THIS RESEARCH REPORT EXPRESSES SOLELY OUR OPINIONS. We are short sellers. We
are biased. So are long investors. So is Enviva. So are the banks that raised money for theCompany. If you are invested (either long or short) in Enviva, so are you. Just because we arebiased does not mean that we are wrong. Use BOC Texas, LLC’s research opinions at yourown risk. This report and its contents are not intended to be and do not constitute or containany financial product advice. Investors should seek their own financial, legal and tax advice inrespect of any decision regarding any securities discussed herein. You should do your own
research and due diligence before making any investment decisions, including with respect tothe securities discussed herein. We have a short interest in Enviva’s securities and therefore
stand to realize significant gains in the event that the price of such securities declines. Pleaserefer to our full disclaimer located on the last page of this report.

COMPANY: Enviva Inc. │ NYSE: EVA
INDUSTRY: Consumable Fuels
PRICE (AS OF CLOSE
10/11/2022)

USD 58.97
MARKET CAP

We are short Enviva (NYSE: EVA) (“Enviva” or the “Company”) because we think EBITDA is
inflated, it will cut its dividend, and newly discovered data suggests, in our opinion, that the Company
is flagrantly greenwashing its wood procurement.
Enviva claims to be a pure play ESG Company with a healthy, self-funded dividend and cash flows
to provide a platform for future growth. We think this is nonsense on all counts.

USD 3.9 BN

In our opinion, Enviva is a dangerously levered serial capital raiser whose deteriorating cash
conversion and unprofitability will drain it of cash next year. Contrary to Enviva’s claims, it
generates nowhere near the cash from operations to support its dividend, let alone future capital
expenditures to drive growth. Rather, Enviva’s dividends are funded through capital raising. Given its already troubling leverage,
we think Enviva will be forced into further dilutive equity raises, more borrowing at punitive rates, or most likely, a significant
dividend cut.
We believe that Enviva is the latest ESG farce, a product of deranged European climate subsidies which incentivize the destructionof American forests so that European power companies can check a bureaucratic box. In an Orwellian twist, even though burning
wood emits more CO2 per unit of heat generated than any major energy source (including coal), an arcane carbon accounting
loophole subsidizes European power companies to replace coal with wood pellets derived from deforestation in the United States.
All in the name of climate activism.
In our opinion, Enviva is engaging in textbook greenwashing. Hidden GPS data embedded in Enviva’s Track and Trace disclosures
allowed us to geolocate the Company’s harvests. Satellite imagery indicates that contrary to the Company’s claims, in many
instances Enviva is procuring wood from the widely condemned practice of clear-cutting. Former senior Enviva sustainability andprocurement executives confirmed that this practice was endemic. We also think this explains the “exodus of sustainability
leadership” from Enviva in 2021, including the recent resignations of both authors of the Company’s prominent sustainability“white paper.”Ultimately, we think that any legitimate ESG investor or allocator should be embarrassed to own this stock. But in addition toevidence of greenwashing, Enviva’s troubling cash flows, dangerous leverage, and unsustainable dividend only add further
momentum to the short thesis, which is why we expect the stock price to contract significantly from Enviva’s current nosebleed
valuation.
1.

Hidden Metadata Reveals that Enviva Procures Wood from Clear-Cutting Forests. Enviva publicly denies clear-cutting
forests, the controversial practice of removing full swaths of forest which is widely condemned by ESG investors and climatechange advocates. Although Enviva refuses to disclose to watchdogs or investors the exact location of its harvests, when weanalyzed the metadata from its Track and Trace database, we found embedded GPS coordinates. We think that there is areason Enviva tried to conceal this data. When we geolocate Enviva’s harvests using these GPS coordinates, satellite imagery
reveals hundreds of images of clear-cut forests, suggesting that the practice is widespread and that Enviva is misleading
investors. We corroborated this with interviews of two former senior Enviva executives, who unequivocally stated that Enviva
sources wood from clear-cutting. A former senior Enviva sustainability executive lamented that the practice was routine
because clear-cutting was cheaper than other more sustainable methods of harvesting. Ultimately, multiple strands of
independent evidence, from the statements of former senior executives to satellite imagery, indicate that Enviva is procuring
wood from clear-cutting, a practice roundly rejected by ESG investors and expressly discouraged by EU sustainability
guidelines.

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Enviva Drives Demand for Deforestation. Enviva claims that harvesting forests for wood pellets is sustainable and produces
lower greenhouse gas emissions than coal because it is only harvesting waste left by the timber industry, scraps that otherwise
would be left to rot on the forest floor. Enviva insists that it does not drive demand for deforestation or influence the harvesting
decisions of landowners because the Company claims to purchase on average less than 30% of the wood from each harvest.
The other 70%, according to Enviva, is higher value timber sold to other industries. Yet Enviva’s own Track and Trace datashows that the Company is violating this key threshold and is likely driving demand for deforestation.
a.

Enviva Track and Trace Data Contradicts Reported Harvesting Threshold. On its website, Enviva publishes its
Track and Trace data, including the total acreage harvested and the proportion of each harvest purchased by Enviva. Thisdata shows that Enviva took greater than 30% of the volume of the harvest in over 2/3rds of the acreage harvested by theCompany, including a substantial amount of acreage in which Enviva took 70-100% of the wood harvested. According
to a former high-level sustainability officer we interviewed, Enviva takes 70-90% of the volume in “plenty of tracks”
because of the low prices for such wood. The larger the proportion of a harvest taken by Enviva, the more likely Enviva’spresence and payments are driving the economics that influence a decision of the landowner to cut the forest down. In our
opinion, Enviva’s own data provides compelling evidence that the Company is driving demand for deforestation andmisleading investors regarding its procurement practices.

3.

Hardwood Forest Inventory is Decreasing Around Enviva’s Facilities. As evidence of the purported sustainability of its
practices, Enviva claims that forest inventories are increasing in sourcing regions around its facilities. This is misleading,because it ignores that inventories of hardwood trees are decreasing, replaced by less expensive pine seedlings and negatively
impacting forest biodiversity. Recent academic and scientific studies analyzing satellite imagery around Enviva’s facilities
concluded that it was “very likely” that Enviva’s pellet mill operations contributed to elevated rates of deforestation of
deciduous trees in the area. This ties directly to Enviva’s valuation in that it directly undermines the Company’s claims
regarding the sustainability of its practices and its already controversial standing as an environmentally friendly stock suitable
for ESG investors.

4.

“Exodus of Sustainability Leadership” in 2021. Turnover at the CFO or chief accounting officer position can often be asign of accounting shenanigans or even fraud, and smart investors tend to haircut a valuation when confronted with a clusterof high-profile resignations. In this case, three of Enviva’s key sustainability officers resigned within months of each other in
2021. These were high profile departures, including the Chief Sustainability Officer and the co-author of the Company’ssustainability white paper. Both were the public face of Enviva’s attempt to attract ESG investment, making their departureakin to a CFO and chief accounting officer resigning at the same time. A former senior sustainability executive we interviewed
stated that Enviva’s C-level “were making too many decisions that ran contrary to the values that the Company was purportingto have.” In our opinion, this lends further credence to our investment opinion that Enviva is greenwashing its ESG credentials.

