THE WOOD PELLET INDUSTRY AND ITS SUPPLY CHAIN EDWARD SONTAG DIRECTOR OF FIBER SOURCING

Transcription

1 THE WOOD PELLET INDUSTRY AND ITS SUPPLY CHAIN EDWARD SONTAG DIRECTOR OF FIBER SOURCING

2 AGENDA Overview of Enviva Worldwide Biomass Markets The Wood Pellet Business and its Supply Chain 2

3 OVERVIEW OF ENVIVA

4 ENVIVA - SUSTAINABLE, RENEWABLE, BIOMASS FUELS Established in 2004, Enviva is a privately held, privately funded company headquartered in Maryland with operations throughout the Southeastern United States and in Europe. Enviva sells processed biomass fuels to US and international energy utilities and industrial customers seeking to decrease their dependence on fossil fuels and reduce their carbon footprint. 4

5 ENVIVA VALUES Live with Integrity Be honest and candid; do what we say, say what we do. Our word is our bond. Respect individuals, the environment and communities. Train, coach, and mentor our people to achieve their potential. Never compromise on safety: safe environments are the foundation of personal and professional goals. Hear the Customer Produce quality products that exceed customer expectations. Reliably deliver on time to maintain customer confidence. Continuously strive to eliminate waste and lower costs to provide savings to our customers. Set and Achieve High Standards. Meet our stakeholders expectations consistently and then exceed them. Measure performance, establish facts, and eliminate root cause issues to achieve peak performance. Grow from our setbacks; learn from the mistakes and successes of others. Focus on Value Creation Create long term economic value that is sustainable for Enviva, our partners and the environment. Pursuit of continuous improvement through Lean Thinking to achieve superior results. Maximize outcomes: be humble enough to learn and confident enough to teach. Act Sustainably in the Decisions We Make Work to eliminate the perceived tradeoffs between cost and the environment. Strive for environmental leadership, not only compliance. Lead from the front; individual actions can have profound impact. 5

6 ENVIVA IS ONE OF THE WORLD S LARGEST BIOMASS SUPPLIERS DELIVERING A CLEAN DROP IN SUBSTITUTE FOR COAL-FIRED POWER GENERATION Enviva US Footprint Robust existing operations in mid-atlantic, Mississippi and Alabama Pellet industry gains cost advantages by optimizing site selection, scale and equipment selection Enviva locates facilities in sustainable fiber baskets close to transportation infrastructure. Vertically integrated operations provide cost stability and competitive advantage. Bethesda, MD Enviva Port of Chesapeake is a low-cost pellet export port in North America due to a shipping advantage to European customers and ability to handle large vessels. Biomass Energy, Bumpass, VA 100K Southampton, VA 500K Northampton, NC 500K Port of Chesapeake, VA Ahoskie, NC 350K Partner Facility 50K Amory, MS 90K Wiggins, MS 136K Plants Port infrastructure Company Headquarters Port of Mobile, AL 6

7 WOOD FIBER IS THE CORE OF ENVIVA S RAW MATERIAL SUPPLY Enviva s wood biomass sources include: Processed residues, (chips, bark and sawdust by-products). Unprocessed residues, (tree tops, branches, stumps, and other forestry debris remaining after the primary biomass or tree trunk has been processed and shipped from the forest). Low-grade wood fiber and round timber. Sawdust (Residuals from Wood Industry) Woodchips (Forest Residuals) Tops and Limbs (Forest Residuals Slash) Low-grade round wood 7

8 PELLET PRODUCTION PROCESS Enviva is the forest-to-furnace renewable energy analog to conventional midstream commodity companies Procurement Receiving & Storage Debarking & Chipping Drying Size Reduction Pelleting Truck Loading Port Storage & Shipping Related Industries Traditional forestry, pulp & paper and wood panels industries Non-wood based pelleting Grain and other dry bulk commodities Industrial processes and equipment used for decades in related industries 8

9 ENVIVA'S SUSTAINABILITY BEGINS IN THE FOREST Enviva Fiber Sourcing & Processes Are Certified Sustainable However Less Than 20 Percent of Our Raw Material Is Certified Sustainable Forestry Initiative (SFI) Programme for the Endorsement of Forest Certification (PEFC) Forest Stewardship Council (FSC) Green Gold Label (GGL) Certified Sourcing Certification: April 2011 Chain of Custody Certification: March 2012 Chain of Custody Certification: April 2012 Certification: March 2012 Chain of Custody Certification: March 2012 Fiber From Certified Forests Facilitates Market Access & Ensures Continued Growth of Forest-to-Energy Market 9

10 CHALLENGES OF FOREST CERTIFICATION European member states importing biomass for power generation view US as transparent and relatively low risk; however, these same countries deem forest certification as a means to ensure sustainable forest management and to avoid the threat of deforestation. Only 8 Percent of the World s Forests Are Certified Only 26 Percent of the World s Industrial Roundwood Supply is Certified After Almost 20 Years of Forest Certification Customers are increasingly concerned not only about sourcing wood pellets but also receiving environmental credit for the product Source: PEFC

11 SOME GROUPS ARE CONCERNED ABOUT THE IMPACTS OF THE WOOD BIOMASS ENERGY INDUSTRY Some groups have raised concerns related to the impacts of the biomass to energy industry on forests and the air pollution associated with the combustion of wood biomass fuels. Replacing coal with biomass has been shown to result in substantial environmental benefits in scientific studies. Due to the heightened scrutiny, sustainable forestry practices including adherence to BMP s and ensuring prompt reforestation will be critical to the industry s success. 11

