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 November 5, 2015 - 7:30 AM EST
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Enviva Partners, LP Reports Financial Results for Third Quarter 2015

Enviva Partners, LP (NYSE:EVA) (the “Partnership” or “we”) today reported financial and operating results for the third quarter of 2015.

Highlights for the Quarter:

  • Generated adjusted EBITDA of $15.9 million on net income of $6.4 million, both in-line with guidance
  • Increased quarterly cash distribution by approximately 7% to $0.4400 per unit
  • Maintained strong balance sheet with $75.2 million of cash for future growth
  • Acquisition of Southampton plant still expected in fourth quarter of 2015

“Enviva’s solid third quarter 2015 operating performance delivered financial results at the top end of our expectations,” said John Keppler, Chairman and Chief Executive Officer. “Our stable cash flow profile and our leadership position in a high-growth industry continues to differentiate Enviva from the broader MLP sector, as highlighted by our ability to significantly increase our distribution.”

Third Quarter Results

For the third quarter of 2015, we generated net revenue of $116.6 million, a $40.5 million, or 53 percent, increase over the corresponding quarter of last year. For the third quarter, we generated net income of $6.4 million compared to $3.1 million for the corresponding quarter in 2014. The increase in revenue was primarily the result of additional contracted sales volume and improved customer mix. The increase in net income was a result of these higher revenues partially offset by higher general and administrative costs, including costs associated with being a public company.

Adjusted EBITDA improved to $15.9 million in the third quarter of 2015, a 59 percent increase compared to the corresponding period in 2014. The improvement was driven by higher sales volumes, more favorable pricing under our customer contracts, and lower export shipping costs, and was partially offset by the increased costs of delivered wood pellets that were purchased under contract from our sponsor’s Southampton plant this year and higher general and administrative costs.

The Partnership’s distributable cash flow for the third quarter was $12.6 million, resulting in a distribution coverage ratio of 1.21 times.

Liquidity and Financial Position

The Partnership had total cash on hand of $75.2 million at September 30, 2015, which is available for general partnership purposes, including potential acquisitions.


As announced last week, the board of directors of the Partnership’s general partner (the “Board”) declared a cash distribution of $0.4400 per common and subordinated unit for the third quarter of 2015. For the second quarter of 2015, the Partnership paid a prorated amount of the minimum quarterly distribution of $0.4125 per unit as its first distribution following the closing of its initial public offering. The distribution for the third quarter is approximately 7 percent higher than the minimum quarterly distribution. The quarterly distribution will be paid Friday, November 27, 2015, to unitholders of record as of the close of business Tuesday, November 17, 2015.

Outlook and Guidance

The guidance amounts provided below do not include the impact of any potential acquisitions from the Partnership’s sponsor or others. Consistent with previous guidance, the Partnership expects its existing business to generate net income in the range of $5.6 million to $6.6 million and adjusted EBITDA in the range of $14.8 million to $15.8 million, and to incur maintenance capital expenditures in the range of $0.5 million to $1.0 million and interest expense net of amortization of debt issuance costs and original issue discount of $2.5 million in the fourth quarter of 2015. As a result, the Partnership expects to generate distributable cash flow of $11.3 million to $12.3 million during the fourth quarter of 2015. Consistent with our prior guidance for the second half of 2015, fourth quarter adjusted EBITDA is expected to be slightly below the run rate of prior quarters primarily due to an unfavorable contracted shipment (one of two) inherited as part of the Cottondale plant acquisition, partially offset by a non-recurring utility refund.

Mr. Keppler commented, “We expect Enviva’s strong year-to-date operating performance to continue in the fourth quarter of 2015 and beyond. We believe our stable cash flow profile, combined with the anticipated acquisition of the proposed Southampton plant and the benefits from incremental, modest capital investments in our current plants, will provide opportunities to substantially increase our distribution going forward.”