5.

Evidence that Enviva Inflates Profit Margins by Providing Equipment to Loggers in Exchange for Reduced Prices.
Based on conversations with a former procurement officer, we believe Enviva may be burying some of its costs in capital
expenditures, thereby inflating its EBITDA and adjusted gross profit. Specifically, the former employee told us that Enviva
provides capital equipment such as woodchippers to loggers in exchange for reduced wood prices. Enviva’s former VP of
procurement implied that this practice was common, as it would not be feasible for loggers to cut many forests without this“subsidy” from Enviva. Enviva is not profitable under GAAP accounting and has reported $1 billion in capital expenditures
since 2015. In our view, not only does this arrangement undermine Enviva’s reported non-GAAP profitability metrics, but
subsidies to logging companies further destroys the notion that Enviva plays a benign role in deforestation.

6.

Looming Dividend Cut. Enviva trades at an eye-watering 10x tangible net asset value and 36x LTM Adjusted EBITDA
because shareholders mistakenly believe that its business will continue to support its large historic dividends. However, we
calculate that Enviva’s business generates nowhere near the cash required to fund its dividend and that following the 2021
restructuring transaction, Enviva’s distributable and operating cash flows are now negative. This is likely why theCompany has been a serial capital raiser, raising $2.3 billion through debt and dilutive equity issuances since 2015. Based on
Enviva’s reported cash balance and guided capital expenditures, we calculate that Enviva’s cash burn is so severe that it will
run out of cash in 1H 2023. Enviva is now excessively levered (5.2x Net Debt to EBITDA) and LTM 1H 2022 operating
cash flows were negative $91 million, meaning its only choice will be to either continue diluting shareholders with equity
issuances or, more likely, cutting its dividend.
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Enviva Historically Overpaid for Related Party Acquisitions? 57% of Enviva’s EBITDA growth since IPO has come fromacquiring pellet facilities from its largest shareholder. The Company claims that these acquisitions were made at an attractive
multiple of 6-7x EV/EBITDA. Yet since these acquisitions, Enviva’s cash conversion has begun to diverge materially fromadjusted EBITDA. Based on the poor cash conversion, we suspect that these facilities generate half the EBITDA claimed,which would imply an acquisition multiple nearer 12x. We also calculate that Enviva paid an average price of $310 per tonneof capacity for its four most recent acquisitions from its largest shareholder, 42% more per tonne than it paid to acquire
Waycross from an independent third party in 2020. Ultimately, such calculations raise not only governance concerns, but also
undermine the Company’s reported EBITDA and guidance.

Ultimately, we view Enviva as an ESG farce, and evidence of greenwashing in the Company’s procurement processes undermines
not only Enviva’s suitability as an ESG investment, but future demand for its product. We do not believe that investors should
reliably model the continuation of environmental subsidies for European customers to buy wood pellets procured from clear-cutting
American forests in the name of climate activism. In addition to evidence of greenwashing, it’s also a bad business. Enviva’s
troubling cash flows, dangerous leverage, and unsustainable dividend only add further momentum to the short thesis, which is why
we expect the stock price to contract significantly from Enviva’s current nosebleed valuation.

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The Green Myth: Introducing an ESG Farce
Enviva’s business model is an ESG farce built on a carbon accounting loophole. At a high level, Enviva harvests
wood and other biomass from forests in the Southeastern United States for conversion into wood pellets at Enviva’s
manufacturing facilities. These pellets are then shipped mainly to Europe, where European power producers burn thewood to produce electricity.
International climate treaties include a grandfathered provision of the Kyoto protocol classifying the burning of forest
biomass as a “renewable” energy source under limited circumstances, and this controversial loophole has allowed aburgeoning industry of deforesting biomass to masquerade as a zero-emission energy source.
Countries, principally in Europe and Asia, have taken advantage of this loophole, burning wood instead of coal tomeet emissions targets. These countries dole out subsidies in the form of carbon credits for switching to wood burning,
even though wood pellets emit more CO2 per unit of heat generated than any other widely used fuel source, including
coal.
Financial commentator Doomberg said it best when recently summarizing this bizarre scheme:“In a farce so perverted and obscene that it can only be the work of bloated and arrogant bureaucracies, acarbon accounting loophole is causing amounts of CO2 to be pumped into the atmosphere today that willtake decades to abate using natural means. . . . . .All across the US Southeast, massive industrial feller
bunchers are cutting down and stacking mature trees with ruthless efficiency. … Once in Europe, the pellets
are burned, emitting more CO2 per unit of heat generated than any other fuel source currently used at scale(including coal, and by a wide margin). We are meant to believe this process is somehow carbon neutral.
The loophole that enables this orgy of deforestation boils down to how and where emissions are counted . . .
From the perspective of Britain and the EU, the wood pellets they burn were immaculately conceived – themanner in which the pellets arrived at their power plants is not relevant to their carbon emission calculations.
By burning “carbon neutral” wood pellets and decreasing their use of coal, European environmentalists getto brag to the rest of us about what wonderful stewards of this shared planet they are, all while being amongits worst offenders.”
In an Orwellian twist, despite being the leading player in an industry allegedly driving an “orgy of deforestation,”
Enviva claims its practices are “sustainable” and pitches itself as an ESG investment.
Enviva’s stock has ridden this wave of ESG euphoria to a nosebleed valuation of 36x LTM Adjusted EBITDA and
10x Price / Tangible Book Value.
Enviva’s absurd valuation rests on two pillars: its dividend (and the misconception that this dividend is covered bycash flows from its existing business), and its central claim to be a pure-play ESG business in the fight against climatechange.
Contrary to Company claims, we think the independent evidence indicates that Enviva is driving demand for
deforestation and procuring substantial amounts of its wood from clear-cutting, a practice that is widely condemnedby environmental groups and ESG investors and expressly discouraged by European sustainability guidelines. We
struggle to see why European and other countries will continue to subsidize the burning of wood procured under suchconditions.
The ESG portion of our investment thesis, however, is not based only on the threat that Enviva will lose someenvironmentally conscious investors and allocators. Rather, evidence of greenwashing, especially evidence ofwidespread clear-cutting, creates a real and imminent existential threat to Enviva’s contract backlog, and all future
customer demand. Enviva’s customers buy wood pellets from Enviva only on the condition that the Company’s
procurement satisfies global climate regulations that allow its customers to switch from coal to “sustainable forest
biomass,” allowing its customers to receive lucrative carbon credits and tax subsidies.
Stated differently, we do not believe that Enviva’s customers will have any use for wood pellets procured in such amanner. Nor should they.

