Enviva adds to wood pellet contract portfolio

US wood pellet producer Enviva has signed a new 210,000 t/yr 17-year take-or-pay contract to supply a "major Japanese trading house", it said in its first-half 2021 results today, bringing its total contracted wood pellet volume to the Japanese market to around 4mn t, under agreements that extend as far as the 2040s.

The contract is subject to certain conditions, which Enviva expects to be met this year. Deliveries under the contract are expected to begin in 2025.

Enviva remains 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 utilise biomass to improve overall thermal efficiency in co-firing power plant opportunities", it said.

Enviva also signed an initial agreement with a "major European utility" for around 60,000 t/yr of wood pellets to a facility in the Netherlands for 12 years starting in early 2024, it said.

Enviva recorded higher costs in the second quarter, largely owing to higher wood pellet production costs, an increase in third-party purchases and costs owing to expansion projects. The producer's adjusted gross margin fell by $8.53/t or 17.2pc on the year to $41.02/t in the second quarter as a result. But overall, Enviva's adjusted gross margin rose to $41.80/t in the first half of 2021, up from $40.66/t a year earlier.

Enviva's wood pellet sales rose by 61.2pc on the year to 1.4mn t in the second quarter of 2021, bringing its overall sales to 2.5mn t of wood pellet in the first six months of 2021, up by 35.8pc on the year.

Enviva expects its new Lucedale production plant to commence operations in the second half of 2021. The Lucedale plant also includes an option to expand production capacity by approximately 300,000 t/yr, for which the necessary permits have been granted.

Enviva's Pascagoula terminal is expected to commence operations in the third quarter of 2021. The Pascagoula terminal is expected to have total throughput capacity of 3 mn t/yr when fully constructed, allowing for throughput from multiple plants.

Expected production expansions

Enviva "continues to develop wood pellet production assets to serve its growing backlog of long-term contracted demand", it said.

Enviva is developing a fully contracted wood pellet production plant in Epes, Alabama, which is designed and permitted to produce more than 1 mn t/yr of wood pellets as well as a "potential future plant site" in Bond, Mississippi, the company said.

The prospective Bond plant is being designed to produce between 750,000 t/yr and more than 1 mn t/yr. Given its proximity to the port of Pascagoula, production from a plant in Bond would be delivered to the Pascagoula terminal by truck for export.

Production also continues to ramp up at Enviva's recently expanded Northampton, North Carolina, and Southampton, Virginia, wood pellet production plants. Each plant is expected to reach its expanded nameplate production capacity of around 750,000 t/yr and 760,000 t/yr, respectively, by the end of 2021.

Expansions at Enviva's pellet plants in Sampson, North Carolina, Hamlet, North Carolina, and Cottondale, Florida, continue to progress and are expected to be completed by the end of 2022.

By April Poore