UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~FORM~~

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2020~~2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____

~~For the transition period from _____ to _____~~

Commission file ~~number:~~number 001-37363

~~Enviva Partners, LP~~


Enviva Partners, LP
(Exact name of registrant as specified in its charter)


Delaware						46-4097730
(State or other jurisdiction						(I.R.S. Employer
of incorporation or organization)						~~(I.R.S. Employer~~ Identification No.)

~~7200~~7272 Wisconsin Ave.

Suite ~~1000~~1800

Bethesda,

20814

~~(Address~~ (Address of principal executive offices)

(Zip code)


(301)			657-5560
(Registrant’s telephone number, including area code)

~~(Registrant’s telephone number, including area code)~~

~~Securities registered pursuant to Section 12(b) of the Act:~~


Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading ~~Symbol(s)~~Symbol	Name of each exchange on which registered
Common Units	EVA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

☒

Accelerated filer

☒☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act). Yes ☐ No ☒

As of ~~October 30, 2020, 39,767,468~~July 23, 2021, 45,008,079 common units were outstanding.

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ENVIVA PARTNERS, LP

QUARTERLY REPORT ON FORM ~~10-Q~~10‑Q

TABLE OF CONTENTS


	~~Page~~
~~CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS~~Cautionary Statement Regarding Forward‑Looking Statements			1
~~GLOSSARY OF TERMS~~Glossary of Terms			3
PART I—FINANCIAL INFORMATION			4
Item 1.		Financial Statements (unaudited)	4
		Condensed Consolidated Balance ~~Sheets~~Sheets	4
		Condensed Consolidated Statements of ~~Operations~~Income	5
		Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~	6
		Condensed Consolidated Statements of Changes in Partners’ Capital	7
		Condensed Consolidated Statements of Cash Flows	9
		Notes to ~~the~~ Condensed Consolidated Financial Statements	11
Item 2.2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	3123
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	4537
Item 4.		Controls and Procedures	4637
PART II—OTHER INFORMATION			4738
Item 1.		Legal Proceedings	4738
Item 1A.		Risk Factors	4738
Item 6.		Exhibits	4838

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CAUTIONARY STATEMENT REGARDING ~~FORWARD-LOOKING~~FORWARD‑LOOKING STATEMENTS

Certain statements and information in this Quarterly Report on Form ~~10-Q~~10‑Q (this “Quarterly Report”) may constitute “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify ~~forward-looking~~forward‑looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. Although management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

•the volume and quality of products that we are able to produce or source and sell, which could be adversely affected by, among other things, operating or technical difficulties at our wood pellet production plants or deep-water marine terminals;

•the prices at which we are able to sell our products;

•our ability to successfully negotiate, ~~and~~ complete and integrate drop-down ~~and~~or third-party acquisitions, including the associated contracts, or to realize the anticipated benefits of such acquisitions;

•failure of our customers, vendors and shipping partners to pay or perform their contractual obligations to us;

•our inability to successfully execute our project development, expansion and construction activities on time and within budget;

•the creditworthiness of our contract counterparties;

•the amount of low-cost wood fiber that we are able to procure and process, which could be adversely affected by, among other things, disruptions in supply or operating or financial difficulties suffered by our suppliers;

•changes in the price and availability of natural gas, coal or other sources of energy;

•changes in prevailing economic conditions;

•unanticipated ground, grade or water conditions;

•inclement or hazardous environmental conditions, including extreme precipitation, temperatures and flooding;

•fires, explosions or other accidents;

•changes in domestic and foreign laws and regulations (or the interpretation thereof) related to renewable or low-carbon energy, the forestry products industry, the international shipping industry or power, heat or combined heat and power generators;

•changes in the regulatory treatment of biomass in core and emerging markets;

•our inability to acquire or maintain necessary permits or rights for our production, transportation or terminaling operations;

•changes in the price and availability of transportation;

•changes in foreign currency exchange ~~rates~~ or interest rates, and the failure of our hedging arrangements to effectively reduce our exposure to the risks related thereto;

•risks related to our indebtedness;

•our failure to maintain effective quality control systems at our wood pellet production plants and deep-water marine terminals, which could lead to the rejection of our products by our customers;

•changes in the quality specifications for our products that are required by our customers;

•labor ~~disputes;~~disputes, unionization or similar collective actions;

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•our inability to hire, train or retain qualified personnel to manage and operate our business and newly acquired assets;

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•the effects of the exit of the United Kingdom from the European Union on our and our customers’ businesses;

•the possibility of cyber and malware attacks;

•our inability to borrow funds and access capital markets; and

•viral contagions or pandemic diseases, such ~~as the recent outbreak of a novel strain of coronavirus known~~ as COVID-19.

Please read the risks described in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 and the risk factors included herein in Item 1A. Risk Factors. All forward-looking statements in this Quarterly Report are expressly qualified in their entirety by the foregoing cautionary statements.

Readers are cautioned not to place undue reliance on forward-looking statements and we undertake no obligation to update or revise any such statements after the date they are made, whether as a result of new information, future events or otherwise.

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GLOSSARY OF TERMS

~~biomass~~biomass:: any organic biological material derived from living organisms that stores energy from the sun.

~~co-fire~~co-fire: : the combustion of two different types of materials at the same time. For example, biomass is sometimes fired in combination with coal in existing coal plants.

dry-bulk: describes dry-bulk commodities that are shipped in large, unpackaged amounts.

metric ~~ton~~ton:: one metric ton, which is equivalent to 1,000 kilograms and 1.1023 short tons.

off-take ~~contract~~contract:: an agreement concerning the purchase and sale of a certain volume of future production of a given resource such as wood pellets.

~~ramp:~~ ~~increasing production for a period of time following the startup of a plant or completion of a project.~~

utility-grade wood ~~pellets~~pellets:: wood pellets meeting minimum requirements generally specified by industrial consumers and produced and sold in sufficient quantities to satisfy ~~industrial-scale~~industrial‑scale consumption.

wood ~~fiber~~fiber:: cellulosic elements that are extracted from trees and used to make various materials, including paper. In North America, wood fiber is primarily extracted from hardwood (deciduous) trees and softwood (coniferous) trees.

wood ~~pellets~~pellets:: energy-dense, low-moisture and uniformly sized units of wood fuel produced from processing various wood resources or byproducts.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except number of units)


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
		(unaudited)					(unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,346	$	9,053	Cash and cash equivalents	$	42,901	$	10,004
Accounts receivable	Accounts receivable	86,930		72,421		Accounts receivable	74,398		124,212
Related-party receivables, net	Related-party receivables, net	11,228		0		Related-party receivables, net	0		2,414
Inventories	Inventories	61,978		32,998		Inventories	47,662		42,364
Prepaid expenses and other current assets	Prepaid expenses and other current assets	14,845		5,617		Prepaid expenses and other current assets	13,501		16,457
Total current assets	Total current assets	176,327		120,089		Total current assets	178,462		195,451
Property, plant and equipment, net	Property, plant and equipment, net	1,061,870		751,780		Property, plant and equipment, net	1,114,521		1,071,819
Operating lease right-of-use assets	Operating lease right-of-use assets	52,417		32,830		Operating lease right-of-use assets	49,539		51,434
Goodwill	Goodwill	101,303		85,615		Goodwill	99,660		99,660
Other long-term assets	Other long-term assets	11,734		4,504		Other long-term assets	10,526		11,248
Total assets	Total assets	$	1,403,651	$	994,818	Total assets	$	1,452,708	$	1,429,612
Liabilities and Partners’ Capital	Liabilities and Partners’ Capital					Liabilities and Partners’ Capital
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	27,182	$	18,985	Accounts payable	$	28,041	$	15,208
Related-party payables, net	Related-party payables, net	0		304		Related-party payables, net	4,581		0
Deferred consideration for drop-down due to related-party		0		40,000

Accrued and other current liabilities	Accrued and other current liabilities	78,759		59,066		Accrued and other current liabilities	99,342		108,976
Current portion of interest payable		12,136		3,427
Interest payable						Interest payable	23,966		24,642
Current portion of long-term debt and finance lease obligations	Current portion of long-term debt and finance lease obligations	11,611		6,590		Current portion of long-term debt and finance lease obligations	12,056		13,328
Total current liabilities	Total current liabilities	129,688		128,372		Total current liabilities	167,986		162,154
Long-term debt and finance lease obligations	Long-term debt and finance lease obligations	893,837		596,430		Long-term debt and finance lease obligations	789,451		912,721
Long-term operating lease liabilities	Long-term operating lease liabilities	50,891		33,469		Long-term operating lease liabilities	48,368		50,074
Deferred tax liability, net		13,801		0

Deferred tax liabilities, net						Deferred tax liabilities, net	13,224		13,217
Other long-term liabilities	Other long-term liabilities	13,042		3,971		Other long-term liabilities	13,154		15,419
Total liabilities	Total liabilities	1,101,259		762,242		Total liabilities	1,032,183		1,153,585
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies	0		0
Partners’ capital:	Partners’ capital:					Partners’ capital:
Limited partners:	Limited partners:					Limited partners:
Common unitholders—public (26,181,093 and 19,870,436 units issued and outstanding at September 30, 2020 and December 31, 2019, respectively)		447,690		300,184
Common unitholder—sponsor (13,586,375 units issued and outstanding at September 30, 2020 and December 31, 2019)		55,182		82,300
General partner (0 outstanding units)		(152,280)		(101,739)
Accumulated other comprehensive income		(8)		23
Common unitholders—public (31,421,704 and 26,209,862 units issued and outstanding at June 30, 2021 and December 31, 2020, respectively)						Common unitholders—public (31,421,704 and 26,209,862 units issued and outstanding at June 30, 2021 and December 31, 2020, respectively)	587,737		424,825
Common unitholder—sponsor (13,586,375 units issued and outstanding at June 30, 2021 and December 31, 2020)						Common unitholder—sponsor (13,586,375 units issued and outstanding at June 30, 2021 and December 31, 2020)	15,394		41,816
General partner (1) (0 outstanding units)						General partner (1) (0 outstanding units)	(134,877)		(142,404)
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(8)		(18)
Total Enviva Partners, LP partners’ capital	Total Enviva Partners, LP partners’ capital	350,584		280,768		Total Enviva Partners, LP partners’ capital	468,246		324,219
Noncontrolling interest		(48,192)		(48,192)
Total partners' capital		302,392		232,576
Noncontrolling interests						Noncontrolling interests	(47,721)		(48,192)
Total partners’ capital						Total partners’ capital	420,525		276,027
Total liabilities and partners’ capital	Total liabilities and partners’ capital	$	1,403,651	$	994,818	Total liabilities and partners’ capital	$	1,452,708	$	1,429,612

(1) Includes incentive distribution rights

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Operations~~Income

(In thousands, except per unit amounts)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Product sales	Product sales	$	216,187	$	155,188	$	569,691	$	478,989	Product sales	$	271,242	$	155,651	$	495,772	$	353,504
Other revenue (1)	Other revenue (1)	9,393		2,217		28,078		4,864		Other revenue (1)	13,800		12,061		30,314		18,685
Net revenue	Net revenue	225,580		157,405		597,769		483,853		Net revenue	285,042		167,712		526,086		372,189
Cost of goods sold (1)	Cost of goods sold (1)	179,772		117,993		468,349		395,861		Cost of goods sold (1)	234,155		124,407		430,794		287,025
Loss on disposal of assets										Loss on disposal of assets	1,704		640		3,348		1,552
Depreciation and amortization	Depreciation and amortization	20,237		12,946		48,863		35,112		Depreciation and amortization	21,869		14,986		42,321		28,626
Total cost of goods sold	Total cost of goods sold	200,009		130,939		517,212		430,973		Total cost of goods sold	257,728		140,033		476,463		317,203
Gross margin	Gross margin	25,571		26,466		80,557		52,880		Gross margin	27,314		27,679		49,623		54,986
General and administrative expenses	General and administrative expenses	6,425		361		10,284		5,669		General and administrative expenses	2,587		2,096		5,087		3,859
Related-party management services agreement fees		6,196		7,439		20,832		22,998
Related-party management services agreement fee										Related-party management services agreement fee	9,246		6,947		18,016		14,636
Total general and administrative expenses	Total general and administrative expenses	12,621		7,800		31,116		28,667		Total general and administrative expenses	11,833		9,043		23,103		18,495
Income from operations	Income from operations	12,950		18,666		49,441		24,213		Income from operations	15,481		18,636		26,520		36,491
Other (expense) income:	Other (expense) income:									Other (expense) income:
Interest expense	Interest expense	(11,950)		(9,872)		(32,468)		(28,701)		Interest expense	(12,647)		(10,124)		(25,279)		(20,518)
Other income, net		136		58		267		616
Other (expense) income, net										Other (expense) income, net	(165)		(41)		(54)		131
Total other expense, net	Total other expense, net	(11,814)		(9,814)		(32,201)		(28,085)		Total other expense, net	(12,812)		(10,165)		(25,333)		(20,387)
Net income (loss) before income tax benefit		1,136		8,852		17,240		(3,872)
Income tax benefit		(275)		0		(275)		0
Net income (loss)		$	1,411	$	8,852	$	17,515	$	(3,872)
Net income before income tax expense										Net income before income tax expense	2,669		8,471		1,187		16,104
Income tax expense										Income tax expense	24		0		7		0
Net income										Net income	2,645		8,471		1,180		16,104
Less net income attributable to noncontrolling interest										Less net income attributable to noncontrolling interest	57		0		82		0
Net income attributable to Enviva Partners, LP										Net income attributable to Enviva Partners, LP	$	2,588	$	8,471	$	1,098	$	16,104
Net (loss) income per limited partner common unit:	Net (loss) income per limited partner common unit:									Net (loss) income per limited partner common unit:
Basic and diluted	Basic and diluted	$	(0.18)	$	0.15	$	(0.11)	$	(0.44)	Basic and diluted	$	(0.22)	$	0	$	(0.49)	$	0.10

Weighted-average number of limited partner common units outstanding:	Weighted-average number of limited partner common units outstanding:									Weighted-average number of limited partner common units outstanding:
Basic and diluted	Basic and diluted	39,767		33,457		35,814		31,230		Basic and diluted	41,234		34,082		40,587		33,816

Distributions declared per common unit		$	0.7750	$	0.6700	$	2.2200	$	1.9750

(1) See Note 14, Related-Party Transactions
Distributions declared per limited partner common unit										Distributions declared per limited partner common unit	$	0.8150	$	0.7650	$	1.6000	$	1.4450

(1) See Note 11, Related-Party Transactions										(1) See Note 11, Related-Party Transactions

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~

(In thousands)

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Net income (loss) $ 1,411 $ 8,852 $ 17,515 $ (3,872)
Other comprehensive loss, net of tax of $0:
Net unrealized gains (losses) on cash flow hedges 0 13 0 (148)
Reclassification of net gains on cash flow hedges realized into net income (loss) 0 (59) (22) (252)
Currency translation adjustment (9) 4 (9) 4
Total other comprehensive loss (9) (42) (31) (396)
Total comprehensive income (loss) $ 1,402 $ 8,810 $ 17,484 $ (4,268)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	2,645	$	8,471	$	1,180	$	16,104
Other comprehensive (loss) income, net of tax of $0:
Reclassification of net gains on cash flow hedges realized into net income	0		(2)		0		(22)
Currency translation adjustment	(4)		(3)		10		0
Total other comprehensive (loss) income	(4)		(5)		10		(22)
Total comprehensive income	2,641		8,466		1,190		16,082
Less comprehensive income attributable to noncontrolling interest	57		0		82		0
Comprehensive income attributable to Enviva Partners, LP partners	$	2,584	$	8,466	$	1,108	$	16,082

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Partners’ Capital

(In thousands)

(Unaudited)



			Limited Partners’ Capital
	General Partner Interest (1)		Common Units— Public			Common Units— Sponsor			Accumulated Other Comprehensive Loss		Non- controlling Interests		Total Partners Capital
			Units	Amount		Units	Amount
Partners' capital December 31, 2020	$	(142,404)	26,210	$	424,825	13,586	$	41,816	$	(18)	$	(48,192)	$	276,027
Distributions to unitholders, distribution equivalent and incentive distribution rights	(8,120)		—	(22,238)		—	(10,598)		—		—		(40,956)
Payments for withholding tax and number of units issued associated with Long-Term Incentive Plan vesting	(6,352)		230	(1,724)		—	—		—		—		(8,076)
Issuance of common units, net	—		—	28		—	—		—		—		28
Non-cash Management Services Agreement expenses	9,141		—	2,656		—	—		—		—		11,797
Other comprehensive income	—		—	—		—	—		14		—		14
Contribution of assets	—		—	—		—	—		—		389		389
Net income (loss)	8,120		—	(6,340)		—	(3,270)		—		25		(1,465)
Partners' capital, March 31, 2021	$	(139,615)	26,440	$	397,207	13,586	$	27,948	$	(4)	$	(47,778)	$	237,758
Distributions to unitholders, distribution equivalent and incentive distribution rights	(8,322)		—	(22,229)		—	(10,665)		—		—		(41,216)
Payments for withholding tax and number of units issued associated with Long-Term Incentive Plan vesting	(1,971)		57	(507)		—	—		—		—		(2,478)
Issuance of common units, net	—		4,925	214,534		—	—		—		—		214,534
Non-cash Management Services Agreement expenses	6,709		—	2,577		—	—		—		—		9,286
Other comprehensive loss	—		—	—		—	—		(4)		—		(4)
Net income (loss)	8,322		—	(3,845)		—	(1,889)		—		57		2,645
Partners' capital, June 30, 2021	$	(134,877)	31,422	$	587,737	13,586	$	15,394	$	(8)	$	(47,721)	$	420,525

(1) Includes incentive distribution rights.

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Partners’ Capital

(In thousands)

(Unaudited)

General
Partner
Interest Limited Partners’ Capital Accumulated
Other
Comprehensive
Income Noncontrolling Interest Total
Partners'
Capital
Common
Units—
Public Common
Units—
Sponsor
Units Amount Units Amount
Partners' capital, December 31, 2019 $ (101,739) 19,870 $ 300,184 13,586 $ 82,300 $ 23 $ (48,192) $ 232,576
Distributions to unitholders, distribution equivalent and incentive distribution rights (3,289) — (14,798) — (9,172) — — (27,259)
Issuance of units through Long-Term Incentive Plan (3,356) 149 (371) — — — — (3,727)
Non-cash Management Services Agreement expenses 3,484 — 2,158 — — — — 5,642
Other comprehensive loss — — — — — (17) — (17)
Net income 3,289 — 2,585 — 1,759 — — 7,633
Partners' capital, March 31, 2020 (101,611) 20,019 289,758 13,586 74,887 6 (48,192) 214,848
Distributions to unitholders, distribution equivalent and incentive distribution rights (3,458) — (14,777) — (9,239) — — (27,474)
Issuance of units through Long-Term Incentive Plan (160) 6 17 — — — — (143)
Issuance of common units, net — 6,154 190,813 — — — — 190,813
Non-cash Management Services Agreement expenses 1,872 — 2,098 — — — — 3,970
Other comprehensive loss — — — — — (5) — (5)
Net income 3,458 — 3,015 — 1,998 — — 8,471
Partners' capital, June 30, 2020 (99,899) 26,179 470,924 13,586 67,646 $ 1 (48,192) 390,480
Excess consideration over Enviva Pellets Greenwood, Holdings II, LLC net assets (61,830) — — — — — — (61,830)
Distributions to unitholders, distribution equivalent and incentive distribution rights (7,471) — (21,354) — (10,394) — — (39,219)
Issuance of units through Long-Term Incentive Plan (63) 2 39 — — — — (24)
Issuance of common units, net — — (228) — — — — (228)
Non-cash Management Services Agreement expenses 9,512 — 2,299 — — — — 11,811
Other comprehensive loss — — — — — (9) — (9)
Net income 7,471 — (3,990) — (2,070) — — 1,411
Partners' capital September 30, 2020 $ (152,280) 26,181 $ 447,690 13,586 $ 55,182 $ (8) $ (48,192) $ 302,392

~~See accompanying notes to condensed consolidated financial statements.~~



			Limited Partners’ Capital
	General Partner Interest (1)		Common Units— Public			Common Units— Sponsor			Accumulated Other Comprehensive Income		Non-controlling Interest		Total Partners’ Capital
			Units	Amount		Units	Amount
Partners' capital December 31, 2019	$	(101,739)	19,870	$	300,184	13,586	$	82,300	$	23	$	(48,192)	$	232,576
Distributions to unitholders, distribution equivalent and incentive distribution rights	(3,289)		—	(14,798)		—	(9,172)		—		—		(27,259)
Payments for withholding tax and number of units issued associated with Long-Term Incentive Plan vesting	(3,356)		149	(371)		—	—		—		—		(3,727)
Non-cash Management Services Agreement expenses	3,484		—	2,158		—	—		—		—		5,642
Other comprehensive loss	—		—	—		—	—		(17)		—		(17)
Net income	3,289		—	2,585		—	1,759		—		—		7,633
Partners' capital, March 31, 2020	$	(101,611)	20,019	$	289,758	13,586	$	74,887	$	6	$	(48,192)	$	214,848
Distributions to unitholders, distribution equivalent and incentive distribution rights	(3,458)		—	(14,777)		—	(9,239)		—		—		(27,474)
Payments for withholding tax and number of units issued associated with Long-Term Incentive Plan vesting	(160)		6	17		—	—		—		—		(143)
Issuance of common units, net	—		6,154	190,813		—	—		—		—		190,813
Non-cash Management Services Agreement expenses	1,872		—	2,098		—	—		—		—		3,970
Other comprehensive loss	—		—	—		—	—		(5)		—		(5)
Net income	3,458		—	3,015		—	1,998		—		—		8,471
Partners' capital, June 30, 2020	$	(99,899)	26,179	$	470,924	13,586	$	67,646	$	1	$	(48,192)	$	390,480

(1)

Includes incentive distribution rights.