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Hidden Metadata Reveals that Enviva Procures Wood From Clear-Cutting Forests

Central to Enviva’s claim of sustainably harvesting forest biomass is the Company’s insistence that it is not procuring
forest biomass from “clear-cutting,” the environmentally destructive practice of removing full swaths of trees from a
section of forest instead of selectively removing trees.
The practice of clear-cutting a forest, including the removal of all of its biomass, is a controversial practice widely
criticized by ESG investors and climate change advocates. For that reason, according to one study of global biomass
harvesting regulations in over 40 jurisdictions, “virtually all guidelines advise leaving some standing live or dead trees
and downed wood on-site.” In the draft European Commission Implementing Regulation regarding sustainability
criteria for forest biomass, the European Commission promulgates that clear-cuts should be “minimized.”
Enviva is sensitive to this topic and insists in its sustainability white paper that “entire mature forest stands are notbeing clear-cut for pellets.”

Source: Enviva 2020 White Paper
In response to media criticism, a senior Enviva executive recently stated point blank in an interview with CBS Newsthat Enviva doesn’t clear-cut forests.

Source: CBS NewsWe believe, based on independent evidence, including Enviva’s own hidden metadata, that this is not true. Rather,
we think there is overwhelming evidence showing that Enviva sources a considerable amount of forest biomass forwood pellets from the environmentally destructive practice of clear-cutting forests.
•

Enviva’s Own Embedded Metadata Indicates Widespread Clear-Cutting

Enviva claims to be “transparent” in its sourcing practices because it provides Track and Trace data on its harvests.
Yet this data is difficult for most ESG investors to audit because the Company does not explicitly provide location
data. We think we know why.
Buried in the metadata of Enviva’s Track and Trace database, we discovered GPS coordinates of the forests
harvested. Using these GPS coordinates, we were able to geolocate Enviva’s harvests, revealing satellite imagery ofclear-cut forests.

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Source: Enviva
Despite repeated denials in the media and to ESG investors that it does not clear-cut forests, the satellite imagery
shows countless examples of clear-cut forests at the GPS coordinates of Enviva’s harvests.
For example, below are satellite images of a 68-acre harvest close to Enviva’s Sampson Plant. Note that according to
the Track and Trace data, Enviva took 95% of this harvest.

Source: Enviva
The satellite imagery shows a large area of clear-cut forest at the precise GPS coordinates we found in the hidden
Track & Trace metadata.

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After
Jul-2018

Source: Google Earth
As a basis of comparison, historic satellite image of the same location from early 2018 shows dense, untouched forest.
BeforeJan-2018

Source: Google Earth
The satellite imagery shows, in our opinion, an indisputable example of clear-cutting. As we discuss in the next
section, that Enviva took 95% of the harvest suggests not only that the Company is procuring wood from clear-cut
forests, but that Enviva is driving the decision to harvest.
We found hundreds of examples in which satellite imagery of hidden GPS coordinates appear to show clear-cutting.
In many of these cases – as with the above example – Enviva took a high proportion of the harvest.

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Source: Google Earth

Source: Google Earth

Source: Google Earth8

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Source: Google Earth

Source: Google Earth

Source: Google Earth9

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In some instances, satellite imagery suggests that clear-cut forests were turned into housing developments, which we
think is another direct violation of sustainability rules. 1

Source: Google EarthIn our view, satellite imagery undermines the Company’s claims and reveals example after example of clear-cut forests.
We think that this is compelling evidence that Enviva sources from clear-cut forests and indicates that Enviva misleads
ESG investors and, perhaps even its customers, regarding its procurement practices.
Furthermore, the Company buried this damning GPS information in the metadata of its Track and Trace databaseinstead of making it readily visible for most investors and ESG watchdogs to audit. We think Enviva is engaging in
the exact opposite of the “transparency in sourcing” mandated by almost all relevant regulatory guidelines and forest
certification standards.
•

Former Enviva Executives Admit that Enviva Clear-Cutting is Endemic

To corroborate our analysis, we interviewed a former senior Enviva sustainability executive, who left the Company
in 2021 in what they called “an exodus of sustainability leadership.” The executive lamented that “there is a generaltransparency and disclosure issue with the Company.”
They explained that the reason Enviva procures wood from clear-cutting is because clear-cutting is cheaper thanmore sustainable practices:“Different methods of harvest that are not clear-cuts are much less financially attractive, because
clear-cutting is the most efficient way to go about things. But there are other methods to use that are
just more expensive.”- Former Sustainability Executive, Enviva
They even referred to clear-cutting as the “dominant form of timber harvesting in the Southeast U.S.” They also said
that “clear-cutting whole properties and whole trees for energy” was “happening in many locations… becauseof changes in timber values and pulpwood values that are leading it to be just as competitive in some spots from aprice standpoint for landowners to sell their pulpwood to a bioenergy company as opposed to a pulpwood factory.”
We see this as textbook greenwashing. Enviva disclaims the practice of clear-cutting to investors and the media, but
its own senior level sustainability executive described the practice as endemic because it was so much cheaper thanother forms of harvesting.

“One of the criteria that [Enviva] have is that there's no consumption of land use change. So, say you have a huge forest where it's beensold and they're going to clear it and build houses on it and none of that fiber we would take in.” – Former VP Procurement
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We also spoke with a former Enviva Vice President who had previously had responsibility for Enviva’s timbersourcing and procurement. He also unequivocally confirmed that Enviva sources wood from clear-cutting.
“There’s going to be some [tracts] that are just overgrown and there's going to be a lot of underbrushand slash that’s on the tract and they are just going to clear-cut it and start over again. . . . There’s
a lot of low-grade lumber, and they’re just going to clear-cut it.”- Former VP of Procurement, Enviva
The former VP described clear-cutting as “one of two paths” from which Enviva sources wood (the other path being
to selectively harvest wood from well-managed forests). According to him, clear-cutting the unkept forests was
actually the preferred path for Enviva because it produces more low-grade material suitable for use in pellet making.
“The majority of the fiber that we take in is low-grade . . . so the unkept overgrown (tracts) is a better
option for us.”- Former VP of Procurement, Enviva
Not only does this confirm that Enviva is procuring wood from clear-cut harvesting at scale, but its business model
also appears to be predicated on it. That’s because according to its former VP of procurement, selective harvesting ofwell managed forests simply doesn’t produce much low-grade material of the type suitable for pellet making.
“Where they’ve done a better job of managing the forest, there’s not going to be a lot of pulpwood.
It’s going to be more towards the saw timber side. They’re going to selectively take sections where
it’s going to be high graded for the timber.”- Former VP of Procurement, Enviva
In our opinion, not only do the former executive’s remarks contradict the Company’s statements to the media and
ESG investors but adds credence to the argument that Enviva is a driving economic force behind an environmental
practice (clear-cutting) that is anathema to ESG mandates and, ultimately, the sustainability of Enviva’s wood pellets.
•

