EVA - Earnings call transcript Q2 2018

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Operator

Good morning and welcome to the Enviva Partner’s Second Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ray Kaszuba. Please go ahead.

Ray Kaszuba

Thank you. to call. Partners’ welcome financial second and conference results morning the LP Enviva quarter Good your in appreciate today. We interest for thank participating you Enviva Partners and this Chairman John Even, On Financial we and Chief CEO Shai Keppler, Officer. call, morning’s and have

Shai be released financial provide update and and business current discuss on our Our agenda our John outlook. to will an for results yesterday

We questions. will then open up the phone lines for

few get items. started, a housekeeping we Before

the be course Q&A please some of remarks that keep First, we subsequent will in and certain and session, statements during we to non-GAAP making mind forward-looking the refer our will measures.

which statements about could the website, our our can or be the any and or risks the Our materially or section to actual are no release forward-looking concerning is www.envivabiomass.com, of our forward-looking statements issued changed that circumstances. Investor other obligation uncertainties as SEC. differ recent comments on posted in cause XX-K Relations reflect subject new variety in to those with statements to filings in assume our a as of events and Information found results the expectations risks. yesterday, We business forward-looking to future well update from

be want will the we and call, and GAAP we this During of each. figures to non-GAAP on clear be discussing basis

this As contracts months three ended of ASC with adopted the January from results X, are for the June on XXXX, XXX customers. prepared indicated revenue basis. the partnership XXXX financial Unless otherwise XX,

approximate emergency to XXXX business which through measures to to presenting financial incurred have Reconciliation XX, of of I the of in John. recoveries incremental to impact be the our margin turn in Pellet full it may and offset with expenses found disposal asset we excluding References to in Wood include June incremental well connection non-GAAP Pellet Chesapeake now and also Chesapeake cost incident impact addition In release. results measures cases of GAAP results full yesterday’s incident. with Wood the of the over as the insurance in like received continuity include financial to-date. responses, cost on logistics accordance loss GAAP press as associated production, financial provided inventory, certain disposal repair by also financial would

John Keppler

everyone Thank Ray. joining for morning, Good and us thanks you, today.

hoped As important partnership its earnings I release earnings in very last noticed sponsor call. and you since our the some our milestones achieved

turn highly to two fair of first bit know before after quarter. advantage a the many to some key have Vice carrier his new tremendous you we of take team the like discuss I him us. But over many to would recently us in a executive months already partners before track From Energy. and to a our energy Shai He Even, shortly. investors Financial we of and be growth broader But highlights and for the I President share our So opportunity dive will the and Officer. of of today. introduce the proven Enviva to ago to will successful building take I as in Shai of call are with the as want MLP Shai continue opportunities clear, discussions most the joined with familiar financial CFO record. it's Lawn and key member space, Chief we

generation. in of and since starting are purchaser continued of an metric contract offtake XXXX our biomass per year a by we the Enviva front, extended ton contracting relationship a XXXX. Drax, Drax executing biomass world in the proud XXX,XXX to we be the very customer with has part On the largest power in growth been take-or-pay

of with production of to firm a fully offtake contracted the contract partnership remaining of Drax fully billion. the strategy capacity As partnership with XXXX, is years contracts term firm and now extended revenue from is backlog you contracts contract through $X.X know, our weighted X.X the average

executed grade ton we subject we conditions very starting that to trading a XXX,XXX expect announce in the a met metric year. major the investment Japanese excited that per to also offtake house to precedent year are XXXX by end We just be contract XX with of year

