remaining term and product sales backlog would increase to 13.2 years and US$17.9 billion, respectively.

“Solid operating performance drove a 25 percent increase in adjusted EBITDA for the second quarter, a substantial improvement over the first quarter of 2019 and over the second quarter of 2018. For the second half of 2019, we expect a significant increase over the first half with the benefit of the now-ramping Hamlet facility in the fourth quarter of 2019. The Hamlet facility is the eighth operating plant in our broader organization, and we expect it to be followed by additional plants in Lucedale, Mississippi and elsewhere to fulfill the continued increases in demand for our product, evidenced again by the more than one million tons per year of long-term contracted deliveries we and our sponsor recently executed,” said John Keppler, Chairman and CEO of Enviva, here seen addressing delegates at the 2018 USIPA conference.

The company increased revenue by 24 percent through increased pellet sales and volume compared to the same period in 2018 – sales of US$167.2 million on 869 000 tonnes of wood pellets sold during the second quarter of 2019, as compared to US$133.2 million on 699 000 tonnes during the corresponding quarter of 2018. The US$34.0 million increase in product sales was primarily attributable to a 24.3 percent increase in sales volumes.

Production and storage capacity expansions underway

The Greenwood facility was acquired by the Hancock JV at the beginning of 2018 from The Navigator Company, and Enviva says that it expects to have “the opportunity to acquire” the facility. The Hancock JV plans to increase Greenwood’s production capacity from 500 000 tonnes-per-annum (tpa) to 600 000 tpa, subject to receiving necessary permits.

The Hancock JV also continues with the development of its deep-water marine terminal in Pascagoula, Mississippi and its wood pellet production plant in Lucedale, Mississippi. In addition, it continues to evaluate a potential pellet production plant in Epes, Alabama, along with other sites in Alabama and Mississippi, which would export wood pellets through the Pascagoula terminal.

Enviva says it expects to have the “opportunity to acquire” these assets and related off-take contracts from the sponsor and the Second JV.

In North Carolina (NC), the Hamlet pellet plant being developed by Enviva Wilmington Holdings is now operating, and Enviva expects the plant to exit 2019 with a production run-rate of approximately 500 000 tpa and to reach its nameplate production capacity of approximately 600 000 tpa in 2021.

Enviva’s previously announced “Mid-Atlantic Expansions” to increase the aggregate production capacity of its pellet production plants in Northampton, North Carolina (NC) and Southampton, Virginia (VA) by approximately 400 000 tpa are progressing with detailed engineering in process, major pieces of equipment are being delivered, and site preparation work is advancing.

Subject to receiving necessary permits, Enviva expects to complete the construction of the expansion activities in the first half of 2020 with startup thereafter.

The US Department of Commerce’s Economic Development Administration (EDA) recently awarded a US$10.0 million grant to the Panama City Port Authority in Panama City, Florida to support the development of a new biomass bulk storage dome at the marine export terminal from which the Partnership exports wood pellets produced at its plant in Cottondale, Florida.

The project is expected to increase the storage capacity at the terminal by approximately 20 000 tonnes and provide increased protection against extreme weather conditions. The grant is expected to be matched with US$2.75 million in state investment.

The increase in terminal throughput capacity made possible through the port improvements funded by this grant will enable Enviva to consider opportunities to expand its production in the region.

Over 1 million tpa in new pending off-take contracts

In addition to the approximately 2 million tpa of firm, long-term off-take contracts with Japanese counterparties the Partnership and its sponsor have previously announced, Enviva’s sponsor has recently executed several agreements with Japanese counterparties totaling over 1 million tpa of additional volumes, including:

  • A 15-year, take-or-pay off-take contract with a major Japanese trading house that is a new customer to supply a new biomass power plant, subject to certain conditions precedent, which the sponsor expects to be met in the fourth quarter of 2019. Deliveries under the contract are expected to commence in 2022 with average volumes of 60 000 tpa
  • A 20-year, take-or-pay off-take contract with a major Japanese trading house to supply a new biomass power plant, subject to certain conditions precedent, which the sponsor expects to be met during the first half of 2020. Deliveries under this contract are expected to commence in 2024 with volumes of 400 000 tpa
  • A 10-year, take-or-pay off-take contract with a major Japanese trading house to supply a biomass co-firing power plant, subject to certain conditions precedent, which the sponsor expects to be met in the third quarter of 2019. Deliveries under this contract are expected to commence in 2022 with volumes of 210 000 tpa
  • A 17-year, take-or-pay off-take contract to supply a coal-to-biomass conversion power plant project currently being developed by a group of Japanese industry leaders. The contract is subject to certain conditions precedent, which the sponsor expects to be met in the fourth quarter of 2019. Deliveries under this contract are expected to commence in 2022 with volumes of 340 000 tpa

In addition, Enviva has executed a firm 2-year take-or-pay off-take contract with Albioma Le Moule (Albioma), a leading renewable energy generator in Guadeloupe, to supply a power plant currently being converted from coal to biomass, which Albioma reports will increase the share of renewable energy on the island from 20 percent to 35 percent.

Deliveries under the contract are expected to commence in 2020 with volumes of 130 000 tpa.

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