ESG Watchdog Reportedly Followed Truck Delivering Pellets from Clear-Cut Site Directly to Enviva
Facility

Clear-cutting as a practice is so abhorrent that several environmental groups in the Southeastern United States dedicate
a large part of their resources to monitoring, investigating, and photographing Enviva’s activity in local forests. In
December 2021, a local member of one of these environmental groups reportedly discovered loggers in the act ofclear-cutting a forest and then followed the trucks directly to Enviva’s facilities.
We have obtained the photographs taken of this event in December 2021. According to the investigator, thephotographs show a logging company clear-cutting a forest area in Edenton, NC and then that truck driving directly
to the gates of Enviva’s wood pellet plant in Ahoskie, NC, located approximately 30 miles away. In our opinion, thisis further compelling evidence that Enviva is contributing to the problem, and ties clear-cut forests directly to Enviva.
Photos of activity at the scene of December 2021 clear-cut

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Photographs of truck leaving the site carrying wood chippings

Photographs of the same truck pulling into the gates of Enviva’s wood pellet plant in Ahoskie

We think it is the height of hypocrisy for ESG investors to invest in a Company that procures from clear-cutting
forests. Although the Company has publicly disclaimed the practice, we think there is compelling independent
evidence showing that Enviva relies on sourcing wood from clear-cutting.
In our view, this is egregious greenwashing and made worse by the fact that Enviva’s valuation rests on the
misconception that it is an ally in the fight against climate change.

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Enviva Drives Demand for Deforestation

The central misconception regarding Enviva’s procurement is the notion, propagated loudly by the Company, that
Enviva does not drive demand for deforestation because it merely picks up the forest scraps created by other industries.
The stakes for Enviva could not be higher. According to a July 2020 study that Enviva promotes on its website, “ifold forests were to be cut down specifically for biomass … biomass powered electricity would have higher GHG
emissions than coal in most cases due to its lower combustion efficiency.”

Source: Enviva Website
This is why Enviva, and other biomass producers, emphasize that their biomass is only produced from wood that is
generated as a by-product of a sawmill operation or a planned timber harvest by non-pellet manufacturers.
Because it claims to only be picking up the waste left on the forest floor, Enviva concludes that it does not drive
demand for harvesting. Put another way, even though Enviva provides a market for the wood and provides anadditional monetary incentive to cut down forests that would otherwise continue growing, Enviva asserts that thebiomass is such a low-value commodity that such additional payments do not influence the landowner’s or logging
company’s decision to cut down forests.

Source: Enviva 2020 Sustainability Report

Source: Enviva 2020 White Paper
However, we think there is substantial independent evidence to suggest that Enviva is misleading ESG investors
regarding its procurement practices, and the notion that the Company is merely picking up waste or scraps grossly
mischaracterizes Enviva’s business.
Rather, Enviva’s own data indicates, in our opinion, that the incremental decision to cut down a forest is likely driven
by Enviva. That is because Enviva’s own data shows that Enviva is buying a far larger proportion of the harvested
wood than it represents to investors. Rather than picking up waste, the data shows that in many instances, Enviva istaking most of the harvested wood. Accordingly, we think the Company is clearly driving demand for deforestationand misleading investors regarding its procurement practices.
•

Enviva’s Own Data Contradicts its Key Reported 30% Harvesting Threshold

When confronted with the obvious rebuttal that Enviva’s large purchases must surely drive incremental demand for
deforestation, the Company retreats to a key threshold. Enviva states that “we purchase on average about 30 percent
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of the wood that is harvested from a particular piece of ground. The other 70% of the wood is higher value
timber that goes to other forest product industries, such as the sawtimber or the pulp & paper industries.”

Source: Enviva Website
Enviva’s logic is simple: because it supposedly takes less than 30% of the forest harvest, its biomass purchases do not
drive demand to deforest a tract. The landowner, according to Enviva, is more likely to make a deforestation decision
based on 70% of the wood which is higher value timber.
Yet Enviva’s own data undermines this narrative.
On its website, Enviva publishes its Track and Trace data, which contains select data regarding the Company’s
harvests, the type of wood cut down, the county of the harvest, the age of the trees harvested, the total acreage
harvested, and most critically, percentage of the harvest which Enviva purchased.

Source: Track and Trace Data
Although the website is antediluvian, we managed to scrape the data to analyze whether Enviva was honest withinvestors about the percentage of harvests in which its volume taken exceeded the key 30% threshold.
If the data supported the Company’s claims, then we should find that most of Enviva’s acreage is purchased in harvests
in which the Company takes less than 30% of the volume of the forest. But the Company’s own data shows the
opposite.

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When we parse Enviva’s Track and Trace data by the volume of forest purchased, the data shows that Enviva’s
proportion of the volume harvested exceeded its key reported threshold in 70% of the total acreage harvestedby the Company.

Source: Enviva Track and Trace Data
Enviva argues that it does not drive demand for deforestation because it claims to purchase less than 30% of thevolume of the forest in most harvests. Yet Enviva’s own Track and Trace data shows that 70% of its total acreage isharvested in cases in which Enviva is taking a much higher proportion of the wood.
Enviva’s data even shows that the Company is procuring a substantial amount of wood in cases in which Enviva
is purchasing 70-100% of the volume of the harvest.
In fact, Enviva’s Track and Trace data shows 43 instances where Enviva took 100% of the wood from a particular
final harvest, totaling over 4,100 acres.
In the example below, Enviva appears to have procured from a 234-acre clearcut of forest in Liberty County, FL andtaken all 100% of the 234-acre final harvest.

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Source: Enviva Track and Trace Data, Google Maps

Source: Enviva Track and Trace Data
Even when Enviva is not taking 100% of a harvest, it often takes a significant percentage of a harvest from anenormous amount of acreage. In the example below, Enviva took 630 out of 700 acres of forest, 90% of the final
harvest.

