US wood pellet producer Enviva achieved strong sales growth in the third quarter, with the company's operations largely unaffected by the Covid-19 pandemic.
Enviva sold 1.13mn t of wood pellets in the third quarter, up by 40pc from a year earlier. The company's operations "have not been materially impacted by Covid-19", chief executive John Keppler said, and all "customers have performed in accordance with their contracts". And while the "full implications of Covid-19 are not yet known", Enviva has plans in place to mitigate potential disruptions if necessary, Keppler said.
Enviva's adjusted gross margin was largely steady on the year at $50.13/t in July-September, down by just 43¢/t, or less than 1pc, from a year earlier.
Enviva expects its overall fourth-quarter earnings "to be stronger than the third", Keppler said.
The company recorded $8.2mn of revenue for "modifying shipments under its long-term take-or-pay off-take contracts, which otherwise would have been included in product sales". Several European utilities have requested delays to a range of contracted wood pellet vessels this year, as consumption has lagged behind supply.
All conditions have been satisfied for Enviva's previously announced 270,000 t/yr 20-year contract to supply Japanese power plant developer Ichihara Yawatafuto Biomass Power GK. The contract, which makes Enviva the sole supplier for Ichihara, is now firm. Sales under the contract are expected to start in 2023, which will take Enviva's total wood pellet supply to Japan to around 2.7mn t/yr by 2024.
Future demand growth
The producer maintained its expectations for future wood pellet demand growth, pointing toward climate policies in Europe and Asia-Pacific.
Enviva highlighted Japan's goal to become carbon neutral by 2050 and the proposed increase of the EU's GHG emissions savings target to 60pc from 1990 levels by 2030. "These commitments and the corresponding policies… underpin the continued strong growth expected in global demand for industrial-grade wood pellets," Enviva said.
Enviva remains in an "ongoing dialogue with several large power and heat generators in Germany who intend to convert existing coal-fired assets to biomass, subject to the final legislative direction expected over the next several months", the firm said. And Enviva continues to "progress negotiations that [it] anticipates will result in additional long-term offtake contracts", it said.
Expansions progressing
Expansion works are continuing at Enviva's 510,000 t/yr Northampton, North Carolina, and Southampton, Virginia, plants. The installation of new equipment at Southampton is expected by the end of this year.
"Procurement and detailed engineering activities" to expand the production capacity of its Greenwood plant in South Carolina to 600,000 t/yr are under way, Enviva said. The expansion remains on track for completion by the end of 2021, "subject to receiving the necessary permits", the firm said.
Construction of the 700,000 t/yr Lucedale plant and deepwater marine terminal in Pascagoula, Mississippi, is continuing, and remains on track to be completed by mid-2021.
A final investment decision over the development of a new production plant in Epes, Alabama, is still expected by the end of this year. And Enviva is evaluating additional sites for wood pellet production plants in Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, and Mississippi.
The company owns and operates nine pellet production plants with a combined capacity of around 4.9mn t/yr in Virginia, North Carolina, South Carolina, Georgia, Mississippi, and Florida.
