Enviva announces drop-down transactions, increases guidance
Enviva Partners announced that it had agreed to purchase the sponsor's interest in its first development joint venture, Enviva Wilmington Holdings. The First JV owns a wood pellet production plant under construction in Hamlet, North Carolina and a firm, 15-year take-or-pay off-take contract to supply MGT Power Ltd.'s Tees Renewable Energy Plant with nearly one million metric tons per year of wood pellets, following a ramp period. In addition, the Partnership announced that it has agreed to make the second and final payment for its October 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 Hamlet Transaction is expected to generate net income in the range of $10.4M-$13.4M and adjusted EBITDA in the range of $26.0M-$29.0M once the Hamlet plant and the MGT contract are fully ramped. With the Hamlet Transaction and the Hamlet Throughput, the Partnership expects full-year 2019 net income to be in the range of $25.6M-$33.6M, adjusted EBITDA to be in the range of $130.0M-$138.0M, and distributable cash flow to be in the range of $92.0M-$100.0M, prior to any distributions attributable to incentive distribution rights paid to our general partner. The Hamlet Transaction and Hamlet Throughput associated with the Second Payment are expected to be immediately accretive to distributable cash flow per common unit; as a result, the Partnership now expects to distribute at least $2.65 per common unit for full-year 2019 and between $2.87 and $2.97 per common unit for full-year 2020. The Partnership has agreed to issue approximately $200.0M in common units, which, when combined with borrowings under its existing $350.0M senior secured revolving credit facility, would fully finance the Hamlet Transaction, the Second Payment, and the previously announced production capacity expansions at the Partnership's Northampton and Southampton production plants. The Partnership revised its annual target distribution coverage ratio from 1.15 to 1.20 times, on a forward basis.