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Source: Enviva Track and Trace Data
The proportion of the harvest taken by Enviva is critical. The greater the percentage of the cut taken by the Company,
the more likely that Enviva’s payments were driving the decision to cut down the forest. In the examples above,
Enviva took 90% and 100% of the volume of wood from the cut, which we think is compelling evidence that Enviva’spresence and payment created the demand for the harvest.
Although Enviva does not disclose the density of wood procured in its Track and Trace data, we think the data clearlyshows that the vast majority of the Company’s biomass is procured in cases which the Company is taking a muchhigher proportion of the forest than it reports to investors.
Accordingly, we think this is compelling evidence, from the Company’s own Track and Trace data, that Enviva isdriving demand for deforestation. This is because the larger the proportion of a harvest taken by Enviva, the more
likely Enviva’s presence and payments are driving the decision of the landowner of whether to cut the forest down.
Notably, Enviva’s own former executives confirmed this suspicion.
•

Former High-Level Sustainability and Procurement Executives Corroborate Data

We interviewed a former sustainability executive at Enviva who confirmed this point:“[Enviva] would say that they don’t have influence over harvesting decisions… but there are plentyof tracks where they are taking 70-90% of the volume because of low pulpwood prices but also insome areas with low prices that lead to clear cutting.”-

Former Sustainability Executive, Enviva

This is Enviva’s own former sustainability executive who flagged the sustainability practices of the Company
because contrary to Enviva’s claims, the Company is taking 70-90% in plenty of harvests.
When we interviewed Enviva’s former VP of procurement, he described instances in which Enviva’s payments forbiomass drove demand for clear-cutting. When a forest is growing poorly, he stated that there is often not sufficient
hardwood timber for the loggers to justify cutting it down.
[Enviva] “provides the economics for that [clear-cutting] decision to be made because in poor
performing tracts there’s not enough revenue there to justify the cost of a logger going in to do that.
It’s an outlet, an additional revenue source that wouldn’t be there normally.”-

Former VP of Procurement, Enviva

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In such instances, without Enviva contracting with the logging company to pay for part of the harvest, the forest would
not be cut down because the growth of trees is not sufficient to justify the cost to the logging company of clearing theland.
If Enviva only accounted for a small proportion of the harvest, then the Company’s claims would have more credence.
But as discussed above, its own Track and Trace data reveals that most of Enviva’s wood is sourced from harvests inwhich Enviva’s proportion of the harvest exceeds its stated 30% threshold.
As described by its former procurement officer, these are instances in which the logger would be less likely to cut
down the forest because the economics provide insufficient financial incentive to log. As we see it, without Enviva,
these forests would be left standing.
The stakes for Enviva could not be higher. Recall that according to the analysis that Enviva posts on its own website,“if old forests were to be cut down specifically for biomass, without replanting or natural regeneration, biomass
powered electricity would have higher GHG emissions than coal in most cases due to its lower combustion efficiency.”
The sustainability of the Company’s business model is predicated on its claim that forests are not being harvested forbiomass, yet in reality, we think the evidence clearly shows that Enviva is not only influencing the landowner’s
decision to harvest but driving market demand to cut down forest. Under Enviva’s own definition of “sustainablebiomass,” this would suggest that the biomass burned by Enviva’s customers results in higher CO2 emissions thancoal.
We view this as an existential problem for Enviva, which not only undermines Enviva tenuous claims to sustainability
but should ultimately crush demand for its wood pellets.

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Enviva Inc. │ NYSE: EVA
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www.blueorcacapital.com

Enviva’s Claims regarding Forest Inventory Contradicted by Independent Data

To distract ESG investors from the stunningly obvious, Enviva also asserts that its practices are sustainable because
forest inventories in Enviva’s sourcing regions are growing.

Source: Enviva Investor Presentation May 16, 2022
Enviva’s logic is that cutting down trees can’t possibly drive deforestation because forest inventories are increasingnear its wood pellet factories.
The first obvious rebuttal is that inventories have increased in the region because of broader industry trends whichhave nothing to do with Enviva. For example, the US paper industry has been absolutely decimated over the past two
decades, causing widespread mill closures. This, and other factors, have caused productive forest growth to outpace
timber demand in the US South since 2007.

Source: McKinsey Article, April 4, 2022
The fact that more trees happen to be growing than Enviva is cutting down is a lucky coincidence for the Company.
It likely has little to do with Enviva. And it may not last.
But unpack the data further and the Company’s claims appear even more misleading. Enviva states that total forest
inventory in its region is increasing yet fails to mention that deforestation of hardwood trees is actually increasing in
the areas it operates. The reason, according to independent experts, is that hardwood trees are being cut down andreplaced with much less expensive pine seedlings.

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Enviva Inc. │ NYSE: EVA

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In December 2021, scientists from Clark University published a research study that analyzed satellite imagery of theareas surrounding Enviva’s North Carolina and Virginia operations. That study concluded that it was “very likely”
that Enviva’s pellet mill operations contributed to elevated rates of deforestation of deciduous trees in the area.

Source: December 7, 2021 study, Forest Clearing Rates in the
Sourcing Regions for Enviva Pellet Mills in Virginia and North Carolina, U.S.A.
Similarly, Enviva’s customer, Drax conducted a “Catchment Area Analyses” of Enviva’s supply areas. On May 21,
2020, Drax posted to its website a summary of its findings. Drax explained that the biggest change since 2000 “hasbeen in the hardwood areas where there has been a decline of around 314,000 ha, despite the total area of timberland
increasing by 31,000 ha.”2
Enviva claims that its practices are sustainable because forest inventories are increasing in the areas it operates. Yet
academic research, and even data published by Enviva’s own customer, show that inventory of hardwood trees isfalling, likely as a result of Enviva’s procurement.
Climate scientists largely agree that while pine trees grow faster than hardwood trees, the latter absorbs more carbon
from the atmosphere in the long term. Rather than support sustainability, we think this is yet another data point
undermining the Company’s ESG credentials and credibility.

2 Drax attributed this to private forest owners seeking to gain a better return on investment from their forest land.

20Enviva Inc. │ NYSE: EVA
4.

www.blueorcacapital.com

Exodus of Sustainability Leadership in 2021

We think there is substantial corroborating evidence of our investment opinion that Enviva is greenwashing its ESG
credentials. Turnover at the CFO or chief accounting officer position can often be a sign of accounting shenanigans
or even fraud, and smart investors tend to haircut a valuation when confronted with a cluster of high-profile
resignations. In this case, three of Enviva’s key sustainability officers resigned within months of each other. These
high-profile departures include the only two named authors of the Company’s prominent 2020 “White Paper” that
purports to address the “sustainability, scientific, and economic principles that underpin our business.”
Both were the public face of Enviva’s attempt to attract ESG investment, making their departure akin to a CFO andchief accounting officer resigning at the same time.
•

Chief Sustainability Officer Resigns 2021

Enviva claims to have robust practices in place to ensure the sustainability of its operations. Yet it has not had a Chief
Sustainability Officer for the last 14 months. Until July 2021, Enviva had employed a highly credentialed, Nobel Prizewinning Chief Sustainability Officer, Dr. Jennifer Jenkins. She was responsible for developing and implementing
Enviva’s sustainability policies related to its wood procurement. She was “responsible for Enviva’s environmental
stewardship” and “ensuring the sustainability and traceability of the wood supply chain.”

Source: Enviva (Wayback Machine)
During her time as Chief Sustainability Officer, Dr. Jenkins introduced and oversaw the Company’s half yearly impact
reports, signing off her letters to shareholders with “yours in forest stewardship.” Given the importance ofsustainability to Enviva’s core business model, Dr. Jenkins arguably held one of the most important jobs in the CSuite. Enviva also lent heavily on Dr. Jenkin’s credentials as an endorsement of its practices.