Sponsor Activity

The Partnership continues to progress the potential acquisition of the fully operational 510,000 metric tons per year (“MTPY”) wood pellet production plant in Southampton County, Virginia (the “Southampton plant”) currently owned and operated by the Partnership’s sponsor. The sponsor has made a proposal to the Partnership regarding the potential acquisition by the Partnership of the Southampton plant, together with a ten-year, 500,000 MTPY off-take agreement (385,000 metric tons for the first year), which is being evaluated by a Conflicts Committee formed by the Board due to the related party nature of the proposed transaction. We continue to discuss the terms, including financing of the proposed transaction, and expect to complete the transaction in the fourth quarter of 2015.

In addition, the sponsor’s 515,000 MTPY production plant in Sampson County, North Carolina (the “Sampson plant”) and a deep-water marine terminal in Wilmington, North Carolina (the “Wilmington terminal”) are both on track to begin operations in the first quarter of 2016. The Partnership expects to have the opportunity to acquire the Sampson plant with a ten-year off-take contract in late 2016 and the Wilmington terminal in 2017. Finally, the sponsor continues to prepare for the construction of an additional 500,000 MTPY production plant on a site it owns in Hamlet, North Carolina.

Market Update

Major European power generators continue to make the economic decision to fuel generation with wood pellets, highlighting strong growth in this industry:

  • DONG Energy’s coal-to-wood pellet conversion of its 360 megawatt (“MW”) Studstrup unit 3 and expansion of its 250 MW Avedore unit 1 are on track. The Avedore unit is part of the largest power station in Denmark and its other unit is already firing wood pellets and straw. Combined additional annual wood pellet demand from these two power stations is projected to be around 1 million tons starting in 2016. Our sponsor has a ten-year, 420,000 MTPY (385,000 metric tons for the first year) off-take agreement with an affiliate of DONG Energy that commences in September 2016.
  • E.ON announced the sale of its 556 MW Langerlo power facility in Belgium, which the buyer intends to convert to a wood pellet-fueled power station that is expected to commence operations in 2017. When fully operational, this facility is projected to require more than 1.5 million tons of wood pellets annually.
  • Macquarie’s MGT Teesside 299 MW Renewable Energy Plant project has initiated the selection of lenders as it continues to progress towards financial close in early 2016 after its U.K. government-backed contract for difference (“CfD”) passed the EU state-aid review process. This project is expected to consume more than 1 million tons of wood pellets annually, commencing in early 2019.
  • Drax’s third 660 MW biomass unit is operational and ramping up toward full capacity when it is expected to demand more than 2 million tons of wood pellets annually. Also in the U.K., RWE’s 420 MW Lynemouth coal facility is expected to generate demand for approximately 1.5 million tons of wood pellets annually. Both facilities have received confirmation from the U.K. government that they can move forward with their planned conversions to biomass under the Renewable Obligation Certificate (“ROC”) subsidy as an alternative to their previously awarded CfDs if the CfDs do not receive EU state aid approval.

At the country level, in the Netherlands, the Minister of Economic Affairs stated in a letter to Parliament his intention to significantly increase the budget for the renewable incentive scheme from 3.5 billion euros in 2015 to 8.0 billion euros in 2016, consistent with a report from the Dutch Court of Audit that the scheme budget needed to be increased in order to meet binding EU renewables targets. The final budget is expected to be confirmed before the end of 2015.

In the U.S., the Environmental Protection Administration (“EPA”) published the final Clean Power Plan in the Federal Register. This regulatory action is one of the keystones of the current administration’s climate change initiative and, with this announcement, the EPA will begin accepting comments on its proposed “Model Rule” which is intended to provide states with a road map for developing their plans, including use of biomass, to meet the aggressive CO2 emissions reductions and renewable energy targets. Although a series of expected lawsuits have been filed against the EPA’s action, states are still expected to submit their plans by September 2016.

“Customers in our core European utility market segment continue to see profitable opportunities to generate renewable energy by converting coal-fired assets to biomass-fired power stations,” said Mr. Keppler. “In addition to the highly visible growth in this sector, we are also encouraged by the initial regulatory progress for utility demand in the U.S. and the rapidly growing institutional, industrial, and residential heating demand for wood pellets both here and abroad, which our production increasingly has the opportunity to serve.”

