Enviva Partners, LP’s $165 Million Drop-Down Transaction

For the Hamlet Transaction, Evercore served as exclusive financial advisor and Baker Botts LLP served as legal counsel to the conflicts committee of the board of directors of the Partnership’s general partner. Vinson & Elkins LLP served as legal counsel to the sponsor. Bracewell advised Evercore acting as financial advisor to the Conflicts Committee of the Board of Directors of Enviva Partners GP, LLC

Enviva Partners, LP (NYSE: EVA) had agreed to purchase the sponsor’s interest in its first development joint venture, Enviva Wilmington Holdings, LLC. The First JV owns a wood pellet production plant under construction in Hamlet, North Carolina and a firm, 15-year take-or-pay off-take contract to supply MGT Power Ltd.’s Tees Renewable Energy Plant with nearly one million metric tons per year of wood pellets, following a ramp period. In addition, the Partnership announced that it has agreed to make the second and final payment for its October 2017 acquisition of the deep-water marine terminal in Wilmington, North Carolina and to commence the associated terminal services agreement to handle contracted volumes from the Hamlet plant.

The Partnership expects to complete the Hamlet Transaction for total consideration of $165.0 million on or about April 2, 2019, subject to customary closing conditions (the “Closing”). The Hamlet plant is expected to achieve commercial operations (“COD”) in June 2019 and to reach its nameplate production capacity of approximately 600,000 metric tons per year (“MTPY”) in 2021. The Hamlet Transaction includes the MGT contract, which commences in 2019, ramps to full supply volumes in 2021, and continues through 2034. As previously announced, the Partnership already has contracts with the First JV to supply 470,000 MTPY of the volumes under the MGT contract. The incremental sales volume of approximately 500,000 MTPY would extend the weighted-average remaining term of the Partnership’s off-take contracts to 10.6 years and increase its contracted revenue backlog to $9.1 billion as of February 1, 2019.

The Hamlet Transaction is expected to generate net income for the Partnership in the range of $10.4 million to $13.4 million and adjusted EBITDA in the range of $26.0 million to $29.0 million, after full production capacity is achieved and the MGT contract is fully ramped in 2021. On this basis, the purchase price for the Hamlet Transaction, including the Incremental Hamlet Capital (as defined below), represents an adjusted EBITDA multiple of approximately seven times. Thereafter, the net income and adjusted EBITDA from the Hamlet Transaction are expected to increase, such that, in 2024, the Hamlet Transaction is expected to generate net income for the Partnership in the range of $18.1 million to $22.1 million and adjusted EBITDA in the range of $33.0 million to $37.0 million.

Upon the Closing, the Partnership expects to make an initial payment of $75.0 million to the sponsor consisting of 1,681,238 common units representing limited partner interests in the Partnership (“common units”) at a price of $29.74 per unit (which was the undiscounted 20-day volume-weighted average price as of March 20, 2019), or approximately $50.0 million of common units, and $25.0 million in cash. Upon COD, the Partnership expects to make a second payment in the amount of $50.0 million in cash. The third and final payment of $40 million in cash is expected to be made on January 2, 2020.

Baker Botts advised the Conflicts Committee with a team including Michael Rosenwasser (Picture), Michael Swidler, Jonathan Kovacs (M&A), Michael Bresson, Jared Meier (Tax) and Matthew Kuryla (Environmental).

Vinson & Elkins served as counsel to the sponsor in Enviva Partners, LP with a team including Caroline Phillips and Brittany Sakowitz and associate Heather Brocksmith, with assistance from associate Tara Tegeleci. Also advising were partner Tzvi Werzberger and associates Carter Olson and Erin Brown; partner Ryan Carney, of counsel Price Manford and associate Dan Henderson; partner Darren Tucker and associate Ryan Will; partner Ramey Layne, senior associates Chris Mathiesen and Frankie Shulkin and associate Brittany Smith; and senior associate Daniel Hatch.

Bracewell advised Evercore with William S. Anderson and Charlotte Keenan.

Involved fees earner: Michael Bresson – Baker Botts; Jonathan Kovacs – Baker Botts; Matthew Kuryla – Baker Botts; Jared Meier – Baker Botts; Michael Rosenwasser – Baker Botts; Michael Swidler – Baker Botts; William Anderson – Bracewell; Charlotte Keenan – Bracewell; Caroline Blitzer Phillips – Vinson & Elkins LLP; Heather Brocksmith – Vinson & Elkins LLP; Erin Brown – Vinson & Elkins LLP; Ryan Carney – Vinson & Elkins LLP; Daniel Hatch – Vinson & Elkins LLP; Daniel Henderson – Vinson & Elkins LLP; Ramey Layne – Vinson & Elkins LLP; Price Manford – Vinson & Elkins LLP; Christian Mathiesen – Vinson & Elkins LLP; Carter Olson – Vinson & Elkins LLP; Brittany Sakowitz – Vinson & Elkins LLP; Frankie Shulkin – Vinson & Elkins LLP; Brittany Smith – Vinson & Elkins LLP; Darren Tucker – Vinson & Elkins LLP; Tzvi Werzberger – Vinson & Elkins LLP; Ryan Will – Vinson & Elkins LLP;

Law Firms: Baker Botts; Bracewell; Vinson & Elkins LLP;

Clients: Enviva Partners, LP; Enviva Partners, LP – Conflicts Committee ; Evercore Partners;


Author: Ambrogio Visconti