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Enviva teams up with John Hancock to target Asia, Europe

The Riverstone-backed wood pellets supplier has entered into its third joint venture with the life insurer as it looks to serve growing overseas demand.

Enviva Holdings has again partnered with affiliates of John Hancock Life Insurance Company to acquire, develop and build wood pellet production plants and a deep-water marine terminal in the south-eastern US.

The first investment of the joint venture, Enviva JV Development Company, will be the acquisition of a plant and related assets in Greenwood, South Carolina, from Portuguese paper and pulp producer The Navigator Company – a transaction set to close in the first half of 2018, Enviva said.

“The new joint venture is expected to develop and construct new production plants and marine terminals required to serve the growing Asian and European markets,” said Enviva president and chief executive John Keppler.

Prosperous pellets

Asian industrial wood pellet demand is expected to reach nearly 10 million tons by 2021, representing an annual growth rate of 35 percent, according to an investor presentation Enviva released in November. In Europe demand is set to hit 19.2 million tons, translating into an annual growth rate of 13 percent.

“As the plants and terminal assets contemplated in the joint venture become fully contracted and reach commercial operation, we expect to offer them to Enviva Partners LP, providing additional visibility into the partnership’s potential drop-down inventory,” Keppler added, referring to Enviva Holdings’ publicly traded master limited partnership, one of the two main entities through which Enviva Holdings conducts its activities.

Enviva Development Holdings, the second main entity and Enviva’s wholly owned development subsidiary, will manage and operate the new joint venture with support from the Hancock Renewable Energy Group, a unit of the Hancock Natural Resource Group.

“The new joint venture is expected to develop and construct new production plants and marine terminals required to serve the growing Asian and European markets”
John Keppler, Enviva Holdings

In addition to acquiring and investing in the Greenwood plant, which began operating in October 2016, the new company will develop a deep-water terminal at the Port of Pascagoula, Mississippi and at least two additional wood pellet production facilities. Enviva Wilmington Holdings, an existing development joint venture between Enviva and John Hancock, will contribute wood pellet production plant and marine terminal development projects in the south-eastern US to the new joint venture.

The company did not specify which projects would be transferred to the new joint venture. It also did not provide financial details regarding the tie-up nor the acquisition of the Greenwood plant. A spokeswoman for the company declined to comment.

However, according to The Navigator Company’s website, the Greenwood plant, which has a production capacity of 500,000 tons per year, represents an investment of $110 million and is expected to generate sales of $80 million per year.

Enviva and John Hancock’s other joint ventures includes Enviva Pellets Hamlet, which is in the process of constructing a production plant in Hamlet, North Carolina. Production from the Hamlet plant, which will have a capacity of 600,000 metric tons per year once operational in the first quarter of 2019, will supply MGT Power’s Teesside Renewable Energy Plant, currently under construction in the UK.

Mega-contracts

Enviva’s strategy is to fully contract its production capacity under long-term agreements, according to company documents. Enviva Partners recently announced that it had entered an agreement with DONG Energy, the largest power producer in Denmark, to supply approximately 200,000 metric tons of incremental volumes from late 2018 through mid-2021. In Belgium, it has contracted with Engie to supply 450,000 metric tons of wood pellets from mid-2017 through the end of 2019.

In addition, Enviva Partners and Enviva Holdings are in the process of finalizing a take-or-pay off-take contract as the sole source supplier of 650,000 MTPY of wood pellets to the largest dedicated biomass project announced to date in Japan. “Subject to definitive agreement documentation and certain conditions precedent, deliveries under this US dollar-denominated contract would commence in 2022 and continue for at least 15 years,” Enviva said in its investor presentation.

The Bethesda, Maryland-based company, which describes itself as the world’s largest supplier of utility-grade wood pellets to major power generators, currently owns and operates six production plants in Mississippi, North Carolina, Virginia and Florida with a total production capacity of 2.8 million metric tons per year. Its storage and terminaling assets comprise the Port of Mobile in Alabama, Port of Panama City in Florida, Port of Chesapeake in Virginia and the Port of Wilmington in North Carolina, the latter two being wholly owned by Enviva.

Enviva Holdings’ principal owner is Riverstone, an energy-focused private equity firm that has to date invested $550 million in the Bethesda company.