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Condensed Consolidated Statements of Changes in Partners’ Capital (Continued)~~

~~(In thousands)~~

~~(Unaudited)~~

General
Partner
Interest Limited Partners’ Capital Accumulated
Other
Comprehensive
Loss Noncontrolling interest Total
Partners'
Capital
Common
Units—
Public Common
Units—
Sponsor
Units Amount Units Amount
Partners' capital, December 31, 2018 $ (133,687) 14,573 $ 207,612 11,905 $ 72,352 $ 439 $ — $ 146,716
Distributions to unitholders, distribution equivalent and incentive distribution rights (1,671) — (10,269) — (7,619) — — (19,559)
Issuance of units through Long-Term Incentive Plan (2,129) 94 659 — — — — (1,470)
Issuance of common units, net — 3,509 96,661 — — — — 96,661
Non-cash Management Services Agreement expenses 136 — 2,072 — — — — 2,208
Cumulative effect of accounting change - derivative instruments — — (10) — (8) 18 — 0
Other comprehensive loss — — — — — (162) — (162)
Net income (loss) 1,671 — (5,880) — (4,714) — — (8,923)
Partners’ capital, March 31, 2019 (135,680) 18,176 290,845 11,905 60,011 295 — 215,471
Excess consideration over Enviva Wilmington Holdings, LLC net assets and initial recognition of noncontrolling interest 1,283 — — — — — (48,192) (46,909)
Distributions to unitholders, distribution equivalent and incentive distribution rights (2,271) — (13,720) — (8,763) — — (24,754)
Issuance of units through Long-Term Incentive Plan 247 2 (287) — — — — (40)
Issuance of common units, net — 1,692 49,641 — — — — 49,641
Issuance of units associated with the Hamlet Drop-Down — — — 1,681 50,000 — — 50,000
Non-cash Management Services Agreement expenses 11,226 — 1,013 — — — — 12,239
Reimbursable amounts under Make-Whole Agreement 1,502 — — — — — — 1,502
Other comprehensive loss — — — — — (192) — (192)
Net income (loss) 2,271 — (3,609) — (2,463) — — (3,801)
Partners’ capital, June 30, 2019 (121,422) 19,870 323,883 13,586 98,785 $ 103 (48,192) 253,157
Distributions to unitholders, distribution equivalent and incentive distribution rights (2,772) — (13,776) — (8,969) — — (25,517)
Issuance of units through Long-Term Incentive Plan (215) 0 215 — — — — 0
Costs of common unit issuances — — (24) — — — — (24)
Non-cash Management Services Agreement expenses 8,119 — 350 — — — — 8,469
Reimbursable amounts under Make-Whole Agreement 6,988 — — — — — — 6,988
Other comprehensive loss — — — — — (42) — (42)
Net income 2,772 — 3,610 — 2,470 — — 8,852
Partners' capital September 30, 2019 $ (106,530) 19,870 $ 314,258 13,586 $ 92,286 $ 61 $ (48,192) $ 251,883

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	17,515	$	(3,872)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income						Net income	$	1,180	$	16,104
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	49,801		35,747		Depreciation and amortization	43,500		29,204
MSA Fee Waivers	MSA Fee Waivers	13,963		18,749		MSA Fee Waivers	15,025		4,757
Amortization of debt issuance costs, debt premium and original issue discounts	Amortization of debt issuance costs, debt premium and original issue discounts	1,471		899		Amortization of debt issuance costs, debt premium and original issue discounts	1,265		813
Loss on disposal of assets	Loss on disposal of assets	1,683		562		Loss on disposal of assets	3,348		1,552
Unit-based compensation	Unit-based compensation	6,602		3,835		Unit-based compensation	5,358		4,256
Fair value changes in derivatives	Fair value changes in derivatives	(3,022)		(2,275)		Fair value changes in derivatives	2,797		(5,347)
Unrealized (losses) gains on foreign currency transactions, net		73		58
Unrealized gains (losses) on foreign currency transactions, net						Unrealized gains (losses) on foreign currency transactions, net	27		(138)
Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:
Accounts and insurance receivables		(14,361)		9,492
Accounts and other receivables						Accounts and other receivables	52,618		(11,406)
Related-party receivables	Related-party receivables	(6,621)		1,392		Related-party receivables	0		(2,843)
Prepaid expenses and other current and long-term assets	Prepaid expenses and other current and long-term assets	12,238		(212)		Prepaid expenses and other current and long-term assets	1,376		(14)
Inventories	Inventories	(15,952)		(10,679)		Inventories	(6,034)		(7,062)
Derivatives	Derivatives	(250)		1,514		Derivatives	(1,982)		(792)
Accounts payable, accrued liabilities and other current liabilities	Accounts payable, accrued liabilities and other current liabilities	16,771		(2,247)		Accounts payable, accrued liabilities and other current liabilities	(5,964)		11,771
Related-party payables	Related-party payables	0		(12,025)		Related-party payables	6,032		0
Deferred revenue						Deferred revenue	(4,818)		(3,152)
Accrued interest	Accrued interest	4,820		6,420		Accrued interest	1,163		17,718
Deferred revenue		(4,139)		0
Operating lease liabilities	Operating lease liabilities	(3,832)		(3,715)		Operating lease liabilities	(3,293)		(2,169)
Other long-term liabilities	Other long-term liabilities	(17,570)		(164)		Other long-term liabilities	(160)		406
Net cash provided by operating activities	Net cash provided by operating activities	59,190		43,479		Net cash provided by operating activities	111,438		53,658
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(76,887)		(81,484)		Purchases of property, plant and equipment	(72,872)		(58,839)
Payments in relation to the Greenwood Drop-Down, net of cash acquired		(129,631)		0
Payment in relation to the Georgia Biomass Acquisition, net of cash acquired		(163,299)		0
Payment in relation to the Hamlet Drop-Down		0		(74,700)
Other	Other	(3,769)		1,502		Other	0		(3,769)
Net cash used in investing activities	Net cash used in investing activities	(373,586)		(154,682)		Net cash used in investing activities	(72,872)		(62,608)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from senior secured revolving credit facility, net		105,000		112,000
Proceeds from debt issuance		155,625		0

Principal payments on senior secured revolving credit facility, net						Principal payments on senior secured revolving credit facility, net	(120,000)		0
Principal payments on other long-term debt and finance lease obligations	Principal payments on other long-term debt and finance lease obligations	(3,708)		(2,026)		Principal payments on other long-term debt and finance lease obligations	(6,891)		(2,081)
Cash paid related to debt issuance and deferred offering costs		(3,838)		0
Cash paid related to debt issuance costs and deferred offering costs						Cash paid related to debt issuance costs and deferred offering costs	(1,345)		(1,310)
Proceeds from common unit issuances, net	Proceeds from common unit issuances, net	191,113		96,822		Proceeds from common unit issuances, net	214,865		199,990
Payment of deferred consideration for the Wilmington Drop-Down		0		(24,300)
Payments for deferred consideration		(40,000)		0
Payments in relation to the Hamlet Drop-Down						Payments in relation to the Hamlet Drop-Down	0		(40,000)
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(93,634)		(69,526)		Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(81,744)		(54,874)
Payment for withholding tax associated with Long-Term Incentive Plan vesting	Payment for withholding tax associated with Long-Term Incentive Plan vesting	(3,869)		(1,870)		Payment for withholding tax associated with Long-Term Incentive Plan vesting	(10,554)		(3,727)
Net cash provided by financing activities		306,689		111,100
Net decrease in cash, cash equivalents and restricted cash		(7,707)		(103)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(5,669)		97,998
Net increase in cash, cash equivalents and restricted cash						Net increase in cash, cash equivalents and restricted cash	32,897		89,048
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	9,053		2,460		Cash, cash equivalents and restricted cash, beginning of period	10,004		9,053
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	1,346	$	2,357	Cash, cash equivalents and restricted cash, end of period	$	42,901	$	98,101

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Continued)

(In thousands)

(Unaudited)

Nine Months Ended
September 30,
2020 2019
Non-cash investing and financing activities:
Property, plant and equipment acquired included in liabilities $ 18,270 $ 4,391
Common unit issuance for deferred consideration for Wilmington Drop-Down 0 49,700
Common unit issuance for the Hamlet Drop-Down 0 50,000
Supplemental cash flow information:
Interest paid, net of capitalized interest $ 22,666 $ 19,977


	Six Months Ended June 30,
	2021		2020
Non-cash investing and financing activities:
Property, plant and equipment acquired included in accounts payable and accrued liabilities	$	13,595	$	21,296
Equity issuance and debt issuance costs included in liabilities	0		9,740
Supplemental information:
Interest paid, net of capitalized interest	$	23,466	$	(77)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands, except number of units, per unit amounts and unless otherwise noted)

~~(Unaudited)~~

(1) Description of Business and Basis of Presentation

Description of Business

Enviva Partners, LP ~~together~~(together with its subsidiaries, ~~(“we,~~“we,” “us,” ~~“our”~~“our,” or the “Partnership”) supplies utility-grade wood pellets primarily to major power generators under long-term, take-or-pay off-take contracts. We procure wood fiber and process it into utility-grade wood pellets and load the finished wood pellets into railcars, trucks and barges for transportation to deep-water marine terminals, where they are received, stored and ultimately loaded onto oceangoing vessels for delivery under long-term, take-or-pay off-take contracts to our customers ~~principally~~ in the United Kingdom (the “U.K.”), Europe and ~~increasingly~~ Japan.

WeAs of June 30, 2021, we own and operate 9 industrial-scale wood pellet production plants located in the ~~Mid-Atlantic and Gulf Coast regions of the~~Southeast United States. In addition to the volumes from our plants, we also procure wood pellets from third parties. Wood pellets are exported from our wholly owned deep-water marine ~~terminal~~terminals at the Port of Chesapeake, Virginia and terminal assets at the Port of Wilmington, North Carolina (the “Wilmington terminal”) and ~~from~~ third-party deep-water marine terminals in Mobile, Alabama, Panama City, Florida and Savannah, ~~Georgia under a short-term contract, a long-term contract and a lease and associated terminal services agreement, respectively.~~Georgia.

Basis of Presentation

The unaudited financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of ~~1934.~~1934, as amended. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.

In the opinion of management, all adjustments and accruals necessary for a fair presentation have been included. All such adjustments and accruals are of a normal and recurring nature unless disclosed otherwise. All intercompany balances and transactions have been eliminated in consolidation. The results reported in the financial statements are not necessarily indicative of the results that may be reported for the entire year.

The unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Reclassification

Certain prior year amounts have been reclassified ~~from general and administrative expenses to related-party management services agreement fees~~ to conform to current period presentation on the condensed consolidated statements of ~~operations.~~cash flows.

~~Enviva Pellets~~ Greenwood

On July 1, 2020, we acquired from ~~Enviva Holdings, LP (together with Enviva MLP Holdco, LLC and Enviva Development Holdings, LLC, where applicable,~~ our ~~“sponsor”),~~sponsor all of the limited liability company interests in Enviva Pellets Greenwood Holdings II, LLC, ~~(“Greenwood Holdings II”),~~ the indirect owner of Enviva Pellets Greenwood, LLC (“Greenwood”), which owns a wood pellet production plant located in Greenwood, South Carolina (the “Greenwood plant” and such transaction, the “Greenwood Drop-Down”), for a purchase price of ~~$132.0~~$129.7 million, ~~subject to~~after accounting for certain adjustments (such transaction, the “Greenwood Drop-Down”). In connection therewith, our sponsor assigned five biomass off-take contracts to us (collectively, the “Associated Off-Take Contracts”). The Associated Off-Take Contracts call for aggregate annual deliveries of 1.4 million metric tons per year (“MTPY”) and mature between 2031 and 2041. Our sponsor also assigned two fixed-rate shipping contracts and partially assigned two additional fixed-rate shipping contracts to us.

adjustments. The Greenwood Drop-Down was an asset acquisition ofbetween entities under common control and accounted for on the carryover basis of accounting. Accordingly, ~~the consolidated financial statements for the period beginning~~we recorded net assets of $67.8 million as of July 1, 2020 to reflect the ~~acquisition. See Note 3,~~ ~~Transactions Between Entities Under Common Control.~~Greenwood Drop-Down.

~~On the date of the Greenwood Drop-Down:~~

•We entered into an agreement with our sponsor, pursuant to which our sponsor agreed to reimburse us for any construction costs incurred for the planned expansion of the Greenwood plant in excess of $28.0 million (the “Greenwood Make-Whole Agreement”).

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

•We entered into an agreement with Enviva Management Company, LLC, a Delaware limited liability company and wholly owned subsidiary of our sponsor (together with its affiliates that provide services to us, as applicable, “Enviva Management”), pursuant to which (1) Enviva Management waived our obligation to pay an aggregate of approximately $37.0 million in management services and other fees payable under our management services agreement with Enviva Management for the period from July 1, 2020 through the fourth quarter of 2021 and (2) Enviva Management will waive our obligation to pay certain management services and other fees during 2022 unless and until the Greenwood plant’s production volumes equal or exceed 50,000 metric tons (“MT”) in any calendar month, in each case, to provide cash flow support to us during the planned expansion of the Greenwood plant (the “Third EVA MSA Fee Waiver”).

~~Georgia Biomass Holding LLC~~Waycross

On July 31, 2020, ~~Enviva Pellets Waycross Holdings, LLC, a wholly owned subsidiary of the Partnership,~~we acquired all of the limited liability company interests in Georgia Biomass Holding LLC ~~a Georgia limited liability company (“Georgia Biomass”~~(the “Georgia Biomass Acquisition”), ~~and~~ the ~~indirect~~ owner of a wood pellet production plant located in Waycross, Georgia (the “Waycross plant”)~~, for a purchase price of $175.0 million, subject to certain adjustments (the “Georgia Biomass Acquisition”)~~. The Waycross plant has been in operation since 2011 and has a production capacity of approximately 800,000 MTPY. The Waycross plant terminals its production at a two-dome pellet export terminal with a storage capacity of 50,000 MT at the Port of Savannah, Georgia pursuant to a lease and associated terminal services agreement through 2028. Approximately 500,000 MTPY of the Waycross plant’s production is contracted under separate agreements to an existing customer of the Partnership through 2024. In August 2020, Georgia Biomass converted to a limited liability company organized under the laws of the State of Delaware under the name Enviva Pellets Waycross Holdings Sub, LLC (“Waycross”).

The Georgia Biomass Acquisition was recorded as a business combination and accounted for using the acquisition method. Assets acquired and liabilities assumed were recognized at fair value on the acquisition date of July 31, 2020, and the difference between the consideration transferred, excluding acquisition-related costs, and the fair values of the assets acquired and liabilities assumed was recognized as goodwill. ~~See Note 4,~~ Accordingly, we recorded net identifiable assets of $150.0 million and goodwill of $14.0 million as of July 31, 2020 to reflect the Georgia Biomass Acquisition.

~~Acquisition.~~

~~Enviva Wilmington Holdings, LLC~~Table of Contents

~~On April 2, 2019, we acquired from our sponsor~~ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

Hamlet JV

We own all of the issued and outstanding Class B Units in Enviva Wilmington Holdings, LLC (the “Hamlet JV”), a limited liability company owned by our sponsor and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates (collectively, as applicable, “John Hancock”). ~~On the date of acquisition (the “Hamlet Drop-Down”), we began to~~We consolidate the Hamlet JV as a variable interest entity of which we are the primary beneficiary. As managing member, we have the sole power to direct the activities that most impact the economics of the Hamlet JV. Additionally, as the Class B Units represent a controlling interest in the Hamlet JV, we account for the Hamlet JV as a consolidated subsidiary, not as a joint venture. The Hamlet JV owns a wood pellet production plant in Hamlet, North Carolina (the “Hamlet plant”) and a firm, 15-year take-or-pay off-take contract with a customer for the delivery of nearly 1.0 million MTPY of wood pellets, following a ramp period. The Hamlet Drop-Down was an asset acquisition of entities under common control and accounted for on the carryover basis of accounting. Accordingly, the consolidated financial statements for the period beginning April 2019 reflect the acquisition.

(2) Significant Accounting Policies

During interim periods, we follow the accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in our ~~unaudited~~condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

~~Intangibles~~

Intangibles consist of the assembled workforce at the Greenwood plant carried over in the Greenwood Drop-Down and favorable customer contracts, unfavorable customer contracts and an unfavorable shipping contact that were acquired in the Georgia Biomass Acquisition. Intangibles with definite lives are amortized based on the pattern of economic benefit over their estimated useful lives and reviewed periodically for impairment. The intangibles acquired in the Georgia Biomass Acquisition are being amortized on a straight-line basis, as MT of wood pellets to be sold or shipped under each contract are constant through the end of such contracts. See Note 9, ~~Goodwill and Other Intangibles~~.

~~Income taxes~~

Substantially all of our operating subsidiaries are organized as limited partnerships and entities that are disregarded entities for U.S. federal and state income tax purposes. As a result, those entities disregarded for U.S. federal and state income tax purposes are not subject to U.S. federal and most state income taxes. Our partners and unitholders are liable for these income taxes on their share of our taxable income. Some states impose franchise and capital taxes on the Partnership. Such taxes are not material to the consolidated financial statements and have been included in other income (expense) as incurred.

One of our subsidiaries formed in connection with the Georgia Biomass Acquisition is subject to U.S. federal income tax and accounts for income tax under the liability method. Deferred taxes are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of any tax rate change on deferred taxes is recognized in the period that includes the enactment date of the tax rate change. Realization of deferred tax assets is assessed on an annual basis and, if not more likely than not, any deferred tax assets can be utilized and a valuation allowance is recorded to write down the deferred tax assets to their net realizable value.

Recently Adopted Accounting Standards

On January 1, ~~2020,~~2021, we adopted ASU 2019-12-Income Taxes (Topic 740): Simplifying the Accounting ~~Standards Update 2016-13~~ for Income Taxes~~Financial Instruments—Credit Losses (Topic 326): Measurement~~, which removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of ~~Credit Losses on Financial Instruments~~ ~~which changes how entities measure credit losses for most financial assets.~~a consolidated group. The adoption did not have a material impact on the financial statements.

Recently Issued Accounting Standards not yet Adopted

Currently, there are no recently issued accounting standards not yet adopted by us that we expect to be reasonably likely to materially impact our financial position, results of operations or cash flows.

(3) ~~Transactions Between Entities Under Common Control~~

~~Enviva Pellets Greenwood Holdings II, LLC~~

The Greenwood Drop-Down closed on July 1, 2020 and was an asset acquisition of entities under common control where the financial statements of the receiving entity reflect the transferred assets and liabilities at the historical cost of the parent of the entities under common control. Accordingly, the consolidated financial statements for the period beginning July 1, 2020 reflect the Greenwood Drop-Down. The $132.0 million purchase price for the Greenwood Drop-Down consisted of a cash payment of $129.7 million, net of a purchase price adjustment of $2.3 million.

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

The change in net assets on July 1, 2020 from the Greenwood Drop-Down included $67.8 million of net assets acquired. The following table outlines the changes in consolidated net assets resulting from the Greenwood Drop-Down on July 1, 2020.


~~Assets:~~
~~Cash and cash equivalents~~	$	29
~~Accounts receivable, net~~	25
~~Inventories~~	~~5,165~~
~~Prepaid expenses and other current assets~~	21
~~Property, plant and equipment, net~~	~~104,662~~
~~Operating lease right-of-use assets~~	~~7,850~~
~~Intangible assets, net~~	~~845~~
~~Other long-term assets~~	71
~~Total assets~~	~~118,668~~

~~Liabilities:~~
~~Accounts payable~~	~~1,951~~
~~Accrued and other current liabilities~~	~~4,303~~
~~Interest payable~~	~~366~~
~~Seller Note~~	~~36,880~~
~~Finance lease obligations~~	~~699~~
~~Long-term operating lease liabilities~~	~~6,649~~
~~Total liabilities~~	~~50,848~~
~~Net assets contributed to Partnership~~	$	~~67,820~~

The unaudited pro forma combined revenue and net income presented below have been prepared as if the Greenwood Drop-Down had occurred on January 1, 2019. The unaudited pro forma financial information has been derived from the consolidated statements of operations of the Partnership and Greenwood for the below periods. The historical financial information has been adjusted in the unaudited combined pro forma information to give effect to pro forma events that are (1) directly attributable to the Greenwood Drop-Down, (2) factually supportable and (3) expected to have a continuing impact on our results of operations following the Greenwood Drop-Down. The unaudited pro forma financial information does not include non-recurring items such as transaction costs related to the acquisition. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the Greenwood Drop-Down had taken place on January 1, 2019.

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

~~The unaudited pro forma combined revenue and net loss for the nine months ended September 30, 2020 and for the year ended December 31, 2019 are as follows:~~

Nine Months Ended
September 30, 2020 Year Ended December 31, 2019
Revenue $ 596,505 $ 682
Net loss (4,596) (46,323)

~~Enviva Wilmington Holdings, LLC~~

The $165.0 million purchase price for the Hamlet Drop-Down in April 2019 consisted of (1) an initial cash payment of $24.7 million, net of a purchase price adjustment of $0.3 million, (2) the issuance of 1,681,237 unregistered common units at a value of $29.74 per unit, or $50.0 million of common units, (3) $50.0 million in cash, paid on June 28, 2019 and (4) a third and final cash payment of $40.0 million paid on January 2, 2020.

We are responsible for managing the activities of the Hamlet JV, including the development, construction and operation of the Hamlet plant and are the primary beneficiary of the Hamlet JV. We included all accounts of the Hamlet JV in our consolidated results as of the date of the Hamlet Drop-Down as the Class B Units represent a controlling interest in the Hamlet JV and we are generally unrestricted in managing the assets and cash flows of the Hamlet JV; however, certain decisions, such as those relating to the issuance and redemption of equity interests in the Hamlet JV, guarantees of indebtedness and fundamental changes, including mergers and acquisitions, asset sales and liquidation and dissolution of the Hamlet JV, require the approval of the members of the Hamlet JV.

~~(4) Acquisition~~

The Georgia Biomass Acquisition closed on July 31, 2020 for a total purchase price of $175.0 million, subject to certain adjustments. After accounting for certain adjustments, we paid $168.3 million, subject to further adjustment. The Georgia Biomass Acquisition diversifies our manufacturing and export terminaling footprint and expands our operations into a new region with similarly advantaged low-cost access to wood fiber.

~~Preliminary Purchase Price Allocation~~

The purchase price allocation for the Georgia Biomass Acquisition is preliminary. The assets acquired and liabilities assumed have been measured on a preliminary basis using assumptions that are reasonable based on information currently available. The final purchase price allocation may vary based on final valuations and analyses of the fair value of the assets acquired and liabilities assumed.

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

The Georgia Biomass Acquisition was accounted for as a business combination using the acquisition method of accounting. The following table summarizes the estimated purchase price and the estimated fair values of the amounts recorded for identifiable assets acquired and liabilities assumed at July 31, 2020, the acquisition date:


~~Purchase price:~~
~~Cash paid by the Partnership at closing~~	$	~~168,338~~
~~Reimbursement to the Partnership of certain acquisition-related costs, net~~	~~161~~
~~Settlement of payable from the Partnership to Georgia Biomass~~	~~(3,684)~~
~~Payment in relation to the Georgia Biomass Acquisition~~	~~164,815~~
~~Receivable from purchase price adjustment~~	~~(1,845)~~
	$	~~162,970~~

~~Identified net assets acquired:~~
~~Cash~~	$	~~1,516~~
~~Accounts receivable~~	~~124~~
~~Inventories~~	~~5,774~~
~~Prepaid expenses and other current assets~~	~~872~~
~~Intangible assets~~	~~5,400~~
~~Property, plant and equipment~~	~~171,798~~
~~Operating lease right-of-use assets~~	~~14,716~~
~~Accounts payable~~	~~(3,225)~~
~~Accrued and other current liabilities~~	~~(7,121)~~
~~Current portion of long-term finance lease obligations~~	~~(926)~~
~~Long-term finance lease obligations~~	~~(3,733)~~
~~Long-term operating lease liabilities~~	~~(13,356)~~
~~Deferred tax liability, net~~	~~(14,076)~~
~~Intangible liabilities~~	~~(9,600)~~
~~Other long-term liabilities~~	~~(880)~~
~~Identifiable net assets acquired~~	~~147,283~~
~~Goodwill~~	~~15,687~~
~~Total purchase price~~	$	~~162,970~~

The net assets of Georgia Biomass were recorded as provisional amounts at their currently estimated fair values. Significant inputs used to estimate the fair values of certain net assets acquired included estimates of the: (1) replacement cost for property, plant and equipment as if each asset was new as of the acquisition date, which was then adjusted for the depreciation and any obsolescence since the date Georgia Biomass originally acquired that asset; (2) market prices for finished goods inventory and for customer and shipping contracts; (3) incremental borrowing rates as of the acquisition date for leases acquired; and (4) appropriate discount rates. We are in the process of obtaining additional information to identify and measure all assets acquired and liabilities assumed in the Georgia Biomass Acquisition within the measurement period, which could be up to one year from the date of acquisition. Such provisional amounts will be retrospectively adjusted to reflect any new information about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of these amounts. Additionally, key valuation inputs and their sensitivity to the valuation of assets acquired and liabilities assumed are currently being reviewed by management. As the valuation of the net assets acquired are finalized, it is reasonably possible that the provisional amounts recorded as of the acquisition date for property, plant and equipment, intangible assets and liabilities, lease-related assets and obligations, deferred taxes, and goodwill may change during the measurement period.

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

Goodwill is calculated as the excess of the fair value of the consideration transferred over the fair value of the net assets recognized and represents the future economic benefits arising from other net assets acquired that could not be individually identified and separately recognized. We believe that the primary items that generated goodwill include both (1) the value of the synergies created between the acquired assets and our pre-existing assets and long-term, take-or-pay off-take contracts and (2) our expected ability to grow the combined business by leveraging the combined business experience and the expanded footprint. None of the goodwill is expected to be deductible for tax purposes.

