MLP Enviva Partners LP completes drop-down purchase of Sampson Plant for $175 million

Written By: Stratton Report
December 14, 2016

Enviva

On December 14, master limited partnership Enviva Partners, LP announced the completion of its drop-down purchase of the Sampson plant and associated off-take contracts from its sponsor, Enviva Holdings, LP, and joint venture partners, affiliates of John Hancock Life Insurance Company.

John Keppler, Chairman and Chief Executive Officer remarked: “We are pleased to announce that the Sampson acquisition, our second drop-down transaction since our IPO last year, was completed ahead of schedule. The acquisition adds a world-class asset to our production fleet and further diversifies our customer base, and the related financing activities provide significant financial flexibility as we plan for continued long-term growth.”

Per the firm, the Sampson acquisition includes a wood pellet production plant in Sampson County, North Carolina; a 10-year, 420,000 metric tons per year off-take contract with an affiliate of DONG Energy Thermal Power A/S; a 15-year, 95,000 MTPY off-take contract with the Hancock JV; and matching third-party shipping contracts. The Sampson plant is expected by its new owners to produce approximately 500,000 MTPY of wood pellets in 2017 and to reach its full production capacity of approximately 600,000 MTPY in 2019.

According to Enviva, the acquired off-take contracts extend the weighted average remaining term of the Partnership’s portfolio of off-take contracts to 9.7 years and increase the product sales backlog to $5.7 billion as of January 1, 2017.

The Sampson plant is expected by the firm to generate incremental net income and adjusted EBITDA of approximately $2.3 million and $22.0 million, respectively, for 2017, increasing to approximately $6.5 million and $27.0 million, respectively, once full production capacity is achieved.

The master limited partnerships full-year 2017 guidance for ranges of net income of $31.0 million to $35.0 million and adjusted EBITDA of $110.0 million to $114.0 million include the incremental net income and adjusted EBITDA expected from the Sampson acquisition.

Per Enviva, the $175.0 million purchase price for the Sampson acquisition was financed with the issuance of 1,098,415 common units representing limited partner interests in the partnership to affiliates of John Hancock Life Insurance Company at approximately $27.31 per unit, resulting in a value of $30.0 million, and a portion of the $300.0 million in proceeds from the previously announced issuance of the partnership’s senior unsecured notes due 2021. The remainder of the proceeds from the senior notes was used to repay $158.1 million of outstanding term loan indebtedness, plus accrued interest, under the partnership’s senior secured credit facilities. In connection with the repayment of term loan indebtedness, the partnership’s revolver capacity under its senior secured credit facility increased from $25.0 million to $100.0 million.

Evercore served as exclusive financial advisor and Andrews Kurth Kenyon LLP served as legal counsel to the conflicts committee of the board of directors of the Partnership’s general partner. Vinson & Elkins L.L.P. served as legal counsel to the Hancock JV.