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Root cause: US pellets, an oligopoly?

Organic growth, attrition and acquisitions explain why an ever-larger share of the country's wood-pellet production is in fewer hands. We single out the winners in a couple of charts.

Earlier this month, Enviva Holdings, a US wood pellet maker owned by buyout firm Riverstone, entered a $320 million tie-up with John Hancock. The partnership, which more specifically involves Hancock Renewable Energy Group, will see the pair build, own and operate two biomass pellet mills totalling 1 million tons of output and a port terminal in the US. The team’s first project, expected to boost Enviva’s production capacity by 15 percent, will cement the company’s status as the world’s largest supplier of utility-grade wood pellets to major power generators.

It also continues a trend of consolidation in the sector at large, which has been happening of late through organic growth, acquisitions and attrition. In December, Rentech, another large player, filed for bankruptcy. Two of its subsidiaries went on the block last month, and the company’s New England business was sold to Lignetics, which will double its output as a result. LaSalle, a Lousiana-based producer, was bought out of bankruptcy by Drax in April, before returning to operations in November.

The net result is a concentration of US wood pellet production in ever fewer hands. And what matters to the US matters to the rest of the world: Enviva president and chief executive John Keppler said this month that its tie-up with Hancock aimed to build the capacity “required to serve the growing Asian and European markets.” The figures are eloquent: Forisk, a consultancy, reckons that seven companies account for nearly 70 percent and 90 percent of total US and Southern pellet production capacity, respectively.