Enviva Partners Announces 24th Consecutive Quarterly Distribution Increase, Reports Second-Quarter 2021 Results, and Reaffirms Guidance

BETHESDA, Md.–(BUSINESS WIRE)–Enviva Partners, LP (NYSE: EVA) (“Enviva,” the “Partnership,” “we,” “us,” or “our”) today announced the declaration of its 24th consecutive quarterly distribution increase and reported financial and operating results for the second quarter of 2021. Additionally, the Partnership reaffirmed its previously announced full-year 2021 and 2022 guidance.

Highlights:

• For the second quarter of 2021, the Partnership declared a distribution of $0.815 per common unit, a 6.5% increase over the second quarter of 2020 and its 24th consecutive quarterly distribution increase since its IPO
• For the second quarter of 2021, the Partnership reported net income of $2.6 million, adjusted net income of $9.8 million, and adjusted EBITDA of $48.9 million. Adjusted EBITDA increased by 30.7% over the same period in 2020
• The Partnership completed the previously announced acquisitions of the fully contracted Lucedale plant and Pascagoula terminal and associated equity financing
• The Partnership reaffirmed full-year 2021 and 2022 financial guidance, which includes per-unit distributions of at least $3.30 and $3.62, respectively, each before considering the benefit of any additional drop-downs or other acquisitions
• The Partnership’s sponsor announced the signing of a new 17-year take-or-pay off-take contract to supply a major Japanese trading house with 210,000 metric tons per year (“MTPY”) of wood pellets. Deliveries under the contract are expected to commence in 2025
• The Partnership’s sponsor also announced the signing of a memorandum of understanding (“MOU”) with a major European utility for the supply of approximately 60,000 MTPY of wood pellets to a facility in the Netherlands for a term of 12 years starting in early 2024

“During the second quarter of 2021, Enviva delivered results in line with our expectations for the quarter and laid the foundation for a very strong back half of the year,” said John Keppler, Chairman and Chief Executive Officer. “With the benefit of the commissioning and ramp of our Northampton, Southampton, and Greenwood plant expansions, continued progress on our Multi-Plant Expansions, and the substantial contracted cash flow acquired with the drop-downs of the Lucedale plant and Pascagoula terminal, we were pleased to increase our guidance for 2021, announce guidance for 2022, and complete a sizeable equity raise. We believe Enviva is firmly on track to deliver a strong full-year 2021 and an even more robust 2022.”

Second-Quarter 2021 Financial Results

$ millions, unless noted		Second Quarter 2021		Second Quarter 2020		% Change
Net Revenue		285.0		167.7		70.0
Gross Margin		27.3		27.7		(1.3)
Adjusted Gross Margin		56.1		42.0		33.4
Net Income		2.6		8.5		(69.4)
Adjusted Net Income		9.8		8.7		12.7
Adjusted EBITDA		48.9		37.4		30.7
Distributable Cash Flow Attributable to Enviva Partners, LP		32.9		25.9		27.1
Adjusted Gross Margin $/metric ton		41.02		49.55		(17.2)

The financial results for the second quarter of 2021 outlined above, which were substantially in line with management’s expectations, benefited from incremental production and sales related to acquisitions and operational improvements executed in 2020. Similar to previous years, the Partnership expects net income, adjusted EBITDA, and distributable cash flow attributable to Enviva Partners, LP (“DCF”) for the second half of 2021 to be significantly higher than for the first half of the year and for the fourth quarter to be a significant step up from the third. Select financial highlights for the second quarter include:

