The financially troubled wood-to-energy company didn't get off to a good start until 2024, with a bond payment delay and a warning that it could soon be delisted from the New York Stock Exchange (NYSE) due to its falling stock price.
Enviva's stock price was also hovering around 60 cents a share on Tuesday, down more than 99% from its high less than two years ago.
But the next few days could reveal some of what the future holds for the company that has a large economic footprint in eastern North Carolina, supporting more than 1,800 jobs at its four wood pellet production plants and the Port of Wilmington facility.
What happened in 2024?
Last month, Enviva decided to skip a $24.4 million payment to bondholders, entering a 30-day grace period to negotiate with lenders and customers. According to a filing with the US Securities and Exchange Commission (SEC), the company said the move “enhances its flexibility in the short term.”
With its finances already in trouble, Enviva announced in November while reporting its dismal third-quarter 2023 results that it was conducting a “comprehensive review of alternatives” and its capital structure amid fears it would not be able to continue operating its company. Current model.
Enviva's third-quarter results showed a loss of $85 million, up from $18.3 million in the third quarter of 2022. The company's financial woes are largely due to the collapse in wood pellet prices, which means the company is making less money even though it is selling more of pellets compared to the third quarter. since when. With Enviva locked into several long-term contracts with customers at low prices, losses may continue to mount unless the company can renegotiate the agreements.
The bond default last month prompted Fitch Ratings, a global credit rating agency, to downgrade the company's debt rating further to junk bond territory.
Chopped:The wood pellet giant with major operations in eastern North Carolina is skipping a bond payment
It drops to less than $1
On January 23, Enviva received notice from the New York Stock Exchange that the company was not in compliance with listing standards because its stock price had fallen below $1 per share. Stock exchange listing standards require companies to maintain an average closing price per share of at least $1 over a period of 30 consecutive trading days.
Enviva can regain compliance at any time during the next six months if the stock's closing price is $1 and the stock's average closing price is at least $1 during the 30-day trading period ending in the month.
Although an obvious red flag, the notice from the NYSE does not impact Enviva's ongoing business operations or the ability to buy and sell company stock.
Why it matters this week
With the company tight-lipped about its future plans and yet to announce its Q4 2023 financial results, which are expected to show a lot of red ink, there has been a lot of speculation about Enviva's future.
Tim Haynes, global head of credit research at Debtwire, expects that to change this week when the company's 30-day grace period to pay bondholders expires.
“This will stop the uncertainty,” he added.
Whether this financial framework on how to move forward involves bankruptcy or some streamlining of Enviva's operations to keep it as a going concern with a smaller capacity, is not yet known. But Haynes said some sort of agreement with the company's bondholders was likely to be reached this week.
An Enviva spokesperson said Monday that the company has no comment on its financial future beyond what it has already shared publicly.
Troubled business plan?
Enviva supplies European and Asian utilities with wood pellets as an alternative to burning dirty coal.
But environmentalists and clean energy advocates question the purported sustainability value of chopping down trees in the southern United States, processing them and then shipping the pellets thousands of miles to be burned as a “clean” fuel source for power plants. They also criticize countries receiving pellets as trying to “wash their environmental credentials” by saying the pellets are a renewable energy source that helps them meet net-zero emissions targets amid pressure to respond to climate change.
Enviva has also faced environmental justice questions over 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.
Reporter Gareth McGrath can be reached at GMcGrath@Gannett.com or @GarethMcGrathSN on X/Twitter. This story was produced with financial support from Green South and the Prentice Foundation. The USA TODAY Network retains full editorial control over the work.