In connection with the Georgia Biomass Acquisition, acquisition-related costs through September 30, 2020 are approximately $3.9 million, of which $3.6 million was expensed during the three and nine months ended September 30, 2020 and included within general and administrative expenses on the condensed consolidated statements of operations. These acquisition-related costs do not include integration costs.

~~Post-acquisition and pro forma financial information~~

The condensed consolidated statements of operations for the three and nine months ended September 30, 2020 include $26.5 million of revenue and $0.1 million of net income from the Georgia Biomass Acquisition since July 31, 2020.

The unaudited pro forma combined revenue and net income presented below have been prepared as if the Georgia Biomass Acquisition had occurred on January 1, 2019. The unaudited pro forma financial information has been derived from the consolidated statements of operations of the Partnership for the below periods and from the consolidated abbreviated statements of revenues and direct expenses of Georgia Biomass for the six months ended June 30, 2020 and the year ended December 31, 2019. The abbreviated statements of revenues and direct expenses of Georgia Biomass were prepared for the purposes of complying with the requirements of Rule 3-05 of Regulation S-X as no separate financial statements of Georgia Biomass had previously been prepared. The abbreviated statements of revenues and direct expenses of Georgia Biomass include the revenues and direct expenses directly attributable to manufacturing and distributing wood pellets to customers in the United Kingdom and Europe by Georgia Biomass.

The unaudited pro forma financial information reflects the effects of applying certain preliminary purchase price accounting adjustments to the historical financial information based on the fair value of the identified net assets acquired as of July 31, 2020. The historical financial information has been adjusted in the unaudited pro forma information to give effect to pro forma events that are (1) directly attributable to the Georgia Biomass Acquisition, (2) factually supportable and (3) expected to have a continuing impact on our results of operations following the Georgia Biomass Acquisition. The unaudited pro forma financial information does not include non-recurring items such as transaction costs related to the acquisition. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the Georgia Biomass Acquisition had taken place on January 1, 2019.

~~The unaudited pro forma combined revenue and net income for the nine months ended September 30, 2020 and for the year ended December 31, 2019 are as follows:~~

Nine Months Ended
September 30, 2020 Year Ended December 31, 2019
Revenue $ 680,883 $ 845,340
Net income 28,778 10,497

~~(5)~~ Revenue

We disaggregate our revenue into two categories: product sales and other revenue. Product sales includes sales of wood pellets. Other revenue includes fees associated with customer requests to cancel, defer or accelerate shipments in satisfaction of the related performance obligation and third- and related-party terminal services fees. Other revenue also includes fees received for other services, including for sales and marketing, scheduling, sustainability, consultation, shipping and risk management services, where the revenue is recognized when we ~~both~~ have satisfied the performance obligation and have a right to the corresponding fee. These categories best reflect the nature, amount, timing and uncertainty of our revenue and cash flows.

Performance Obligations

As of ~~September~~June 30, ~~2020,~~2021, the aggregate amount of ~~revenues~~consideration from contracts with customers allocated to the performance obligations that were unsatisfied or partially satisfied was approximately ~~$14.6~~$13.8 billion. This amount excludes forward prices

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

related to variable consideration including inflation, ~~and~~ foreign currency and commodity prices. Also, this amount excludes the effects of the related foreign currency derivative contracts as they do not represent contracts with customers.

As of ~~October 1, 2020,~~June 30, 2021, we expect to recognize approximately ~~2.0%~~4.0% of our remaining performance obligations as revenue during the remainder of ~~2020, approximately 7.0%~~2021, an additional 9.0% in ~~2021~~2022 and the balance thereafter. Our off-take contracts expire at various times through 2043 and our terminal services ~~contracts extend into~~contract expires in 2021.

~~Additionally, as of October 1, 2020, we have obligations under other contracts to sell and purchase wood pellets of $259.5 million and $187.8 million, respectively.~~

Variable Consideration

Variable consideration from off-take contracts arises from several pricing features ~~outlined~~ in our off-take contracts, pursuant to which such contract pricing may be adjusted in respect of particular shipments to reflect differences between certain contractual quality specifications of the wood pellets as measured both when the wood pellets are loaded onto ships and unloaded at the discharge port as well as certain other contractual adjustments.

Variable consideration from terminal services contracts, which was none for the three and nine months ended September 30, 2020 and insignificant for the three and nine months ended September 30, 2019, arises from price increases based on agreed inflation indices and from above-minimum throughput quantities or services.

We allocate variable consideration under our off-take and terminal services contracts entirely to each performance obligation to which variable consideration relates. The estimate of variable consideration represents the amount that is not more likely than not to be reversed. For the three months ended September 30, 2020, revenue was reduced by $0.1 million related to performance obligations satisfied in previous periods. For the nine months ended September 30, 2020, we recognized $0.1 million of revenue related to performance obligations satisfied in previous periods. For the three and nine months ended September 30, 2019 we recognized $0.1 million and $0.5 million, respectively, of revenue related to performance obligations satisfied in previous periods.

~~Contract Balances~~

Accounts receivable related to product sales as of September 30, 2020 and December 31, 2019 were $78.4 million and $67.7 million. As of September 30, 2020, we had 0 deferred revenue for future performance obligations associated with off-take contracts. As of December 31, 2019, we had $4.1 million of deferred revenue for future performance obligations associated with off-take contracts.

~~Other~~

Accrued and other current liabilities included approximately $12.2 million and $7.6 million at September 30, 2020 and December 31, 2019 for amounts associated with purchased shipments from third-party suppliers that were resold in back-to-back transactions.

~~(6) Significant Risks and Uncertainties Including Business and Credit Concentrations~~

Our business is significantly impacted by greenhouse gas emission and renewable energy legislation and regulations in the U.K., European Union (“EU”) as well as its member states and Japan. If the U.K., the EU or its member states or Japan significantly modify such legislation or regulations, then our ability to enter into new contracts as our existing contracts expire may be materially affected.

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Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

~~(Unaudited)~~

Variable consideration from our terminal services contract arises from price increases based on agreed inflation indices and from above-minimum throughput quantities or services. There was no variable consideration from our terminal services contract for the three and six months ended June 30, 2021 and 2020.

For the three and six months ended June 30, 2021, we recognized $0.2 million and $0.4 million, respectively, of product sales revenue related to performance obligations satisfied in previous periods. For the three months ended June 30, 2020, we reversed an insignificant amount of product sales revenue related to performance obligations satisfied in previous periods. For the six months ended June 30, 2020, we recognized $0.1 million of product sales revenue related to performance obligations satisfied in previous periods.

Contract Balances

Accounts receivable related to product sales as of June 30, 2021 and December 31, 2020 were $70.9 million and $108.5 million, respectively. Of these amounts, $58.7 million and $95.0 million, at June 30, 2021 and December 31, 2020, respectively, related to amounts that were not yet billable under our contracts with customers pending finalization of prerequisite billing documentation. The amounts that had not been billed are billed upon receipt of prerequisite billing documentation, where substantially all is typically billed one to two weeks after full loading of the vessel and where the remaining balance is typically billed one to two weeks after discharge of the vessel.

As of June 30, 2021 and December 31, 2020, we had $0.1 million and $4.9 million, respectively, of deferred revenue for future performance obligations under contracts associated with off-take contracts.

Other

Accrued and other current liabilities included approximately $34.7 million and $50.6 million at June 30, 2021 and December 31, 2020, respectively, for amounts associated with our product sales.

(4) Significant Risks and Uncertainties, Including Business and Credit Concentrations

Our business is significantly impacted by greenhouse gas emissions and renewable energy legislation and regulations in the U.K., the European Union, as well as its member states, and Japan. If the U.K., the European Union and its member states or Japan significantly modify such legislation or regulations, then our ability to enter into new contracts as our existing contracts expire may be materially affected.

Our current product sales are primarily to industrial customers located in the U.K., Denmark, Belgium and ~~Belgium.~~the Netherlands. Product sales to third-party customers that accounted for 10% or a greater share of consolidated product sales ~~are~~were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Customer A	Customer A	35	%	49	%	36	%	50 %		Customer A	45	%	40	%	69	%	37	%
Customer B	Customer B	10	%	12	%	10	%	11	%	Customer B	3	%	13	%	10	%	11	%
Customer C	Customer C	26	%	22	%	29	%	21	%	Customer C	20	%	40	%	32	%	31	%
Customer D	Customer D	8	%	8	%	8	%	11	%	Customer D	1	%	0	%	17	%	8	%
Customer E	Customer E	12	%	0	%	5	%	0	%	Customer E	18	%	0	%	32	%	1	%

~~(7)~~(5) Inventories

Inventories consisted of the following ~~as of:~~at:

September 30, 2020 December 31, 2019
Raw materials $ 11,719 $ 9,795
Consumable tooling 27,824 20,485
Finished goods 22,435 2,718
Total inventories $ 61,978 $ 32,998

~~(8) Property, Plant and Equipment~~

~~Property, plant and equipment consisted of the following as of:~~

September 30, 2020 December 31, 2019
Land $ 22,420 $ 15,226
Land improvements 60,064 56,637
Buildings 316,830 217,167
Machinery and equipment 787,175 588,447
Vehicles 1,317 635
Furniture and office equipment 8,202 6,822
Leasehold improvements 1,029 1,029
Property, plant and equipment 1,197,037 885,963
Less accumulated depreciation (278,951) (203,695)
Property, plant and equipment, net 918,086 682,268
Construction in progress 143,784 69,512
Total property, plant and equipment, net $ 1,061,870 $ 751,780

For the three and nine months ended September 30, 2020, total depreciation expense was $18.8 million and $48.0 million, respectively. For the three and nine months ended September 30, 2019, total depreciation expense was $13.3 million and $35.8 million, respectively. For the three and nine months ended September 30, 2020, total interest capitalized related to construction in progress was $1.7 million and $4.1 million, respectively. For the three and nine months ended September 30, 2019, total interest capitalized related to construction in progress was $0.7 million and $1.4 million, respectively. At September 30, 2020 and December 31, 2019, accrued amounts for property, plant and equipment and construction in progress included in accrued and other current liabilities were $12.0 million and $9.4 million, respectively.


	June 30, 2021		December 31, 2020
Raw materials and work-in-process	$	14,236	$	12,500
Consumable tooling	21,106		21,855
Finished goods	12,320		8,009
Total inventories	$	47,662	$	42,364

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Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

~~(Unaudited)~~

~~(9) Goodwill~~(6) Property, Plant and ~~Other Intangibles~~Equipment, net

~~Goodwill~~

~~Goodwill was $101.3 million~~Property, plant and ~~$85.6 million at September 30, 2020 and December 31, 2019, respectively. In July 2020, we recorded $15.7 million to goodwill as part of the Georgia Biomass Acquisition, see Note 4,~~ ~~Acquisition. We did 0t record any impairment losses during the three and nine months ended September 30, 2020 and 2019.~~

~~Intangibles~~

~~Intangible assets (liabilities)~~equipment, net consisted of the following ~~at September 30, 2020:~~at:

Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Favorable customer contracts $ 5,400 $ (2,200) $ 3,200
Assembled workforce 1,856 (1,130) 726
Unfavorable customer contracts (3,300) 256 (3,044)
Unfavorable shipping contract (6,300) 231 (6,069)
Total intangible liabilities, net $ (2,344) $ (2,843) $ (5,187)


	June 30, 2021		December 31, 2020
Land	$	22,570	$	22,611
Land improvements	61,276		60,110
Buildings	321,691		316,706
Machinery and equipment	848,049		799,881
Vehicles	3,128		3,105
Furniture and office equipment	9,757		8,202
Leasehold improvements	2,660		1,029
Property, plant and equipment	1,269,131		1,211,644
Less accumulated depreciation	(336,509)		(295,921)
Property, plant and equipment, net	932,622		915,723
Construction in progress	181,899		156,096
Total property, plant and equipment, net	$	1,114,521	$	1,071,819

~~The Greenwood Drop-Down included an intangible asset of assembled workforce. As a result of the Georgia Biomass Acquisition, we recorded intangible assets~~Total depreciation expense and ~~liabilities~~interest capitalized related to ~~favorable off-take contracts that expire~~construction in 2020, unfavorable customer contracts that expire in December 2025 and an unfavorable shipping contract that expires in December 2026. During the three and nine months ended September 30, 2020, $1.8 million of net amortization expense was included in depreciation and amortization on the condensed consolidated statements of operations.

~~The estimated aggregate net increase in (reduction of) amortization expense for the next five years are~~progress were as follows:

Year Ending December 31:
Remainder of 2020 $ 3,011
2021 (1,433)
2022 (1,780)
2023 (1,911)
2024 (1,911)
Thereafter (1,163)
Total $ (5,187)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Depreciation expense	$	22,474	$	15,297	$	43,521	$	29,247
Interest capitalized related to construction in progress	2,286		1,362		4,343		2,427

~~(10) Leases~~

~~We have operating~~Accrued amounts for property, plant and ~~finance leases related to real estate, machinery,~~ equipment and other assets where we are the lessee. Leases with an initial term of 12 months or less are not recorded on the balance sheet but are recognized as lease expense on a straight-line basis over the applicable lease terms. Leases with an initial term of longer than 12 months are recorded on the balance sheet and classified as either operating or finance.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Our leases do not contain any material residual value guarantees, restrictive covenants or subleases. In addition to fixed lease payments, we have contracts that incur variable lease expense related to usage (e.g. throughput fees, maintenance and repair and machine hours), which are expensed as incurred. Our leases have remaining terms of one to 27 years, some of which include options to extend the leases for up to five years. Our leases are generally noncancelable. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

We apply an incremental borrowing rate to our leases for balance sheet measurement. As most of our leases do not provide an implicit rate, we generally use the estimated rate of interest for a collateralized borrowing over a similar term of the lease payments at the lease commencement date as our incremental borrowing rate.

~~Operating leases are~~construction in progress included in ~~operating lease ROU assets,~~ accrued and other current liabilities were $22.7 million and ~~long-term operating lease liabilities on our condensed consolidated balance sheets. Finance leases are included in property, plant~~$10.8 million at June 30, 2021 and equipment, current portion of long-term debt and finance lease obligations and long-term debt and finance lease obligations on our condensed consolidated balance sheets. Changes in ROU assets and operating lease liabilities are included net in change in operating lease liabilities on the condensed consolidated statements of cash flows.

~~Operating lease ROU assets and liabilities and finance leases were as follows:~~

September 30, 2020 December 31, 2019
Operating leases:
Operating lease right-of-use assets $ 52,417 $ 32,830
Current portion of operating lease liabilities $ 3,506 $ 1,439
Long-term operating lease liabilities 50,891 33,469
Total operating lease liabilities $ 54,397 $ 34,908
Finance leases:
Property, plant and equipment, net $ 19,251 $ 7,398
Current portion of long-term finance lease obligations $ 7,111 $ 4,584
Long-term finance lease obligations 7,195 2,954
Total finance lease liabilities $ 14,306 $ 7,538

~~Operating and finance lease costs were as follows:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
Lease Cost Classification 2020 2019 2020 2019
Operating lease cost:
Fixed lease cost Cost of goods sold $ 1,502 $ 1,269 $ 4,008 $ 3,546
Variable lease cost Cost of goods sold 1 3 1 29
Short-term lease costs Cost of goods sold 2,474 15 6,389 15
Total operating lease costs $ 3,977 $ 1,287 $ 10,398 $ 3,590
Finance lease cost:
Amortization of leased assets Depreciation and amortization $ 2,227 $ 1,094 $ 5,219 $ 2,578
Variable lease cost Cost of goods sold 53 4 169 4
Interest on lease liabilities Interest expense 145 70 363 179
Total finance lease costs $ 2,425 $ 1,168 $ 5,751 $ 2,761
Total lease costs $ 6,402 $ 2,455 $ 16,149 $ 6,351

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

~~Operating and finance lease cash flow information was as follows:~~

Nine Months Ended
September 30,
2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 3,832 $ 3,715
Operating cash flows from financing leases 363 179
Financing cash flows from financing leases 3,702 2,020
Assets obtained in exchange for lease obligations:
Operating leases $ 20,931 $ 7,465
Financing leases 15,357 5,380

~~The future minimum lease payments and the aggregate maturities of operating and finance lease liabilities are as follows as of September 30, 2020:~~

Years Ending December 31, Operating
Leases Finance
Leases Total
Remainder of 2020 $ 1,701 $ 2,525 $ 4,226
2021 6,756 6,061 12,817
2022 6,466 2,667 9,133
2023 6,718 1,577 8,295
2024 6,190 502 6,692
Thereafter 72,754 1,651 74,405
Total lease payments 100,585 14,983 115,568
Less: imputed interest (46,188) (677) (46,865)
Total present value of lease liabilities $ 54,397 $ 14,306 $ 68,703

The weighted-average remaining lease terms and discount rates for our operating and finance leases were weighted using the undiscounted future minimum lease payments and are as follows as of September 30, 2020:


~~Weighted average remaining lease term (years):~~
~~Operating leases~~	17
~~Finance leases~~	3
~~Weighted average discount rate:~~
~~Operating leases~~	7	%
~~Finance leases~~	4	%

December 31, 2020, respectively.

~~(11)~~(7) Derivative Instruments

We use derivative instruments to partially offset our business exposure to foreign currency exchange ~~and interest rate risk.~~

~~We may enter into foreign currency forward and option contracts to offset some of the foreign currency exchange~~ risk onfrom expected future cash flows and interest rate ~~swaps to offset some of the interest rate~~ risk ~~on expected future cash flows on~~resulting from certain borrowings. ~~The~~Although the preponderance of our off-take contracts are ~~US Dollar-denominated. We~~U.S. Dollar-denominated, we are ~~primarily~~ exposed to fluctuations in foreign currency exchange rates related to a minority of our off-take contracts that require future deliveries of wood pellets to be settled in British Pound Sterling (“GBP”) and Euro (“EUR”) in the minority of our contracts that are not denominated in US Dollars. Our derivative instruments expose us to credit risk to the extent that hedge counterparties may be unable to meet the terms of the applicable derivative instrument. .

We seek to mitigate ~~such risks~~the credit risk associated with derivative instruments by limiting our counterparties to major financial institutions. ~~In addition,~~Although we monitor the potential risk of loss ~~with any one counterparty resulting from~~due to credit ~~risk. Management does~~risk, we do not expect

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

material losses as a result of defaults by counterparties. We use derivative instruments to manage cash flow and do not enter into derivative instruments for speculative or trading purposes.

We have entered and may continue to enter into foreign currency forward contracts, purchased option contracts or other instruments to partially manage foreign currency exchange risk. In 2020, we entered into pay-fixed, receive-variable interest rate swaps that expire in September 2021 and October 2021 to hedge interest rate risk associated with our variable rate borrowings under our senior secured revolving credit facility that are not designated and accounted for as cash flow hedges.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

Derivative instruments are classified as Level 2 assets or liabilities based on inputs such as spot and forward benchmark interest rates (such as LIBOR) and foreign exchange rates. The fair value of derivative instruments ~~not designated as hedging instruments~~ at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019 was~~2020 were as follows:


			Asset (Liability)						Asset (Liability)
		Balance Sheet Classification	September 30, 2020		December 31, 2019			Balance Sheet Classification	June 30, 2021		December 31, 2020

Interest rate swap:
Not designated as hedging instruments:							Not designated as hedging instruments:
Interest rate swaps							Interest rate swaps	Accrued and other current liabilities	$	(47)	$	(119)
		Accrued and other current liabilities	$	(142)	$	0
		Other long-term liabilities	(4)		0
Foreign currency exchange contracts:	Foreign currency exchange contracts:						Foreign currency exchange contracts:
		Other current assets	873		408			Prepaid and other current assets	$	423	$	308
		Other long-term assets	3,488		1,774			Other long-term assets	423		924
		Accrued and other current liabilities	(220)		(735)			Accrued and other current liabilities	(3,009)		(2,224)
		Other long-term liabilities	(296)		(1,055)			Other long-term liabilities	(3,135)		(3,508)
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments		$	3,699	$	392	Total derivatives not designated as hedging instruments		$	(5,345)	$	(4,619)

Unrealized ~~losses~~gains related to the change in fair ~~market~~ value of interest rate swaps are recorded in interest expense and were insignificant and ~~$0.2~~$0.1 million, respectively, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020. Our interest rate swap outstanding at~~2021, and ~~during~~unrealized losses of $0.1 million and $0.2 million, respectively, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019 was designated as a hedging instrument.~~2020.

~~Net~~During the three months ended June 30, 2021 and 2020, product sales included net unrealized gains of $0.4 million and losses of $0.1 million, respectively, related to the change in fair ~~market~~value of foreign currency derivatives. During the six months ended June 30, 2021 and 2020, net unrealized losses of $0.8 million and gains of $6.7 million, respectively, related to the change in fair value of foreign currency derivatives were ~~$2.6 million during the three months ended September 30, 2020 and were~~ included in product sales. ~~Net unrealized gains~~

Included in product sales on the condensed consolidated statements of income are realized losses related to ~~the change in fair market value of~~ foreign currency derivatives ~~were $4.1 million during the nine months ended September 30, 2020 and were included in product sales. Net unrealized gains related to the change in fair market value~~settled of ~~foreign currency derivatives were $1.1~~$1.5 million and ~~$1.4~~$2.5 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019, respectively, and were included in product sales.~~

2021, respectively. Realized gains related to derivatives settled were ~~$0.1~~insignificant and $0.2 million, ~~and $0.3 million~~respectively, during the three and ~~nine~~six months ended ~~September~~June 30, 2020, respectively, and were included in product sales. Realized gains related to derivatives settled were $1.6 million and $1.7 million during the three and nine months ended September 30, 2019, respectively, and were included in product sales.

We enter into master netting arrangements designed to permit net settlement of derivative transactions among the respective counterparties. If we had settled all transactions with our respective counterparties at ~~September~~June 30, ~~2020,~~2021, we would have ~~received~~had to pay a net settlement termination payment of ~~$3.6~~$5.4 million, which isdiffers by $0.1 million ~~less than~~from the recorded fair value of the derivatives. We present our derivative assets and liabilities at their gross fair values.

The notional amounts of outstanding derivative instruments associated with outstanding or unsettled derivative instruments as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Foreign exchange forward contracts in GBP	Foreign exchange forward contracts in GBP	£	92,225	£	50,575	Foreign exchange forward contracts in GBP	£	107,575	£	108,825
Foreign exchange purchased option contracts in GBP	Foreign exchange purchased option contracts in GBP	£	42,115	£	43,415	Foreign exchange purchased option contracts in GBP	£	23,515	£	40,365
Foreign exchange purchased option contracts in EUR		€	0	€	1,200
Interest rate swap		$	70,000	$	34,354
Foreign exchange forward contracts in EUR						Foreign exchange forward contracts in EUR	€	19,250	€	12,250
Interest rate swaps						Interest rate swaps	$	70,000	$	70,000

(8) Fair Value Measurements

The amounts reported in the condensed consolidated balance sheets as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, related-party receivables, net, accounts payable, related-party payables, net, and accrued and other current liabilities approximate fair value because of the short-term nature of these instruments.

Derivative instruments and long-term debt including the current portion are classified as Level 2 instruments. Derivatives are classified as Level 2 as they are fair valued using inputs that are observable in active markets such as benchmark interest rates and foreign exchange rates (see Note 7, Derivative Instruments). The fair value of our 2026 Notes was determined based on

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Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

~~(Unaudited)~~

~~(12) Fair Value Measurements~~

The amounts reported in the unaudited condensed consolidated balance sheets as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, related-party receivables, net, related-party payables, net, and accrued and other current liabilities approximate fair value because of the short-term nature of these instruments.