Source: Enviva 2020 Impact Report21

Enviva Inc. │ NYSE: EVA

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Despite Dr. Jenkins role in the C-Suite, Enviva failed to name Dr. Jenkins as an Executive Officer of the Company.
Whether this was intentional or a convenient omission, the consequence of this to Enviva’s investors is that when Dr.
Jenkins abruptly departed in July 2021, the Company was not required to file a press release and SEC Form 8-K
announcing the departure. Consequently, to this day investors are left to speculate why the face and leader of Enviva’s
sustainability program suddenly and silently departed the Company.
Following her departure, the role of Chief Sustainability Officer appears to have remained unfilled. Even more notably,
Dr. Jenkins’ departure came within six months of the departure of another of Enviva’s key sustainability executives.
•

Director of Sustainability and Climate Initiatives Resigns After 16 Months

In January 2021, the Company’s Director of Sustainability and Climate Initiatives - Alan Kroeger – resigned after
less than 18 months in the role.

Source: Linkedin
Kroeger co-authored Enviva’s white paper “seeing the forest” on sustainability practices alongside Dr. Jenkins. In
other words, Enviva’s two key sustainability personnel resigned within six months of one another.
We interviewed a former high-level sustainability executive at Enviva, who stated that a third sustainability executive
also departed shortly after the departures of Dr. Jenkins and Mr. Kroeger. They described the three resignations as an“exodus of sustainability leadership.” The sustainability executive cautioned that:“… tradeoffs that were being made that we didn’t think were warranted in slowing down thesustainability progress of the industry… There is a general transparency and disclosure issue with theCompany.”-

Former Sustainability Executive, Enviva

Enviva presented Dr. Jenkins and Kroeger as strong and credible authorities on its sustainability practices. By thatsame virtue, their sudden departures from the Company in 2021 lends further credence to our investment opinion that
Enviva is greenwashing its ESG credentials.

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Enviva Inc. │ NYSE: EVA
5.

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Evidence that Enviva Inflates EBITDA Margins by Providing Equipment to Loggers in Exchange for
Reduced Wood Prices

Enviva is not profitable under GAAP accounting. But Enviva tells investors that its business is profitable based on
its self-reported Adjusted EBITDA and Adjusted Gross Margin metrics, which the Company claims have improvedin recent years due to efficiency gains.
Adjusted Gross Margin is a non-GAAP metric reported by Enviva which excludes depreciation and amortization costs.
Enviva tells investors that this provides a reliable measure of its profitability per ton.
Enviva Adjusted Gross Margin Per Ton (Reported)
39
29

26

FY13

FY14

FY15

46

45

FY16

FY17

Non-Recast

39

43

47
39

41

FY18

FY19

FY20

FY21

RecastSource: Company Filings

Source: Company Filings
We think that there is reason to be suspicious of such reported non-GAAP metrics.
Since 2015, Enviva’s cumulative free cash flow has been negative $848 million, 3 fueled by $1 billion of capital
expenditures. Based on conversations with a former employee, we believe Enviva may be burying some of its
operating costs in these capital expenditures, flattering its adjusted EBITDA and gross profit metrics.
Specifically, we spoke to a former procurement executive who told us that Enviva provides capital equipment tologgers in exchange for reduced wood prices. In his own words, Enviva “actively” provides equipment to loggers toprocess the wood onsite, receiving lower material prices in return.
“[Enviva] provides equipment to loggers to bring in the chips . . .That’s something that [Enviva] wereactively doing is providing fixed assets to loggers that they would repay us in either the contracts priceof the material.”- Former VP of Procurement, Enviva
The mechanics appear to be as follows:
1.
2.
3.
4.

Enviva purchases logging equipment, recording the cash cost of the equipment as a capital expenditure on its
balance sheet.
Enviva “provides” this equipment as a subsidy to loggers who use the equipment to harvest forests and produce
chips.
In return, the logging companies offer Enviva lower prices for processed wood.
This reduces Enviva’s cost of materials, inflating its EBITDA and gross margins.

3 Defined as Cash from Operations (-) Total Capital Expenditures

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Enviva Inc. │ NYSE: EVA
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The costs of the logging equipment are capitalized and buried among the Company’s other sizeable capital
expenditure projects. Any depreciation costs from with the equipment are excluded from Enviva’s reported
EBITDA and Adjusted Gross Margin metrics.
Woodchipper Transaction Illustration

Source: Illustrative Diagram by Blue Orca
We are led to believe that this arrangement is common across Enviva’s practice because according to the former
procurement executive, without this subsidy by Enviva, these contracts for low quality wood simply wouldn’t makefinancial sense to the loggers.
“The reason why is there isn’t / wasn’t a lot of supply out there for the chips that we’re looking for,and in order to get them, nobody is going to go out there and spend 500,000 dollars on a piece ofequipment. To receive $23 per tonne for chips. So it’s a form of subsidy that Enviva has, to loggers.”-

Former VP of Procurement, Enviva

The former procurement executive’s statements are corroborated by Enviva’s filings, including Enviva’s 2019 annual
report in which the Company states that it procures wood using contracts “where we [Enviva] may also provide theharvesting equipment.”

Source: Enviva Annual Report 2019
Furthermore, we could not find any mention of lease revenue from renting equipment in Enviva’s financial statements.
In our view, this appears to support the former employee’s claim that Enviva received alternative consideration for
the use of equipment in the form of a discount on the price of wood.
Whether or not by design, we believe that these arrangements may be materially flattering Enviva’s EBITDA byburying operating expenses as capital expenditures. We believe that this is likely material to Enviva’s financials giventhat wood sourcing costs are one of the largest variable inputs for EVA’s margins. 44 See Goldman Sachs Sell Side Note on Enviva, December 2021.

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Enviva Inc. │ NYSE: EVA

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In an industry otherwise riddled with bankruptcies5 of companies who have struggled to make a profit, our findings
may explain why Enviva’s reported results have diverged so starkly from similarly situated peers.
Not only are these arrangements highly alarming from an accounting and investor standpoint, but subsidies to loggers
also further dispel the myth that Enviva is not contributing to deforestation.

5 German Pellets, Rentech, Zilkha

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Enviva Inc. │ NYSE: EVA
6.

www.blueorcacapital.com

Looming Dividend Cut

Enviva trades at a ludicrous valuation: 36x its self-reported Adjusted LTM EBITDA, 143x its actual LTM EBITDA,
and 10x its tangible net asset value. Enviva justifies this valuation by directing investor attention to its large dividend
payments, which Enviva guides will continue to rise in coming years.

