Money doesn’t grow on trees: Wood pellet firm tells investors it’s in a financial crisis

Enviva, the world’s largest manufacturer of wood pellet fuel, which operates 10 plants in the Southeast, including four in North Carolina, is bleeding cash and experiencing serious financial trouble, company executives said on a third-quarter earnings call Nov. 9.  

Falling wood pellet prices and “operational challenges” could also force Enviva to default on some of its loans, according to its most recent report to the Securities and Exchange Commission. “These conditions and events in the aggregate raise substantial doubt regarding the Company’s ability to continue,” the report read.

Enviva reported a net loss of $85.2 million in the third quarter of this year, compared with an $18.3 million loss in the third quarter of 2022. Even though the company sold more tons of wood pellets this summer, an “unfavorable pricing environment” led to a 50% drop in earnings.

Enviva’s financial crisis could persist through 2025, the company’s SEC report said.

The company also announced it has replaced its CEO Thomas Meth with Glenn Nunziata as interim CEO; he was previously the company’s chief financial officer.

Environmental and climate advocates have long scrutinized and criticized Enviva’s business model, which falsely claims to produce “renewable energy” sources and to be climate-friendly. 

Each year Enviva clear-cuts thousands of acres of forest, including upland hardwoods, to produce wood pellets that are shipped overseas to be burned instead of coal as fuel.

The wood pellet process produces significant amounts of greenhouse gases at every step of production: The clear-cutting releases carbon dioxide that is sequestered in the trees and roots. Even when trees are replanted, it takes decades for them to reach maturity and capture the carbon of older trees. Clear-cutting also exacerbates flooding, which is now more common because of climate change, because there is no vegetation to absorb or slow the water. 

The company then ships those trees – in diesel-emitting log trucks – to plants in Ahoskie, Faison, Hamlet and Garysburg, where they are turned into pellets. And in total, the pellet plants themselves release a quarter-million tons each year of greenhouse gases, as well as smaller, but significant amounts of hazardous air pollutants.

The pellets are then trucked or shipped by rail to the Port of Wilmington, where Enviva has an export terminal. There, the pellets are loaded onto diesel-powered ships that then head to nations in Europe or Asia. Power plants in those countries burn the wood pellets – releasing tons of carbon dioxide into the atmosphere – instead of coal. 

All of Enviva’s plants are located in predominantly non-white and low-income neighborhoods where residents are exposed to tons of air pollution from the facilities each year. Since 2017, Enviva’s North Carolina facilities have tallied 14 air quality violations, according to N.C. Department of Environmental Quality records. Fires ignited at the Faison plant in Sampson County in both 2020 and 2021. Another fire broke out at the Garysburg plant in Northampton County in 2016.

The Dogwood Alliance, based in Asheville, attributed its 10-year “Our Forests Aren’t Fuel” campaign for some of Enviva’s financial woes. With community members, “we made the company take responsibility for its pollution and environmental injustices,” the Alliance said in a prepared statement. “We exposed their greenwashing, leading to lawsuits and higher legal costs for Enviva. We have delayed their expansions and diminished their production through constant pressure and scrutiny of regulatory processes. We made them invest in air quality improvements, which they should have done from the start. These improvements are now hurting the company’s profits.”

Yet Enviva’s significant contributions to climate change have also contributed to its financial struggles. Globally, 2023 was the warmest on record, according to NOAA’s National Centers for Environmental Information. Land temperatures are running 4.2 degrees Fahrenheit warmer than average, and ocean temperatures are 1.85 degrees warmer.

That warmth has reduced the demand for indoor heat. “Enviva generally experiences an uptick in wood pellet consumption in the winter, when heating demand is high,” the company’s report said. “This dynamic, which was particularly pronounced in the fourth quarter of 2022, has not materialized to date in 2023.” 

In April 2022, Enviva’s stock price peaked at $89.64 a share. At the end of trading yesterday, it was just 85 cents.