Enviva Reports Q3 2021 Results, Increases Distribution, Announces First Industrial Contract for SAF and Biodiesel.
Enviva Partners, LP (NYSE: EVA) (“Enviva,” “we,” “us,” or “our”) announced financial and operating results for the third quarter of 2021, declared its 25th consecutive quarterly distribution increase, and announced its first direct contract with an industrial customer, a European counterparty that processes solid biomass into refined liquids that ultimately become high-grade renewable fuels like sustainable aviation fuel (“SAF”) and biodiesel.
Highlights:
- For the third quarter of 2021, Enviva declared a distribution of $0.840 per common unit, an 8.4% increase over the third quarter of 2020 and its 25th consecutive quarterly distribution increase since its IPO. Enviva expects to distribute $3.30 and $3.62 per share for full-year 2021 and 2022, respectively
- For the third quarter of 2021, Enviva reported a net loss of $0.1 million, adjusted net income of $28.3 million, and adjusted EBITDA of $62.9 million. Adjusted EBITDA increased by 15.6% over the same period in 2020
- On October 15, 2021, Enviva announced the acquisition of its former sponsor, Enviva Holdings, LP (“Holdings”), and the elimination of incentive distributions rights (the “Simplification Transaction”). Enviva also announced plans to convert from a master limited partnership to a corporation under the name of Enviva Inc. by the end of the year (the “Conversion”); a unitholder meeting is now scheduled to be held on December 17, 2021
- Enviva announced the signing of a new 10-year take-or-pay off-take contract to supply an industrial customer with up to approximately 1.2 million metric tons per year (“MTPY”) of wood pellets, to be refined into feedstock for the production of SAF and other renewable fuels, with initial annual deliveries of 60,000 MTPY expected to commence in 2023
“For the third quarter of 2021, Enviva delivered financial and operational results that represent an important step forward for us, and we are positioned for a solid finish to what has been an incredible year for our company, our team, and our equity holders,” said John Keppler, Chairman and Chief Executive Officer. “Today, we are very pleased to announce our inaugural contract in the rapidly growing industrial sector, with a customer who will process our solid biomass into refined liquids that ultimately become high-grade renewable fuels like sustainable aviation fuel and biodiesel. We expect this important milestone to be just the first of many as we work with large industrial customers who can use our products to make difficult-to-decarbonize industries less GHG-intensive and more sustainable.”
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“The future has never been brighter for Enviva. With our transformative Simplification Transaction and Conversion, along with our expanding production capacity underpinned by our existing assets, the plant expansions underway, and the commissioning of the Lucedale plant and the Pascagoula terminal, we are entering 2022 with increased size and scale, a significantly improved cost of capital, and a broadening customer base. With the potential of exponential growth ahead for our product, driven by global commitments to ‘net zero,’ we are continuing to build a company and a platform that delivers real climate change benefits, today, while consistently and sustainably delivering superior returns to our stakeholders.”
Distribution
On November 3, 2021, Enviva’s board of directors declared a distribution of $0.840 per common unit for the third quarter of 2021, an increase of 8.4% over the corresponding period in 2020. This distribution represents the 25th consecutive distribution increase since Enviva’s IPO. The quarterly distribution will be paid on Friday, November 26, 2021, to unitholders of record as of the close of business on Monday, November 15, 2021.
Contracting and Market Update
Significant progress is being made by regulators, policymakers, utilities, power generators, and difficult-to-decarbonize industries towards achieving net-zero emissions. This progress, combined with favorable legislative and policy recommendations supporting substantial incremental utilization of sustainably sourced biomass, continues to reinforce the growing long-term market opportunity for Enviva’s product around the world.
Today, Enviva announced the signing of a new 10-year take-or-pay off-take contract to supply our first direct industrial customer with 60,000 MTPY of wood pellets to be used as a feedstock in the refining process for SAF and other renewable fuels like biodiesel. Deliveries under the initial tranche of the contract are scheduled to commence in 2023, with volumes potentially increasing to approximately 1.2 million MTPY by 2027, through a series of additional 10-year take-or-pay tranches, as the customer builds incremental production capacity. Enviva will be the sole supplier of this customer’s incremental wood pellet needs. The initial tranche’s conditions precedent, are expected to be met during 2022.
As of October 1, 2021, and including the initial 60,000 MTPY tranche related to the recently announced industrial contract as well as the recently announced contracts with Drax Group PLC and a large Japanese trading house, Enviva’s total weighted-average remaining term of off-take contracts is approximately 14.5 years, with a total contracted revenue backlog of over $21 billion.