• Net revenue increased by $117.3 million, or 70.0%, for the second quarter of 2021 as compared to the second quarter of 2020, substantially as a result of an increase in product sales
• Gross margin for the second quarter of 2021 decreased by $0.4 million, or 1.3%, as compared to the second quarter of 2020 principally due to higher revenue being offset by higher cost of goods sold. The Partnership recognized higher cost of goods sold during the second quarter of 2021 as compared to the second quarter of 2020 primarily as a result of (i) higher finished product costs given increased sales volumes, (ii) a greater percentage of the sales volumes being volumes procured from third parties, (iii) costs incurred during the commissioning of expansion projects, and (iv) an increase in depreciation and amortization expense associated with the Greenwood plant drop-down and Waycross plant acquisition in July of 2020
• Adjusted gross margin for the second quarter of 2021 increased by $14.1 million, or 33.4%, as compared to the second quarter of 2020. The increase in adjusted gross margin is primarily attributable to higher sales volumes and higher pricing due to customer contract mix, which were partially offset by higher cost of goods sold as described above
• Adjusted gross margin per metric ton (“MT”) for the second quarter of 2021 decreased by $8.53, or 17.2%, as compared to the second quarter of 2020. The decrease in adjusted gross margin per MT is primarily attributable to the factors impacting adjusted gross margin noted above
• The Partnership generated net income of $2.6 million for the second quarter of 2021 as compared to net income of $8.5 million for the corresponding period in 2020. Adjusted net income for the second quarter of 2021 increased by $1.1 million, or 12.7%, as compared to the corresponding period in 2020
• Adjusted EBITDA for the second quarter of 2021 increased by $11.5 million, or 30.7%, as compared to the second quarter of 2020, primarily due to higher sales volumes. DCF increased by $7.0 million, or 27.1%, for the second quarter of 2021 as compared to the corresponding period in 2020
• The Partnership’s liquidity as of June 30, 2021, which included cash on hand and availability under our $525.0 million revolving credit facility, was $567.6 million
• The Partnership continues to report that, during the first half of 2021 and to date, our operating and financial results have not been materially impacted by the ongoing coronavirus pandemic (“COVID-19”) and all of our customers have performed in accordance with their contracts with us

Acquisition and Financing Activities

On July 1, 2021, the Partnership completed the previously announced transaction to purchase from Enviva Holdings, LP (our “sponsor”) a wood pellet production plant in Lucedale, Mississippi (the “Lucedale plant”), a deep-water marine terminal in Pascagoula, Mississippi (the “Pascagoula terminal”), and three long-term, take-or-pay off-take contracts with creditworthy Japanese counterparties (the “Associated Off-Take Contracts”), which we refer to collectively as the “Acquisitions.”

The Partnership purchased the Lucedale plant for cash consideration of $156 million and expects to further invest $59 million in remaining construction capital expenditures. The Lucedale plant is expected to commence operations during the second half of 2021. The acquisition of the Lucedale plant includes an embedded, fully permitted option to expand production capacity by approximately 300,000 MTPY for around $60 million in estimated capital costs. This expansion project, if executed by the Partnership, is expected to generate incremental annual adjusted EBITDA of approximately $15 million, which represents an attractive adjusted EBITDA investment multiple of approximately four times.

The Partnership purchased the Pascagoula terminal for cash consideration of $104 million and expects to further invest $26 million in remaining construction capital expenditures and for the terminal to commence operations during the third quarter of 2021. The Pascagoula terminal is expected to have total throughput capacity of 3 million MTPY when fully constructed, allowing for throughput from multiple plants.

Three long-term, take-or-pay off-take contracts were assigned to the Partnership as part of the Acquisitions. These contracts are with creditworthy Japanese counterparties, have maturities ranging between 2034 and 2045, represent aggregate annual deliveries of 630,000 MTPY, and add a total of $1.9 billion to Enviva’s fully contracted sales backlog.

To support the Partnership during completion and ramp-up of the Acquisitions, our sponsor has agreed to (i) waive $53 million of certain management services and other fees that otherwise would be owed by the Partnership from the third quarter of 2021 through the fourth quarter of 2023, (ii) provide protection against construction delays, cost overruns, and production shortfalls, and (iii) guarantee a minimum throughput volume at the Pascagoula terminal for 20 years. Similar to the previously executed drop-down transactions of our Hamlet and Greenwood plants, we expect this support will significantly de-risk the financial performance of the Acquisitions and provide us with enhanced cash flow certainty.

