BETHESDA, Md.--(BUSINESS WIRE)--Enviva Partners, LP (NYSE:EVA) reported financial and operating results for the second quarter of 2016.

Highlights for the Second Quarter of 2016:

• Generated net income of $12.0 million and adjusted EBITDA of $23.5 million, up from $2.9 million and $19.1 million, respectively, for the second quarter in 2015
• Declared a quarterly distribution of $0.5250 per unit, a 2.9 percent increase from the distribution paid for the first quarter of 2016
• Updated full-year 2016 guidance for net income to a range of $40.0 million to $42.0 million and adjusted EBITDA to a range of $86.0 million to $88.0 million, excluding any impact of potential drop-downs or other acquisitions

“Our strong operating and financial performance through the second quarter, coupled with our increased outlook for the remainder of 2016, put us solidly on the path toward our previously announced full-year distribution expectation of at least $2.10 per unit for 2016, excluding the impact of any potential drop-downs or other acquisitions,” said John Keppler, Chairman and Chief Executive Officer. “In addition, our market position enabled us to capitalize on dislocations in the market this quarter and optimize deliveries to our growing customer base.”

Financial Results

For the second quarter of 2016, we generated net revenue of $119.7 million, an increase of 9.2 percent, or $10.0 million, from the corresponding quarter of 2015. Included in net revenue was product sales of $116.2 million on volume of 620 thousand metric tons of wood pellets. Product sales increased from the corresponding quarter of last year due to higher wood pellet sales volumes as a result of shipment timing, partially offset by a higher percentage of “free on board” shipments, which exclude shipping from revenue and cost of goods sold.

For the second quarter, we generated net income of $12.0 million compared to $2.9 million for the corresponding quarter in 2015. Adjusted EBITDA improved to $23.5 million in the second quarter of 2016, a 23.0 percent increase compared to the corresponding period in 2015. The increases in net income and adjusted EBITDA were driven by higher wood pellet sales volumes under our long-term, take-or-pay contracts, increased other revenue primarily derived from shipments purchased from and sold to third parties, and lower general and administrative expenses, partially offset by contract pricing mix. The cost position of our delivered wood pellets, primarily driven by plant utilization and raw material costs, was consistent between periods.

The Partnership’s distributable cash flow, net of amounts attributable to incentive distribution rights, increased from $15.4 million for the second quarter of 2015 to $19.5 million for the second quarter of 2016, resulting in a distribution coverage ratio of 1.50 times.

Distribution

As announced yesterday, the board of directors of the Partnership’s general partner declared a distribution of $0.5250 per common and subordinated unit for the second quarter of 2016. This distribution is 2.9 percent higher than the first quarter 2016 distribution. The second quarter distribution will be paid Monday, August 29, 2016, to unitholders of record as of the close of business Monday, August 15, 2016.

Outlook and Guidance

The Partnership updated its full-year 2016 guidance. The guidance amounts provided below do not include the impact of any potential acquisitions from the Partnership’s sponsor or others.

The Partnership now expects full-year 2016 net income to be in the range of $40.0 million to $42.0 million, which reflects higher non-cash compensation expense and non-cash asset impairment and disposal charges than previously anticipated, and adjusted EBITDA to be in the range of $86.0 million to $88.0 million, which reflects the Partnership’s better-than-expected performance during the first half of 2016. The Partnership expects to incur maintenance capital expenditures of $4.0 million and interest expense net of amortization of debt issuance costs and original issue discount of $12.0 million in 2016. As a result, the Partnership expects full-year distributable cash flow to be in the range of $70.0 million to $72.0 million, prior to any distributions attributable to incentive distribution rights paid to the general partner, which reflects the expected improvement in full-year adjusted EBITDA. For full-year 2016, we expect to distribute at least $2.10 per common and subordinated unit.

Market and Contracting Update

Our sales strategy is to fully contract the production capacity of the Partnership. We are fully contracted for 2016 and our current capacity is matched with a portfolio of off-take contracts that has a weighted-average remaining term of 8.0 years from July 1, 2016, including the Partnership’s recently announced 9.5 year contract to supply 800,000 metric ton per year (“MTPY”) to Lynemouth Power Limited, but excluding potential sales under the Partnership’s 15-year contract to supply MGT Power’s Teesside Renewable Energy Plant in the UK, which continues to proceed towards financial close.

