PE-backed Enviva Partners in $210m IPO

Utility-grade wood pellets supplier Enviva Partners has set terms for an IPO, as it looks to expand driven by a buoyant biomass industry.

According to a Monday filing with the US Securities and Exchange Commission, Enviva, backed by Riverstone Holdings and The Carlyle Group, will issue 10 million units priced at between $19 and $21 each.

The IPO gives underwriters an over-allotment option to buy another 1.5 million units, with the potential to raise proceeds to $241.5 million if shares sell at $21. Enviva plans to spend most of the proceeds, combined with $85.9 million in borrowings under a current loan facility, on a $144.5 million distribution to its private equity backers, which have invested $348.5 million in equity in the company.

The partnership plans to repay $81.9 million in debt and put aside about $45 million for general partnership purposes, including future acquisitions. The Bethesda, Maryland-based firm owns and operates five production plants in the southeastern US that have a combined wood pellet production capacity of 1.7 million metric tons per year – roughly 15 percent of the world’s supply.

Enviva has secured off-take for all its production under take or pay contracts throughout 2016 and has already contracted half of its production from 2017 through 2021. According to consultant Hawkins Wright, demand for utility-grade wood pellets is expected to grow at a compound annual rate of 21 percent from 2014 to 2020. The growth is expected thanks to the conversion of coal-fired power generation and combined heat and power plants to co-fired or dedicated biomass plants in northern Europe and, increasingly, in South Korea and Japan.

In December, John Hancock Life Insurance Company entered into a $320 million joint venture with Enviva to produce wood pellets. According to the IPO prospectus, Enviva will have a five-year right of first offer to acquire the current and future wood pellet production plants and associated deep-water marine terminals that the joint venture may develop or purchase.

This story first appeared on PEI's sister title Low Carbon Energy Investor.