What does wood-to-energy giant Enviva's bankruptcy mean for North Carolina?

When the biggest wood-to-energy company in the world declared bankruptcy last week, stating its debts exceeded $2.6 billion, it ended a months-long waiting game to find out the future of Enviva.

The Maryland-based company has a substantial economic footprint in Eastern North Carolina. According to the company, it supports 1,800 jobs across the state, with most of those associated with four mills − in Northampton, Richmond, Hertford and Sampson counties − and an export facility at the Port of Wilmington.

The mills turns trees into wood pellets that are shipped overseas to supply "cleaner" fuel for power plants in Europe and Asia that are used to be powered by pollutant-spewing fossil fuels, like coal.

Here's the latest we know about the potential impacts of Enviva's Chapter 11 bankruptcy filing on the Tar Heel State:

How did we get here?

Basically, thanks to Enviva entering bad contracts and wood pellet prices cratering.

The result was a collapse in the company's share price from more than $80 a share in early 2022 to around 45 cents a share on Tuesday, and Enviva's value falling from nearly $3.5 billion to less than $34 million.

After recording massive losses in the third quarter of 2023, the company announced plans to restructure and enter talks with its creditors and customers. Then it skipped a bond payment, delayed reporting its fourth-quarter results from 2023, and kept getting a extensions on talks with its creditors.

The end result was last week's negotiated filing for bankruptcy.

"These agreements with our lenders and noteholders represent a significant milestone in the ongoing process to transform our business, as we focus on improving profitability, reducing costs, enhancing asset productivity, and optimizing our capital structure," company CEO Glenn Nunziata said in a statement. "We look forward to emerging from this process as a stronger company with a solid financial foundation and better positioned to be a leader in the future growth of the wood-based biomass industry."

The restructuring is targeted to be completed during the fourth quarter of 2024, the company said.

What does it mean?

Chapter 11 bankruptcy is designed to allow a company, with the court's permission, to stay in business while it restructures its operations, which in many cases means shedding debt and bad contracts. In theory, that should allow the company to emerge as a leaner company better able to serve its customers and creditors.

That's exactly what Enviva says it plans to do.

Although historical analysis shows the company's projections to be quite aggressive, Tim Hynes, global head of credit research at Debtwire, said Enviva should emerge from bankruptcy well capitalized and operating as a smaller, slimmed-down, but more sustainable business.

Moves include shedding roughly $1 billion in debt and reducing its capital expenditures. Although Enviva said that construction will continue at its mill in Epes, Alabama, work will be paused at its planned mill in Bond, Mississippi.

Among the biggest contracts that could be nixed or renegotiated is a nearly $350 million deal with German utilities giant RWE. According to filings, Enviva agreed to buy large quantities of raw material from RWE in 2022 to turn into wood pellets. But the company terminated the deal early after pellet prices crashed.

CHOPPED DOWN:Wood pellet giant Enviva, which has a big footprint in Eastern N.C., files for bankruptcy

What about its operations, creditors in North Carolina?

Hynes said that at least for the short term he expects Enviva to operate its North Carolina mills and exports from the Port of Wilmington as normal.

"It's going to be pretty much business as usual," he said. "That could change as their reorganization plan starts taking more shape, but I don't think you'll see any immediate changes."

Enviva hadn't filed a Worker Adjustment and Retraining Notification, or WARN notice, with the N.C. Department of Commerce announcing any mass layoffs as of Tuesday.

The company also runs a shipping terminal at the Port of Wilmington. A spokesperson for the State Port said the agency wouldn't have a comment at this time on any potential financial ramifications from the company's bankruptcy filing.

According to court filings, Enviva owes money to several North Carolina companies, the largest of which is Ezzell Trucking, in Harrells, which is owed $1.5 million. Electrical Equipment Co. in Raleigh is owed $332,000.

Hynes said he expects all the company's creditors will get paid. In a letter to its business partners, Enviva stated that it intends to pay all its vendors in full.

"It's just how long it might take some people to get paid," Hynes said.

Stock holders and tax credits

And if you're an Enviva stock holder?

"It probably won't get any worse than it is now," Hynes said, adding that current shareholders are expected to retain at least 5% of the post-bankruptcy company.

One unknown is if Enviva's bankruptcy will impact the federal government's plan to expand a tax credit program for biomass producers, like wood pellet companies. The move was seen as a way of promoting the Biden administration's push to reduce greenhouse gas emissions from traditional coal- and gas-powered power plants, which contribute to climate change and a warming climate, in favor of more environmentally friendly fuels sources.

Environmentalists have repeatedly questioned the alleged sustainability value of chopping down trees in the U.S., processing them and then shipping the pellets thousands of miles to burn as a "clean" fuel source for power plants. Enviva also has faced environmental justice questions over its logging practices and emissions from pellet production, since many of the company's operations are located in low-income and minority communities.

The company has repeatedly said it embraces sustainable logging practices and provides jobs in areas where other economic opportunities are often limited.

“Years of deceiving customers, destroying forests, and polluting communities has finally caught up to Enviva,” said Danna Smith, executive director of Dogwood Alliance, in a statement after the company filed for bankruptcy. “In the process millions of taxpayer dollars have been wasted. Our government must not give one more dime to this failing, dirty industry. Instead, we need to start the process of recovery and transition. We need a shift to forest protection, not more destruction.”

Reporter Gareth McGrath can be reached at GMcGrath@Gannett.com or @GarethMcGrathSN on X/Twitter. This story was produced with financial support from the Green South Foundation and the Prentice Foundation. The USA TODAY Network maintains full editorial control of the work.