Derivative instruments and long-term debt and finance lease obligations, including the current portion, are classified as Level 2 instruments. The fair value of our senior notes was determined based on observable market prices in ~~a less~~an active market and was categorized as Level 2 in the fair value hierarchy. The fair value of ~~other long-term debt and finance lease obligations~~our Seller Note is classified as Level 2 ~~was determined~~and is estimated on discounted cash flow analyses based on ~~the usage of market prices not quoted on~~observable inputs in active markets ~~and other observable market data. The fair value of the long-term debt and finance lease obligations are based upon rates currently available~~ for debt ~~and finance lease obligations~~ with similar terms and remaining maturities. The carrying amount of ~~derivative instruments~~other long-term debt, which is primarily composed of the senior secured revolving credit facility that resets based on a market rate, approximates fair value.

The carrying amount and estimated fair value of long-term debt ~~and finance lease obligations as of September~~at June 30, ~~2020~~2021 and December 31, ~~2019 were~~2020 was as follows:


		September 30, 2020				December 31, 2019					June 30, 2021				December 31, 2020
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value
2026 Notes	2026 Notes	$	746,920	$	793,125	$	593,476	$	644,250	2026 Notes	$	747,135	$	785,625	$	746,875	$	796,875
Seller Note	Seller Note	37,222		38,467		0		0		Seller Note	35,754		37,882		37,571		40,405
Other long-term debt and finance lease obligations		121,306		121,306		9,544		9,544
Total long-term debt and finance lease obligations		$	905,448	$	952,898	$	603,020	$	653,794
Other long-term debt										Other long-term debt	2,000		2,000		122,000		122,000
Total long-term debt										Total long-term debt	$	784,889	$	825,507	$	906,446	$	959,280

~~(13)~~(9) Intangibles

Intangible assets (liabilities) consisted of the following as of June 30, 2021 and December 31, 2020:


	June 30, 2021						December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Favorable customer contracts	$	6,200	$	(5,645)	$	555	$	6,200	$	(5,566)	$	634
Assembled workforce	1,856		(1,487)		369		1,856		(1,249)		607
Unfavorable customer contract	(600)		124		(476)		(600)		57		(543)
Unfavorable shipping contract	(6,300)		1,066		(5,234)		(6,300)		485		(5,815)
Total intangible liabilities, net	$	1,156	$	(5,942)	$	(4,786)	$	1,156	$	(6,273)	$	(5,117)

(10) Long-Term Debt and Finance Lease Obligations

Long-term debt and finance lease obligations at carrying value are composed of the ~~following:~~following at:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
2026 Notes, net of unamortized discount, premium and debt issuance of $3.1 million as of September 30, 2020 and $6.5 million as of December 31, 2019		$	746,920	$	593,476
2026 Notes, net of unamortized discount, premium and debt issuance of $2.9 million and $3.1 million as of June 30, 2021 and December 31, 2020, respectively						2026 Notes, net of unamortized discount, premium and debt issuance of $2.9 million and $3.1 million as of June 30, 2021 and December 31, 2020, respectively	$	747,135	$	746,875
Senior secured revolving credit facility	Senior secured revolving credit facility	105,000		0		Senior secured revolving credit facility	0		120,000
Seller Note, net of unamortized discount of $2.8 million		37,222		0
Seller Note, net of unamortized discount of $1.7 million and $2.4 million as of June 30, 2021 and December 31, 2020, respectively						Seller Note, net of unamortized discount of $1.7 million and $2.4 million as of June 30, 2021 and December 31, 2020, respectively	35,754		37,571
Other loans	Other loans	2,000		2,006		Other loans	2,000		2,000
Finance leases	Finance leases	14,306		7,538		Finance leases	16,618		19,603
Total long-term debt and finance lease obligations	Total long-term debt and finance lease obligations	905,448		603,020		Total long-term debt and finance lease obligations	801,507		926,049
Less current portion of long-term debt and finance lease obligations	Less current portion of long-term debt and finance lease obligations	(11,611)		(6,590)		Less current portion of long-term debt and finance lease obligations	(12,056)		(13,328)
Long-term debt and finance lease obligations, excluding current installments	Long-term debt and finance lease obligations, excluding current installments	$	893,837	$	596,430	Long-term debt and finance lease obligations, excluding current installments	$	789,451	$	912,721

2026 Notes

In December 2019, we issued $600.0 million in principal amount of 6.5% senior unsecured notes due January 15, 2026 (the “2026 Notes”). In July 2020, we issued an additional $150.0 million aggregate principal amount of the 2026 Notes at an offering price of 103.75% of the principal amount (the “Additional Notes”). We received net proceeds of approximately $153.6 million from the Additional Notes offering after deducting discounts and commissions. We used the net proceeds from the Additional Notes offering to fund a portion of the cash consideration for the Georgia Biomass Acquisition and the Greenwood Drop-Down, to repay borrowings under our revolving credit facility and for general partnership purposes.

~~As of September~~At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we were in compliance with ~~all~~the covenants and restrictions associated with, and no events of default existed under, the indenture dated as of December 9, 2019 governing the 2026 Notes. The 2026 Notes are guaranteed jointly and severally on a senior unsecured basis by our existing subsidiaries (excluding Enviva Partners Finance Corp.) that guarantee certain of our indebtedness and may be guaranteed by certain future restricted subsidiaries.

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Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

~~(Unaudited)~~

Senior Secured Revolving Credit Facility

AsIn April 2021, we amended the credit agreement governing our senior secured revolving credit facility to, among other things, increase the revolving credit commitments from $350.0 million to $525.0 million, extend the maturity from October 2023 to April 2026, increase the letter of ~~September~~credit commitment from $50.0 million to $80.0 million and reduce the cost of borrowing by 25 basis points.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we were in compliance with ~~all~~the covenants and restrictions associated with, and no events of default existed under, our senior secured revolving credit facility. Our obligations under the senior secured revolving credit facility are guaranteed by certain of our subsidiaries and secured by liens on substantially all of our assets; however, the senior secured revolving credit facility is not guaranteed by the Hamlet JV or secured by liens on its assets.

At ~~September~~June 30, 2021 and December 31, 2020, we had ~~$105.0 million in outstanding borrowings under our senior secured revolving credit facility. We had 0 outstanding borrowings under our senior secured revolving credit facility at December 31, 2019.~~

~~We had~~ a ~~$31.0~~$0.3 million letter of credit outstanding under our senior secured revolving credit ~~facility as of September 30, 2020 and 0 letter of credit outstanding at December 31, 2019. The sole outstanding letter of credit was issued in connection the Georgia Biomass Acquisition.~~

~~Seller Note~~

In connection with the Greenwood Drop-Down, we became a party to, and a guarantor of, a promissory note (the “Seller Note”) with a remaining principal balance of $40.0 million, which was initially recorded at its carrying value of $36.9 million. The Seller Note matures in February 2023 and has an interest rate of 2.5% per annum. Principal and related interest payments are due annually beginning February 2018 through February 2022 and quarterly thereafter.facility.

~~(14)~~(11) Related-Party Transactions

Related-party amounts included on the unaudited condensed consolidated statements of ~~operations~~income were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Other revenue	Other revenue	$	0	$	496	$	1,264	$	1,323	Other revenue	$	0	$	658	$	0	$	1,264
Cost of goods sold	Cost of goods sold	25,361		26,300		101,357		80,921		Cost of goods sold	24,144		39,739		54,586		75,996
General and administrative expenses	General and administrative expenses	6,196		7,439		20,832		22,998		General and administrative expenses	9,246		6,947		18,016		14,636

Management Services Agreements

~~Enviva Partners, LP and the Hamlet JV~~We are ~~parties~~party to management services agreements ~~(together, the “MSAs”~~(“MSAs”) with Enviva ~~Management.~~Management Company, LLC, a Delaware limited liability company and wholly owned subsidiary of our sponsor (together with its affiliates that provide services to us, as applicable, “Enviva Management Company”). Enviva Management Company provides us with operations, general administrative, management and other services. We ~~reimburse~~believe the costs allocated to us have been made on a reasonable basis and are the best estimate of the costs that we would have incurred on a stand-alone basis.

Enviva Partners, LP reimburses Enviva Management Company for all direct or indirect internal or third-party expenses it incurs in connection with the provision of such services. ~~The MSAs include rent-related amounts for noncancelable operating leases for office space in Maryland and North Carolina held by our sponsor.~~

Under the Hamlet JV’s ~~management services agreement~~MSA (the “Hamlet JV MSA”), the Hamlet JV pays an annual management fee to Enviva Management ~~and~~Company; to the extent allocated costs exceed the annual management fee, the additional costs are recorded with an increase to partners’ capital.

In connection with the acquisition of the Hamlet ~~Drop-Down,~~JV on April 2, 2019 (the “Hamlet Drop-Down”), Enviva Management Company waived the Hamlet JV’s obligation to pay approximately $2.7 million of management fees payable to Enviva Management Company from the date thereof until July 1, 2020 (the “Hamlet JV MSA Fee Waiver”).

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Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

~~(Unaudited)~~

Related-party amounts included on the unaudited condensed consolidated balance sheets under our MSAs were as follows:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Finished goods inventory	Finished goods inventory	$	2,774	$	419	Finished goods inventory	$	1,622	$	907
Related party payables		7,077		18,703
Related-party payables						Related-party payables	3,915		8,650

Related-party amounts included on the unaudited condensed consolidated statements of ~~operations~~income under our MSAs were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Cost of goods sold	Cost of goods sold	$	22,952	$	17,764	$	53,465	$	51,477	Cost of goods sold	$	20,164	$	14,613	$	44,465	$	30,513
Related-party management services agreement fees		6,196		7,439		20,832		22,998
General and administrative expenses										General and administrative expenses	9,246		6,947		18,016		14,636

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, $0.2~~2021, $0.8 million and $1.5 million, respectively, of fees expensed under the Hamlet JV MSA were waived pursuant to the Hamlet JV MSA Fee Waiver and recorded as an increase to partners’ capital. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2019, $0.8~~2020, $0.6 million and ~~$1.7~~$1.3 million, ~~respectfully,~~respectively, of fees expensed under the Hamlet JV MSA were waived pursuant to the Hamlet JV MSA Fee Waiver and recorded as an increase to partners’ capital.

Drop-Down Agreements

Greenwood Drop-Down

On the date of the Greenwood Drop-Down:

•We entered into an agreement with Enviva Management Company pursuant to which (1) Enviva Management Company waived our obligation to pay an aggregate of approximately $37.0 million in management services and other fees payable under our management services agreement with Enviva Management Company for the period from July 1, 2020 through the fourth quarter of 2021 and (2) Enviva Management Company will waive our obligation to pay certain management services and other fees during 2022 unless and until the Greenwood plant’s production volumes equal or exceed 50,000 metric tons (“MT”) in any calendar month, in each case, to provide cash flow support to us during the planned expansion of the Greenwood plant (the “Third EVA MSA Fee Waiver”).

Pursuant to the Third EVA MSA Fee Waiver, during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, $9.0~~2021, $5.0 million and $13.0 million, respectively, was recorded as an increase to partners’ capital consisting of expenses waived under the agreement. No expenses were waived under the Third EVA MSA Fee Waiver during the three and six months ended June 30, 2020.

Hamlet Drop-Down

On the date of the Hamlet Drop-Down:

•We entered into an agreement with our sponsor, pursuant to which (1) our sponsor agreed to guarantee certain cash flows from the Hamlet plant until June 30, 2020, (2) our sponsor agreed to reimburse us for construction cost overruns in excess of budgeted capital expenditures for the Hamlet plant, subject to certain exceptions, (3) we agreed to pay to our sponsor quarterly incentive payments for any wood pellets produced by the Hamlet plant in excess of forecast production levels through June 30, 2020 and (4) our sponsor agreed to retain liability for certain claims payable, if any, by the Hamlet JV (the “Hamlet Make-Whole Agreement”).

•We entered into an agreement with Enviva Management Company to waive our obligation to pay an aggregate of approximately $13.0 million in fees payable under our ~~management services agreement~~MSA with Enviva Management Company (the “EVA MSA”) with respect to the period from the date of the Hamlet Drop-Down through the second quarter of 2020 (the “First EVA MSA Fee Waiver”).

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Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

•The Hamlet JV entered into an interim services agreement (the ~~“ISA”~~“Hamlet ISA”) with Enviva Hamlet Operator, LLC, a wholly owned subsidiary of our sponsor (“Hamlet Operator”), pursuant to which Hamlet Operator, as an independent contractor, agreed to manage, operate, maintain and repair the Hamlet plant and provide other services to the Hamlet JV for the period from July 1, 2019 through June 30, 2020 in exchange for a fixed fee per MT of wood pellets produced by the Hamlet plant during such period and delivered at place to the Wilmington terminal. Under and during the term of the Hamlet ISA, Hamlet Operator agreed to (1) pay all operating and maintenance expenses at the Hamlet plant, (2) cover all reimbursable general and administrative expenses associated with the Hamlet plant and (3) pay other costs and expenses incurred by the Hamlet plant to produce and sell the wood pellets delivered to the Wilmington terminal from the Hamlet plant. Our sponsor ~~guarantees~~guaranteed all obligations of Hamlet Operator under the Hamlet ISA.

~~For the three months ended September 30, 2020, we did not record any amounts related to the~~The Hamlet Make-Whole Agreement, First EVA MSA Fee Waiver and Hamlet ISA ~~as they~~ expired pursuant to their terms on June 30, 2020. For the ~~nine~~three and six months ended

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

~~September~~ June 30, 2020, $1.0 million and $3.5 million ~~was recorded as an increase to partners’ capital consisting~~ of ~~expenses~~fees expensed under the Hamlet JV MSA and waived under the First EVA MSA Fee ~~Waiver. Cost~~Waiver were recorded as an increase to partners’ capital. For the three and six months ended June 30, 2020, cost of goods sold included $14.6 million and $25.2 million, respectively, net of a cost of cover deficiency fee from our sponsor pursuant to the Hamlet Make-Whole Agreement, ~~as a result of Hamlet Operator’s failure to meet specified production levels,~~ offset by ~~the agreed-upon~~contract price due to Hamlet Operator for ~~the~~ wood pellets ~~produced by~~under the Hamlet ~~plant that we sold. Additionally, at~~ISA. As of June 30, 2021 and December 31, ~~2019, $0.5 million was included in finished goods inventory. As of September 30,~~ 2020, ~~included in~~ related-party receivables ~~net are $16.6~~included $0.4 million and $12.3 million related to the Hamlet ISA.

~~Second EVA MSA Fee Waiver~~

In June 2019, we entered into an agreement with Enviva Management (the “Second EVA MSA Fee Waiver”) pursuant to which we received a $5.0 million waiver of fees under the EVA MSA through September 30, 2019 as consideration for an assignment of two shipping contracts to our sponsor to rebalance our and our sponsor’s respective shipping obligations under our existing off-take contracts. During the three and nine months ended September 30, 2019, $2.3 million and $5.0 million, respectively, of EVA MSA fees expensed were waived and recorded as an increase to partners’ capital pursuant to the Second EVA MSA Fee Waiver.

Greenwood Contract

We were a party to a contract with Greenwood to purchase wood pellets produced by the Greenwood plant through March 2022 (the “Greenwood ~~contract”~~Contract”) and had a take-or-pay obligation with respect to 550,000 MTPY of wood pellets from July 2019 through March 2022, subject to Greenwood’s option to increase or decrease the volume by 10% each contract year. Pursuant to amendments to the Greenwood Contract, our take-or-pay obligation with respect to 550,000 MTPY of wood pellets was deferred to 2021.. The Greenwood Contract was terminated on the date of the Greenwood Drop-Down.

During the ~~nine~~three months ended ~~September~~June 30, 2020, we purchased $10.1 million of wood pellets from Greenwood and recorded 0 cost of cover deficiency fee from Greenwood. During the six months ended June 30, 2020, we purchased $18.8 million of wood pellets from Greenwood and recorded a cost of cover deficiency fee of approximately $0.3 million from Greenwood. During the three and nine months ended September 30, 2019, we purchased $11.3 million and $35.5 million, respectively, of wood pellets from Greenwood and recorded a cost of cover deficiency fee of approximately $1.0 million and $4.3 million, respectively, from Greenwood as it was unable to satisfy certain commitments.

As of ~~September~~June 30, 2020, of the net purchased amount of ~~$18.1~~$18.5 million related to the Greenwood contract, $18.1 million was included in cost of goods ~~sold. As of September 30, 2019, the net purchased amount of $31.2 million related to the Greenwood contract included $29.7 million in cost of goods~~ sold and ~~$1.5~~$0.4 million was included in finished goods inventory.

Holdings TSA

WePrior to its termination on the date of the Greenwood Drop-Down, we were party to a long-term terminal services agreement with our sponsor (the “Holdings TSA”) effective until September 1, 2026. Pursuant to the Holdings TSA, our sponsor agreed to deliver a minimum of 125,000 MT of wood pellets per quarter for receipt, storage, handling and loading services by the Wilmington terminal and pay a fixed fee on a per-ton basis for such terminal services.

. The Holdings TSA was amended and assigned to Greenwood and provided for deficiency payments ~~to Wilmington~~ if quarterly minimum throughput requirements were not met. During the ~~nine~~three and six months ended ~~September~~June 30, 2020, we recorded $1.3 million of deficiency fees from Greenwood, which are included in other revenue. We did not record deficiency fees from Greenwood during the three months ended September 30, 2020. During the three and nine months ended September 30, 2019, we recorded $0.5$0.7 million and $1.3 million, respectively, of deficiency fees from Greenwood, which ~~are~~was included in other revenue. ~~The Holdings TSA was terminated on the date of the Greenwood Drop-Down.~~

Enviva FiberCo, LLC

We purchase raw materials from Enviva FiberCo, LLC (“FiberCo”), a wholly owned subsidiary of our sponsor, including through a wood supply agreement that provided for deficiency fees in the event ~~that~~ FiberCo did not satisfy certain volume commitments. Purchased raw materials net of cost of cover deficiency fees are included in cost of goods sold. Raw materials purchased during the three and ~~nine~~six months ended ~~September~~June 30, 2021 were $3.9 million and $9.9 million, respectively. Raw materials purchased during three and six months ended June 30, 2020 ~~was $2.4~~were $0.8 million and ~~$4.6~~$2.2 million, respectively. ~~NaN~~No cost of cover deficiency fees were recognized during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020. Purchased raw materials, net~~2021 and 2020, respectively. At June 30, 2021, related-party payables of ~~cost of cover deficiency fees from FiberCo during the three and nine months ended September 30, 2019 was insignificant and~~ $0.6 ~~million, respectively. As of September 30, 2020, $0.3~~ million is included in related-party payables related to raw materials purchased from FiberCo. At December 31, 2020, related-party payables included $0.3 million related to raw materials purchased from FiberCo.

Hamlet JV Revolver

At June 30, 2021 and December 31, 2020, the Hamlet JV had a revolver outstanding balance to Enviva, LP, of $46.9 million and $41.7 million, respectively, both of which were eliminated upon consolidation.

Railcar Subleases

Effective February 2021, we agreed to sublease certain railcars from Enviva Pellets Lucedale, LLC (“Lucedale”), which was a wholly owned subsidiary of our sponsor. On July 1, 2021, we acquired Lucedale (see Note 16, Subsequent Event). The sublease agreements terminate no later than August 30, 2021. During the three and six months ended June 30, 2021, cost of

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Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

~~(Unaudited)~~

~~(15)~~goods sold includes expense related to the railcar subleases and railcar deliveries of $0.1 million and $0.2 million, respectively. At June 30, 2021, we had $0.1 million included in related-party payables.

(12) Income Taxes

As of June 30, 2021, the only periods subject to examination for U.S. federal and state income tax returns are 2017 through 2019. We believe our income tax filing positions, including our status as a pass-through entity, would be sustained on audit and do not anticipate any adjustments that would result in a material change to our condensed consolidated balance sheet. Therefore, no reserves for uncertain tax positions or interest and penalties have been recorded.

Our condensed consolidated statements of income for the three and six months ended June 30, 2021 included an insignificant income tax expense. For the three and six months ended June 30, 2020, 0 provision for income tax was recorded in the condensed consolidated financial statements.

(13) Partners’ Capital

Issuance of Common Units

In June ~~2020,~~2021, we issued~~6,153,846~~ 4,925,000 common units ~~in a private placement~~ at a price of ~~$32.50~~$45.50 per common unit for ~~gross~~total net proceeds of ~~$200.0 million. We received proceeds of $190.8~~$214.5 million, ~~net of $9.2~~after deducting $9.5 million of issuance costs. As of June 30, 2021, $0.3 million of the issuance costs was included in accrued and other current liabilities.

Allocations of Net Income (Loss)

Our partnership agreement contains provisions for the allocation of net income and loss to our unitholders and Enviva Partners GP, LLC ~~(“General~~(the “General Partner”), a wholly owned subsidiary of our sponsor. For purposes of maintaining partner capital accounts, the partnership agreement specifies that items of income and loss shall be allocated among the partners of the Partnership in accordance with their respective percentage ownership interest. Such allocations are made after giving effect, if any, to priority income allocations in an amount equal to incentive cash distributions, which are allocated 100% to the ~~General Partner.~~holder of our incentive distribution rights (“IDRs”).

Prior to the Hamlet Drop-Down, John Hancock had received all of its capital contributions and substantially all of its preference amount and the historical net losses of the Hamlet JV had been allocated to the members of the Hamlet JV in proportion to their unreturned capital contributions; consequently, the balance of members’ capital attributable to John Hancock was negative at the time of the Hamlet Drop-Down. We have not received full repayment of revolving borrowings from the Hamlet JV pursuant to the Hamlet JV Revolver or its capital contributions and full preference amount as of ~~September~~June 30, ~~2020;~~2021; as a result, none of the earnings of the Hamlet JV have been allocated to John Hancock following the Hamlet Drop-Down and no change has been recognized to the negative noncontrolling interest balance attributable to John Hancock that we acquired.

Incentive Distribution Rights

~~Incentive distribution rights (“IDRs”)~~IDRs represent the right to receive increasing percentages (from 15.0% to 50.0%) of quarterly distributions from operating surplus after we achieve distributions in amounts exceeding specified target distribution levels. Our sponsor currently holds 100% of our IDRs through its wholly owned subsidiary Enviva MLP Holdco, LLC. Prior to 2021, the IDRs were held by the General Partner, ~~currently holds the IDRs, but may transfer them at any time.~~a wholly owned subsidiary of our sponsor.

Cash Distributions to Unitholders

Distributions that have been paid or declared related to the reporting period are considered in the determination of earnings per unit. The following table details the cash distribution paid or declared (in millions, except ~~per-unit~~per unit amounts):


Quarter Ended	Quarter Ended	Declaration Date	Record Date	Payment Date	Distribution Per Unit		Total Cash Distribution		Total Payment to General Partner for Incentive Distribution Rights		Quarter Ended	Declaration Date	Record Date	Payment Date	Distribution Per Unit		Total Cash Distribution		Total Payment to holder of Incentive Distribution Rights

September 30, 2019		October 30, 2019	November 15, 2019	November 29, 2019	$	0.6700	$	22.4	$	3.1
December 31, 2019		January 29, 2020	February 14, 2020	February 28, 2020	$	0.6750	$	22.7	$	3.3
March 31, 2020		April 29, 2020	May 15, 2020	May 29, 2020	$	0.6800	$	22.9	$	3.5
June 30, 2020	June 30, 2020	August 5, 2020	August 14, 2020	August 28, 2020	$	0.7650	$	30.4	$	7.5	June 30, 2020	August 5, 2020	August 14, 2020	August 28, 2020	$	0.7650	$	30.4	$	7.5
September 30, 2020	September 30, 2020	October 30, 2020	November 13, 2020	November 27, 2020	$	0.7750	$	30.8	$	7.9	September 30, 2020	October 30, 2020	November 13, 2020	November 27, 2020	$	0.7750	$	30.8	$	7.9
December 31, 2020											December 31, 2020	January 29, 2021	February 15, 2021	February 26, 2021	$	0.7800	$	31.2	$	8.1
March 31, 2021											March 31, 2021	April 28, 2021	May 14, 2021	May 28, 2021	$	0.7850	$	31.4	$	8.3
June 30, 2021											June 30, 2021	July 27, 2021	August 13, 2021	August 27, 2021	$	0.8150	$	36.7	$	10.7

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

For purposes of calculating our earnings per unit under the two-class method, common units are treated as participating preferred units. IDRs are treated as participating securities.

