FROM STAR NEWS ONLINE:
Wood pellet giant enters 2024 amid a financial crisis. So what went wrong at Enviva?
The company, which supports thousands of jobs in Eastern N.C., has seen its share price crash in recent months, prompting questions over whether it will survive or be broken up
USA TODAY NETWORK
The next few weeks could shape the future of one of the biggest economic players in Eastern North Carolina.
Enviva, the world’s largest wood-to-energy company that supports thousands of jobs in rural communities across the state’s Coastal Plain, is walking a financial tightrope as it enters 2024.
The company’s stock price on Thursday was hovering around 80 cents, down 99% from its peak of $87 a share in April 2022. As recently as spring 2023, the stock was still holding at more than $21 a share. Then a series of worrying disclosures sent the stock into a tailspin, with shares losing more than 77% of their value on a single day in November when the company issued its disappointing third-quarter financial results and warned that it could struggle to remain a going concern, was hiring advisers to assess its options, taking moves to cut costs, and looking to renegotiate its contracts.
The company also replaced its CEO, announced it would delay completion of a new pellet plant in Mississippi, and hinted the fourth-quarter financials could be even more dismal than the third-quarter numbers.
“These conditions and events in the aggregate raise substantial doubt regarding the company’s ability to continue as a going concern,” stated the company in the report on its third-quarter performance.
So what happened to the once high-flying company that has received incentives from North Carolina and operates a storage and shipping facility at the Port of Wilmington?
Company officials have said a series of factors have combined to chop down the company even as it sells more wood pellets than ever to customers in the United Kingdom, continental Europe and Japan. They include collapsing prices for wood pellets, long-term contracts that lock Enviva into deals with customers at low prices, high interest rates that makes its loans more expensive to service, and operational issues at some of its plants.
The dismal outlook prompted Fitch Ratings, one of the country’s leading financial rating companies, in November to downgrade Enviva’s credit rating to Rating Watch Negative (RWN), commonly known as junk grade. The financial meltdown has also prompted some shareholders to file a class-action lawsuit against the company.
This week an Enviva spokesperson declined to comment on the company’s ongoing efforts to right itself beyond what was stated during the third-quarter earnings report. She added that a date for the release of the fourth-quarter financial results had yet to be announced.
Business model under fire
While any collapse or consolidation of Enviva’s operation could leave some rural communities and residents of Eastern North Carolina struggling, the company’s business model has been a target for environmentalists for years.
Enviva supplies European and Asian utilities with wood pellets as an alternative to burning dirty coal. But environmentalists and clean-energy advocates question the alleged sustainability value of chopping down trees in the U.S. South, processing them and then shipping the pellets thousands of miles to burn as a “clean” fuel source for power plants. They also criticize countries receiving the pellets as attempting to “greenwash” their environmental credentials by stating the pellets are a renewable energy source that’s helps them reach net-zero emission goals amid pressure to respond to climate change.
Enviva also has faced environmental justice questions over its logging practices and emissions from pellet production, since many of the company’s operations are located in low-income and minority communities. The company has repeatedly said it embraces sustainable logging practices and provides jobs in areas where other economic opportunities are often limited.
According to Enviva, the company supports more than 1,800 jobs in mostly rural North Carolina at its four wood pellet production plants and Port of Wilmington facility and has invested more than $675 million in the state. Facilities are also located in six other Southeastern U.S. states, with several more plants planned.
Reporter Gareth McGrath can be reached at [email protected] or @GarethMcGrathSN on X/Twitter. This story was produced with financial support from Green South Foundation and the Prentice Foundation. The USA TODAY Network maintains full editorial control of the work.