Check out Enviva Partners (Ticker: EVA)
Industry leader EVA is the global leader in the supply of utility-grade wood pellets. The company operates facilities with an annual production of ~5.4mm metric tons per year, significantly more than its nearest competitor, selling to major utilities and
Biomass is one of the most cost-effective ways to reduce carbon emissions. The renewable energy agency predicts that global investment in biomass will grow from $13 billion to $69 billion over the next three decades.
The company, structured as an MLP, has a backlog of take-or-pay contracts totaling $16 billion with a weighted-average remaining life of over 13 years ($20 billion and 14-year life including contracts currently held by EVA’s sponsor). Since inception, EVA has dropped down six projects all from its sponsor company, Riverstone.
EVA has been growing its dividend progressively by 8% per year. If this trend continues, EVA will be able to grow its dividend 10% per year through 2022.
What to expect?
EVA trades at a yield of 6.8%, a discount to Alternative Energy total return comps, which could narrow as EVA executes on its backlog and the woody biomass industry matures. An increasing IDR burden presents some uncertainty regarding a potential simplification strategy, though we believe this catalyst may be several years away. There’s a chance it hits $64 in the months ahead.