Sunday, June 16, 2024


Dhaka Tribune

Enviva (NYSE: EVA) stock down 78% - the wheels come off another green dream

As the wind farm companies decline to build any more money losers so the wood pellet business fails

Update : 10 Nov 2023, 04:19 PM

Enviva (NYSE: EVA) stock is down 78% in the one day on the publication of the results. Worse for EVA stock this comes accompanied with a going concern warning. It’s not obvious that the capital structure can survive beyond the end of the year, not without some fairly drastic action being taken that is. The problem is that as currently structured at least the business simply is not economic. Obviously, this is true of many a green plan but often enough that’s covered by varied subsidies. Making wood pellets to be burnt i power plants doesn’t seem to attract those sorts of subsidies - at least, not enough to cover the gaping hole where operating profits should be.

The business line: “Enviva Inc. produces, processes, and sells utility-grade wood pellets. The company’s products are used as a substitute for coal in power generation, and combined heat and power plants. It serves power generators in the United Kingdom, European Union, and Japan.” While they may or may not be an actual customer this is the sort of product that gets burned at Drax. In terms of actually being green therefore it’s a total boondoggle, it actually has an anti-value as far as climate change is concerned.

Enviva stock price from Google Finance

The going concern warning: “Enviva—which grinds up trees at facilities across the South and ships the resulting pellets abroad to be burned in power plants—gave investors a litany of bad news on Thursday, prompting a 78% drop in its shares to less than $1. It’s the latest big drop for the stock which traded at $80 two years ago.”

And yes, the results were that bad: “Enviva Inc (NYSE: EVA) reported a net loss of $85.2 million for the third quarter of 2023, a substantial increase from the net loss of $18.3 million reported for the third quarter of 2022. This loss included $21.2 million of asset impairments, $22.1 million of interest expense on repurchase accounting, and $6.3 million of restructuring costs not incurred in the previous year. Adjusted EBITDA for the quarter was $36.6 million, down from $60.6 million in Q3 2022, primarily due to lower revenue from commercial activities.”

The specific problem is prices: “Revenue of $320.6M (-1.6% Y/Y) misses by $29.87M.

Metric tons sold during third-quarter 2023 were 1.433 million MT, as compared to 1.256 million MT during third-quarter 2022, representing a 14% increase in volumes year-over-year.” Sales volume up, revenues down, it’s the price they’re able to collect on a sale that is the problem.

Of course, for anyone concerned about the planet this is excellent news. For the idea of running power plants on woodchips transported thousands of miles is entirely a boondoggle, something that exists only because of wholly perverse classifications of it as carbon neutral. Bit of a pity for Enviva stockholders, obviously, but of benefit to the rest of us.

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