extend operational XXXX. to represent into firm of out additional are for construction projects in supplied We investment houses are the and have from From of the per In Pascagoula, year a Greenwood significant the and and years drop largest to billion. by Lucedale, year costs almost that thirds the recently and chain identified that sales expect notwithstanding diversification. partnership. brings sales, our which the to firmly our sponsor for XX.X and down long-term X.X expect the X.X port to would Mississippi contract million infrastructure, of JVs $XX.X addition, now contract make grade offtake new partnership the plans, logistic major would are the to also represent long-term tons incremental in two is underpin executed and take-or-pay associated expected per largest its XXX,XXX the quarter Hamlet, from potential almost which we partnership. supplying a our remaining and trading associated from This next development made contracts product due joint decades to an and sponsor's we Hancock would the sponsor of behind would with year. Corporation quarter, years suppliers the product contracts to contracts take-or-pay the held Chesapeake customer enterprise, several one increase backlog extended These contract included, with had currently two volumes in tons by X.X our production XXXX our us. sponsor XX held the our Japanese the and These incident, XXXX contracts contingent Enviva good two some starting the we volumes the with ventures about total term two Sumitomo contracted that only firm offtake and particularly metric down become in Japan different as standpoint, additional Japan. also weighted-average under extend be and would available If by the and partnership, volumes If in

XX As expectations. we with terminal repairs enabled in line press described the June fire Chesapeake depth time facility our recommission the the on From about event, the our late June, XX were the complete out in to returned release initial and our in in the organizational from operation us days. to dones cleared

in approach throughout There and business believe resulting the validating model our customers no we importantly no any shipments the had that sold entire to over local did wood miss of reliability portfolio pellets other XXXX our the the on with not supplier our period. improvements same by more second Meanwhile ton tons the underlying we was world the More over decreased operations no quarter productivity we impact community quarter metric XXXX to X% and second process, injuries. XX% in of while the the can per continue match. cost see

we distribution at and IPO. long-term confidence the quarter strong and nature of Given to business quarterly per board trends underlying increase the is and full our no least financial year our to volume results discuss quarterly a a over year continued trajectory XXth of now change unit the its the see I we XXXX, last The of like of per-unit hand to the reaffirm our it quarter to we fundamentals guidance XX.X% before the associated to our and growth represents Chesapeake continue distribution provide positive to Shai the the since XXXX for temporary over quarter the temporal and will corresponding increase would cost the second consecutive elected declare issues of $X.XX. the Distribution on and incident. for second $X.XX that opportunities. expect where an production of of Chesapeake impact remain growth event, update from market returning with

Shai Even

Thank you, John.

revenue $XXX.X to quarter million representing of XXXX was $XXX.X million, revenue as basis a sales million compared the XXXX. over GAAP product second of second of For on Order the quarter net X.X% sales of year. of last for increase corresponding period an the $XXX.X was

increase tons XXX,XXX metric pellets, during of as we to sold an quarter, compared second XX%. the the For XXXX of wood tons quarter of metric XXX,XXX

was second quarter the impact For of net contract was XXX XXXX for by well reported incident, achieved XXXX a compared quarter quarter for purposes. the $X.X entailed the customer Higher the consistent as GAAP Chesapeake have Chesapeake would XXXX gross basis, for been adjusted quarter of million lower costs adjusted On during the corresponding were the to to sales gross $XX.X of pricing quarter million, million quarter and metric volumes of the margin the adjusted per production net was incident, margin financial $XX.XX comparison excluding second ton in the $XX.XX as of offset driven mix period as expenses full the per of million compared Adjusted corresponding XXXX, recovery. XXXX. the metric as for insurance of for to same related quarter second income quarter for is second of second lower XXXX. basis the for EBITDA quarter second for net XXXX of the for ASC a $XX.X XXXX. with of the revenue, On margin was $XX.XX versus million by impact $X.X XXXX, gross $XX.X of other income lower ton of

On year for with $XX.X to our as continue $XX.X of operations an that call subject basis, last ranges insurers million the recoveries the our is million we attributable flow, remains representing of this and adjusted line Chesapeake the cash to incident, second will how as paid for the impact from achievable, incident believe we financial our full other $XXX million our reported responsible distribution million general from distributions with guidance $XX.X well We any Chesapeake timing quarter for $XXX believe been call. for XXXX expectations quarter the incentive EBITDA expectations the the terminal of resulting of prior distributable the quarter adjusted returned second all to quarter amount $XX.X times, on partner, million recoverable. quarter. X.XX of guidance Chesapeake the the distribution flow XX earnings covers to to rights of substantially in we characterize quarter increase to XXXX, which The have EBITDA over parties. would consistent during be a and cost Distributable cash XXXX was full of Excluding million. that XXXX provided second February to and and at to