Investor Conference

Management will be participating in the 2015 RBC Capital Markets’ MLP Conference in Dallas, Texas on November 19, 2015.

Conference Call

The Partnership will host a conference call with executive management related to its third quarter 2015 results and to discuss our outlook, guidance, market update, and update on our sponsor’s activities at 10:00 a.m. (Eastern Time) on Thursday, November 5, 2015. Information on how interested parties may listen to the conference call is available in the Investor Relations page of our website ( A replay of the conference call will be available on our website after the live call concludes.

About Enviva Partners, LP

Enviva Partners, LP (NYSE:EVA) is a publicly traded master limited partnership that aggregates a natural resource, wood fiber, and processes it into a transportable form, wood pellets. The Partnership sells a significant majority of its wood pellets through long-term, take-or-pay agreements with creditworthy customers in the United Kingdom and Europe. The Partnership owns and operates five plants in Northampton County and Ahoskie, North Carolina; Amory and Wiggins, Mississippi; and Cottondale, Florida. We have a combined production capacity of approximately 1.7 million metric tons of wood pellets per year. In addition, the Partnership owns a deep-water marine terminal at the Port of Chesapeake, Virginia, which is used to export wood pellets. Enviva Partners also exports pellets through the ports of Mobile, Alabama and Panama City, Florida.

To learn more about Enviva Partners, LP, please visit our website at

Non-GAAP Financial Measures

We view adjusted gross margin per metric ton, adjusted EBITDA, and distributable cash flow as important indicators of performance.

Adjusted Gross Margin per Metric Ton

We define adjusted gross margin as gross margin excluding depreciation and amortization included in cost of goods sold. We believe adjusted gross margin per metric ton is a meaningful measure because it compares our off-take pricing to our operating costs for a view of profitability and performance on a per metric ton basis. Adjusted gross margin per metric ton will primarily be affected by our ability to meet targeted production volumes and to control direct and indirect costs associated with procurement and delivery of wood fiber to our production plants and the production and distribution of wood pellets.

Adjusted EBITDA

We define adjusted EBITDA as net income or loss excluding depreciation and amortization, interest expense, taxes, early retirement of debt obligation, non-cash unit compensation expense, asset impairments and disposals, and certain items of income or loss that we characterize as unrepresentative of our operations. Adjusted EBITDA is a supplemental measure used by our management and other users of our financial statements, such as investors, commercial banks, and research analysts, to assess the financial performance of our assets without regard to financing methods or capital structure.

Distributable Cash Flow

We define distributable cash flow as adjusted EBITDA less maintenance capital expenditures and interest expense net of amortization of debt issuance costs and original issue discount. Distributable cash flow is used as a supplemental measure by our management and other users of our financial statements as it provides important information relating to the relationship between our financial operating performance and our ability to make cash distributions.

Adjusted gross margin per metric ton, adjusted EBITDA, and distributable cash flow are not financial measures presented in accordance with generally accepted accounting principles (“GAAP”). We believe that the presentation of these non-GAAP financial measures provides useful information to investors in assessing our financial condition and results of operations. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Each of these non-GAAP financial measures has important limitations as an analytical tool because they exclude some, but not all, items that affect the most directly comparable GAAP financial measures. You should not consider adjusted gross margin per metric ton, adjusted EBITDA, or distributable cash flow in isolation or as substitutes for analysis of our results as reported under GAAP. Our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following tables present a reconciliation of adjusted gross margin per metric ton, adjusted EBITDA, and distributable cash flow to the most directly comparable GAAP financial measure, as applicable, for each of the periods indicated.

