Enviva Stock

Enviva Inc. develops, constructs, acquires, and owns and operates, fully contracted wood pellet production plants where the company aggregates a natural resource, wood fiber, and process it into dry, densified, uniform pellets that can be effectively stored and transported around the world.

The company primarily sells its wood pellets through long-term, take-or-pay off-take contracts with creditworthy customers in the United Kingdom (the ‘U.K.’), the European Union (the ‘EU’), and Japan, who use the company’s pellets to displace coal and other fossil fuels to generate power and heat as part of their efforts to accelerate the energy transition away from conventional energy sources. The company’s wood pellets meet the criteria put forth by the European Union’s Renewable Energy Directive II (‘RED II’) which includes biomass in its definition of renewable energy. The wood pellets the company produces are viewed by its customers as a critical component of their efforts to reduce life-cycle greenhouse gas emissions in their core energy generation or industrial manufacturing processes and to mitigate the impact of climate change. The company’s pellets also have potential applicability to hard-to-abate sectors as bio-based raw material feedstock to industrial processes formerly provided by fossil fuels where their use could reduce greenhouse gas emissions on a lifecycle basis and to generate process steam and heat in heavy industrial manufacturing like lime, sugar, steel, and cement, and to generate aviation fuels and other liquids.

The company owns and operates ten plants (collectively, ‘plants’) with a combined production capacity of approximately 6.2 million metric tons per year (‘MTPY’) of wood pellets in Virginia, North Carolina, South Carolina, Georgia, Florida, and Mississippi, the production of which is fully contracted with a few of the company’s contracts extending well into the 2040s. The company exports its wood pellets to global markets through its deep-water marine terminal at the Port of Chesapeake, Virginia, terminal assets at the Port of Wilmington, North Carolina, and the Port of Pascagoula, Mississippi, and from third-party deep-water marine terminals in Savannah, Georgia, Mobile, Alabama, and Panama City, Florida.

In 2022, the company commenced the construction of its fully contracted wood pellet production plant in Epes, Alabama (the ‘Epes plant’), which is designed and permitted to produce more than one million MTPY of wood pellets. Additionally, in 2022, the company commenced the development of a wood pellet production plant in Bond, Mississippi (the ‘Bond plant’), which is designed to produce one million MTPY of wood pellets. All of the company’s facilities are located in geographic regions with low input costs and favorable transportation logistics. The company’s plants are sited in robust fiber baskets providing stable pricing for the low-grade fiber used to produce wood pellets. The company’s raw materials are byproducts of the sawmilling process or traditional timber harvesting, principally low-value wood materials, such as trees generally not suited for sawmilling or other manufactured forest products, tree tops and limbs, understory, brush, and slash that are generated in a harvest.

The company’s primary sales strategy is to fully contract the wood pellet production from its plants under long-term, take-or-pay off-take contracts with a diversified and creditworthy customer base.

The company procures low-grade wood fiber and process it into utility-grade wood pellets and load the finished wood pellets into railcars, trucks, and barges for transportation to deep-water marine terminals, where the company receives, stores, and ultimately loads its products onto dry bulk cargo oceangoing vessels for delivery to the company’s customers.

The company owns and operates ten industrial-scale wood pellet production plants strategically located in the Mid-Atlantic and Gulf Coast regions of the United States, geographic areas in which wood fiber resources are plentiful and readily available. The company employs a ‘build-and-copy’ approach to the construction of new capacity, which allows for efficiencies in the engineering, design, construction, and operation of the company’s facilities. Furthermore, the company’s multi-plant profile and scale provide the company with flexibility under its portfolio of off-take contracts that enhances the reliability of the company’s deliveries and provides for opportunities for optimization as detailed above.

The company’s facilities are designed to operate 24 hours per day, 365 days per year, although the company schedules up to 15 days of planned maintenance for the company’s wood pellet production plants during each calendar year. There are no regularly required major turnarounds or overhauls.

Port Operations

Wood pellets are exported from the company’s owned or leased deep-water, marine terminals and are stored in domes, barges, and warehouses at the ports. The company’s terminals operate 24 hours per day, seven days per week.

Governmental Regulations

The federal Clean Air Act, as amended (the ‘CAA’), and state and local laws and regulations that implement and add to CAA requirements, regulate the emission of air pollutants from the company’s facilities. The CAA requires that the company obtains various construction and operating permits, including in some cases, Title V air permits.

The company’s operations are subject to limited direct regulation with respect to emissions of GHGs. For example, at this time, the U.S. Environmental Protection Agency (the ‘EPA’) requires certain large facilities to undergo CAA pre-construction review and obtain operating permits for their GHG emissions.

Safety and Maintenance

The company is subject to a number of federal and state laws and regulations, including the Federal Occupational Safety and Health Act, as amended (‘OSHA’), and comparable state statutes, which are intended to protect the health and safety of employees and contractors. OSHA imposes various requirements, including safety-related training, policies, and programs. In addition, the OSHA Hazard Communication Standards and the EPA’s Emergency Planning and Community Right-to-Know Act statutes require that information be maintained concerning hazardous materials used or produced in the company’s operations and that this information be provided to employees, state and local governmental authorities and citizens. The company’s deep-water marine terminals are required to adhere to Homeland Security/the U.S. Coast Guard regulations regarding physical security and emergency response plans.

Seasonality

The company’s business is affected by seasonal fluctuations. During the first half of the year (year ended December 2022), the cost of producing wood pellets tends to be higher because during the winter months, the cost of delivered raw materials are higher, primarily due to a reduction in accessibility during cold and wet weather conditions, which results in the company’s need to extend the procurement radius around the company’s plants. The company’s raw materials typically have higher moisture content during this period, resulting in lower production levels; moreover, the cost of drying wood fiber increases during periods of lower ambient temperatures given greater energy required in the process of heating. The company’s operating costs are primarily fixed, resulting in low fixed cost absorption or higher operating cost per metric ton (‘MT’). Additionally, the company’s customer contract price mix is typically higher during the second half of the year as the company increase the sales volumes delivered to customers using wood pellets for heating.

Competition

The company’s competitors are Drax Biomass Inc., AS Graanul Invest, Fram Renewable Fuels, LLC, An Viet Phat Energy Co., LTD, and Highland Pellets LLC.

History

The company was founded in 2013 as a Delaware limited partnership. It was incorporated in 2013 as a Delaware corporation. The company was formerly known as Enviva Partners, LP and changed its name to Enviva Inc. in 2021.