Enviva, with plant in Sampson, files for bankruptcy

The largest global industrial wood pellet supplier, with a plant in Sampson County, filed for Chapter 11 bankruptcy protection on Wednesday, announcing its intention to cut about $1 billion of debt by restructuring agreements with creditors, including those who have invested heavily in new facilities.

Maryland-based Enviva said in the filing that its debts exceed $2.6 billion. A pre-arranged restructuring plan aims to reduce that debt by approximately $1 billion.

“These agreements with our lenders and noteholders represent a significant milestone in the ongoing process to transform our business, as we focus on improving profitability, reducing costs, enhancing asset productivity, and optimizing our capital structure,” Glenn Nunziata, interim chief executive officer and chief financial officer, stated.

“We look forward to emerging from this process as a stronger company with a solid financial foundation and better positioned to be a leader in the future growth of the wood-based biomass industry,” Nunziata continued. “We appreciate the support of our lenders, our vendors, and our customers, and the tremendous efforts of our entire team as we continue to execute our transformation plan.”

Enviva leaders have secured commitments for $500 million in debtor-in-possession financing as the company plans to continue operations at plants. The company owes $780 million to a Delaware bank, $348 million to a German energy company, as well as $353 million in bonds from local development authorities in Mississippi and Alabama.

“This is a pre-arranged restructure with our creditors that will be processed through the courts. In addition, we have secured commitments for additional funding,” Chris Brown, Mid-Atlantic Senior Community Relations manager for Enviva, stated in an email to Sampson County officials this week with the Chapter 11 announcement attached. “The goal is to emerge out of this filing by the end of 2024 a much stronger company. During this restructure period, our plants will continue to operate at capacity. We will continue to source wood, make pellets, and ship them to our customers.”

Enviva Pellets Sampson is one of four wood pellet plants the company has in North Carolina. Over the years, Enviva has invested $150 million in its Sampson plant and, as of 2022, hired around 80 associates at the plant located in the Faison area of northern Sampson. In Sampson, the annual production goal is 600,000 metric tons of wood pellets.

In all, the company owns and operates 10 plants with expected annual production of approximately 5 million metric tons per year in Virginia, North Carolina, South Carolina, Georgia, Florida, and Mississippi, and is constructing its 11th plant, in Epes, Ala. The Epes plant is projected to add 1.1 million MTPY — approximately an 18% increase — to Enviva’s production capacity, and is expected to be the world’s largest wood pellet production plant once constructed.

With increased interest from Asian and European nations in burning wood for fuel, Enviva officials had hoped that new plants in Alabama and Mississippi would increase its existing annual pellet production. Construction will continue at the location in Epes, Ala., but the development of a Bond, Miss., facility is pausing until the company finishes restructuring, Enviva officials said this week.

New payback plans will be hammered out with one investment group that holds over three-fourths of the bonds related to the Alabama plant and another group with more than 92% of the bonds for the Mississippi plant.

Back in November, a third quarter earnings report that revealed significant losses for Enviva, prompting an immediate realignment of leadership and plans to transform the company’s financial position.

Enviva cited difficulties maintaining profitability due to increased costs associated with converting raw wood fiber into pellets for biofuel use. According to securities filings, the company also made a wrong-way bet on the price of power-plant fuel in the futures market, resulting in hundreds of millions of dollars in losses, leading to financial strain and ultimately this week’s bankruptcy filing.

The bankruptcy and planned restructuring announcement came two months after Fitch Ratings downgraded Enviva’s default rating following a missed interest payment of $24.4 million.

“Considerable uncertainty exists regarding Enviva’s ability to renegotiate uneconomic customer contracts” entered into in the fourth quarter of the 2022 fiscal year, the global credit-rating agency said in a Jan. 19 press release.

Over the past two decades, Enviva worked to meet global demand for alternative energy sources and built 10 wood pellet production plants across the U.S. South, capitalizing on the heavily forested region’s reputation as the world’s “wood basket.” Those pellets produced from low-grade wood fiber and residuals are shipped abroad to provide heat and electricity in places like Europe and Asia.

Enviva officials said they expected to continue to pay suppliers in the ordinary course for authorized goods received and services provided after the filing. In its announcement, Enviva officials said they had also been in contact with the New York Stock Exchange and anticipated the continued listing of its common stock on the NYSE throughout the restructuring process so long as the company continues to meet the minimum continued listing standards.

Enviva’s shares, which reached nearly $90 in 2022, have traded for less than $1 this year and have dropped by about 99% over the past year. At noon Friday, they were down 11% on the day, standing at 44 cents per share.