Distributions made in future periods based on the current period calculation of cash available for distribution are allocated to each class of equity that will receive the distribution. Any unpaid cumulative distributions are allocated to the appropriate class of equity.

We determine the amount of cash available for distribution for each quarter in accordance with our partnership agreement. The amount to be distributed to unitholders and IDR holders is based on the distribution waterfall set forth in our partnership agreement. Net earnings for the quarter are allocated to each class of partnership interest based on the distributions to be made.

(14) Equity-Based Awards

Long-Term Incentive Plan

Affiliate Grants

The following table summarizes information regarding phantom unit awards (the “Affiliate Grants”) under the Enviva Partners, LP Long-Term Incentive Plan (“LTIP”) to employees of Enviva Management Company and its affiliates who provide services to us:


	Time-Based Phantom Units			Performance-Based Phantom Units			Total Affiliate Grant Phantom Units
	Units	Weighted-Average Grant Date Fair Value (per unit)(1)		Units	Weighted-Average Grant Date Fair Value (per unit)(1)		Units	Weighted-Average Grant Date Fair Value (per unit)(1)
Nonvested December 31, 2020	1,061,885	$	33.52	648,514	$	34.07	1,710,399	$	33.73
Granted	299,144	$	48.39	161,836	$	48.36	460,980	$	48.38
Forfeitures	(63,257)	$	39.66	(24,966)	$	38.54	(88,223)	$	39.34
Vested	(266,498)	$	29.22	(129,592)	$	28.91	(396,090)	$	29.12
Nonvested June 30, 2021	1,031,274	$	38.57	655,792	$	38.45	1,687,066	$	38.52

(1) Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.

The unrecognized estimated unit-based compensation cost relating to outstanding Affiliate Grants at June 30, 2021 was $17.9 million, which will be recognized over the remaining vesting period.

Director Grants

The following table summarizes information regarding phantom unit awards to independent directors of the General Partner (the “Director Grants”) under the LTIP:


	Time-Based Phantom Units
	Units	Weighted-Average Grant Date Fair Value (per unit)(1)
Nonvested December 31, 2020	14,987	$	38.37
Granted	14,234	$	48.48
Vested	(12,112)	$	37.98
Nonvested June 30, 2021	17,109	$	47.05

(1) Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.

In January 2021 and April 2021, Director Grants valued at $0.6 million and $0.1 million, respectively, and which vest on the first anniversary of the grant date in January and April 2022, respectively, were granted.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and unless otherwise noted)

~~(Unaudited)~~

~~(16) Equity-Based Awards~~

~~The following table summarizes information regarding phantom unit awards (the “Affiliate Grants”) under the LTIP to employees of Enviva Management and its affiliates who provide services to us:~~

Time-Based
Phantom Units Performance-Based
Phantom Units Total Affiliate Grant
Phantom Units
Units Weighted-Average Grant Date Fair Value (per unit)(1) Units Weighted-Average Grant Date Fair Value (per unit)(1) Units Weighted-Average Grant Date Fair Value (per unit)(1)
Nonvested December 31, 2019 874,286 $ 28.90 435,270 $ 28.84 1,309,556 $ 28.88
Granted 550,540 $ 37.97 387,060 $ 38.02 937,600 $ 37.99
Forfeitures (120,176) $ 32.97 (103,053) $ 30.78 (223,229) $ 31.96
Vested (193,522) $ 25.49 (53,645) $ 25.39 (247,167) $ 25.47
Nonvested September 30, 2020 1,111,128 $ 33.55 665,632 $ 34.16 1,776,760 $ 33.78

~~(1)Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.~~

~~The unrecognized estimated compensation expense relating to outstanding Affiliate Grants at September 30, 2020 was $17.5 million, which will be recognized over the remaining vesting period.~~

~~The following table summarizes information regarding phantom unit awards to certain non-employee directors of the General Partner (the “Director Grants”) under the LTIP:~~

Time-Based Phantom Units
Units Weighted-Average Grant Date Fair Value (per unit)(1)
Nonvested December 31, 2019 13,264 $ 30.16
Granted 14,987 $ 38.37
Vested (13,264) $ 30.16
Nonvested September 30, 2020 14,987 $ 38.37

In February and August 2020, Director Grants valued at $0.5 million and $0.1 million were granted and vest on the first anniversary of the grant date. In February 2019, the Director Grants that were nonvested at December 31, 2019 vested, and common units were issued in respect of such vested Director Grants. During the three and nine months ended September 30, 2020 we recognized $0.1 million and $0.3 million, respectively, of unit based compensation expense with respect to the Director Grants. The unrecognized estimated compensation expense relating to outstanding Director Grants at September 30, 2020 was $0.2 million, which will be recognized over the remaining vesting periods.

~~(17) Income Taxes~~

Substantially all of our operating subsidiaries are organized as limited partnerships and entities that are disregarded entities for U.S. federal and state income tax purposes. Our unitholders are liable for these income taxes on their share of our taxable income. Some states impose franchise and capital taxes on us. Such taxes are not material to the condensed consolidated financial statements and have been included in other income (expense) as incurred. One of our subsidiaries formed in connection with the Georgia Biomass Acquisition is a taxable entity and is subject to U.S. federal income taxes.

As of September 30, 2020, the only periods subject to examination for U.S. federal and state income tax returns are 2017 through 2019. We believe our income tax filing positions, including our status as a pass-through entity, would be sustained on audit and do not anticipate any adjustments that would result in a material change to our unaudited condensed consolidated balance sheet. Therefore, 0 reserves for uncertain tax positions or interest and penalties have been recorded.

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(In thousands, except number of units, per unit amounts and unless otherwise noted)~~

~~(Unaudited)~~

Our condensed consolidated statements of operations for the three and nine months ended September 30, 2020 included income tax benefit of $0.3 million. For the three and nine months ended September 30, 2019, 0 provision for income tax was recorded in the condensed consolidated financial statements.

~~(18)~~(15) Net Income (Loss) per Limited Partner Unit

Net income (loss) per unit applicable to limited partners is computed by dividing limited partners’ interest in net income (loss), after deducting any incentive distributions, by the weighted-average number of ~~units outstanding.~~outstanding units. Our net income (loss) is allocated to the limited partners in accordance with their respective ownership percentages, after giving effect to priority income allocations for incentive distributions, if any, to the holder of the IDRs, which are declared and paid following the close of each quarter. Earnings in excess of distributions are allocated to the limited partners based on their respective ownership interests. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income (loss) allocations used in the calculation of earnings per unit.

In addition to the common units, we have identified the IDRs and phantom units as participating securities and apply the two-class method when calculating the net income (loss) per unit applicable to limited partners, which is based on the weighted-average number of common units outstanding during the period. Diluted net income per unit includes the effects of potentially dilutive time-based and performance-based phantom units on our common units.

The ~~following~~ computation of net income (loss) available per limited partner unit is as ~~follows~~follows:


	Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
	Common Units		Incentive Distribution Rights		Total		Common Units		Incentive Distribution Rights		Total
Distributions declared	$	36,687	$	10,708	$	47,395	$	68,113	$	19,030	$	87,143
Earnings less than distributions	(45,657)		—		(45,657)		(87,809)		—		(87,809)
Net (loss) income available to partners	$	(8,970)	$	10,708	$	1,738	$	(19,696)	$	19,030	$	(666)
Weighted-average units outstanding—basic and diluted	41,234						40,587

Net loss per limited partner unit—basic and diluted	$	(0.22)					$	(0.49)


	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
	Common Units		Incentive Distribution Rights		Total		Common Units		Incentive Distribution Rights		Total
Distributions declared	$	30,422	$	7,471	$	37,893	$	53,278	$	10,929	$	64,207
Earnings less than distributions	(30,290)		—		(30,290)		(49,794)		—		(49,794)
Net income available to partners	$	132	$	7,471	$	7,603	$	3,484	$	10,929	$	14,413
Weighted-average units outstanding—basic and diluted	34,082						33,816
Net income per limited partner unit—basic and diluted	$	0					$	0.10

(16) Subsequent Event

Common Control Transaction

On July 1, 2021, our sponsor contributed to us all of the limited liability company interests in Lucedale, which owns a wood pellet production plant under construction in Lucedale, Mississippi, Enviva Port of Pascagoula, LLC, which owns a deep-water marine terminal under construction in Pascagoula, Mississippi, Enviva Development Finance Company, LLC, and three long-term, take-or-pay off-take contracts with creditworthy Japanese counterparties for a purchase price of $260.0 million, subject to certain adjustments. The purchase price was funded with a combination of proceeds from the ~~three~~issuance of common units in June 2021 and ~~nine months ended September 30, 2020 and 2019:~~

Three Months Ended
September 30, 2020 Nine Months Ended
September 30, 2020
Common Units General Partner Total Common Units General Partner Total
Distributions declared $ 30,821 $ 7,869 $ 38,690 $ 84,100 $ 18,798 $ 102,898
Earnings less than distributions (38,150) 0 (38,150) (87,931) 0 (87,931)
Net (loss) income available to partners $ (7,329) $ 7,869 $ 540 $ (3,831) $ 18,798 $ 14,967
Weighted-average units outstanding—basic and diluted 39,767 35,814
Net loss per limited partner unit—basic and diluted $ (0.18) $ (0.11)

Three Months Ended
September 30, 2019 Nine Months Ended
September 30, 2019
Common Units General Partner Total Common Units General Partner Total
Distributions declared $ 22,416 $ 3,107 $ 25,523 $ 66,077 $ 8,150 $ 74,227
Earnings less than distributions (17,275) 0 (17,275) (79,925) 0 (79,925)
Net income (loss) available to partners $ 5,141 $ 3,107 $ 8,248 $ (13,848) $ 8,150 $ (5,698)
Weighted-average units outstanding—basic and diluted 33,457 31,230
Net income (loss) per limited partner unit—basic and diluted $ 0.15 $ (0.44)
borrowings under the senior secured credit facility on July 1, 2021.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise stated or the context otherwise indicates, all references to “we,” “us,” “our,” the “Partnership”, or similar expressions refer to Enviva Partners, LP, including its consolidated subsidiaries. References to “our sponsor” refer to Enviva Holdings, LP and, where applicable, its wholly owned subsidiaries Enviva MLP Holdco, LLC and Enviva Development Holdings, LLC. References to ~~“our General~~our “General Partner” refer to Enviva Partners GP, LLC, a wholly owned subsidiary of Enviva Holdings, LP. References to “Enviva ~~Management”~~Management Company” refer to Enviva Management Company, LLC, a wholly owned subsidiary of Enviva Holdings, LP, and its affiliates who provide services to the Partnership, and references to “our employees” refer to the employees of Enviva Management and its affiliates who provide services to the Partnership. References to the “Sponsor JV” refer to Enviva JV Development Company, LLC, which is a joint venture between our sponsor and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates.Company.

The following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis (“MD&A”) in Part II-Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 as filed with the U.S. Securities and Exchange Commission (the “SEC”). Our ~~2019~~2020 Form 10-K contains a discussion of other matters not included herein, such as disclosures regarding critical accounting policies and estimates and contractual obligations. You should also read the following discussion and analysis together with the risk factors set forth in the ~~2019~~2020 Form 10-K, Item 1A. “Risk Factors” ~~in the Quarterly Report on Form 10-Q for the period ended June 30, 2020~~ and the factors described under “Cautionary Statement Regarding Forward-Looking Information” and Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q for information regarding certain risks inherent in our business.

Basis of Presentation

The following discussion about matters affecting ~~our~~the financial condition and results of operations of the Partnership should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this report and the audited consolidated financial statements and related notes that are included in the ~~2019~~2020 Form 10-K. Among other things, those financial statements and the related notes include more detailed information regarding the basis of presentation for the following information.

Business Overview

We aggregate a natural resource, wood fiber and process it into a transportable form, wood pellets. We sell a significant majority of our wood pellets through long-term, take-or-pay off-take contracts with creditworthy customers in the United Kingdom, Europe and increasingly in Japan. ~~We own~~As of June 30, 2021, we owned and ~~operate~~operated nine ~~wood pellet production~~ plants (collectively, “our plants”) with a combined production capacity of approximately ~~4.9~~5.3 million metric tons (“MT”) of wood pellets per year (“MTPY”) in Virginia, North Carolina, South Carolina, Georgia, Florida and Mississippi, the production of which is fully contracted through 2025. On July 1, 2021, we acquired from our sponsor a wood pellet production plant in Lucedale, Mississippi, a deep-water marine terminal in Pascagoula, Mississippi and three long-term, take-or-pay off-take contracts with creditworthy Japanese counterparties. We export wood pellets through our wholly owned dry-bulk, deep-water marine terminal at the Port of Chesapeake, Virginia (the “Chesapeake terminal”) and terminal assets at the Port of Wilmington, North Carolina and from third-party deep-water marine terminals in Savannah, Georgia, Mobile, Alabama and Panama City, ~~Florida (the “Panama City terminal”).~~Florida. All of our facilities are located in geographic regions with low input costs and favorable transportation logistics. Owning these cost-advantaged assets, the output from which is fully contracted, in a rapidly expanding industry provides us with a platform to generate stable and growing cash flows. Our plants are sited in robust fiber baskets providing stable pricing for the low-grade fiber used to produce wood pellets. Our raw materials are byproducts of traditional timber harvesting, principally low-value wood materials, such as trees generally not suited for sawmilling or other manufactured forest products, and tree tops and limbs, understory, brush and slash that are generated in a harvest.

Our strategy is to fully contract the wood pellet production from our plants under long-term, take-or-pay off-take contracts with a diversified and creditworthy customer base. Our long-term off-take contracts typically provide for fixed-price deliveries that may include provisions that escalate the price over time and provide for other margin protection. During ~~2020,~~2021, production capacity from our wood pellet production plants and wood pellets sourced from our affiliates and third parties were approximately equal to the contracted volumes under our existing long-term, take-or-pay off-take contracts. Our long-term, take-or-pay off-take contracts provide for a product sales backlog of ~~$14.9~~$16.0 billion and have a total weighted-average remaining term of ~~12.8~~13.2 years from ~~October~~July 1, ~~2020.~~2021. Under our current product sales backlog, our plants are fully contracted through 2025. Assuming all volumes under the firm and contingent long-term off-take contracts held by our sponsor ~~and its joint venture~~ were included with our product sales backlog for firm and contingent contracted product sales, our product sales backlog would increase to ~~$19.4~~$20.4 billion and the total weighted-average remaining term from ~~October~~July 1, ~~2020~~2021 would increase to ~~13.7~~14.4 years.

Our customers primarily use our wood pellets as a substitute fuel for coal in dedicated biomass or co-fired coal power plants. Wood pellets serve as a suitable “drop-in” alternative to coal because of their comparable heat content, density and form. Due to the uninterruptible nature of our customers’ fuel consumption, our customers require a reliable supply of wood pellets that meet stringent product specifications. We have built our operations and assets to deliver and certify the highest levels of

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product quality and our proven track record of reliable deliveries enables us to charge premium prices for this certainty. In addition to our customers’ focus on the reliability of supply, they are concerned about the combustion efficiency of the wood pellets and their

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safe handling. Because combustion efficiency is a function of energy density, particle size distribution, ash/inert content and moisture, our customers require that we supply wood pellets meeting minimum criteria for a variety of specifications and, in some cases, provide incentives for exceeding our contract specifications.

Recent Developments

~~Georgia Biomass Acquisition~~Lucedale-Pascagoula Acquisitions

On July ~~31, 2020,~~1, 2021, we ~~acquired all of~~completed the ~~limited liability company interests in Georgia Biomass Holding LLC, a Georgia limited liability company (“Georgia Biomass”) and the indirect owner~~purchase from our sponsor of a wood pellet production plant ~~located~~ in ~~Waycross, Georgia~~Lucedale, Mississippi (the ~~“Waycross~~“Lucedale plant”), a deep-water marine terminal in Pascagoula, Mississippi (the “Pascagoula terminal”) and three long-term, take-or-pay off-take contracts with creditworthy Japanese counterparties (the “Associated Off-Take Contracts”), which we refer to collectively as the “Lucedale-Pascagoula Acquisitions.” The purchase price for ~~total consideration of $175.0~~the Lucedale-Pascagoula Acquisitions was $260.0 million, ~~in cash,~~ subject to certain ~~adjustments (the “Georgia Biomass Acquisition”)~~adjustments. We expect to invest approximately $85.0 million in remaining construction capital expenditures in the Lucedale plant and Pascagoula terminal, representing a total investment of $345.0 million in the Lucedale-Pascagoula Acquisitions.

The Lucedale-Pascagoula Acquisitions increase our production capacity by 14% and increase our deep-water marine terminal throughput capacity by 38%. The ~~Waycross~~Associated Off-Take Contracts represent incremental deliveries of 630,000 MTPY of wood pellets to Japan, have an aggregate weighted-average contract life of 15 years and add a total sales backlog of $1.9 billion to our portfolio.

The Lucedale plant, ~~has been in operation since 2011 and has~~which will have a production capacity of approximately ~~800,000 metric tons per year (“MTPY”).~~750,000 MTPY of wood pellets, is permitted to produce 1.1 million MTPY. Its production will be transported via rail service to the Pascagoula terminal. The ~~Waycross plant terminals its production at a two-dome pellet export~~Pascagoula terminal ~~with a storage~~is expected to have total throughput capacity of ~~50,000 MT at the Port of Savannah, Georgia pursuant to a lease and associated terminal services agreement effective through 2028. Approximately 500,000~~3.0 million MTPY of the Waycross plant’s production is contracted under separate agreements to one of our existing customers through 2024. In August 2020, Georgia Biomass converted to a limited liability company organized under the laws of the State of Delaware under the name Enviva Pellets Waycross Holdings Sub, LLC (“Waycross”).

~~Greenwood Drop-Down~~

~~On July 1, 2020, we acquired~~when fully constructed, allowing for throughput from our sponsor all of the limited liability company interests in Enviva Pellets Greenwood Holdings II, LLC (“Greenwood Holdings II”), the indirect owner of Enviva Pellets Greenwood, LLC, which owns a wood pellet production plant in Greenwood, South Carolina (the “Greenwood plant”), for a purchase price of $132.0 million, subject to certain adjustments (such transaction, the ��Greenwood Drop-Down”). The Greenwood Drop-Down was an asset acquisition of entities under common control and accounted for on the carryover basis of accounting. Accordingly, the consolidated financial statements for the period beginning July 1, 2020 reflect the acquisition.

On July 1, 2020 we paid cash consideration of $129.7 million, net of an initial purchase price adjustment of $2.3 million. In addition, Greenwood Holdings II’s liabilities included a $40.0 million, third-party promissory note bearing interest at 2.5% per year that we assumed at closing.multiple plants.

On the date of the Greenwood Drop-Down, our sponsor assigned five biomass off-take contracts to us (collectively, the “Associated Off-Take Contracts”). The Associated Off-Take Contracts call for aggregate annual deliveries of 1.4 million MTPY and mature between 2031 and 2041. Our sponsor also assigned to us fixed-rate shipping contracts with aggregate annual shipping volume of 1.4 million MTPY. The Associated Off-Take Contracts were assigned to fully contract wood pellets produced by the Greenwood plant and Waycross plant. The shipping contracts were assigned to facilitate transportation of those produced wood pellets.Lucedale-Pascagoula Acquisitions:

The Greenwood plant is currently permitted to produce approximately 500,000 MTPY of wood pellets and transports its production via rail service to our terminal assets at the Port of Wilmington, North Carolina. •We ~~plan to invest $28.0 million to expand the Greenwood plant’s production capacity to 600,000 MTPY by year-end 2021, subject to receiving the necessary permits.~~

~~Greenwood Make-Whole Agreement~~

~~On the date of the Greenwood Drop-Down, we~~ entered into a make-whole agreement with our sponsor, pursuant to which (1) our sponsor agreed to guarantee certain cash flows for construction cost overruns and production shortfalls and guarantee a minimum throughput volume at the Pascagoula terminal and (2) we agreed to reimburse usour sponsor for any ~~construction costs incurred~~excess wood pellet production for full calendar quarters from July 1, 2021 through September 30, 2022, or, if the ~~planned expansion~~Lucedale plant becomes operational on the first day of a quarter, then through the ~~Greenwood plant in excess of $28.0 million.~~four quarters following such date.

~~Greenwood~~•We and Enviva Management ~~Services Fee Waiver~~

~~On the date of the Greenwood Drop-Down, we~~Company entered into an agreement ~~with Enviva Management Company, LLC, a wholly owned subsidiary of our sponsor (together with its affiliates that provide services to us, as applicable, “Enviva Management”)~~ pursuant to which (1) Enviva Management Company agreed to waive an aggregate of approximately ~~$37.0~~$53.0 million in management services and other fees that otherwise would be owed by us under ~~our~~a management services agreement (“MSA”) with Enviva Management ~~will be waived~~Company with respect to the period from ~~the closing of the Greenwood Drop-Down~~July 1, 2021 through ~~the fourth quarter of 2021~~December 31, 2023 and (2) Enviva Management ~~will~~Company agreed to continue to waive certain management services and other fees ~~during~~up to approximately $4.0 million from January 1, 2022 through December 31, 2024 unless and until the ~~Greenwood~~Lucedale plant’s production volumes equal or exceed ~~50,000 metric tons~~62,500 MT in any calendar month, in each case to provide cash flow support to us.

•We entered into an interim services agreement (the “Lucedale ISA”) with Enviva Lucedale Operator, LLC, a wholly owned subsidiary of our sponsor (“Lucedale Operator”), pursuant to which Lucedale Operator, as an independent contractor, agreed to manage, operate, maintain and repair the Lucedale plant and provide other services to us for the period from July 1, 2021 through June 30, 2022 in exchange for a fixed fee per MT of wood pellets produced by the Lucedale plant during such period and delivered at place to the Pascagoula terminal. Under and during the ~~planned expansion~~term of the ~~Greenwood plant. During~~Lucedale ISA, Lucedale Operator agreed to (1) pay all operating and maintenance expenses at the three months and nine months ended September 30, 2020, $9.0 million of MSA fees were waived, of which $5.5 million was included in cost of goods sold and $3.5 million was included in related-party management services fees inLucedale plant, (2) cover all reimbursable general and administrative ~~expenses.~~expenses associated with the Lucedale plant and (3) pay other costs and expenses incurred by the Lucedale plant to produce and sell the wood pellets delivered to the Pascagoula terminal from the Lucedale plant. Our sponsor guarantees all obligations of Lucedale Operator under the Lucedale ISA.

Issuance of Common Units

In June 2021, we issued 4,925,000 common units at a price of $45.50 per common unit for total net proceeds of $214.5 million, after deducting $9.5 million of issuance costs. The net proceeds partially financed the Lucedale-Pascagoula Acquisitions as well as our development activities to expand our wood pellet production plants in Sampson, North Carolina, Hamlet, North Carolina, and Cottondale, Florida (collectively the “Multi-Plant Expansions”).

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~~Tack-On Notes Issuance~~

On July 15, 2020, we issued an additional $150.0 million in aggregate principal amount of the 2026 Notes at an offering price of 103.75% of the principal amount, which implied an effective yield to maturity of approximately 5.7%. We received net proceeds of approximately $153.6 million from the offering after deducting discounts and commissions and offering costs.

~~Private Placement of Common Units~~

On June 18, 2020, we entered into a Common Unit Purchase Agreement (the “Unit Purchase Agreement”) with certain investors to sell 6,153,846 common units in a private placement at a price of $32.50 per common unit for gross proceeds of $200.0 million (the “Private Placement”). We used the net proceeds of $190.8 million from the Private Placement to fund a portion of the consideration for each of the Greenwood Drop-Down and the Georgia Biomass Acquisition.