12 WORLDWIDE BIOMASS MARKETS

13 UTILITIES USING WOOD BIOMASS FUELS TO IMPROVE THE ENVIRONMENTAL PROFILE OF ENERGY GENERATION Carbon dioxide is released back into the atmosphere Forests absorb carbon dioxide through photosynthesis Previously sequestered carbon is released into the atmosphere Excess CO 2 accumulates in the atmosphere Biomass can be converted into heat and power Forest can be harvested sustainably to produce biomass 13

14 WHY WOOD PELLETS Similarities to Coal Make Wood Pellets an Ideal Low Carbon Replacement Wood pellets provide power generators with a drop in alternative to coal Reduces overall carbon footprint of generation by ~80% compared to coal 1 High energy density and uniform shape enhance transportation and storage economics Existing conventional generation can be converted Median Heat Content (BTU/lb.) Wood Pellet vs. Coal Attributes Wood Pellets 1 NYMEX CAPP Coal 2 Southern PRB Coal 3 8,000 12,000 8,600 Moisture 4 10% < 10% 26 30% Ash 0 2% < 13.5% % Sulfur % < 1.0% < 1.0% 1 Source: Enviva. 2 Source: CME Group. 3 Source: Union Pacific. 14

15 SUBSTANTIAL GROWTH IN EUROPEAN DEMAND PROJECTED THROUGH 2020 AND BEYOND EU 2020 Goals have aggressive, binding renewable energy and carbon emission requirements Wood pellets provide utilities with attractive low carbon alternative to meet energy and emission requirements Biomass fired power plants provide reliable, base load power that can be generated on demand, unlike some other forms of renewable energy. Low-cost renewable energy alternative Currently available European supply insufficient to meet demand growth Europe is natural resource constrained (UK has about 1/3 the forested acres as the state of North Carolina) European supply to be supplemented by imports Source: Poyry Source: Poyry 15

16 CURRENT AND FUTURE PELLET TRADE FLOWS Existing tradeflows Future tradeflows Illustrative 16

17 DEVELOPING DEMAND IN ASIA Consumption Levels (Millions of Tonnes) Asia is key export market after Europe China South Korea & Japan Pricing expectations vs. cost realities gap will narrow Shipping differential is about $20 $20 higher from South East of the US to Asia than from West Coast $20 higher from West Coast to Europe than from South East to Europe. Source: POYRY 17

18 US DEMAND EMERGING BUT NOT NEAR TERM Potential large US demand, even 1 percent coal displacement in the US would be approximately 17 million metric tons per year; however No national environmental / carbon policy so market is fragmented Some state level mandates provide one-off opportunities for utilities

19 THE WOOD PELLET BUSINESS AND THE SUPPLY CHAIN

20 THE US SOUTHEAST IS A PREMIER ENVIRONMENT FOR THE GROWING WOOD PELLET INDUSTRY Abundant, sustainably harvested forests and timber resources Growth to drain ratios that have exceeded one for decades Well-developed harvesting and logistical infrastructure (waterways, rail and highway) Proximity to international export ports Operating cost advantage Established forest monitoring and best management practices Wood basket proximity to inland waterways and export ports Source: U.S.D.A. Forest Service: U.S. Forest Resource Facts and Historical Trends

21 OPERATING AND PROPOSED PELLET MILLS >200K/YEAR PRODUCTION CAPACITY IN THE SOUTHEAST Enviva Pellets Southampton 550,000 Biomass Energy - Enviva Partner 150,000 Franklin Pellets 500,000 Enviva Pellets Amory 96,000 Enviva Pellets Northampton 550,000 Enviva Pellets Ahoskie 365,000 International WoodFuels 330,000 Westervelt Renewable Energy 275,578 Drax Morehouse Bioenergy 500,000 Bayou Wood Pellets Enviva Partner 60,000 Point Bioenergy 400,000 Biomass Secure Power 1,102,000 Drax Amite Bioenergy 500,000 Enviva Pellets Wiggins 150,000 Zilkha Biomass 303,000 Green Circle Bio Energy 468,500 Enova Energy Trenton 500,000 Fulghum Graanul 200,000 Low Country Biomass 220,400 Fram Fuels Appling 254,000 General Biofuels 440,000 Enova Energy Gordon - 500,000 Enova First Georgia Bioenergy 375,000 Fram Fuels Hazelhurst 331,000 Georgia Biomass 850,000 Enviva Facilities Operational and Under Construction Competitive Pellet Facilities - Operational Competitive Pellet Facilities - Announced Annual production capacities listed in short tons per year Green wood purchases are approximately double the production capacity 21

22 ENVIVA BUILDS PARTNERSHIPS The wood pellet industry is stable and growing Enviva enters into long-term offtake agreements with our customers and provide consistent, ratable supply and fiber demand Enviva encourages supply chain growth and inspires confidence Enviva supports the implementation of BMPs, continuing education for loggers and promotes sustainable forest practices to ensure responsible fiber extraction A broad, stable supply chain is good for us and good for the region With our current and announced projects, Enviva will consume nearly 5 million tons. 22

23 THANK YOU Edward Sontag Director of Fiber Sourcing Enviva LP 7200 Wisconsin Ave, Suite 1100 Bethesda, MD USA +1 (301) fax +1 (301)