In 2022, we expect the Acquisitions to generate a net loss in the range of $6.4 million to $8.4 million and adjusted EBITDA in the range of $40.0 million to $42.0 million. Once the Associated Off-Take Contracts are fully ramped in 2025, we expect the Acquisitions to generate net income in the range of $18.9 million to $20.9 million and adjusted EBITDA in the range of $43.0 million to $45.0 million.

Consistent with Enviva’s conservative financial policy of financing acquisitions and growth initiatives with 50% equity and 50% debt, the Partnership issued a total of 4,925,000 common units for approximately $224 million of gross proceeds to partially finance the Acquisitions as well as the Partnership’s previously announced expansions of its wood pellet production plants in Sampson, North Carolina, Hamlet, North Carolina, and Cottondale, Florida (collectively the “Multi-Plant Expansions”). The Partnership expects to fund the remainder of the total investment in the Acquisitions and Multi-Plant Expansions with borrowings under its revolving credit facility.

Distribution

On July 27, 2021, the board of directors of the Partnership’s general partner (the “Board”) declared a distribution of $0.815 per common unit for the second quarter of 2021, an increase of 6.5% over the corresponding period in 2020. This distribution represents the 24th consecutive distribution increase since the Partnership’s IPO. The Partnership’s DCF, net of amounts attributable to incentive distribution rights, of $22.2 million for the second quarter of 2021 covered the distribution for the quarter at 0.61 times. The quarterly distribution will be paid on Friday, August 27, 2021, to unitholders of record as of the close of business on Friday, August 13, 2021.

When determining the distribution for a quarter, the Board evaluates the Partnership’s distribution coverage ratio on a forward-looking annual basis, after taking into consideration its expected DCF, net of expected amounts attributable to incentive distribution rights, for the full year. On this basis, the Partnership continues to target a distribution coverage ratio of 1.2 times on a forward-looking annual basis.

2021 and 2022 Guidance Reaffirmed

On the basis of the financial results of the first six months of 2021 and the Partnership’s expectations for full-year 2021 and 2022, the Partnership reaffirms the guidance previously issued on June 3, 2021 in conjunction with the announcement of the Acquisitions. Specifically, after accounting for the expected benefit of the Acquisitions, the Partnership expects:

$ millions, unless noted		2021				2022
Net Income		29.4 – 49.4				96.0 – 116.0
Adjusted EBITDA		250.0 – 270.0				310.0 – 330.0
DCF		180.0 – 200.0				242.0 – 262.0
Distribution per Common Unit		≥$3.30/unit				≥$3.62/unit
Distribution Coverage Ratio (on a forward-looking annual basis)		≥1.2 times				≥1.2 times

The guidance amounts provided above include the benefit of the recently completed Acquisitions, but do not include the impact of any additional acquisitions by the Partnership from our sponsor or third parties.

The Partnership’s quarterly income and cash flow are subject to seasonality and the mix of customer shipments made, which vary from period to period. Similar to previous years, the Partnership expects net income, adjusted EBITDA, and DCF for the second half of 2021 to be significantly higher than for the first half of the year, and for the fourth quarter to be a significant step up from the third quarter. Drivers of this expected growth are primarily comprised of (i) increased revenue generated from Japanese customers as deliveries commence under previously signed contracts, (ii) increased adjusted gross margin per MT due to seasonality benefits, (iii) increased production capabilities as the Mid-Atlantic and Greenwood expansions continue to ramp, and (iv) the adjusted EBITDA contribution from the Acquisitions.

Market and Contracting Update

Global commitments and significant progress made by regulators, policymakers, utilities, and power generators to achieve net-zero emissions, combined with favorable legislative and policy recommendations supporting incremental utilization of sustainably sourced biomass, continue to reinforce the growing long-term market opportunity for the Partnership’s product around the world.