As we disclosed June 8, 2016, subsidiaries of Graanul Invest group (“Graanul”) announced that they had purchased the shares of the company which owns the Langerlo power station in Genk, Belgium and intend to convert the power station from coal to biomass. The Langerlo power station has already received a subsidy from the Flemish government to support the conversion, is a system-relevant production asset for the Belgium power grid, and its conversion is a critical component of Belgium’s plan for meeting binding European Union renewable energy consumption requirements. We are in discussions with Graanul in regards to potentially supplying a portion of the Langerlo power station’s wood pellet fuel needs, which are expected to be 1.8 million MTPY commencing in the second half of 2018. We had previously entered into an off-take contract to supply wood pellets to an affiliate of German Pellets GmbH that intended to use our product at the Langerlo power station. As a result of the sale to Graanul, however, we believe it is unlikely that our contract counterparty will perform its obligations under this contract and, although we intend to preserve all of our rights against our counterparty, we do not expect our counterparty to take deliveries of wood pellets under it.

In the Netherlands, the government awarded several biomass co-firing, dedicated biomass heat, and combined heat and power projects a total of 2.5 billion euros in subsidies in the first of two rounds of applications for the 2016 renewable incentive program. Biomass co-firing projects owned by RWE and Engie were among the initial recipients. The budget for the program had already been substantially increased to 8.0 billion euros for 2016 from 3.5 billion euros in 2015, and the budget for the second round of applications, open from September through October 2016, was increased further from 4.0 billion euros to 5.0 billion euros.

“In light of our contracting activity this quarter, our sales book and production capacity are substantially balanced through early 2022 and include contracts that extend out to 2027. Additional growth will be driven by demand continuing to materialize in our core European market and the developing Asian market, which we believe can be supplied cost-competitively from our assets in the Southeastern U.S. due to its advantaged fiber basket,” said Mr. Keppler. “As the market leader, we are excited about the opportunities to further extend our contracted position and diversify our customer base, and the opportunities our sponsor may have to build substantial new, fully-contracted production capacity that would add to its inventory of potential drop-down assets.”

Sponsor Activity

Construction of the 515,000 MTPY production plant in Sampson County, North Carolina (the “Sampson plant”) and deep-water marine terminal in Wilmington, North Carolina (the “Wilmington terminal”) is nearing completion. Our sponsor’s operations team expects to assume full operational control of the Sampson plant later this month and for the first vessel to load at the Wilmington terminal in October. The Partnership expects to have the opportunity to acquire the Sampson plant, along with our sponsor’s ten-year off-take contract with an affiliate of DONG Energy, in late 2016 and the Wilmington terminal in 2017. Due to the related-party nature of such transactions, the board of directors of the Partnership’s general partner has formed a Conflicts Committee comprised solely of independent directors in anticipation of evaluating such opportunities.

In addition, our sponsor has executed an agreement with the Jackson County Port Authority granting our sponsor an option to build and operate a marine export terminal at the Port of Pascagoula, Mississippi.

About Enviva Partners, LP

Enviva Partners, LP (NYSE: EVA) is a publicly traded master limited partnership that aggregates a natural resource, wood fiber, and processes it into a transportable form, wood pellets. The Partnership sells a significant majority of its wood pellets through long-term, take-or-pay agreements with creditworthy customers in the United Kingdom and Europe. The Partnership owns and operates six plants in Southampton County, Virginia; Northampton County and Ahoskie, North Carolina; Amory and Wiggins, Mississippi; and Cottondale, Florida. We have a combined production capacity of approximately 2.3 million metric tons of wood pellets per year. In addition, the Partnership owns a deep-water marine terminal at the Port of Chesapeake, Virginia, which is used to export wood pellets. Enviva Partners also exports pellets through the ports of Mobile, Alabama and Panama City, Florida.

To learn more about Enviva Partners, LP, please visit our website at www.envivabiomass.com.