Wood Pellet Giant Enviva Discloses a Financial Crisis

A financial crisis has enveloped Enviva, the Maryland-based company that’s been harvesting large swaths of forest in the Southeast United States to make wood pellets for electricity production in the United Kingdom and Europe.

Enviva calls itself the world’s largest producer of biomass wood pellets, and in recent years it’s faced a cross-Atlantic campaign attempting to debunk the company’s claims of environmental sustainability. It has 10 pellet manufacturing plants in six states: North Carolina, Mississippi, Florida, Virginia, South Carolina and Georgia, where local residents and environmental groups have raised ecological and environmental justice concerns from logging practices and emissions from pellet production.

The company has active plans for two more pellet plants, one in Alabama and the other in Mississippi. But the future of the company is now in doubt, by its own admission.

Enviva’s stock price, which has been falling all year from a high of $51 in January, sank to under a $1 a share on Thursday after a new interim chief executive officer delivered a sobering third-quarter earnings call that raised questions about the company’s viability, blaming unfavorable wood pellet pricing, problems at a plant in Virginia, higher interest expenses and other factors.” In its third quarter Security and Exchange Commission filing, Enviva cautioned that “these conditions and events in the aggregate raise substantial doubt regarding the company’s ability to continue as a going concern.”

As investors rushed for the exits, Bloomberg reported a one-day stock price drop of 79 percent.

“To address these near-term headwinds we are moving with urgency to execute a multifaceted transformation plan,” said Glenn Nunziata, the company’s chief financial officer who has also taken on the new role of interim chief executive officer, according to a transcript of the call. He promised a review of the company’s contracts and debt.

The company’s press office did not immediately respond to a request for comment.

Environmental advocates were quick to suggest that all the questions they have raised about Enviva’s business model and environmental impacts may be catching up to the company.

“Enviva built a business model based on environmental injustice (and) forest destruction,” wrote North Carolina-based Dogwood Alliance, in a press release. “The industry operates on a model of greenwashing, bad climate science, large scale clearcutting, and cutting corners on community protections.”

The environmental group has fought the company’s logging and wood pellet manufacturing for years and has been part of the “Cut Carbon Not Forests” campaign, along with U.S.-based Southern Environmental Law Center and the Natural Resources Defense Council. The coalition worked with U.K.-based Biofuelwatch to fight lucrative subsidies to Drax, a major British utility and Enviva wood pellet burner. The environmentalists have seen Drax as a key driver of what’s been a booming wood pellet industry in the South.

Enviva has benefited from British and European policies that effectively considered the practice of burning wood pellets to make electricity as carbon neutral, even though scientists have shown the practice can emit more greenhouse gases than burning coal.

Heather Hillaker, a staff attorney with the Southern Environmental Law Center, said she’s not sure exactly what caused the company’s financial crisis. But, she said, “it’s all really coming to a head right now—the science, the policy, the community stories and everything we have been talking about for years.”

In 2021, more than 500 scientists wrote a letter to President Biden and European leaders, defending the need to protect Southern forests from biomass energy.

“Trees are more valuable alive than dead both for climate and for biodiversity. To meet future net zero emission goals, your governments should work to preserve and restore forests and not to burn them.”

Hillaker noted that Enviva’s stock took a tumble last October, when the activist investment services company Blue Orca Capital issued a blistering critique of the company, largely endorsing criticisms from scientists and environmentalists.

“We believe that Enviva is the latest ESG farce, a product of deranged European climate subsidies which incentivize the destruction of American forests so that European power companies can check a bureaucratic box,” Blue Orca wrote, referencing its environmental, social and governance policies. “In an Orwellian twist, even though burning wood emits more CO2 per unit of heat generated than any major energy source (including coal), an arcane carbon accounting loophole subsidizes European power companies to replace coal with wood pellets derived from deforestation in the United States. All in the name of climate activism. In our opinion, Enviva is engaging in textbook greenwashing.”

At the time, Enviva responded by saying the Blue Orca report “contains numerous errors, repeats previous unsupported speculation and gross mischaracterizations, and draws specious, misleading conclusions.”

In its presentation today, the company said it had sold more tons of wood pellets in the third quarter of 2023 compared to last year, but still posted an $85.2 million loss for the period of July through September.

“The single most important lever we have to ensure the long-term success of the business is improving the profitability of our current portfolio of contracts and ensuring that the value of those contracts more appropriately reflects the value we provide to customers,” the new CEO said.

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Enviva has applied for U.S. Department of Energy clean-energy tax credits in a fund that was bolstered by the Inflation Reduction Act, the landmark federal climate and clean energy law backed by President Biden.

In August, company officials told investors in their second quarter earnings call that it was seeking the tax breaks to offset costs associated with the two new planned Enviva wood pellet plants, one in Sumpter County, Alabama, and the other in Bond, Mississippi.

If successful, company officials said the tax credit could offset from 6 percent to 30 percent of the total eligible capital investments in each project, which the company estimated at between $335 million and $365 million, according to a meeting transcript.

In late September, more than two dozen environmental groups wrote to Energy Secretary Jennifer Granholm to object to the company’s application.

The tax credits the company seeks are “intended to be used for an energy transition away from polluting energy,” they wrote. “We must not divert its limited funding towards projects that continue to perpetuate harms to the climate and communities on par with fossil fuel combustion.”

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                James Bruggers covers the U.S. Southeast, part of Inside Climate News’ National Environment Reporting Network. He previously covered energy and the environment for Louisville’s Courier Journal, where he worked as a correspondent for USA Today and was a member of the USA Today Network environment team. Before moving to Kentucky in 1999, Bruggers worked as a journalist in Montana, Alaska, Washington and California. Bruggers’ work has won numerous recognitions, including best beat reporting, Society of Environmental Journalists, and the National Press Foundation’s Thomas Stokes Award for energy reporting. He served on the board of directors of the SEJ for 13 years, including two years as president. He lives in Louisville with his wife, Christine Bruggers.

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