Pursuant to the Unit Purchase Agreement, we entered into a registration rights agreement (the “Registration Rights Agreement”) with the investors in connection with the closing of the Private Placement, pursuant to which we agreed to file and maintain a registration statement (the “Shelf Registration Statement”) with respect to the resale of the common units on the terms set forth therein. The Registration Rights Agreement also provides certain investors with customary piggyback registration rights. On July 10, 2020, we filed the Shelf Registration Statement and on July 20, 2020, the Shelf Registration Statement was declared effective.

Financing Activities

Our net proceeds of $190.8 million from the Private Placement and the net proceeds of the tack-on offering of the 2026 Notes of $153.6 million were used primarily to repay the $129.7 million purchase price for the Greenwood Drop-Down, and to pay $168.3 million of the purchase price for the Georgia Biomass Acquisition.

~~Mid-Atlantic Expansions~~

~~During 2019,~~In April 2021, we ~~started construction~~amended our senior secured revolving credit facility to increase the ~~aggregate~~revolving credit commitments from $350.0 million to $525.0 million, extend the maturity from October 2023 to April 2026, increase the letter of credit commitment from $50.0 million to $80.0 million and reduce the cost of borrowing by 25 basis points.

Development Activities

We have completed the recent expansion project of our Northampton, North Carolina wood pellet production plant and we are commissioning the recent expansion project at our Southampton, Virginia wood pellet production plant (the “Mid-Atlantic Expansions”). We continue to expect each plant to reach its expanded nameplate production capacity of ~~our plants in Northampton, North Carolina (the “Northampton plant”),~~approximately 750,000 and ~~Southampton, Virginia (the “Southampton plant”) (together,~~760,000 MTPY, respectively, by the ~~“Mid-Atlantic Expansions”) by approximately 400,000 MTPY.~~ end of 2021.

We expect to invest ~~a total of~~ approximately ~~$130.0~~$50.0 million in ~~additional wood pellet production assets and emissions control equipment~~the aggregate for the ~~Mid-Atlantic~~Multi-Plant Expansions of which we have spent $119.8 million through September 30, 2020. We have continued commissioning activities at the expansion project at the Northampton plant. We are commissioning new equipment at the expansion project for the Southampton plant.to de-bottleneck manufacturing processes, eliminate certain costs and increase production capacity. We expect to fund the Multi-Plant Expansions in accordance with our 50/50 equity/debt capital structure and to complete the ~~installation of equipment associated with the Southampton plant expansion around~~Multi-Plant Expansions by the end of ~~2020.~~

~~Greenwood Expansion~~

~~Procurement and detailed engineering activities to expand the Greenwood plant’s production capacity to 600,000 MTPY are underway and,~~2022, subject to receiving the necessary ~~permits,~~permits.

Commitment to Achieve Carbon-Neutral Operations

Consistent with our mission to displace coal, grow more trees and fight climate change, we and our sponsor recently announced our commitment to become “net-zero” in greenhouse gas (“GHG”) emissions from our operations by 2030. The product we manufacture helps reduce the lifecycle GHG emissions of our customers, but we believe we must also do our part within our operations to mitigate the impacts of climate change. We expect ~~the expansion~~ to ~~be completed by year-end 2021.~~

~~Contracted Backlog~~

~~As of October 1, 2020, we had approximately $14.9 billion of product sales backlog for firm contracted product sales~~accomplish neutrality with respect to our ~~long-term off-take customers~~Scope 1 emissions (i.e., direct emissions from our manufacturing) by improving energy efficiency and ~~have a total weighted-average remaining term~~adopting lower-carbon processes, as well as through investment in carbon offsets. We also plan to neutralize our Scope 2 emissions (i.e., indirect emissions from energy we purchase) by using 100% renewable energy by 2030 through the purchase of ~~12.8 years, compared~~renewable electricity and/or onsite generation where practicable. Moreover, we will seek to approximately $9.5 billion and a total weighted-average remaining term of 10.4 years as of October 1, 2019. Contracted backlog represents the revenue to be recognized under existing contracts assuming deliveries occur as specified in the contracts. Contracted future product sales denominated in foreign currencies, excluding revenue hedged with foreign currency forward contracts, are included in U.S. Dollars at October 1, 2020 forward rates. The contracted backlog includes forward prices including inflation, foreign currency and commodity prices. The amount also includes the effects of related foreign currency derivative contracts.

~~Our expected future product sales revenue under our contracted backlog as of October 1, 2020 is as follows (in millions):~~


~~Period from October 1, 2020 to December 31, 2020~~	$	~~232~~
~~Year ending December 31, 2021~~	~~1,159~~
~~Year ending December 31, 2022 and thereafter~~	~~13,555~~
~~Total product sales contracted backlog~~	$	~~14,946~~

~~Assuming all volumes under the firm and contingent off-take contracts held by our sponsor and its joint ventures were included~~proactively engage with our ~~product sales contracted backlog for firm contracted product sales,~~suppliers, transportation partners and other stakeholders to drive innovative improvements in our supply chain to reduce our Scope 3 emissions (i.e., indirect emissions in our value chain). We intend to report our Scopes 1, 2 and 3 emissions annually and fully meet the ~~total weighted-average remaining term~~

~~Table~~requirements of ~~Contents~~

CDP (formerly known as the Carbon Disclosure Project) by 2022. Although it is difficult to project the incremental cost to our operations in 2030, we do not expect any material impact to our financial performance as a result of ~~October 1, 2020 would increase~~our efforts to ~~13.7 years and the product sales backlog would increase to $19.4 billion as follows (in millions):~~


~~Period from October 1, 2020 to December 31, 2020~~	$	~~232~~
~~Year ending December 31, 2021~~	~~1,159~~
~~Year ending December 31, 2022 and thereafter~~	~~17,990~~
~~Total product sales contracted backlog~~	$	~~19,381~~

achieve “net-zero” in GHG emissions from our operations.

Outbreak of the Novel Coronavirus

The outbreak of a novel strain of coronavirus (“COVID-19”) has significantly adversely impacted global markets and continues to present global public health and economic challenges. Although the full impact of COVID-19 isremains unknown, ~~and rapidly evolving,~~ to date, our operations have not been materially impacted by the outbreak.

We have taken prescriptive safety measures including social distancing, hygienic policies and procedures and other steps recommended by the Centers for Disease Control and Prevention (the “CDC”), and adopted the CDC’s risk management approach, since the beginning of the outbreak, and have established risk levels based on the degree to which the virus has spread in a given community and the nature of the work performed at that location. Within our field operations, we have continued operations largely as normal with the additional precautionary measures; however, we continue to monitor local data on a daily basis and have prioritized putting the right plans, procedures and measures in place to mitigate the risk of exposure and infection and the related impacts to our business. We also have facilitated access for our employees to receive vaccines at our locations.

We specifically designed our operations and logistics systems with flexibility and redundancies so they are capable of effectively responding to unforeseen events. ~~As of July 31, 2020, we~~We operate a portfolio of nine wood pellet production plants geographically dispersed across the Southeast U.S. We export our product from a portfolio of four bulk terminals and transport it to our customers under long-term, fixed-price shipping contracts with multiple shipping partners. These operations currently are unaffected by COVID-19.

~~In March, the~~ United States declared the COVID-19 pandemic a national emergency, and several states and municipalities, including states in which we own assets or conduct business, have declared public health emergencies and taken extraordinary actions in response, including issuing “stay-at-home” orders and similar mandates (“Orders”) for many businesses to curtail or cease normal operations. To date, we have not been materially impacted by the Orders, which exempt or exclude businesses that have been designated essential critical infrastructure, such as ours, from various restrictions they impose.

As of September 30, 2020, we had liquidity, which included cash on hand and availability under our $350.0 million revolving credit facility, of $215.3 million, and we have no debt maturities until 2023.States. Our wood pellet production capacity is committed under long-term, take-or-pay off-take contracts with fixed pricing and fixed volumes that are not impacted by the market prices of crude oil, natural gas, power or heat. ~~As discussed above,~~We export our ~~off-take contracts have~~product from a ~~weighted-average remaining term~~portfolio of ~~12.8 years~~five bulk terminals and a product sales contracted backlog of $14.9 billion as of October 1, 2020. Furthermore, most of our current deliveries are to Europe, where they fuel grid-critical base load, dispatchable generation facilities that provide power and heat required for local communities to navigate through their own COVID-19 responses. There are few substitutes or alternatives to the fuel we supplytransport it to our ~~energy generating~~ customers ~~each of whom is in compliance~~under long-term, fixed-price shipping contracts with ~~their agreements with us, including payment terms.~~

We do, however, remain vigilant about the unfolding global crisis and continue to monitor and manage the potential health, safety, business and other risks associated with the COVID-19 pandemic. Nonetheless, we have not experienced these issues in any significant way to date, and we have plans that we believe would mitigate their potential impact if we were to face such issues in the future.

~~For a discussion of certain risks and uncertainties in connection with COVID-19, please see Part II-Other Information, Item 1A. “Risk Factors.”~~multiple shipping partners. These operations currently are unaffected by COVID-19.

Factors Impacting Comparability of Our Financial Results

~~Greenwood Drop-Down~~Waycross

~~The Greenwood Drop-Down was an asset acquisition~~On July 31, 2020, we acquired all of ~~entities under common control~~the limited liability company interests in Georgia Biomass Holding LLC, a Georgia limited liability company (“Georgia Biomass”) and ~~accounted for on~~ the ~~carryover basis~~indirect owner of ~~accounting. Accordingly, the consolidated financial statements for the period beginning July 1, 2020 reflect the acquisition. For more information regarding the Greenwood Acquisition, see Note 1,~~ ~~Description of Business and Basis of Presentation-Basis of Presentation-Enviva Pellets Greenwood~~ ~~and Note 3,~~ ~~Transactions Between Entities Under Common Control.~~a wood pellet production plant located in Waycross,

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Georgia (the “Waycross plant”), for total consideration of $164.0 million in cash, after accounting for certain adjustments (the “Georgia Biomass ~~Acquisition~~Acquisition”). The Waycross plant has been in operation since 2011 and has a production capacity of 800,000 MTPY. The Waycross plant terminals its production at a two-dome pellet export terminal with a storage capacity of 50,000 MT at the Port of Savannah, Georgia pursuant to a lease and associated terminal services agreement effective through 2028. Approximately 500,000 MTPY of the Waycross plant’s production is contracted under separate agreements to one of our existing customers through 2024. In August 2020, Georgia Biomass converted to a limited liability company organized under the laws of the State of Delaware under the name Enviva Pellets Waycross Holdings Sub, LLC (“Waycross”).

The Georgia Biomass Acquisition was recorded as a business combination and accounted for using the acquisition method. Assets acquired and liabilities assumed were recognized at fair value on the acquisition date of July 31, 2020, and the difference between the fair value of consideration transferred, which excludes acquisition-related costs, and the fair values of the identified net assets acquired, was recognized as goodwill. For more information regarding the Georgia Biomass Acquisition, see Note 1, Description of Business and Basis of ~~Presentation-Georgia Biomass Holding LLC~~ ~~andNote 4,~~ ~~Acquisition~~.Presentation-Waycross.

~~Private Placement of Common Units~~Greenwood

~~In June~~On July 1, 2020, ~~we issued 6,153,846 common units in a private placement offering for net proceeds of approximately $190.8 million, net of $9.2 million of issuance costs.~~

~~Hamlet Drop-Down~~

~~On April 2, 2019,~~ we acquired from our sponsor all of the ~~Class B units~~limited liability company interests in Enviva Pellets Greenwood Holdings II, LLC (“Greenwood Holdings II”), the indirect owner of Enviva ~~Wilmington Holdings,~~Pellets Greenwood, LLC, ~~(the “Hamlet JV,”~~which owns the Greenwood plant, for a purchase price of $129.7 million, after accounting for certain adjustments and ~~such acquisition,~~assumption of a $40.0 million third-party promissory note bearing interest at 2.5% per year that we assumed at closing (such transaction, the ~~“Hamlet~~“Greenwood Drop-Down”). ~~We are the managing member of the Hamlet JV, which is partially owned by John Hancock Life Insurance Company (U.S.A.)~~The Greenwood Drop-Down was an asset acquisition between entities under common control and ~~certain of its affiliates (collectively, where applicable, “John Hancock”).~~

The Hamlet JV owns a wood pellet production plant in Hamlet, North Carolina (the “Hamlet plant”) and has a firm 15-year take-or-pay off-take contract to supply a customer with nearly 1.0 million MTPY of wood pellets following a ramp period through 2034. Prior to the Hamlet Drop-Down, we already had off-take contracts with the Hamlet JV to supply 470,000 MTPY of the volumes to be delivered pursuant to the 1.0 million MTPY contract; consequently, we acquired 500,000 MTPY in incremental product sales volumes in connection with the Hamlet Drop-Down. The Hamlet plant became operational during the second quarter of 2019.

We accounted for on the ~~Hamlet JV as a~~carryover basis of accounting. Accordingly, the consolidated ~~subsidiary, not as a joint venture, following~~financial statements for the ~~Hamlet Drop-Down on April 2, 2019. We included all accounts of~~period beginning July 1, 2020 reflect the Hamlet JV in our consolidated results as of April 2, 2019 as the Class B Units represent a controlling interest in the Hamlet JV. We are generally unrestricted in managing the assets and cash flows of the Hamlet JV; however, certain decisions, such as those relating to the issuance and redemption of equity interests in the Hamlet JV, guarantees of indebtedness and fundamental changes, including mergers and acquisitions, asset sales and liquidation and dissolution of the Hamlet JV, require the approval of the members of the Hamlet JV. For more information regarding the Hamlet Drop-Down,acquisition, see Note 1, Description of Business and Basis of Presentation-Basis of ~~Presentation-Enviva~~Presentation-Greenwood.

On the date of and in connection with the Greenwood Drop-Down, our sponsor assigned five biomass off-take contracts to us (collectively, the “Associated Off-Take Contracts”). The Associated Off-Take Contracts call for aggregate annual deliveries of 1.4 million MTPY and mature between 2031 and 2041. Our sponsor also assigned to us fixed-rate shipping contracts with aggregate annual shipping volume of 1.4 million MTPY. The Associated Off-Take Contracts were assigned to fully contract wood pellets produced by the Greenwood plant and Waycross plant. The shipping contracts were assigned to facilitate transportation of those produced wood pellets.

The Greenwood plant current production capacity is 500,000 MTPY of wood pellets and transports its production via rail service to our terminal assets at the Port of Wilmington, ~~Holdings, LLC~~ North Carolina. We expect to invest a total of $28.0 million to expand the Greenwood plant’s production capacity to 600,000 MTPY. We expect to complete the expansion, which is currently underway, by year-end 2021.

On the date of the Greenwood Drop-Down:

•~~and Note 14,~~ ~~Related-Party Transactions-Hamlet Drop-Down Agreements~~.We entered into a make-whole agreement with our sponsor, pursuant to which our sponsor agreed to reimburse us for any construction costs incurred for the planned expansion of the Greenwood plant in excess of $28.0 million.

~~2026 Notes~~

~~During December 2019, we issued $600.0~~•We entered into an agreement with Enviva Management Company pursuant to which (1) Enviva Management Company agreed to waive an aggregate of approximately $37.0 million in ~~principal amount~~management services and other fees that otherwise would be owed by us under an MSA with respect to the period from the closing of the ~~2026 Notes~~Greenwood Drop-Down through the fourth quarter of 2021 and (2) Enviva Management Company agreed to continue to waive certain management services and other fees during 2022 unless and until the Greenwood plant’s production volumes equal or exceed 50,000 MT in ~~private placements under Rule 144A and Regulation S~~any calendar month, in each case, to provide cash flow support to us during the planned expansion of the ~~Securities Act~~Greenwood plant (the “Greenwood MSA Fee Waiver”). During the three months ended June 30, 2021, $5.0 million of ~~1933, as amended (the “Securities Act”). We received gross proceeds~~MSA fees were waived and was included in cost of ~~approximately $601.8~~goods sold. During the six months ended June 30, 2021, $13.0 million ~~from the offerings~~of MSA fees were waived, of which $8.1 million was included in cost of goods sold and ~~net proceeds of approximately $595.8~~$4.9 million ~~after deducting commissions~~was included in related-party management services fees in general and administrative expenses. We used the net proceeds from the offerings (1) to redeem our existing $355.0 million principal amount of 8.5% senior unsecured notes due 2021, including payment of the related redemption premium, (2) to repay borrowings under our senior secured revolving credit facility, including payment of the related accrued interest and (3) for general partnership purposes. Interest payments are due semi-annually in arrears on January 15 and July 15 of each year, commencing July 15, 2020.

~~As discussed above in “Recent Developments,” we issued an additional $150.0 million in aggregate principal amount of 2026 Notes in July 2020.~~

How We Evaluate Our Operations

Adjusted Net Income ~~(Loss)~~

We define adjusted net income ~~(loss)~~ as net income ~~(loss)~~ excluding ~~certain expenses incurred~~interest expense associated with incremental borrowings related to a fire that occurred in February 2018 at the Chesapeake terminal (the “Chesapeake Incident”) and Hurricanes Florence and Michael (the “Hurricane Events”), consisting of emergency response expenses, expenses related to the disposal of inventory, and asset disposal and repair costs, offset by insurance recoveries received, as well as employee compensation and other related costs allocated to us in respect of the Chesapeake Incident and Hurricane Events pursuant to our management services agreement with an affiliate of our sponsor for services that could otherwise have been dedicated to our ongoing operations, interest expense associated with incremental borrowings related to the Chesapeake Incident and Hurricane Events, early retirement of debt obligation, and acquisition and integration and other costs, adjusting for the effect of certain sales and marketing, scheduling, sustainability, consultation, shipping, and risk management services ~~(collectively, the~~

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(collectively, “Commercial Services”), and including certain non-cash waivers of fees for management services provided to us by our sponsor (collectively, ~~the~~ “MSA Fee Waivers”). We believe that adjusted net income ~~(loss)~~ enhances investors’ ability to compare the past

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financial performance of our underlying operations with our current performance separate from certain items of gain or loss that we characterize as unrepresentative of our ongoing operations.

Adjusted Gross Margin and Adjusted Gross Margin per Metric Ton

We define adjusted gross margin as gross margin excluding ~~asset disposals,~~loss on disposal of assets, depreciation and amortization, changes in unrealized derivative instruments related to hedged items included in gross margin, non-cash unit compensation ~~expense, certain items of income or loss that we characterize as unrepresentative of our ongoing operations, including certain~~ expenses, ~~incurred related to the Chesapeake Incident~~ and Hurricane Events, consisting of emergency response expenses, expenses related to the disposal of inventory, and asset disposal and repair costs, offset by insurance recoveries received, as well as employee compensation and other related costs allocated to us in respect of the Chesapeake Incident and Hurricane Events pursuant to our management services agreement with an affiliate of our sponsor for services that could otherwise have been dedicated to our ongoing operations, acquisition and integration costs and other, adjusting for the effect of Commercial Services, and including MSA Fee Waivers. We define adjusted gross margin per metric ton as adjusted gross margin per metric ton of wood pellets sold. We believe adjusted gross margin and adjusted gross margin per metric ton are meaningful measures because they compare our revenue-generating activities to our operating costs for a view of profitability and performance on a ~~total dollar~~total-dollar and a ~~per metric~~per-metric ton basis. Adjusted gross margin and adjusted gross margin per metric ton will primarily be affected by our ability to meet targeted production volumes and to control direct and indirect costs associated with procurement and delivery of wood fiber to our wood pellet production plants and ~~the~~our production and distribution of wood pellets.

Adjusted EBITDA

We define adjusted EBITDA as net income ~~or loss~~ excluding depreciation and amortization, interest expense, income tax expense (benefit), early retirement of debt obligations, non-cash unit compensation expense, ~~asset impairments and disposals,~~loss on disposal of assets, changes in unrealized derivative instruments related to hedged items included in gross margin and other income and expense, ~~certain items of income or loss that we characterize as unrepresentative of our ongoing operations, including certain expenses incurred related to the Chesapeake Incident~~ and Hurricane Events, consisting of emergency response expenses, expenses related to the disposal of inventory, and asset disposal and repair costs, offset by insurance recoveries received, as well as employee compensation and other related costs allocated to us in respect of the Chesapeake Incident and Hurricane Events pursuant to our management services agreement with an affiliate of our sponsor for services that could otherwise have been dedicated to our ongoing operations, acquisition and integration costs and other, adjusting for the effect of Commercial Services, and including MSA Fee Waivers. Adjusted EBITDA is a supplemental measure used by our management and other users of our financial statements, such as investors, commercial banks and research analysts, to assess the financial performance of our assets without regard to financing methods or capital structure.

Distributable Cash Flow

We define distributable cash flow as adjusted EBITDA less maintenance capital expenditures, cash income tax ~~expense~~expenses, and interest expense net of amortization of debt issuance costs, debt premium, original issue discounts, and the impact from incremental borrowings related to the Chesapeake Incident and Hurricane Events. We use distributable cash flow as a performance metric to compare our cash-generating performance from period to period and to compare the cash-generating performance for specific periods to the cash distributions (if any) that are expected to be paid to our unitholders. We do not rely on distributable cash flow as a liquidity measure.

Limitations of Non-GAAP Financial Measures

Adjusted net income, ~~(loss),~~ adjusted gross margin, adjusted gross margin per metric ton, adjusted EBITDA and distributable cash flow are not financial measures presented in accordance with accounting principles generally accepted in the United States (“GAAP”). We believe that the presentation of these non-GAAP financial measures provides useful information to investors in assessing our financial condition and results of operations. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Each of these non-GAAP financial measures has important limitations as an analytical tool because they exclude some, but not all, items that affect the most directly comparable GAAP financial measures. You should not consider adjusted net income, ~~(loss),~~ adjusted gross margin, adjusted gross margin per metric ton, adjusted EBITDA or distributable cash flow in isolation or as substitutes for analysis of our results as reported under GAAP.

Our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. Please see below for a reconciliation of each of adjusted net income, adjusted gross margin and adjusted gross margin per metric ton, adjusted EBITDA and distributable cash flow to the most directly comparable GAAP financial measure.