Source: Investor Presentation Q2 2022
Enviva claims that its dividends are funded by its business, and loudly advertises to investors that it targets a “strong
dividend coverage” ratio of 1.5x.6

Source: Investor Presentation 2020

Source: Investor Presentation Q2 2022
Yet even by the Company’s own non-GAAP adjusted metrics, Enviva has failed to cover its dividend in recent periods.
And it’s getting worse. 7
Enviva Reported Dividend Coverage
USDm
FY16
FY17
FY18
FY19
FY20
FY21 LTM-H122(Recast)Adjusted EBITDA (reported)
79
102
103
141
190
117
145
(-) Maintenance Capex (reported)
(5)
(4)
(5)
(7)
(8)
(14)
(13)
(-) Interest expense
(14)
(30)
(34)
(36)
(41)
(53)
(47)
Distributable cash flow (reported)
60
68
64
98
141
50
86
(-) Distributions to sponsor
(1)
(3)
(6)
(11)
(27)
(19)
Net distributable cash flow
59
64
58
87
115
31
86
Dividend to common shareholders
53
62
67
89
115
157
190
Coverage x (reported)
1.11x
1.04x
0.86x
0.98x
0.99x
0.20x
0.45x
Source: Company Filings.
Note: 2021 figures are presented recast.
In Q4 2021, the Company underwent a restructuring transaction when it converted from its master limited partnership(“MLP”) structure into a more traditional corporate structure by merging with its former parent entity (“Sponsor”).
Prior to this transaction, many costs associated with operating its business were borne by the Sponsor and thus did not
flow through the public company's financials.
6 Previously Enviva targeted a “conservative coverage ratio of 1.20x”
7 Enviva reports net distributable cash flow as adjusted EBITDA less maintenance capex (reported) and interest expenses.

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Enviva Inc. │ NYSE: EVA

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Post-restructuring, the financial performance of the combined entity is substantially worse, likely because Enviva now
has to recognize a number of costs, including $40 million in marketing and other costs, previously born by its Sponsor.8
This has driven a deterioration in Enviva’s own reported dividend coverage to 0.45x in LTM ending H1 2022.
Enviva’s reported EBITDA has become increasingly detached from the actual cash generation of its business. Since
2019, this cash conversion has declined precipitously, fueled in part by aggressive addbacks such as “integration costs.”
Following the restructuring, in the year ending H1 2022, Enviva’s unlevered cash flow from operations was
negative $91 million vs its reported adjusted EBITDA of $145 million.
Adjusted EBITDA vs Unlevered CFFO

250
190

200
150
100

119
102
77 76

119
103

79 67

141

Simplification
Transaction

145

141
117

95

48

50
0
-50

FY15

FY16

FY17

FY18

FY19

FY20

FY21

-100

LTM-H122

(91)

-150
Adjusted EBITDA

Unlevered CFFO

Source: Company Filings. FY21 presented on a fully recast basis

Source: Annual Report 2021

8 Goldman Sachs Equity Research December 2021

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Enviva Inc. │ NYSE: EVA

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If we calculate Enviva’s dividend coverage in terms of actual cash from operations, Enviva’s dividend coverage barely
eclipsed 0.5x since 2019. In FY21 and LTM H1-22, we calculate that Enviva’s distributable cash flows were
negative.9
Enviva Dividend Coverage – Blue Orca Analysis
USDm
FY16
FY17
FY18
FY19
FY20
FY21 LTM-H122(Recast)
CFFO
56
87
84
54
119
33
(98)
(-) Maintenance Capex (reported)
(5)
(4)
(5)
(7)
(8)
(14)
(13)
(+) Cash interest
11
32
35
41
22
15
7
(-) Interest expense
(14)
(30)
(34)
(36)
(41)
(53)
(47)
Distributable cash flow (BOC)
47
84
80
52
93
(18)
(150)
(-) Distributions to sponsor
(1)
(3)
(6)
(11)
(27)
(19)
Net distributable cash flow
46
81
75
41
66
(37)
(150)
Dividend to common shareholders
53
62
67
89
115
157
190
Coverage x (BOC)
0.88x
1.30x
1.11x
0.46x
0.57x
NA
NA
Source: Company Filings.
Note: FY21 and LTM H1 22 presented on a fully “recast” basis
Not only is Enviva struggling to fund its dividend, but the Company is also not generating positive cash flow full stop.
This undermines the key narrative Enviva tells investors; that its dividend payments are covered by its reported nonGAAP profits.
To bridge this gap between its cash flows and dividend payments, Enviva has relied on debt and equity raises, whichhave totaled $2.3 billion10 since 2015.
Enviva Capital Raising vs Dividend Coverage
1.3x

600

1.1x

500

Capital Raised ($m)

1
1
1

0.9x

400

1
300

0.6x
1

0.5x
200

0

100

0

-

FY15

FY16

Equity issuance

FY17

FY18

Debt issuance (net)

FY19

FY20

FY21

H1-22

Cash Dividend Coverage (BOC)

Source: Company Filings. H1-22 includes $250m Jul-2022 Green Bond issuanceBut this is not sustainable. Since 2015, the Company’s share count has nearly tripled, increasing Enviva’s dividend
burden and diluting shareholders. The Company’s leverage also looks stretched: we calculate Enviva’s leverage at

9 Note, this calculation is generous since it does not account for Enviva’s significant equity compensation payments, which havebeen propped up by Enviva’s high stock price and have resulted in substantial dilution to shareholders.
10 H1-22 includes $250m Jul-2022 Green Bond issuance28

Enviva Inc. │ NYSE: EVA

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5.2x Net Debt to FY22 EBITDA, which is quickly approaching the recently renegotiated maximum leverage ratio
allowed under its revolver facility of 5.75x EBITDA. 11
Enviva Leverage Ratio
USDm%2026 senior unsecured
Senior secured RCF
Green bonds
New Market Tax Credit Loans
Seller note
Other loans
Finance leases
Gross Debt(-) Cash as of H1-22(-) Proceeds from Green BondNet Debt

Fixed
Variable
Fixed

6.5%
Eurodollar + 1.5%-2.75%
6.0%

/FY22
EBITDA
2026 748
3.1x2026 430
1.8x2052 250
1.0x
29
0.1x
26
0.1x
4
0.0x
21
0.1x
1,507 6.3x
(13)(0.1)x(250) (1.0)x
1,244 5.2xDue$m

Source: Company Filings. FY22 EBITDA as per Capital IQ Consensus
All considered, Enviva’s capacity for further capital raising now looks limited. Which should concern investors
because, based on Enviva’s reported cash balance and guided capital expenditures, we calculate that even with recent
green bonds, Enviva’s cash burn is so severe that it will run out of cash next year.
By our estimates, Enviva’s available liquidity of $434 million – most of which is from recently raised debt facilities,
will run out in the first half of 2023.
Enviva Available Liquidity
USDm
Q2-22
Cash and equivalents
13
Available under revolving credit facility
136
Other
36
Total available liquidity
184
Tax-exempt green bonds - July'22
250
Total PF liquidity434
Source: Enviva H1-22 Report, Earnings Call Q2-22
This leaves Enviva with unpalatable options in the near term (1H 2023). Either the Company can further lever up its
balance sheet, further dilute shareholders with additional equity issuances, or cut the dividend. We think the latter ismost likely.
Ultimately, we think this short thesis is compelling because of the interplay between the evidence of greenwashingand the Company’s troubling financial situation. We do not believe that ESG investors will continue to indulge in
Enviva’s pretentions to help fight climate change while driving deforestation and procuring wood from clear-cutting.
For other investors, we believe that Enviva’s balance sheet is so stretched that the Company will have no choice but
to cut its dividend.