    Three Months Ended September 30,   Nine Months Ended September 30,
  2015     2014   2015     2014
(Predecessor) (Predecessor)
(in thousands, except per metric ton)

Reconciliation of gross margin to adjusted
 gross margin per metric ton:

Metric tons sold 602 397 1,746 1,094
Gross margin $ 14,056 $ 8,066 $ 39,116 $ 11,964
Depreciation and amortization (1)   6,294   4,767   21,587   14,308
Adjusted gross margin $ 20,350 $ 12,833 $ 60,703 $ 26,272
Adjusted gross margin per metric ton $ 33.80 $ 32.32 $ 34.77 $ 24.01
(1)   Excludes depreciation of office furniture and equipment. Such amount is included in general and administrative expenses.
    Three Months Ended September 30,   Nine Months Ended September 30,
  2015       2014   2015       2014  
(Predecessor) (Predecessor)
(in thousands)

Reconciliation of distributable cash flow and
 adjusted EBITDA to net income (loss):

Net income (loss) $ 6,398 $ 3,105 $ 9,935 $ (2,123 )
Depreciation and amortization 6,306 4,777 21,621 14,335
Interest expense 2,887 2,124 8,673 6,619
Early retirement of debt obligation 4,699 73

Purchase accounting adjustment to

Non-cash unit compensation expense 180 1 363 2
Income tax expense 1 4 2,657 12
Asset impairments and disposals (127 ) (100 ) 62
Acquisition transaction expenses   257       257      
Adjusted EBITDA $ 15,902   $ 10,011 $ 48,802   $ 18,980  

Interest expense net of amortization of
 debt issuance costs and original issue

2,532 1,619 7,444 5,103
Maintenance capital expenditures   735     184   2,342     184  
Distributable cash flow $ 12,635   $ 8,208 $ 39,016   $ 13,693  

The following table provides a reconciliation of the estimated range of adjusted EBITDA to the estimated range of net income, in each case for the three months ending December 31, 2015 (in millions):

    Three Months Ending December 31, 2015
Estimated net income $ 5.6-6.6
Depreciation and amortization 5.1
Interest expense 2.8
Non-cash unit compensation expense 0.4
Income tax expense 0.1
Asset impairments and disposals 0.3
Acquisition transaction expenses   0.5
Estimated adjusted EBITDA $ 14.8-15.8

Cautionary Note Concerning Forward-Looking Statements

Certain statements and information in this press release, including those concerning our future results of operations, acquisition opportunities, and distributions, may constitute “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on the Partnership’s current expectations and beliefs concerning future developments and their potential effect on the Partnership. Although management believes that these forward-looking statements are reasonable when made, there can be no assurance that future developments affecting the Partnership will be those that it anticipates. The forward-looking statements involve significant risks and uncertainties (some of which are beyond the Partnership’s control) and assumptions that could cause actual results to differ materially from the Partnership’s historical experience and its present expectations or projections. Important factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to: (i) the amount of products that the Partnership is able to produce, which could be adversely affected by, among other things, operating difficulties; (ii) the volume of products that the Partnership is able to sell; (iii) the price at which the Partnership is able to sell products; (iv) changes in the price and availability of natural gas, coal, or other sources of energy; (v) changes in prevailing economic conditions; (vi) the Partnership’s ability to complete acquisitions, including acquisitions from its sponsor; (vii) unanticipated ground, grade, or water conditions; (viii) inclement or hazardous weather conditions, including extreme precipitation, temperatures, and flooding; (ix) environmental hazards; (x) fires, explosions, or other accidents; (xi) changes in domestic and foreign laws and regulations (or the interpretation thereof) related to renewable or low-carbon energy, the forestry products industry, or power generators; (xii) inability to acquire or maintain necessary permits; (xiii) inability to obtain necessary production equipment or replacement parts; (xiv) technical difficulties or failures; (xv) labor disputes; (xvi) late delivery of raw materials; (xvii) inability of the Partnership’s customers to take delivery or their rejection of delivery of products; (xviii) changes in the price and availability of transportation; and (xix) the Partnership’s ability to borrow funds and access capital markets.