Global Market

In May of 2021, the International Energy Agency (“IEA”) released the world’s first comprehensive study of how to transition to a net-zero energy system by 2050. The “Net Zero by 2050 Roadmap” sets out more than 400 milestones to achieve carbon neutrality by 2050, including an immediate end to new fossil fuel supply projects and a phase-out of all coal-fired power plants by 2040. The report once again highlights the pivotal role to be played by biomass in achieving the target. The IEA foresees modern bioenergy (of which solid biomass is a subset) meeting almost 20% of total global energy supply by 2050, with solid bioenergy (of which woody biomass is a subset) growing to the equivalent of 14% of total global energy supply. In the electricity sector alone, solid biomass is forecasted to contribute 5% of total global power generation.

European Market

On July 14, 2021, the European Commission (the “Commission”) proposed an update to the 2018 Renewable Energy Directive. This is part of the “Fit for 55” package, which is intended to deliver a 55% reduction in carbon dioxide (“CO₂”) emissions from 1990 levels by 2030, a key milestone needed to reach carbon neutrality by 2050. In the package, the Commission continues to recognize the importance of sustainable biomass in meeting aggressive emissions-reductions goals and its indispensable role in mitigating climate change. As drafted, the proposals for further defining sustainability criteria for biomass are generally in line with Enviva’s existing practices and, as the political process progresses towards binding legislation, we will work with key stakeholders to ensure the European Union (“EU”) only sources biomass that provides a positive contribution to our climate and sustainable forest growth and management.

The EU’s commitment to ambitious emissions-reductions goals continues to drive higher carbon prices, and new EU Emissions Trading System (“EU-ETS”) reforms included in the Fit for 55 package suggest that trend will continue. Since November 2020, EU-ETS prices have more than doubled, allowing biomass to be more profitable in energy generation than carbon-intensive feedstocks such as coal and natural gas, even in markets where there are no direct incentives or subsidies for renewable energy generation. Today, prices have stabilized around the 50 €/MT mark and, given this attractive economic backdrop, we have seen increased momentum around fuel-switching decisions.

In Germany, regulations for long-term financial support to decarbonize district heating networks with renewable alternatives including biomass are expected to be finalized during the third quarter as part of the priority initiatives of the Federal Ministry for Economic Affairs and Energy, with similar regulations for electricity generation conversions from fossil fuels to biomass expected thereafter. The finalization of these regulations should provide a clear path for Enviva and its sponsor to complete commercial discussions currently underway with multiple major utility operators of heating networks and power generation facilities. As noted above, with current carbon pricing at levels where energy generated with biomass can be more profitable than fossil fuel alternatives, additional subsidy frameworks potentially will become less influential on end-user’s decisions to transition to biomass usage.

In the Netherlands, where the Partnership and our sponsor have been serving customers since 2012, we continue to advance new long-term contracts with European utilities and generators to deliver wood pellets into the Dutch power and heating markets. Recently, the Partnership’s sponsor signed an MOU with a major European utility regarding the supply of approximately 60,000 MTPY, for a term of 12 years starting in early 2024, to an industrial customer in the Netherlands.

Utilities have long been the prime consumers of biomass in Europe, but the global industrial sector is becoming an emerging market for the Partnership and our sponsor, where energy-intensive industrial companies are evaluating both coal-to-biomass conversions and adding carbon capture and storage infrastructure to their energy supply chain. We recently delivered test volumes to a number of large European industrial companies to pilot biomass as a solution for reducing their enterprise-wide carbon footprint.

Poland, which has one of the highest per-capita rates of coal usage in the EU, is moving swiftly to decarbonize in order to meet 2030 and 2050 renewable energy targets. In the Polish National Energy and Climate Plan, the government declared that “by 2030, the consumption of biomass for heat production in heating plants must grow almost 10 times.” The government is consolidating coal plants to manage the transformation of its asset base, and is in the process of amending renewable energy regulation, which we believe will support the conversion of coal plants to biomass usage. Following a similar approach employed to develop the Japanese market, our sponsor has formed a local business development team in Warsaw.

