Rentech Acquires New England Wood Pellet

Rentech (Renewable Energy Technology) Inc., Los Angeles, Calif., USA, this week announced that it has acquired New England Wood Pellet (NEWP), the largest producer of wood pellets for the U.S. heating market, for $34.5 million in cash, funded from proceeds of Blackstone/GSO’s recent $150 million investment in Rentech. Rentech will assume NEWP’s cash of $2.4 million and debt of approximately $13 million, for a total initial purchase price of $45.1 million.

 

A slide presentation regarding the announcement appears on Rentech’s website. The company’s management will discuss the acquisition on its first quarter earnings conference call scheduled for May 13.

 

NEWP, established in 1992, operates three wood pellet facilities with a combined annual production capacity of 240,000 tons. The facilities are strategically located in the U.S. Northeast, which is the largest domestic market for consumption of wood pellets for heating. NEWP generated EBITDA of approximately $7.4 million in 2013.

 

"NEWP is the leader in the growing U.S. market for wood pellets used in heating applications. The acquisition brings additional cash flows and profitability to our wood fiber business. In addition, NEWP’s business broadens our product offerings, customer base and geographic markets," said D. Hunt Ramsbottom (photo), president and CEO of Rentech. 

 

NEWP commands an approximate 15% share of the market for heating pellets in the U.S. Northeast. The company is one of the largest suppliers of wood pellets to major retailers including Home Depot, Lowe’s, Tractor Supply, and Walmart. 

Reportedly, prices for wood pellets are competitive with delivered retail prices for natural gas, and lower than prices for heating oil, propane, or electricity. Wood pellet prices have historically been more stable than prices of heating oil or natural gas. Low population density in NEWP’s markets makes the distribution of natural gas inefficient and expensive, the company notes.

 

Approximately 1.5 million tons of wood pellets are consumed annually in the U.S. Northeast. According to independent forecasts, wood pellet consumption in the region is expected to increase at an annual growth rate of 7% through 2018. Customer demand for wood pellets in this market exceeds available regional production.