recall, may As stated be Chesapeake to million that you to incident, XXXX million. to $XX in $XX prior EBITDA of adjusted of half we the expected range the first for the we

that a incident primarily the little balance Chesapeake cost the after of a are the quarter. to even bit result at of due of inventory We short net the excluding large end

inventory during year. excess this deliver the course We of the expect the

million is the stated still also over full-year paid at at be the significant XX quarter allowed increases $XX from from total within we XXXX not facility to we led the the which time million the We represent first half even up the adjusted the to had on drawn are of distribution least at quarter XXXX the the and the revolving was credit liquidity similar capacity expect the I $X.XX, of credit partnership to with at $XXX EBITDA year with hand, our In with of the million back incident, well for continued XXXX ratio, off end half we primarily XX a expected perspective approximately anticipated Chesapeake asked where booked second for look quarter agreement. life expect my available. a for that with From that about on leverage our XXXX prior to throughout case. that range often under and of will the guidance reaffirm XX cash year. of This revolver, XX.X our per-unit of June of our million step we recoveries

Now turn it would to I to like John. back

John Keppler

Thanks Shai.

one deliveries have just business, of the to you clear and has as I our our going It's become us and which contract. and reliability that months great to that agree to and that suppliers Japan's the that in are customers safe, perspective ensure on that contracted growth take-or-pay of under to important drivers just it's think world largest profitable exactly long-term are underlying operations biomass grow. largest on board, power in grow scalability fresh few to Shai enabled will reliable generator stable in European Asian the sharing to short alongside a it's markets continue the and a

by policy that As our a they target and EU had agreement approved big we renewables support profiled also II terms under announced energy the the share this generators up for of in XX% XXXX in the the key energy of important in including EU that biomass for the for could XXXX. XX% news from by be on in reached reconfirmed release count agreement as towards target of mix the target June from Europe that national and Commission Parliament energy will is will framework, the plans. eligible action this Council renewable biomass If binding be wide RED the generated

recently turns large the like Ireland the aggressive In renewables to markets strategic So country's Germany, the and have and coal approved plan. fifth Japan, Netherlands a for very in spotlight targets the government reduction that energy usage.

plant of I a source is representing XX policy role Japan's power X double worldwide capacity indicative wood biomass power we to customers major biomass more growing United capacity. scale, the power addition of that that government gigawatts from chain, XX by confirming and an require the derisking are practices. the part targeting plan sustainable first recognizes sustainability production Obviously, government on investments to stability tons to Enviva's XX% need market the continue In to a demand, industrial the baseload target our their and forestry will supply increasingly this biomass, designated energy's a remind continue fiber as is States. metric track to of and power of and Japanese energy which of including the main was as customers in of plants terminals as here of in And by record export for portfolio benefit will incremental renewable meet Southeast industry-leading, fuel XX% per time that we essential of and today. X.X our share the This successful you year renewables, in customer a in generation. XXXX demand, million the our target biomass in will to perceived To renewable source. our XXXX, port is mix, renewable shift providing investing energy's as generation focus

wanted also brief to development I activities. our a So sponsors' provide update on

Our to venture our XXX,XXX capacity with nameplate continues which in half with metric joint production construct North begin year tons production sponsor's expects Hancock plant in sponsor of per a first a of Hamlet, the John first to Carolina XXXX.

wood currently XXX,XXX Greenwood, to the Our to with tons invest Production and capital sponsor from production pellet in from expects in Carolina production in the plant's second continues plant partnership. the XXX,XXX incremental venture increase Greenwood its subject joint per metric Hancock facility to South to sold permits. is capacity year receiving necessary