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Results of Operations

Three Months Ended ~~September~~June 30, ~~2020~~2021 Compared to Three Months Ended ~~September~~June 30, ~~2019~~2020


		Three Months Ended September 30,							Three Months Ended June 30,				Change
		2020		2019		Change			2021		2020
		(in thousands)							(in thousands)
Product sales	Product sales	$	216,187	$	155,188	$	60,999	Product sales	$	271,242	$	155,651	$	115,591
Other revenue (1)	Other revenue (1)	9,393		2,217		7,176		Other revenue (1)	13,800		12,061		1,739
Net revenue	Net revenue	225,580		157,405		68,175		Net revenue	285,042		167,712		117,330
Cost of goods sold (1)	Cost of goods sold (1)	179,772		117,993		61,779		Cost of goods sold (1)	234,155		124,407		109,748
Loss on disposal of assets								Loss on disposal of assets	1,704		640		1,064
Depreciation and amortization	Depreciation and amortization	20,237		12,946		7,291		Depreciation and amortization	21,869		14,986		6,883
Total cost of goods sold	Total cost of goods sold	200,009		130,939		69,070		Total cost of goods sold	257,728		140,033		117,695
Gross margin	Gross margin	25,571		26,466		(895)		Gross margin	27,314		27,679		(365)
General and administrative expenses	General and administrative expenses	6,425		361		6,064		General and administrative expenses	2,587		2,096		491
Related-party management services agreement fees		6,196		7,439		(1,243)
Related-party management services agreement fee								Related-party management services agreement fee	9,246		6,947		2,299
Total general and administrative expenses	Total general and administrative expenses	12,621		7,800		4,821		Total general and administrative expenses	11,833		9,043		2,790
Income from operations	Income from operations	12,950		18,666		(5,716)		Income from operations	15,481		18,636		(3,155)
Interest expense	Interest expense	(11,950)		(9,872)		(2,078)		Interest expense	(12,647)		(10,124)		(2,523)
Other income		136		58		78
Net income before income tax benefit		1,136		8,852		(7,716)
Income tax benefit		(275)		—		(275)
Other expense								Other expense	(165)		(41)		(124)
Net income before income tax expense								Net income before income tax expense	2,669		8,471		(5,802)
Income tax expense								Income tax expense	24		—		24
Net income	Net income	$	1,411	$	8,852	$	(7,441)	Net income	2,645		8,471		(5,826)
(1) See Note 14, Related-Party Transactions
Less net income attributable to noncontrolling interest								Less net income attributable to noncontrolling interest	57		—		57
Net income attributable to Enviva Partners, LP								Net income attributable to Enviva Partners, LP	$	2,588	$	8,471	$	(5,883)
(1) See Note 11, Related-Party Transactions								(1) See Note 11, Related-Party Transactions

Net ~~revenue~~Revenue

~~Net revenue~~Revenue related to product sales for wood pellets produced or procured by us increased to ~~$225.6~~$271.2 million for ~~the~~ three months ended ~~September~~June 30, ~~2020~~2021 from ~~$157.4~~$155.7 million for ~~the~~ three months ended ~~September~~June 30, ~~2019.~~2020. The ~~$68.2~~$115.6 million, or ~~43%~~74%, increase was primarily attributable to a ~~40%~~61% increase in product sales volumes ~~during~~and improved pricing based on contract mix, offset by approximately $1.1 million less in unrealized and realized gains from the fair value of foreign currency derivative instruments, for the three months ended ~~September~~June 30, ~~2020~~2021 as compared to the three months ended ~~September~~June 30, ~~2019.~~ 2020.

Other revenue for the three months ended ~~September~~June 30, 2021 and 2020 included ~~terminal services revenue~~$12.3 million and ~~$8.2~~$8.9 million, respectively, in payments to ~~the Partnership~~us for ~~modifying shipments under our take-or-pay off-take contracts, which otherwise would have been included in product sales.~~

~~Cost of goods sold~~

Cost of goods sold increased to $200.0 million for the three months ended September 30, 2020 from $130.9 million for the three months ended September 30, 2019. The $69.1 million, or 53%, increase was primarily attributable to a 40% increase in sales volumes and a 6% increase as a result of an increase in depreciation and amortization expense during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.

~~Gross margin~~

Gross margin decreased to $25.6 million for the three months ended September 30, 2020 from $26.5 million for the three months ended September 30, 2019. The de minimis decrease of $0.9 million during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019, was attributable to an increase in sold volumes produced by the Partnership, including production from the recently acquired Greenwood and Waycross plants, primarily offset by increases of depreciation expense and unrealized losses of derivative instruments.

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~~Adjusted gross margin and adjusted gross margin per metric ton~~

Three Months Ended
September 30,
2020 2019 Change
(in thousands except per metric ton)
Reconciliation of gross margin to adjusted gross margin per metric ton:
Gross margin $ 25,571 $ 26,466 $ (895)
Asset impairments and disposals 1,684 212 1,472
Non-cash unit compensation expense 471 — 471
Depreciation and amortization 20,237 12,946 7,291
Chesapeake Incident and Hurricane Events(1)
— 47 (47)
Changes in unrealized derivative instruments 2,616 (1,028) 3,644
MSA Fee Waivers 5,465 2,300 3,165
Acquisition and integration costs 751 59 692
Adjusted gross margin $ 56,795 $ 41,002 $ 15,793
Metric tons sold 1,133 811 322
Adjusted gross margin per metric ton $ 50.13 $ 50.56 $ (0.43)

(1) In February 2018, a fire occurred at the Chesapeake terminal, causing damage to equipment and inventory of wood pellets (the “Chesapeake Incident”). Hurricane Florence caused minor damage at our wood pellet production plant in Sampson County, North Carolina and the Wilmington terminal in September 2018 and Hurricane Michael caused minor damage to our wood pellet production plant in Jackson County, Florida and the Panama City terminal in October 2018 (collectively, “Hurricane Events”.)

We earned adjusted gross margin of $56.8 million, or $50.13 per MT, for the three months ended September 30, 2020. Adjusted gross margin was $41.0 million, or $50.56 per MT, for the three months ended September 30, 2019. The increase in adjusted gross margin was primarily due to the increase in volumes sold discussed above under the heading “Gross margin” and an increase of $3.2 million in MSA Fee Waivers.

~~General and administrative expenses~~

General and administrative expenses were $12.6 million for the three months ended September 30, 2020 and $7.8 million for the three months ended September 30, 2019. The $4.8 million increase in general and administrative expenses was primarily attributable to $4.1 million associated with acquisition and integration costs.

~~Interest expense~~

We incurred $12.0 million of interest expense during the three months ended September 30, 2020 and $9.9 million of interest expense during the three months ended September 30, 2019. The increase in interest expense was primarily attributable to an increase in borrowings as a result of our acquisitions during the three months ended September 30, 2020, as compared to the same period in 2019.

~~Income tax benefit~~

~~We incurred $0.3 million of income tax benefit during the three months ended September 30, 2020 related to an entity acquired in the Georgia Biomass Acquisition.~~

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~~Adjusted net income~~

Three Months Ended
September 30,
2020 2019 Change
(in thousands)
Reconciliation of net income to adjusted net income:
Net income $ 1,411 $ 8,852 $ (7,441)
Chesapeake Incident and Hurricane Events — 47 (47)
MSA Fee Waivers 9,206 7,703 1,503
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events 554 769 (215)
Adjusted net income $ 11,171 $ 17,371 $ (6,200)

We generated adjusted net income of $11.2 million for the three months ended September 30, 2020 and $17.4 million for the three months ended September 30, 2019. The lower net income and adjusted net income for the third quarter of 2020 was primarily due to approximately $4.9 million of acquisition and integration costs and approximately $9.3 million of incremental depreciation, amortization and interest expenses mainly associated with the recent acquisitions, as well as changes in certain non-cash expenses.

~~Adjusted EBITDA~~

Three Months Ended
September 30,
2020 2019 Change
(in thousands)
Reconciliation of net income to adjusted EBITDA:
Net income $ 1,411 $ 8,852 $ (7,441)
Add:
Depreciation and amortization 20,555 13,291 7,264
Interest expense 11,950 9,872 2,078
Non-cash unit compensation expense 2,347 350 1,997
Income tax benefit (275) — (275)
Asset impairments and disposals 1,684 212 1,472
Chesapeake Incident and Hurricane Events — 47 (47)
Changes in the fair value of derivative instruments 2,616 (1,028) 3,644
MSA Fee Waivers 9,206 7,703 1,503
Acquisition and integration costs 4,908 114 4,794
Adjusted EBITDA $ 54,402 $ 39,413 $ 14,989

We generated adjusted EBITDA of $54.4 million for the three months ended September 30, 2020 compared to adjusted EBITDA of $39.4 million for the three months ended September 30, 2019. The $15.0 million increase was primarily attributable to the factors described above under the headings “ Adjusted gross margin and adjusted gross margin per metric ton” and “General and administrative expense,” and an increase of $1.5 million in MSA Fee Waivers during the third quarter of 2020 relative to the same period in 2019.

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~~Distributable Cash Flow~~

Three Months Ended
September 30,
2020 2019 Change
(in thousands)
Adjusted EBITDA $ 54,402 $ 39,413 $ 14,989
Less:
Interest expense, net of amortization of debt issuance costs, debt premium, original issue discount and impact from incremental borrowings related to Chesapeake Incident and Hurricane Events 10,738 8,797 1,941
Maintenance capital expenditures 1,499 579 920
Distributable cash flow attributable to Enviva Partners, LP 42,165 30,037 12,128
Less: Distributable cash flow attributable to incentive distribution rights 7,869 3,107 4,762
Distributable cash flow attributable to Enviva Partners, LP limited partners $ 34,296 $ 26,930 $ 7,366

~~Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019~~

Nine Months Ended
September 30, Change
2020 2019
(in thousands)
Product sales $ 569,691 $ 478,989 $ 90,702
Other revenue (1)
28,078 4,864 23,214
Net revenue 597,769 483,853 113,916
Cost of goods sold (1)
468,349 395,861 72,488
Depreciation and amortization 48,863 35,112 13,751
Total cost of goods sold 517,212 430,973 86,239
Gross margin 80,557 52,880 27,677
General and administrative expenses 10,284 5,669 4,615
Related-party management services agreement fees 20,832 22,998 (2,166)
Total general and administrative expenses 31,116 28,667 2,449
Income from operations 49,441 24,213 25,228
Interest expense (32,468) (28,701) (3,767)
Other income 267 616 (349)
Net income (loss) before income tax benefit 17,240 (3,872) 21,112
Income tax benefit (275) — (275)
Net income (loss) $ 17,515 $ (3,872) $ 21,387
(1) See Note 14, Related-Party Transactions

~~Net revenue~~

Net revenue increased to $597.8 million for the nine months ended September 30, 2020 from $483.9 million for the nine months ended September 30, 2019. The $113.9 million, or 24%, increase was primarily attributable to a 18% increase in sales volumes. Other revenue for the nine months ended September 30, 2020 included $17.1 million in payments to the Partnership for modifying shipmentsadjusting deliveries under our take-or-pay off-take contracts, which otherwise would have been included in product sales. Other revenue for the three months ended June 30, 2020 also included ~~$4.1~~$1.9 million from the Commercial ~~Services during~~Services. During the ~~nine~~three months ended ~~September~~June 30, ~~2020. The $17.7~~2021 and 2020 the $12.3 million and ~~$4.1~~$10.8 million in other revenue was recognized under a breakage model based on when the pellets would have been loaded.

Cost of goods sold

Total cost of goods sold increased to $257.7 million for the three months ended June 30, 2021 from $140.0 million for the three months ended June 30, 2020, primarily as a result of higher finished product costs given increased product sales volumes, a greater percentage of the sales volumes being volumes procured from third parties, costs incurred during the commissioning of expansion projects and an increase in depreciation and amortization expense associated with the Greenwood Drop-Down and the Georgia Biomass Acquisition.

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~~Cost of goods sold~~

~~Cost of goods sold increased to $517.2~~Gross margin was $27.3 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020 from $431.0~~2021 as compared to $27.7 million for the ~~nine~~three months ended ~~September~~June 30, ~~2019. The $86.2~~2020, a decrease of $0.4 million, or ~~20%, increase was primarily attributable to a 18% increase in sales volumes during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.~~1%.

~~Gross margin~~

Gross margin increased to $80.6 million for the nine months ended September 30, 2020 from $52.9 million for the nine months ended September 30, 2019. The gross margin increase of $27.7 million was primarily attributable to a 18% increase in sales volumes and a decrease in acquisition costs, primarily offset by increased depreciation expense.

Adjusted gross margin and adjusted gross margin per metric ton

Nine Months Ended
September 30,
2020 2019 Change
(in thousands except per metric ton)
Reconciliation of gross margin to adjusted gross margin per metric ton:
Gross margin $ 80,557 $ 52,880 $ 27,677
Asset impairments and disposals 3,236 562 2,674
Non-cash unit compensation expense 1,415 — 1,415
Depreciation and amortization 48,863 35,112 13,751
Chesapeake Incident and Hurricane Events(1)
— 125 (125)
Changes in unrealized derivative instruments (4,058) (1,352) (2,706)
MSA Fee Waivers 5,465 5,000 465
Acquisition and integration costs 751 4,302 (3,551)
Commercial Services (4,139) — (4,139)
Adjusted gross margin $ 132,090 $ 96,629 $ 35,461
Metric tons sold 2,985 2,523 462
Adjusted gross margin per metric ton $ 44.25 $ 38.30 $ 5.95


	Three Months Ended June 30,
	2021		2020		Change
	(in thousands, except per metric ton)
Reconciliation of gross margin to adjusted gross margin and adjusted gross margin per metric ton:
Gross margin	$	27,314	$	27,679	$	(365)
Loss on disposal of assets	1,704		640		1,064
Non-cash unit compensation expense	472		473		(1)
Depreciation and amortization	21,869		14,986		6,883
Changes in unrealized derivative instruments	(362)		121		(483)
MSA Fee Waivers	5,000		—		5,000
Acquisition and integration costs and other	72		—		72
Commercial Services	—		(1,882)		1,882
Adjusted gross margin	$	56,069	$	42,017	$	14,052
Metric tons sold	1,367		848		519
Adjusted gross margin per metric ton	$	41.02	$	49.55	$	(8.53)

We earned an adjusted gross margin of ~~$132.1~~$56.1 million, or ~~$44.25~~$41.02 per MT, for the ~~nine~~three months ended ~~September~~June 30, ~~2020. Adjusted gross margin was $96.6~~2021 compared to $42.0 million, or ~~$38.30~~$49.55 per MT, for the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The increase in adjusted gross margin was primarily attributable to higher product sales volumes and higher pricing due to ~~factors discussed above under the heading “Gross margin.”~~

~~Adjusted gross margin for the nine months ended September 30, 2019 excludes $4.2 million~~customer contract mix, which were partially offset by higher cost of ~~incremental costs, which are unrepresentative of our ongoing operations,~~goods sold as described above. The decrease in connection with our evaluation of a third-party wood pellet production plant we considered purchasing (the “Potential Target”). When we commenced our review, the Potential Target had recently returned to operations following an extended shutdown during a bankruptcy proceeding with the intent of demonstrating favorable operations prior to proceeding to an auction sale process; however, the Potential Target had not yet established a logistics chain through a viable export terminal, given that the terminal through which the plant historically had exported was not operational at the time and was not reasonably certain to become operational in the future. Accordingly, as part of our diligence of the Potential Target, we developed an alternative logistics chain to bring the Potential Target’s wood pellets to market and began purchasing the production of the Potential Target for a trial period. The incremental costs associated with the establishment and evaluation of this new logistics chain primarily consist of barge, freight, trucking, storage and shiploading services. We have completed our evaluation of the alternative logistics chain and, therefore, do not expect to incur additional costs of this nature in the future.

During the quarter ended December 31, 2019, we received a non-refundable payment of $5.6 million from a customer in consideration for our performance during the quarter of certain sales and marketing, scheduling, sustainability, consultation, shipping and risk management services (collectively, “Commercial Services”) that were outside of the scope of our existing take-or-pay off-take contract. The customer had requested the Commercial Services, among other things, in order to avoid its exposure to market price volatility associated with its anticipated failure to take required deliveries of certain wood pellet volumes during the fourth quarter of 2019 and first half of 2020 pursuant to the off-take contract. The Commercial Services had a value to the

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~~customer of $5.6 million. We included the entire non-refundable payment of $5.6 million in our publicly stated guidance for 2019 in our press release issued October 30, 2019.~~

~~Under GAAP, we recognized $1.5 million of the $5.6 million payment as revenue during the fourth quarter of 2019, under the breakage model of Accounting Standards Codification (“ASC”) Topic 606,~~ ~~Revenue from Contracts with Customers~~ (“ASC 606”), and recorded the remaining $4.1 million as deferred revenue as of December 31, 2019, to be recognized as revenue during the first six months of 2020 in accordance with the original product sales schedule under the off-take contract. For presentation of our non-GAAP measures, we included the $4.1 million in adjusted net income, adjusted gross margin per ~~metric~~ ton ~~and adjusted EBITDA for~~was primarily attributable to the year ended December 31, 2019 as such amount relates to our performance of certain Commercial Services, which we completed and for which we were compensated in 2019. The $4.1 million increased adjusted net income,factors impacting adjusted gross ~~margin per metric ton and adjusted EBITDA for the year ended December 31, 2019 and decreased such measures by an equal amount during the first six months of 2020.~~margin.

General and administrative expenses

~~General~~Total general and administrative expenses were ~~$31.1~~$11.8 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 and ~~$28.7~~$9.0 million for the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The ~~$2.4~~$2.8 million increase ~~was~~in total general and administrative expenses is primarily ~~associated with~~due to our increased ~~acquisition~~size and ~~integration costs.~~activities resulting from the acquisitions in July 2020 and non-cash unit-based compensation between the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Interest expense

We incurred ~~$32.5~~$12.6 million of interest expense during ~~the nine~~three months ended ~~September~~June 30, ~~2020~~2021 and ~~$28.7~~$10.1 million ~~of interest expense~~ during the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The increase in interest expense from the prior year was primarily attributable to an increase in borrowings as a result of our acquisitions ~~during the nine months ended September 30,~~in July 2020 as compared to the ~~same period in 2019.~~three months ended June 30, 2020.

Income tax ~~benefit~~

We ~~incurred $0.3 million of~~recorded an insignificant income tax ~~benefit~~expense during the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 related to an entity acquired in the Georgia Biomass Acquisition.

~~Adjusted net income~~

Nine Months Ended
September 30,
2020 2019 Change
(in thousands)
Reconciliation of net income (loss) to adjusted net income:
Net income (loss) $ 17,515 $ (3,872) $ 21,387
Chesapeake Incident and Hurricane Events — 55 (55)
MSA Fee Waivers 13,963 18,749 (4,786)
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events 1,672 1,259 413
Commercial Services (4,139) — (4,139)
Adjusted net income $ 29,011 $ 16,191 $ 12,820

We generated adjusted net income of $29.0 million for the nine months ended September 30, 2020 and $16.2 million for the nine months ended September 30, 2019. The increase in net income and adjusted net income for the nine months ended September 30, 2020 were primarily attributable to the factors described below under the heading “Adjusted EBITDA” offset by approximately $4.9 million of acquisition and integration costs and approximately $17.5 million of incremental depreciation, amortization and interest expenses mainly associated with the recent acquisitions, as well as changes in certain non-cash expenses.

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Adjusted net income


	Three Months Ended June 30,
	2021		2020		Change
	(in thousands)
Reconciliation of net income to adjusted net income:
Net income	$	2,645	$	8,471	$	(5,826)
Acquisition and integration costs and other	869		—		869
MSA Fee Waivers	6,302		1,572		4,730
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	—		548		(548)
Commercial Services	—		(1,882)		1,882
Adjusted net income	$	9,816	$	8,709	$	1,107

We generated adjusted net income of $9.8 million for the three months ended June 30, 2021 compared to $8.7 million for the three months ended June 30, 2020. The increase in adjusted net income for the three months ended June 30, 2021 was primarily attributable to the decrease in net income from the three months ended June 30, 2020, which was mainly driven by an increase in depreciation and amortization expense, offset by the increase attributable to MSA Fee Waivers compared to the three months ended June 30, 2020.

Adjusted EBITDA


		Nine Months Ended September 30,							Three Months Ended June 30,
		2020		2019		Change			2021		2020		Change
		(in thousands)							(in thousands)
Reconciliation of net income (loss) to adjusted EBITDA:
Net income (loss)		$	17,515	$	(3,872)	$	21,387
Reconciliation of net income to adjusted EBITDA:								Reconciliation of net income to adjusted EBITDA:
Net income								Net income	$	2,645	$	8,471	$	(5,826)
Add:	Add:							Add:
Depreciation and amortization	Depreciation and amortization	49,802		35,747		14,055		Depreciation and amortization	22,343		15,297		7,046
Interest expense	Interest expense	32,468		28,701		3,767		Interest expense	12,647		10,124		2,523
Income tax expense								Income tax expense	24		—		24

Non-cash unit compensation expense	Non-cash unit compensation expense	6,603		3,835		2,768		Non-cash unit compensation expense	2,702		2,098		604
Income tax benefit		(275)		—		(275)
Asset impairments and disposals		3,236		562		2,674
Chesapeake Incident and Hurricane Events		—		55		(55)
Changes in the fair value of derivative instruments		(4,058)		(1,352)		(2,706)
Loss on disposal of assets								Loss on disposal of assets	1,704		640		1,064
Changes in unrealized derivative instruments								Changes in unrealized derivative instruments	(362)		121		(483)
MSA Fee Waivers	MSA Fee Waivers	13,963		18,749		(4,786)		MSA Fee Waivers	6,302		1,572		4,730
Acquisition and integration costs		5,865		5,566		299
Acquisition and integration costs and other								Acquisition and integration costs and other	869		957		(88)
Commercial Services	Commercial Services	(4,139)		—		(4,139)		Commercial Services	—		(1,882)		1,882
Adjusted EBITDA	Adjusted EBITDA	$	120,980	$	87,991	$	32,989	Adjusted EBITDA	$	48,874	$	37,398	$	11,476

We generated adjusted EBITDA of ~~$121.0~~$48.9 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 compared to ~~adjusted EBITDA of $88.0~~$37.4 million for the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020. The ~~$33.0~~$11.5 million increase was primarily attributable to the factors described above under the heading “Adjusted gross margin and adjusted gross margin per metric ton.”

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Distributable ~~Cash Flow~~cash flow

Nine Months Ended
September 30,
2020 2019 Change
(in thousands)
Adjusted EBITDA $ 120,980 $ 87,991 $ 32,989
Less:
Interest expense, net of amortization of debt issuance costs, debt premium, original issue discount and impact from incremental borrowings related to Chesapeake Incident and Hurricane Events 29,325 26,542 2,783
Maintenance capital expenditures 4,944 2,343 2,601
Distributable cash flow attributable to Enviva Partners, LP 86,711 59,106 27,605
Less: Distributable cash flow attributable to incentive distribution rights 18,798 8,150 10,648
Distributable cash flow attributable to Enviva Partners, LP limited partners $ 67,913 $ 50,956 $ 16,957
The following is a reconciliation of adjusted EBITDA to distributable cash flow:


	Three Months Ended June 30,
	2021		2020		Change
	(in thousands)
Adjusted EBITDA	$	48,874	$	37,398	$	11,476
Less:
Interest expense, net of amortization of debt issuance costs, debt premium, original issue discount, and impact from incremental borrowings related to Chesapeake Incident and Hurricane Events	11,992		9,169		2,823
Maintenance capital expenditures	3,940		2,311		1,629
Distributable cash flow attributable to Enviva Partners, LP	32,942		25,918		7,024
Less: Distributable cash flow attributable to incentive distribution rights	10,708		7,471		3,237
Distributable cash flow attributable to Enviva Partners, LP limited partners	$	22,234	$	18,447	$	3,787

Results of Operations

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020


	Six Months Ended June 30,				Change
	2021		2020
	(in thousands)
Product sales	$	495,772	$	353,504	$	142,268
Other revenue (1)	30,314		18,685		11,629
Net revenue	526,086		372,189		153,897
Cost of goods sold (1)	430,794		287,025		143,769
Loss on disposal of assets	3,348		1,552		1,796
Depreciation and amortization	42,321		28,626		13,695
Total cost of goods sold	476,463		317,203		159,260
Gross margin	49,623		54,986		(5,363)
General and administrative expenses	5,087		3,859		1,228
Related-party management services agreement fee	18,016		14,636		3,380
Total general and administrative expenses	23,103		18,495		4,608
Income from operations	26,520		36,491		(9,971)
Interest expense	(25,279)		(20,518)		(4,761)
Other (expense) income	(54)		131		(185)
Net income before income tax expense	1,187		16,104		(14,917)
Income tax expense	7		—		7
Net income	1,180		16,104		(14,924)
Less net income attributable to noncontrolling interest	82		—		82
Net income attributable to Enviva Partners, LP	$	1,098	$	16,104	$	(15,006)
(1) See Note 11, Related-Party Transactions

Net Revenue

Revenue related to product sales for wood pellets produced or procured by us increased to $495.8 million for the six months ended June 30, 2021 from $353.5 million for six months ended June 30, 2020. The $142.3 million, or 40%, increase was primarily attributable to a 36% increase in product sales volumes and improved pricing based on contract mix, offset by a

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decrease of approximately $10.2 million in unrealized and realized gains from the fair value of foreign currency derivative instruments, for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Other revenue for the six months ended June 30, 2021 and 2020 included $28.4 million and $8.9 million, respectively, in payments to us for adjusting deliveries under our take-or-pay off-take contracts, which otherwise would have been included in product sales. During the six months ended June 30, 2021 and 2020 the $28.4 million and $13.0 million in other revenue was recognized under a breakage model based on when the pellets otherwise would have been loaded. Other revenue for the six months ended June 30, 2020 also included $4.1 million from Commercial Services.