This contracted revenue backlog of over $21 billion is complemented by a similarly large and growing customer pipeline consisting of long-term off-take opportunities in our traditional markets for biomass-fired power and heat generation in geographies ranging from the United Kingdom to the European Union (including emerging opportunities in Germany and Poland), and from Asia (including incremental demand in Japan, emerging potential in Taiwan, and maturing opportunities in South Korea) to developing industrial segments across the globe (including steel, cement, lime, chemicals, SAF, and biodiesel). Over the next 12 months, we expect to progress negotiations and convert numerous contract pipeline opportunities, as well as previously signed exclusive memoranda of understanding, into binding contracts.
Shaping a secure and sustainable energy future continues to be at the forefront of the global energy dialogue and, in mid-October 2021, the International Energy Agency (“IEA”) published a special edition of the World Energy Outlook 2021 report to assist decision-makers at the United Nations Climate Change Conference (“COP26”) in Glasgow, Scotland. The report warns that current progress on clean energy remains “far too slow to put global emissions into sustained decline towards net zero.” In laying out a more rapid energy transition plan, the report states: “Modern bioenergy plays a key role in meeting net zero pledges.” To achieve net-zero carbon emissions by 2050, the report calls for coal to be phased out of the global power sector at a more rapid pace and replaced with low emissions energy sources that complement each other, such as wind, solar, nuclear, hydropower, and bioenergy. The report further states: “There is a growing role for alternative, low emissions fuels such as modern bioenergy and hydrogen-based fuels in all scenarios … These play a key role in the achievement of net zero targets …”
“The IEA report echoes the sentiment of the UN Intergovernmental Panel on Climate Change report issued just a few months ago that time is running out to put in place the measures needed to prevent further irreversible damage from climate change to our planet,” said Keppler. “While there is no silver bullet to achieve net zero, sustainable wood bioenergy is a proven technology that can be expanded at scale – today – to accelerate the energy transition. I am very excited to have accepted an invitation to present next week at COP26 to respected climate and energy authorities and policymakers from around the world about the important and well-recognized role modern bioenergy plays as a part of the global solution to climate change.”
Net Zero Promise
Enviva is making significant progress toward its goal to achieve net zero greenhouse gas emissions in its operations by 2030, in part by using 100% renewable energy at our facilities. Recently, we announced a supply contract with GreenGasUSA, an integrated renewable natural gas (“RNG”) solutions provider, which includes a 10-year RNG off-take agreement to decarbonize natural gas-related emissions in our operations. The methane captured and emissions eliminated as a result of this contract are expected to offset approximately 75% of Enviva’s current direct emissions from its manufacturing operations, or Scope 1 emissions, on an annual basis for the duration of the 10-year agreement, which includes renewal options for an additional 10 years.
Asset Update
Construction of the Lucedale plant is nearing completion, and we expect commissioning to commence in late fourth-quarter 2021. Our terminal at the Port of Pascagoula also remains on track to receive, store, and load production from the Lucedale plant once the plant is operational.
The Northampton expansion is complete and the Southampton expansion continues its commissioning ramp. Construction on the Greenwood expansion is also nearing completion. Further, we have made significant investments in the “Multi-Plant Expansions,” commencing at Enviva’s Sampson and Hamlet plants, with Cottondale to follow.
As part of the Simplification Transaction, Enviva acquired projects at 15 plant sites, all in various stages of evaluation and development. One of these acquired sites is the fully contracted Epes plant, which is currently under development. We expect to commence construction in early 2022, with an in-service date scheduled for mid-2023. The Epes plant is designed and permitted to produce more than one million MTPY of wood pellets, which would make it the largest wood pellet production plant in the world.
A prospective production plant in Bond, Mississippi is the next most likely to be constructed, and is being developed to produce between 750,000 and more than 1 million MTPY of wood pellets. The Bond plant’s proximity to the Port of Pascagoula positions us to transport its production efficiently by truck from the plant to our terminal at the port. We expect construction of the Bond plant to commence once the Epes plant is operational, but timing of construction could be expedited depending on the schedule and delivery requirements of additional off-take contract opportunities under negotiation and general market conditions.
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Enviva Reports Third-Quarter 2021 Results, Increases Distribution, and Announces First Industrial Contract, November 03, 2021
