Enviva Partners LP, the world's largest supplier of power generation wood pellets backed by Riverstone/Carlyle, filed on Tuesday with the SEC to raise up to $100 million in an initial public offering.
Business
Enviva claims that utility-grade wood pellets are increasingly becoming a global energy commodity, used as a substitute for coal in both converted and co-fired power generation and combined heat power plants. It is larger than any competitor, producing 16% of global utility-grade wood pellet supply. The company owns and operates five production plants in the Southeastern US with a combined wood pellet production capacity of 1.7 million metric tons per year (MTPY). After the offering, Enviva will have the right of first offer to acquire wood pellet production plants from Riverstone/Carlyle with production capacity of 2.0 million MTPY.
It estimates that demand for its wood pellets will grow at a CAGR of 21% from 2013 to 2020 (from 9.9 million MTPY to 38.0 million), driven by higher conversion of coal-fired power generation to co-fired or biomass-fired plants in Northern Europe as well as Korea and Japan. Enviva operates under long-term, take-or-pay off-take contracts, and two customers in the 1H14 accounted for 94% of net sales.
Riverstone/Carlyle
Riverstone/Carlyle (100% pre-IPO stake) first entered the business in 2010 when it acquired two small plants in Mississippi. It greatly expanded capacity in 2013 with the build of a new plant in Northampton, NC and in 2014 with the acquisition of a plant in Cottondale, FL. Enviva also owns a dry-bulk, deep-water marine terminal at the Port of Chesapeake to build out logistics and reduce shipping costs.
Financials
Predecessor net revenue grew 79% to $135 million during the six months ended June 30, 2014 because of higher volume associated with two new customer contracts. Gross margin fell 230 bps to 2.9% due to reduced plant utilization and higher wood supply costs amid cold temperatures and excessive precipitation, combined with the costs of ramping up its newest plant. While it saw a 77% increase in metric tons sold, adjusted gross margin per metric ton fell 9% to $19.28 because of the same issues. Adjusted EBITDA rose to $9 million from $444,000, helped by favorable customer mix and higher volume.
Pro forma its most recent acquisition and formation transactions, Enviva generated $305 million in net sales with a gross margin of 11.1%. The company has not disclosed its proposed distribution per unit. It generated $10 million in pro forma cash available for distribution for the 12 months ended June 30, 2014, which it expects to grow to $46 million for the 12 months ended December 31, 2015.
The Bethesda, MD-based company, which was founded in 2010 and booked $364 million in sales for the 12 months ended June 30, 2014, plans to list on the NYSE under the symbol EVA. Enviva Partners LP initially filed confidentially on December 6, 2013. Barclays, Goldman Sachs, RBC Capital Markets and Citigroup are the joint bookrunners on the deal. No pricing terms were disclosed.
