Vinson & Elkins LLP advised Enviva Holdings, LP on the deal.
Enviva Partners, LP (NYSE: EVA) announced that it has agreed to purchase from Enviva Holdings, LP a wood pellet production plant in Lucedale, Mississippi (the “Lucedale plant”), a deep-water marine terminal in Pascagoula, Mississippi, and three long-term, take-or-pay off-take contracts with creditworthy Japanese counterparties.
The Lucedale plant is a wood pellet production plant under construction in Lucedale, Mississippi, with a nameplate capacity of 750,000 metric tons per year (“MTPY”). The Partnership has agreed to purchase the Lucedale plant from our sponsor for cash consideration of $156 million, subject to customary adjustments and closing conditions. The Partnership expects to further invest $59 million in remaining construction capital expenditures and expects the plant to be operational during the third quarter of 2021. The acquisition of the Lucedale plant includes an embedded, fully permitted option to expand the Lucedale plant by about 300,000 MTPY for around $60 million in estimated costs. This expansion project, if executed by the Partnership, is expected to generate incremental adjusted EBITDA of approximately $15 million, which represents an attractive adjusted EBITDA investment multiple of approximately 4 times.
The Partnership has also agreed to purchase the Pascagoula terminal, a deep-water marine terminal under construction in Pascagoula, Mississippi, from our sponsor for cash consideration of $104 million, subject to customary adjustments and closing conditions. The Partnership expects to further invest $26 million in remaining construction capital expenditures and expects the Pascagoula terminal to be operational during the third quarter of 2021. The Pascagoula terminal is expected to have total throughput capacity of 3 million MTPY when fully constructed, allowing for throughput from multiple plants.
To support the Partnership during completion and ramp-up of the Acquisitions, our sponsor has agreed to (i) waive $53 million of certain management services and other fees that otherwise would be owed by the Partnership from the third quarter of 2021 through the fourth quarter of 2023, (ii) provide protection against construction delays, cost overruns, and production shortfalls, and (iii) guarantee a minimum throughput volume at the Pascagoula terminal for 20 years. Similar to the previously executed drop-down transactions of our Hamlet and Greenwood plants, we expect the support from our sponsor to significantly de-risk the Acquisitions and provide enhanced cash flow certainty.
The Partnership expects the Acquisitions to close on or about July 1, 2021.
The V&E team advising on the acquisitions was led by Caroline Blitzer Phillips (Picture), Heather Brocksmith and Tara Tegeleci, with assistance from Tzvi Werzberger, Carter Olson, Ryan Carney, Dan Henderson, Darren Tucker, Ryan Will and Scot Dixon.
Involved fees earner: Caroline Blitzer Phillips – Vinson & Elkins LLP; Heather Brocksmith – Vinson & Elkins LLP; Ryan Carney – Vinson & Elkins LLP; Scot Dixon – Vinson & Elkins LLP; Carmen Guidry – Vinson & Elkins LLP; Daniel Henderson – Vinson & Elkins LLP; Ramey Layne – Vinson & Elkins LLP; Jessica Lewis – Vinson & Elkins LLP; Carter Olson – Vinson & Elkins LLP; Chandler Spinks – Vinson & Elkins LLP; Tara Tegeleci – Vinson & Elkins LLP; Darren Tucker – Vinson & Elkins LLP; Tzvi Werzberger – Vinson & Elkins LLP; Ryan Will – Vinson & Elkins LLP;
Law Firms: Vinson & Elkins LLP;
Clients: Enviva Holdings LP;