For additional information regarding known material factors that could cause the Partnership’s actual results to differ from projected results, please read its filings with the Securities and Exchange Commission, including the prospectus filed on April 29, 2015 in connection with the IPO and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2015. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. The Partnership undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise.


This press release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100%) of the Partnership’s distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership’s distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Financial Statements



(In thousands)


September 30,
December 31,
Current assets:
Cash and cash equivalents $ 75,157 $ 592

Accounts receivable, net of allowance for doubtful accounts of $0 in 2015 and
 $61 in 2014

44,464 21,998
Related party receivable 652
Inventories 25,366 18,064
Restricted cash 11,640
Deferred issuance costs 4,052
Prepaid expenses and other current assets   2,808   1,734
Total current assets 148,447 58,080

Property, plant and equipment, net of accumulated depreciation of $49.1 million in
 2015 and $40.9 million in 2014

321,639 316,259

Intangible assets, net of accumulated amortization of $6.9 million in 2015 and $1.0
 million in 2014

3,505 722
Goodwill 85,615 4,879

Debt issuance costs, net of accumulated amortization of $0.5 million in 2015 and
 $3.0 million in 2014

4,705 3,594
Other long-term assets   519   955
Total assets $ 564,430 $ 384,489
Liabilities and Partners’ Capital
Current liabilities:
Accounts payable $ 8,975 $ 4,013
Related party payable 5,459 2,354
Accrued and other current liabilities 16,399 8,159
Deferred revenue 575 60
Current portion of interest payable 73
Current portion of long-term debt and capital lease obligations   3,072   10,237
Total current liabilities 34,480 24,896
Long-term debt and capital lease obligations 173,767 83,838
Other long-term liabilities   1,176   1,227
Total liabilities 209,423 109,961
Commitments and contingencies
Partners’ capital:
Predecessor equity 271,495
General partner interest
Limited partner interests, 23.8 million units outstanding   352,004  
Total Enviva Partners, LP partners’ capital 352,004 271,495
Noncontrolling partners’ interests   3,003   3,033
Total partners’ capital   355,007   274,528
Total liabilities and partners’ capital $ 564,430 $ 384,489



(In thousands, except per unit amounts)


Three Months Ended September 30, Nine Months Ended September 30,
  2015       2014     2015       2014  
(Predecessor) (Predecessor)
Product sales $ 115,081 $ 75,186 $ 335,857 $ 208,332
Other revenue   1,507     924     4,704     2,827  
Net revenue 116,588 76,110 340,561 211,159

Cost of goods sold, excluding depreciation and

96,238 63,277 279,858 184,887
Depreciation and amortization   6,294     4,767     21,587     14,308  
Total cost of goods sold   102,532     68,044     301,445     199,195  
Gross margin 14,056 8,066 39,116 11,964
General and administrative expenses   4,779     2,837     13,176     7,399  
Income from operations 9,277 5,229 25,940 4,565
Other income (expense):
Interest expense (2,887 ) (2,124 ) (7,576 ) (6,619 )
Related party interest expense (1,097 )
Early retirement of debt obligation (4,699 ) (73 )
Other income   9     4     24     16  
Total other expense, net   (2,878 )   (2,120 )   (13,348 )   (6,676 )
Income (loss) before tax expense 6,399 3,109 12,592 (2,111 )
Income tax expense   1     4     2,657     12  
Net income (loss)   6,398     3,105     9,935     (2,123 )

Less net loss attributable to noncontrolling partners’

  14     19     30     61  
Net income (loss) attributable to Enviva Partners, LP $ 6,412   $ 3,124   $ 9,965   $ (2,062 )
Less: Predecessor loss to May 4, 2015 (prior to IPO) $ (2,132 )

Enviva Partners, LP partners’ interest in net income
 from May 5, 2015 to September 30, 2015

$ 12,097  
Net income per common unit:
Basic $ 0.27 $ 0.51
Diluted $ 0.27 $ 0.50
Net income per subordinated unit:
Basic $ 0.27 $ 0.51
Diluted $ 0.27 $ 0.50