In Taylorsville, agreements addition, second pellet new includes a production Lucedale, Mississippi in plants cluster development for is Alabama and Pascagoula, has a Mississippi, marine JV acquire a and deepwater potentially recently wood and production terminal also in the that pellet Hancock option to the Mississippi. of executed development progressing wood Epes, in sites plant

contracts for scale acquisition and Our full the their associated operations. been partnership sponsor's once achieved make then derisk terminal develop, export by fully plants, practice production have contract, they has and to available

dropdown is with the the additional plant UK project Hamlet plant. from visible current backed terminal itself to and Macquarie Greenwood supply Hamlet plant, volumes EBITDA expected includes in the site the the MGTT from Wilmington which Our the our pipeline

our expect market of Japan. visibility which to lines Pascagoula nicely year the in We timing including development end the cluster by up additional quite to on the of Lucedale activities plant have the

terminal and XXXX XXXX. expect plant We second portion Wilmington dropdown in of acquisition dropdown the the another dropdown and in plant one

conservation Enviva forest. than was programs. sponsor of Finally our Since Forest of to highlight has the bottom XX,XXX in progress launched contributed Conservation acres the more of sustainability our I line want of key Fund one to the XXXX,

target acres year ten XX,XXX conserved. initial Our was

So and also like third track this innovators compliance and ways as on conversation are beyond why Programs trace track. that system is in leading industry on sustainability the we well are our issue. leaders but our to party only fund demonstrate certification, recognized which and critical commitment audits we not far extend

new markets. busy a progress quarter unit on growth performance long-term to contracted further for our to enable long-term We operating gains strong create productivity will that pillars capacity and increase through these us our contracted sum increases development demonstrated distributions overtime. in good again demand platform serve long-term position of in sustainable per solid So of substantial and which believe to a core continue our

would day. I please you all Operator, importantly to questions. line their close great for work of ports thank other keeping we like the at prepare the As for our Enviva every and plants, hard safe most each people can dedication and

Operator

[Operator Instructions] question Please from Sachs. Our first Brian go-ahead. Maguire comes Goldman of

Unidentified Analyst

for like Pretty of a morning everyone, Chesapeake Brian. some improved sounds and Derek there. the in Hey from efficiencies X% considering good challenges volumes XQ solid drove structure here cost on it's operational it

costs curious made other parts costs you of efforts the of could from continuity in lower might business to going you to cost forward the to able offset these as you further know if your Just your of structure? kind talk that any apply of keep some kind that reduce learnings had of to Chesapeake. and And be quarter if you about you some there

John Keppler

as a That's is management One question we've it more increased very on our continuous time worked a then availability assets excellence system management communicate we course system those to points. designed improvement initiatives. operational of the of hard specifically quarter-over-quarter, our as Enviva very operational production reliability drive drives assets key to couple of the of is of as great which call well

ability presses translates of instance pellet increase thousands of has quarter-over-quarter. purchases material reduction front portion the rate ton our basis. that across and facilities X.X material So focus underpins scale any but cost lower continue while per that volume to the our to that so annual tons productive our we a these of on particularly leverage seek raw at additional trend pellet also to increase say What on span enabled XX% and at EBITDA is hour, on of X% increase are given at we into for the even can if of continue I'd debottlenecking us press target to our the an growth that's quarter-over-quarter not cost within only cost obviously those portfolio would the the you

Unidentified Analyst

on lot And really you growth around basis, I reliability some curious Are what's helpful, on towards in deliveries give you bit in speak more a that, that's area. footprint a a capacity specific little cost coming from have focused competitors and feel business they're win customer can that will the pricing online can't you. still of just of business but anticipate this just than bit a customers you one it, these looking then just curious understand able you larger Asia of of more if helping win to be little thank Got confident color you in your North America, new your new any you pressures or if be with more there? some are

John Keppler

a one curve at they because major is partnership here's us that plans, and the great to face do a potential size partners Again And and marketplace flat one ability I'd frankly across cost looking underpin the upstairs a is capacity. flat basis in the our key and curve groundwork in largest our that the look and talk become marginal the it’s Most the market we marginal customers Enviva. like in and and growth be only XXX,XXX on the in the think the long-term we given to a the Japan new Epes question, profile not forestry XX Europe sustainable so XX, just as South what laying about that major customers proven as the is counter East And term. that we practices assets increasingly and way activities supplier we the next the not need to contracted originated portfolio and only reminder, for will reasons this short U.S over about our but to South into to if differentiator the in about growth that we’re and a our is grow party really not of capacity, the United largest why East Lucedale is of Asia the translates the that's that's development a States, at that to the the tons to ability continue our grow the this delivery also very so essential Europe X, tons. cost increasing is sponsor, and where of is that are scale XX, facilities, out million proven into built Japan the contract into the capacity not within existing Taylorsville, volumes the and will next

