Enviva announces drop-down transactions related to Hamlet plant

By Erin Voegele | March 26, 2019

Enviva Partners LP has announced drop-down transactions related to a joint venture that owns a 600,000-metric-ton-per-year pellet plant under construction in Hamlet, North Carolina, and increased its guidance for 2019.

On March 25, Enviva released a statement stating it has agreed to purchase its sponsor’s interest in its first development joint venture, Enviva Wilmington Holdings LLC. The first joint venture owns a the Hamlet plant and a firm, 15-year take-or-pay off-take contract to supply MGT Power Ltd.’s Tees Renewable Energy plant with nearly 1 million metric tons per year of wood pellets, following a ramp up period.

Enviva Partners said it expects to complete the Hamlet transaction for a total consideration of $165 million on or about April 2, subject to customary closing conditions. The Hamlet plant is expected to begin commercial operations in June and reach full nameplate production in 2021. The MGT contract commences in 2019, ramps to full supply volumes in 2021 and continues to 2034.  

The partnership also announced that it has agreed to make the second and final payment for its 2017 acquisition of the deep-water marine terminal in Wilmington, North Carolina, and to commence the associated terminal services agreement to handle contracted volumes from the Hamlet plant. The initial payment of $56 million was made to the first joint venture in October 2017. The remaining $74 million payment is scheduled to be made April 1.

“We’re very excited that, with the transactions announced today, we expect to be able to deliver double-digit annual distribution growth, along with higher coverage levels, for the foreseeable future,” said John Keppler, chairman and CEO of Enviva, in a statement. “Our sponsor intends to recycle the proceeds it receives from these transactions into the build-out of the Pascagoula cluster, which we believe further enhances the long-term growth profile of the Partnership, as we expect to have the opportunity to acquire these assets.”

With the benefit of the Hamlet transaction and Hamlet throughput at the Wilmington terminal, the partnership said it now expects full-year net income to be in the range of $25.6 million to $33.6 million and adjusted EBITDA to be in the range of $130 million to $138 million.

Additional information is available on the Enviva website