11 Enviva Interim Report29

Enviva Inc. │ NYSE: EVA
7.

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Enviva Historically Overpaid for Related Party Acquisitions?

Since going public in 2015, Enviva has grown EBITDA by acquiring new pellet plants from a related party. 12 Between
2015 and 2021, Enviva acquired a total of five new plants and a port terminal from a joint venture owned by its largest
shareholder at a combined cost of more than $882 million, funded mostly with debt.
These related party acquisitions have accounted for 57% of the Company’s run-rate EBITDA growth since IPO.13
Enviva used this supposed EBITDA growth to justify increased distributions. These disproportionately benefited theCompany’s Sponsor, whose Incentive Distribution Rights (“IDRs”) payments increased 27x between 2016 and 2020.
In the same time frame, Enviva’s dividends per share to common stockholders increased just 1.6x.14 When Enviva
paid $870 million to acquire its Sponsor in 2021, the acquisition price was based on a forward valuation of these IDR
payments.

Source: Goldman Sachs Initiation Sep 2021
Enviva tells investors that these acquisitions were made on favorable terms to minority shareholders – dispelling
potential concerns around the related party nature of the transactions. As evidence, Enviva – and sells-side analysts –point investors to the favorable EV/EBITDA multiple of 6.0x-7.0x paid for the assets.
But Enviva’s incremental cash flows from the acquisitions do not, in our view, support the EBITDA figures claimedby the Company.
•

Incremental Cash Flow Implies Acquisition Multiple Nearer 12.0x

From 2015 to 2020, Enviva’s EBITDA reportedly increased by $113 million yet the Company’s unlevered Cash fromOperations increased by just $65 million.
In other words, the EBITDA which Enviva supposedly acquired does not seem to have translated into cash flow forshareholders. Of the incremental EBITDA acquired since 2015, just 58% translated into cash for shareholders.
Acquired EBITDA vs Acquired CFFO (FY20)

Source: Company Filings

12 These “dropdown” acquisitions are a common structure amongst MLPs. Enviva acquired these assets from JVs between its

sponsor and John Hancock.
13 Goldman Sachs Initiation Report September 2021.
14 Enviva’s distribution growth has disproportionately benefited its Sponsor via IDR arrangements.
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The weak cash conversion is even more remarkable considering the $23 million of support payments Enviva received
from the Sponsor in FY20, 15 intended to make the Company whole during the ramp up phase of the acquired assets(“MSA Waiver Payments”). When these temporary support payments ended following the 2021 restructuringtransaction, Enviva’s cash flow deteriorated even further.
This cash conversion is so poor that we question Enviva’s reported EBITDA figures for these acquired assets. Taken
at face value, the incremental cash from operations implies an acquisition multiple for these assets of 12x, which ismuch higher than the 7x touted by the Company.
•

Enviva Paid 42% More Per Ton for Related Party Acquisitions than Third Party Acquisitions

To sense check this, we decided to compare the price paid per ton of capacity for Enviva’s related party acquisitions
vs its acquisition from an independent third party.
Enviva paid an average price of $310 per ton of capacity for its four most recent acquisitions from its Sponsor, whichis 42% more than it paid to acquire Waycross from an independent third party in 2020.
EV/Capacity ($/Ton)
344
292

315

287

Average: 310

Greenwood

HamletSamsonSouthampton

Acquired from Sponsor (2016-21)

219

210

Waycross

Georgia Biofuels

Acquired fromThird Party

Independent
Build Cost

Source: Company Filings, Goldman Sachs
Based on the evidence, we believe that Enviva likely overpaid for the related party acquisitions, and that the true
EBITDA contribution from these acquired assets is lower than the Company claims. Ultimately, such calculations
raise not only governance concerns, but also undermine the Company’s reported EBITDA and guidance.
Ultimately, we view Enviva as an ESG farce, and evidence of greenwashing in the Company’s procurement processes
undermines not only Enviva’s suitability as an ESG investment, but future demand for its product. We do not believethat investors should reliably model the continuation of environmental subsidies for European customers to buy woodpellets procured from clear-cutting American forests in the name of climate activism. In addition to evidence ofgreenwashing, Enviva’s troubling cash flows, dangerous leverage, and unsustainable dividend only add further
momentum to the short thesis, which is why we expect the stock price to contract significantly from Enviva’s current
nosebleed valuation.

15 FY20 Annual Report31

Enviva Inc. │ NYSE: EVA

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DISCLAIMER

We are short sellers. We are biased. So are long investors. So is Enviva. So are the banks that raised money for the Company. If you areinvested (either long or short) in Enviva, so are you. Just because we are biased does not mean that we are wrong. We, like everyone else,
are entitled to our opinions and to the right to express such opinions in a public forum. We believe that the publication of our opinions
about the public companies we research is in the public interest.
You are reading a short-biased opinion piece. Obviously, we will make money if the price of Enviva stock declines. This report and allstatements contained herein are solely the opinion of BOC Texas, LLC, a Texas limited liability company, and are not statements of fact.
Our opinions are held in good faith, and we have based them upon publicly available evidence, which we set out in our research report tosupport our opinions. We conducted research and analysis based on public information in a manner that any person could have done ifthey had been interested in doing so. You can publicly access any piece of evidence cited in this report or that we relied on to write thisreport. Think critically about our report and do your own homework before making any investment decisions. We are prepared to support
everything we say, if necessary, in a court of law.
As of the publication date of this report, BOC Texas, LLC (a Texas limited liability company) (along with or through our members, partners,
affiliates) have a direct or indirect short position in the stock (and/or possibly other options or instruments) of the company covered herein,
and therefore stands to realize significant gains if the price of such instrument declines. Use BOC Texas, LLC’s research at your own risk.
You should do your own research and due diligence before making any investment decision with respect to the securities covered herein.
The opinions expressed in this report are not investment advice nor should they be construed as investment advice or any recommendationof any kind.
This report and its contents are not intended to be and do not constitute or contain any financial product advice as defined in the AustralianCorporations Act 2001 (Cth). Because this document has been prepared without consideration of any specific clients investment objectives,
financial situation or needs, no information in this report should be construed as recommending or suggesting an investment strategy.
Investors should seek their own financial, legal and tax advice in respect of any decision regarding any securities discussed herein. At
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Following publication of this report, we intend to continue transacting in the securities covered therein, and we may be long, short, or
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