Weighted average number of limited partner units

Common – basic 11,906 11,906
Common – diluted 12,193 12,179
Subordinated – basic and diluted 11,905 11,905

Distribution declared per limited partner unit for
 respective periods

$ 0.4400 $ 0.7030



(In thousands)


Nine Months Ended September 30,
  2015       2014  
Net income (loss) $ 9,935 $ (2,123 )

Adjustments to reconcile net income (loss) to net cash provided by operating

Depreciation and amortization 21,621 14,335
Amortization of debt issuance costs and original issue discount 1,229 1,516
General and administrative expense incurred by Enviva Holdings, LP 475
Allocation of income tax expense from Enviva Cottondale Acquisition I, LLC 2,663
Early retirement of debt obligation 4,699 73
Unit-based compensation expense 363 2
Other operating (74 ) 46
Change in operating assets and liabilities:
Accounts receivable (9,954 ) (4,454 )
Prepaid expenses and other assets (757 ) 2,331
Inventories (4,985 ) 3,833
Other long-term assets 494 268
Accounts payable, accrued liabilities and other current liabilities 13,405 5,541
Accrued interest 33 (286 )
Deferred revenue 515 (536 )
Other long-term liabilities       384  
Net cash provided by operating activities 39,662 20,930
Cash flows from investing activities:
Purchases of property, plant and equipment (4,129 ) (13,860 )
Restricted cash 43
Payment of acquisition related costs (3,573 )
Proceeds from the sale of equipment   277     25  
Net cash used in investing activities (7,425 ) (13,792 )
Cash flows from financing activities:
Principal payments on debt and capital lease obligations (183,183 ) (40,117 )
Cash paid related to debt issuance costs (5,123 )
Termination payment for interest rate swap derivatives (146 )
Release of cash restricted for debt service 11,640
Cash restricted for debt service (4,600 )
IPO proceeds, net 215,050
Cash distribution to sponsor (176,702 )
Cash paid deferred IPO costs (1,790 )
Cash distribution to unitholders (6,159 )
Proceeds from contributions from sponsor 10,236
Proceeds from debt issuance   178,505     37,000  
Net cash provided by (used in) financing activities   42,328     (7,717 )
Net increase (decrease) in cash and cash equivalents 74,565 (579 )
Cash and cash equivalents, beginning of period   592     3,558  
Cash and cash equivalents, end of period $ 75,157   $ 2,979  



(In thousands)


Nine Months Ended September 30,
  2015     2014
Non-cash investing and financing activities:

The Partnership acquired property, plant and equipment in non-cash transactions
 as follows:

Property, plant and equipment acquired and included in accounts payable and
 accrued liabilities

$ 1,431 $ 327

Property, plant and equipment acquired and included in other assets as notes

Property, plant and equipment acquired under capital leases 290
Property, plant and equipment acquired under notes payable 39
Property, plant and equipment transferred from prepaid expenses 173
Property, plant and equipment transferred from inventory 146
Contribution of Enviva Pellets Cottondale, LLC non-cash net assets 122,529
Application of deferred IPO costs to partners’ capital 5,913
IPO costs included in accounts payable and accrued liabilities 21
Distributions included in liabilities 179
Debt issuance costs included in accrued liabilities 66
Conveyance of Enviva Pellets Southampton, LLC to Hancock JV 91,696
Distribution of Enviva Pellets Cottondale, LLC assets to sponsor 354
Non-cash adjustments to financed insurance and prepaid expenses 105
Gain on disposal included in receivables 8
Financed insurance 2,157
Depreciation capitalized to inventories 409 242
Early retirement of debt obligation:
Deposit applied to principal outstanding under promissory note 391
Deposit applied to accrued interest under promissory note 154
Non-cash capital contributions from sponsor 339 1,083
Supplemental information:
Interest paid $ 7,369 $ 5,181

Enviva Partners, LP
Raymond Kaszuba, 240-482-3856

Source: Business Wire (November 5, 2015 - 7:30 AM EST)

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