United Kingdom Market

According to recent research conducted by Imperial College London and Drax, biomass accounted for 11% of the United Kingdom’s (“U.K.”) power generation in 2020, the highest of any country in the world. Citing conversion to biomass as one of the key factors contributing to coal plant closures, the report estimates that coal-to-biomass conversions reduced carbon emissions by 10 million tons of CO₂ in 2019 compared to 2012, even surpassing the carbon-emissions reduction achieved by the eight gigawatts of onshore wind farms installed during the same period. The report added that bioenergy with carbon capture and storage (“BECCS”) could remove up to 40 million tons of CO₂ per year by the middle of this decade. The U.K. government is currently evaluating a new biomass strategy, which is the first step in the process for developing a support framework for BECCS projects that could be a prerequisite for the U.K. to meet its commitment to net zero by 2050, prompting further long-term demand for our product in this market.

Asian Market

Today, our sponsor announced the signing of a new 17-year take-or-pay off-take contract to supply a major Japanese trading house with 210,000 MTPY of wood pellets. The contract is subject to certain conditions precedent, which our sponsor expects to be met during 2021. Deliveries related to the contract are expected to commence in 2025. This contract brings the total contracted volumes for long-term deliveries to Japanese customers to approximately 4 million MTPY under agreements which extend out in many cases to the 2040s. The rapidly growing Japanese market remains a core growth segment for the Partnership and our sponsor. We remain in ongoing negotiations for additional long-term volumes with customers in the industrial segment as well as in other key market segments, which include projects that benefit from the 20-year government-sponsored feed-in-tariff in Japan and other projects designed to utilize biomass to improve overall thermal efficiency in co-firing power plant opportunities.

Along with Japan, Taiwan is currently one of the largest coal consumers in Asia. Taiwan has implemented the Renewable Energy Act and the Greenhouse Gas Reduction and Management Act (the “GHG Act”), which provide financial and tax incentives to encourage the development of renewable energy sources needed to achieve carbon-neutrality goals. A forthcoming update to the GHG Act is expected to include biomass as a solution to reduce coal consumption. As with Japan and recently Poland, our sponsor has engaged a local business development team based in Taipei to develop this emerging biomass market.

Corporate Summary

As of July 1, 2021, the Partnership’s current production capacity is matched with a portfolio of firm, take-or-pay off-take contracts that has a total weighted-average remaining term of approximately 13.2 years and a total product sales backlog of approximately $16.0 billion. Assuming all volumes under the firm and contingent off-take contracts held by our sponsor and the Partnership were included, our total weighted-average remaining term and product sales backlog would increase to approximately 14.4 years and approximately $20.4 billion, respectively.

Sustainability

Sustainability is the core of our value proposition in our mission to displace coal, grow more trees, and fight climate change. This is because healthy, growing forests remain one of the most critical tools in the fight to mitigate climate change, and sustainable forest management is part of every plan outlined by the UN Intergovernmental Panel on Climate Change (the “IPCC”) to limit global warming to less than 1.5 degrees Celsius. Specifically, the IPCC’s Special Report on Climate Change and Land, which is considered by global policymakers to be one of the key science-based blueprints for climate change mitigation, declared that “a sustainable forest management strategy aimed at maintaining or increasing forest carbon stocks, while producing an annual sustained yield of timber, fiber, or energy from the forest, will generate the largest sustained [climate change] mitigation benefit.”

One of the ways in which we demonstrate leadership in sustainable forestry is through rigorous third-party audits of our forestry activities and supply chain and maintenance of stringent, internationally recognized sustainable forestry certifications like Forest Stewardship Council (FSC^®), Sustainable Forestry Initiative (SFI^®), Programme for the Endorsement of Forest Certification (PEFC^®), and the Sustainable Biomass Program (SBP). These certifications have been consistently reviewed and renewed and we have never had a notable deficiency under these audits or certifications. Every customer delivery we have made since we commenced shipments over a decade ago has arrived within the agreed upon timeframe and has met or exceeded the sustainability specifications required. This unparalleled track record is a result of our intense and ongoing investment in supply chain management and transparency to ensure that our procurement activities do the right thing, the right way, all of the time. We maintain the data set to demonstrate this commitment, which we then share transparently on our website and directly with key stakeholders.

For instance, our proprietary, industry-leading Tr

Contacts

Investor Contact:

Kate Walsh
Vice President, Investor Relations
[email protected]

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