Operator

Raymond Our comes Undavia Shereen from go next of question James. ahead. Please

Shereen Undavia

in contracts different out though the year, like Germany, I think Hi about seen of out a German by end in house how as phase it take sounds it you've the will before wanted type Japan. ask matter to the a phase coal facility the timing same announce process the of being prior the you that would begin Commission to sign do long

John Keppler

That’s question. a great

start coal with so me the a will of German point RED transition be your II we’re the that part and commission. considerations, on now a I but it, timing of Let between bit RED and in

that the coal against on industry I the and the change broader focused lead German impact the I this the And power objectives heat issue that of phase climate folks critical power the all very government economy the will that back look of on to for these aspects. And where the here's if think balance and the jobs formation in the underestimating out of frankly I stringent between so coal which transformation and base between The in ahead jobs, will much are I critical the out today to and biomass a for assets commodities be think the timing. its generation or actually by looking ascertain power lignite, of power is commission asset set solid German much work. to integration and fired folks coalition and customer frankly lignite actually that and the government, customer of has, effectively that think. set impact think combined eyes translates trying thermal German coal at of of large commission German of preserving coal industry are are can delegation converted and market the we new made very very and be system regulatory so election was to there that I very in generation the is a Germany the preserving it's What that think its us. support so case that is

we contract Coal that and looking I to would the in think the think undertaking. our customers place the on work enable will Based be given very next of quick I plans be and rationalization months. at are infrastructure it that appropriate XX execution the the already conversions, XX these in utility of from the there could Commission regulatory the that implementation

Shereen Undavia

Okay then a follow I Japan. have and question about

to on sense of You would your these Coast with West it forest traditional make as Eastern print. to Japanese you have matter foot continue plants about three build contract a of four logistics, stick the which plant South

John Keppler

That's question this me a just and a a quarter. lot our great quick because obviously contracted do on was just to go report reset and ahead let there is position

maintain EBITDA tons announced MGT for we tons. Japanese target. some the time XXX,XXX fully the approximately partnership's to the XXX,XXX level we Japanese with contract contract look and contract underpinning the the and tons sponsor incremental us volumes metric as incremental in X% to up contracts through through Jacks This growth sets At the announced is for basis we've Sumitomo partnership and with out XXX,XXX contracts extend we if perspective XXXX for again which tons to the So the the from additional contracted about XXX,XXX XXXX. that of plus previously that XX% is

And need does so these capacity. new of we all

maintain requirement in So U.S. mention to will and also and in look volumes cost the sustainable that you've is volumes when cost U.S. continue will heard at anywhere that United base cost Europe in at States advantage to we scale mention the that the to our Southeast to fiber lowest us the be. reason an And to the site from the of Taylorsville. in world. to place to and negotiations its on basis we is basis new a to And continue mention heard Lucedale and Epes you've on from Hamlet, continue find we price and it mention me our Greenwood, continue in increase The potential because that led focus Southeast the basis for world diluted have position on yet a believe Southeast hour marginal Asia we the heard we around the fiber you've continue markets conclude why forestry lowest you logistics win. heard for you the the world that, that curve plus right has combination in to flat us to is cost us given fiber opportunity

Operator

the our for closing Keppler concludes back turn would remarks. like to session. to question-and-answer This conference over [Operator I any John Instructions]

John Keppler

to just thanks everybody I'd us like joining today. again for

able case. what next and that's to started many accomplish I conversation know in just our quarter. we're and of of to you I'm all to been very that the next we've really getting the Talk you As saying fond outlining look just forward soon.

Operator

you attending today's has for concluded. conference The presentation. now Thank

You may disconnect. now

Enviva (EVVAQ) 9 Aug 182018 Q2 Earnings call transcript