Cost of goods sold

Total cost of goods sold increased to $476.5 million for the six months ended June 30, 2021 from $317.2 million for the six months ended June 30, 2020, primarily as a result of higher finished product costs given increased product sales volumes, a greater percentage of the sales volumes being volumes procured from third parties, costs incurred during the commissioning of expansion projects and an increase in depreciation and amortization expense associated with the Greenwood Drop-Down and the Georgia Biomass Acquisition.

Gross margin was $49.6 million for the six months ended June 30, 2021 as compared to $55.0 million for the six months ended June 30, 2020, a decrease of $5.4 million, or 10%. The $5.4 million decrease in gross margin was principally attributable to increases in total cost of goods sold described above, an increase in depreciation and amortization expense associated with the acquisitions in July 2020 and a decrease in unrealized gains from the fair value of derivative instruments, offset by an increase in product sales volumes during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Adjusted gross margin and adjusted gross margin per metric ton


	Six Months Ended June 30,
	2021		2020		Change
	(in thousands, except per metric ton)
Reconciliation of gross margin to adjusted gross margin and adjusted gross margin per metric ton:
Gross margin	$	49,623	$	54,986	$	(5,363)
Loss on disposal of assets	3,348		1,552		1,796
Non-cash unit compensation expense	944		944		—
Depreciation and amortization	42,321		28,626		13,695
Changes in unrealized derivative instruments	798		(6,674)		7,472
MSA Fee Waivers	8,059		—		8,059
Acquisition and integration costs and other	72		—		72
Commercial Services	—		(4,139)		4,139
Adjusted gross margin	$	105,165	$	75,295	$	29,870
Metric tons sold	2,516		1,852		664
Adjusted gross margin per metric ton	$	41.80	$	40.66	$	1.14

We earned adjusted gross margin of $105.2 million, or $41.80 per MT, for the six months ended June 30, 2021 compared to $75.3 million, or $40.66 per MT, for the six months ended June 30, 2020. The increase in adjusted gross margin was primarily attributable to higher product sales volume and higher pricing due to customer contract mix, which were partially offset by higher cost of goods sold as described above.

General and administrative expenses

Total general and administrative expenses were $23.1 million for the six months ended June 30, 2021 and $18.5 million for the six months ended June 30, 2020. The $4.6 million increase in total general and administrative expenses is primarily due to our increased size and activities resulting from the acquisitions in July 2020 and non-cash unit-based compensation during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

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Interest expense

We incurred $25.3 million of interest expense during six months ended June 30, 2021 and $20.5 million during the six months ended June 30, 2020. The increase in interest expense from the prior year was primarily attributable to an increase in borrowings as a result of our acquisitions in July 2020 compared to the six months ended June 30, 2020.

Income tax

We recorded an insignificant income tax expense during the six months ended June 30, 2021 related to an entity acquired in the Georgia Biomass Acquisition.

Adjusted net income


	Six Months Ended June 30,
	2021		2020		Change
	(in thousands)
Reconciliation of net income to adjusted net income:
Net income	$	1,180	$	16,104	$	(14,924)
Acquisition and integration costs and other	1,003		—		1,003
MSA Fee Waivers	15,025		4,757		10,268
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	—		1,118		(1,118)
Commercial Services	—		(4,139)		4,139
Adjusted net income	$	17,208	$	17,840	$	(632)

We generated adjusted net income of $17.2 million for the six months ended June 30, 2021 compared to $17.8 million for the six months ended June 30, 2020. The decrease in adjusted net income for the six months ended June 30, 2021 was primarily attributable to the decrease in net income from the six months ended June 30, 2020, which was mainly driven by an increase in depreciation and amortization expense and a decrease in gains on unrealized derivative instruments, offset by an increase attributable to MSA Fee Waivers, compared to the six months ended June 30, 2020.

Adjusted EBITDA


	Six Months Ended June 30,
	2021		2020		Change
	(in thousands)
Reconciliation of net income to adjusted EBITDA:
Net income	$	1,180	$	16,104	$	(14,924)
Add:
Depreciation and amortization	43,224		29,247		13,977
Interest expense	25,279		20,518		4,761
Income tax expense	7		—		7

Non-cash unit compensation expense	5,358		4,256		1,102
Loss on disposal of assets	3,348		1,552		1,796
Changes in unrealized derivative instruments	798		(6,674)		7,472
MSA Fee Waivers	15,025		4,757		10,268
Acquisition and integration costs and other	1,003		957		46
Commercial Services	—		(4,139)		4,139
Adjusted EBITDA	$	95,222	$	66,578	$	28,644

We generated adjusted EBITDA of $95.2 million for the six months ended June 30, 2021 compared to $66.6 million for the six months ended June 30, 2020. The $28.6 million increase was primarily attributable to the factors described above under the heading “Adjusted gross margin and adjusted gross margin per metric ton.”

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Distributable cash flow

The following is a reconciliation of adjusted EBITDA to distributable cash flow:


	Six Months Ended June 30,
	2021		2020		Change
	(in thousands)
Adjusted EBITDA	$	95,222	$	66,578	$	28,644
Less:
Interest expense, net of amortization of debt issuance costs, debt premium, original issue discount, and impact from incremental borrowings related to Chesapeake Incident and Hurricane Events	24,015		18,587		5,428
Maintenance capital expenditures	7,844		3,445		4,399
Distributable cash flow attributable to Enviva Partners, LP	63,363		44,546		18,817
Less: Distributable cash flow attributable to incentive distribution rights	19,030		10,928		8,102
Distributable cash flow attributable to Enviva Partners, LP limited partners	$	44,333	$	33,618	$	10,715

Liquidity and Capital Resources

Overview

Our primary sources of liquidity include cash and cash equivalent balances, cash generated from operations, borrowings under our revolving credit commitments and, from time to time, debt and equity offerings. Our primary liquidity requirements are to fund working capital, service our debt, maintain cash reserves, finance ~~plant acquisitions~~growth initiatives and ~~plant expansion projects, finance~~ maintenance capital expenditures and pay distributions. We believe cash on hand, cash generated from our operations and the availability of our revolving credit commitments will be sufficient to meet our primary liquidity requirements. However, future capital expenditures, such as expenditures made in relation to ~~plant~~ acquisitions of plants or terminals and/or plant expansion projects, and other cash requirements could be higher than we currently expect as a result of various factors. ~~For example, COVID-19 has disrupted debt and equity capital markets and could restrict our access to, or increase the cost of capital from, public financing activities.~~ Additionally, our ability to generate sufficient cash from our operating activities depends on our future performance, which is subject to general economic, political, financial, competitive and other factors beyond our control.

~~Table~~Our liquidity as of ~~Contents~~

June 30, 2021, which included cash on hand and availability under our $525.0 million revolving credit facility, was $567.6 million.

Cash Distributions

To the extent we have sufficient cash from our operations after establishment of cash reserves and payment of fees and expenses, we intend to pay to holders of our common units cash distributions of at least the minimum quarterly distribution isof $0.4125 per common unit per quarter, which equates to approximately ~~$16.4~~$18.6 million per quarter, or approximately ~~$65.6~~$74.3 million per year, based on the number of common units outstanding as of ~~September 30, 2020.~~July 23, 2021.

Financing Activities

In April 2021, we amended our senior secured revolving credit facility to increase the revolving credit commitments from $350.0 million to $525.0 million, extend the maturity from October 2023 to April 2026, increase of the letter of credit commitment from $50.0 million to $80.0 million and reduce the cost of borrowing by 25 basis points.

Capital Requirements

We operate in a capital-intensive industry, which requires significant investments to maintain and upgrade existing ~~capital assets.~~capital. Our capital requirements primarily have consisted, and we anticipate will continue to consist, ~~primarily~~ of the following:

•Maintenance capital expenditures, which are cash expenditures incurred to maintain our long-term operating income or operating capacity. These expenditures typically include certain system integrity, compliance and safety improvements; and

•Growth capital expenditures, which are cash expenditures we expect will increase our operating income or operating capacity over the long term. Growth capital expenditures include acquisitions or construction of new

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capital assets or capital improvements such as additions to or improvements on our existing capital assets as well as projects intended to extend the useful life of assets.

The classification of capital expenditures as either maintenance or growth is made at the individual asset level during our budgeting process and as we approve, execute and monitor our capital spending.

We expect to invest ~~approximately $130.0~~a total of $28.0 million ~~in additional wood pellet~~to expand the Greenwood plant’s production ~~assets and emissions control equipment for the Mid-Atlantic Expansions,~~capacity to 600,000 MTPY (the “Greenwood Expansion”), of which we have ~~spent $119.8~~paid approximately $15.0 million through ~~September~~June 30, ~~2020.~~2021. We ~~have continued commissioning activities at the expansion project at the Northampton plant. We are commissioning new equipment at the expansion project for the Southampton plant and now~~ expect to complete the ~~installation of equipment associated~~expansion, which is currently underway, by year-end 2021.

We expect to invest approximately $50.0 million in connection with the ~~Southampton plant expansion around~~Multi-Plant Expansions to de-bottleneck manufacturing processes, eliminate certain costs and increase production capacity, of which we have paid approximately $14.0 million through June 30, 2021. We expect to complete the Multi-Plant Expansions by the end of ~~2020.~~2022, subject to receiving the necessary permits.

As part of planned expansion projects or otherwise as part of our ordinary system improvements, including in connection with the Mid-Atlantic Expansions, the Greenwood Expansion and the Multi-Plant Expansions, we expect to invest in the purchase and installation of emissions control equipment, such as regenerative thermal oxidizers, cyclones and baghouses at our existing plants where required for environmental compliance or as part of our environmental leadership strategy.

We expect to invest approximately $85.0 million in remaining construction capital expenditures in the Lucedale plant and the Pascagoula terminal during the remainder of 2021.

Our financing strategy is to fund acquisitions, drop-downs and major expansion projects with 50% equity and 50% debt.

Cash Flows

The following table sets forth a summary of our net cash flows from operating, investing and financing activities for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


		Nine Months Ended September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
		(in thousands)					(in thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	59,190	$	43,479	Net cash provided by operating activities	$	111,438	$	53,658
Net cash used in investing activities	Net cash used in investing activities	(373,586)		(154,682)		Net cash used in investing activities	(72,872)		(62,608)
Net cash provided by financing activities		306,689		111,100
Net decrease in cash, cash equivalents and restricted cash		$	(7,707)	$	(103)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(5,669)		97,998
Net increase in cash, cash equivalents and restricted cash						Net increase in cash, cash equivalents and restricted cash	$	32,897	$	89,048

Cash Provided by Operating Activities

Net cash provided by operating activities was ~~$59.2~~$111.4 million and $53.7 million for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~compared to $43.5~~respectively. The $57.8 million ~~for the nine months ended September 30, 2019. The~~ increase in cash provided by operating activities ~~of $15.7 million~~during six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to ~~the~~an increase of $21.3 million in net ~~income.~~income after considering non-cash adjustments to reconcile to net cash provided by operating activities, and an increase of $36.5 million due to changes in operating assets and liabilities.

Cash Used in Investing Activities

Net cash used in investing activities was ~~$373.6~~$72.9 million and $62.6 million for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~compared to $154.7~~respectively. The $10.3 million ~~for the nine months ended September 30, 2019. The~~ increase in cash used in investing activities ~~of $218.9 million is~~during six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily due to ~~a total of net cash paid of $292.9 million in relation~~capital expenditures related to the Mid-Atlantic Expansions, the Greenwood ~~Drop-Down~~Expansion, and the ~~Georgia Biomass Acquisition during the nine months ended September 30, 2020, offset by the $74.7 million cash payment~~Multi-Plant Expansions, as well as increases in ~~relation~~other capital expenditures resulting from our addition of two new wood pellet production plants to ~~the Hamlet Drop-Down during the nine months ended September 30, 2019.~~our fleet in July 2020.

Cash (Used in) Provided by Financing Activities

Net cash used in financing activities was $5.7 million and net cash provided by financing activities was ~~$306.7~~$98.0 million for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, respectively.

The $103.7 million increase in net cash used in financing activities in 2021, as compared to ~~$111.1~~2020, is primarily attributable to $120.0 million ~~for~~in repayments on the ~~nine months ended September 30, 2019. The~~senior secured revolving credit facility and an increase of $26.9 million in ~~cash provided by financing activities of $195.6~~distributions

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~~million is primarily attributable~~ to ~~the $153.6 million of net proceeds from the issuance of the Additional Notes, $94.3 million increase in net proceeds from common unit issuances~~unitholders, distribution equivalent rights and incentive distribution rights holder, partially offset by $40.0 million ~~payment~~in payments in relation to the Hamlet JV Drop-Down during the ~~nine~~six months ended ~~September~~June 30, 2020.

~~Off-Balance~~Off‑Balance Sheet Arrangements

As of ~~September~~June 30, ~~2020,~~2021, we did not have any ~~off-balance~~off‑balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in our unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. We provide expanded discussion of our significant accounting policies, estimates and judgments in our ~~2019~~2020 Form ~~10-K.~~10‑K. We believe these accounting policies reflect our significant estimates and assumptions used in preparation of our financial statements. There have been no significant changes to our critical accounting policies and estimates since December 31, ~~2019, except for the addition~~2020.

Table of ~~the following critical accounting policy and estimate disclosure related to the Greenwood Drop-Down and Georgia Biomass Acquisition.~~

~~Definition of a Business~~

~~Since the required adoption of Accounting Standards Update 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ (“ASU 2017-01”), on January 1, 2018, determining whether an entity has acquired a business or an asset (or a group of assets) is critical because the accounting for a business combination differs significantly from that of an asset acquisition. For transfers between entities under common control, the transfer of a business would represent a change in reporting entity requiring a retrospective adjustment of the combined financial statements. Conversely, a common control transaction involving the transfer of net assets that does not constitute a business is not accounted for as a change in reporting entity and is, therefore, accounted for prospectively. For an acquisition of a business from an entity not under common control, the overall principle is that, when an entity (the acquirer) takes control of another entity (the target), the fair value of the underlying exchange transaction is used to establish a new accounting basis for the acquired entity where the acquirer recognizes and measures the assets acquired and liabilities assumed at their full fair values as of the date control is obtained. For an acquisition of an asset from an entity not under common control, a cost accumulation and allocation model is used under which the cost of the acquisition is allocated to the assets acquired and liabilities assumed.Contents

We must first evaluate whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. Gross assets acquired should exclude cash and cash equivalents, deferred tax assets and goodwill resulting from the effects of deferred tax liabilities. However, the gross assets acquired should include any consideration transferred (plus the fair value of any noncontrolling interest and previously held interest, if any) in excess of the fair value of net identifiable assets acquired. A tangible asset that is attached to and cannot be physically removed and used separately from another tangible asset (or an intangible asset representing the right to use a tangible asset) without incurring significant cost or significant diminution in utility or fair value to either asset (for example, land and building) should be considered a single asset. In that context, we consider a wood pellet production facility to be a single identifiable asset.

We need to apply judgment to determine what is considered “substantially all” because ASU 2017-01 does not provide a bright line for making this assessment. If the “substantially all” threshold is met, the acquired set of assets and activities is not a business. If that threshold is not met, we must evaluate whether the set meets the definition of a business, which consists of inputs and at least one substantive process applied to those inputs that have the ability to contribute to the creation of outputs. If that threshold is not met but the set does not meet the definition of a business, the acquisition would be an asset acquisition.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our exposure to market risk as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019 other than as described below:~~

~~Foreign Currency Exchange Risk~~

We primarily are exposed to fluctuations in foreign currency exchange rates related to contracts pursuant to which deliveries of wood pellets will be settled in foreign currency. We have entered into forward contracts and purchased options to hedge a portion of our forecasted revenue for these customer contracts.

As of September 30, 2020, we had notional amounts of 92.2 million GBP under foreign currency forward contracts and 42.1 million GBP under foreign currency option contracts that expire between 2020 and 2024.

~~We do not utilize foreign exchange contracts for speculative or trading purposes. The counterparties to our foreign exchange contracts are major financial institutions.~~

2020.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13(a)~~-15(e)~~‑15(e) and 15(d)~~-15(e)~~‑15(e) under the Securities Exchange Act of 1934, as amended) was carried out under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of our General Partner. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of our General Partner concluded that the design and operation of these disclosure controls and procedures were effective as of ~~September~~June 30, ~~2020.~~2021.

Changes in Internal Control Over Financial Reporting

During the quarter ended ~~September~~June 30, ~~2020,~~2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We closed an acquisition of an entity under common control and a business combination during the year ended December 31, 2020. We have evaluated the existing controls and procedures of the acquired businesses and integrated our internal control structure over these acquired businesses.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material changes with respect to the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Item 1A. Risk Factors

~~In addition~~There have been no material changes with respect to the risk factors ~~and other information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in~~ ~~Part II, Item 1A. Risk Factors~~ ~~in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, in~~ ~~Part I, Item 1A. Risk Factors~~disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, and the risk factors included in our Current Report on Form 8-K filed on June 19, 2020, any of which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

~~Our business and operations, and the operations of our customers, may be adversely affected by the outbreak of the novel coronavirus (“COVID-19”) pandemic.~~

We may face risks related to the COVID-19 pandemic, the full impact of which is unknown and rapidly evolving. Health epidemics or outbreaks of communicable diseases such as COVID-19 could result in widespread global or localized health crises that could adversely affect general commercial activity and the economies and financial markets of many countries or localities in which we and our customers operate.

We source our wood fiber from, and operate wood pellet plants and terminals in the Mid-Atlantic and Gulf Coast regions of the United States. On March 13, 2020, the United States declared the COVID-19 pandemic a national emergency, and several states and municipalities, including states in which we own assets or conduct business, have declared public health emergencies. In addition, international, federal, state and local public health and government authorities have taken extraordinary and wide-ranging actions to contain and combat the outbreak and spread of COVID-19, including “stay-at-home” orders and similar mandates in the United States (“Orders”) for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. The Orders generally refer to the United States Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) guidance designating businesses in the forest products and energy (biomass) sectors, such as ours, as essential critical infrastructure. We have not been materially impacted by the Orders, which exempt or exclude essential critical infrastructure businesses from various restrictions they impose (other than encouraging remote work where possible); nevertheless, the spread of COVID-19 has caused us to modify our business practices (including regarding employee travel and physical participation in meetings, events and conferences, screening all persons coming onsite, and increased frequency of cleaning schedules), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers or other stakeholders or the communities in which we operate. Such measures may disrupt our normal operations, and there is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19 or will not adversely impact our business or results of operations.

Moreover, the COVID-19 outbreak could result in adverse impacts to our business, including as a result of interruptions of our operations, unavailability of transportation infrastructure, disruptions of economic markets and the economy generally or temporary or permanent closures of businesses that provide us with raw materials or transportation or other services. A significant portion of our total production is loaded for shipment utilizing automated conveyor and ship loading equipment at the Port of Chesapeake, Port of Wilmington and Port of Panama City, and substantially all of our production is dependent upon infrastructure at our owned, leased and third-party-operated ports. We also rely on various ports of destination, as well as third parties who provide stevedoring or other services at our ports of shipment and destination or from whom we charter oceangoing vessels and crews, to transport our product to our customers. The idling or closure of our plants, terminals or the ports in which our terminals are located, or the unavailability of certain handling, transportation, and other services, whether necessitated for the health and well-being of our employees or contractors or requested or mandated by government authorities, may materially affect our ability to perform critical business functions. There can be no assurance that COVID-19 will not impact our plants, terminals or supply chain, or our ability to produce and export our product to our customers.

Furthermore, substantially all of our revenues currently are derived from customers in Europe, and our revenues historically have been heavily dependent on developments in the European markets. Disruptions to the worldwide economy in general, and the European marketplace in particular, caused by the spread of a highly infectious or contagious disease, such as COVID-19, could disrupt the business, activities and operations of our customers. Our business could face adverse impacts if our customers do not fulfill their contractual obligations to us because of COVID-19. As a general matter, our long-term off-take contracts require our customers to take or pay for our product, and our customers’ payment obligations generally do not qualify for force majeure relief; however, force majeure is a contract-specific mechanism and any potential relief available would depend on the particular jurisdiction as well as the relevant facts and circumstances.

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Additionally, we continue to increase our sales into Japan and other geographies. The impact of COVID-19 on Japan and other developing sales geographies, including potential closures of businesses, limitations on movements of individuals and goods, the imposition of other restrictive measures targeted at mitigating the spread of COVID-19 and any associated delays to current or future utility or other infrastructure projects, contract negotiations or legislation favorable to our industry or that of our customers, may materially delay or otherwise hamper our sales efforts in such geographies or otherwise adversely impact our growth. Moreover, we have historically financed our growth, such as acquisitions or drop-downs of wood pellet production plants and terminals, as well as expansion projects at our existing plants, with a combination of borrowings from our senior secured revolving credit facility and proceeds from public debt and equity financings. COVID-19 has disrupted debt and equity capital markets and could therefore restrict our access to such financing sources and increase our cost of capital, which could adversely impact our ability to consummate, or the returns associated with, our growth projects.

The extent to which COVID-19 impacts our business will depend on the severity, location and duration of the spread of COVID-19, the actions undertaken by government authorities and health officials to contain the virus or mitigate its impact and the actions undertaken by our management and employees as well as those of our customers and other business partners. Although it is not possible at this time to estimate the scope and severity of the impact that COVID-19 could have on our business, the continued spread of COVID-19, and the measures taken by us and various government authorities aimed at mitigating the impact of COVID-19, could adversely affect our financial condition, results of operations and cash flows and our ability to make distributions to unitholders.2020.

Item 6. Exhibits

The information required by this Item 6 is set forth in the Exhibit Index accompanying this Quarterly Report on Form 10‑Q and is incorporated herein by reference.

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~~Exhibit Index~~EXHIBIT INDEX


Exhibit Number	~~Description~~
	Exhibit
2.1		Contribution Agreement, dated June 3, 2021, by and among Enviva Development Holdings, LLC, Enviva, ~~Holdings, LP and Enviva Partners, LP dated March 21, 2019 (Exhibit 2.1, Form 8-K filed March 25, 2019, File No. 001-037363).~~
~~2.2~~	~~Contribution Agreement, dated as of June 18, 2020, by and among Enviva Development Holdings, LLC, Enviva Partners,~~ LP, and Enviva Holdings, LP (Exhibit 2.1, Form 8-K filed June ~~19, 2020,~~7, 2021, File No. 001-37363)
~~2.3~~ 3.1		Membership Interest Membership Interest Purchase and Sale Agreement, dated as of June 18, 2020, by and among Enviva Pellets Waycross Holdings, LLC (as assignee of Enviva Partners, LP), RWE Generation SE (as assignee of innogy SE) and innogy Renewables Beteiligungs GMBH (to be renamed RWE Renewables Beteiligungs GmbH) (Exhibit 2.2, Form 8-K filed June 19, 2020, File No. 001-37363)
~~3.1~~	Certificate of Limited Partnership of Enviva Partners, LP (Exhibit 3.1, Form S‑1 Registration Statement filed October 28, 2014, File No. ~~333-199625)~~333‑199625)
3.2		First Amended and Restated Agreement of Limited Partnership of Enviva Partners, LP, dated May 4, 2015, by Enviva Partners GP, LLC (Exhibit 3.1, Form ~~8-K~~8‑K filed May 4, 2015, File No. ~~001-37363)~~001‑37363)
3.3		Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of Enviva Partners, LP, effective as of December 18, 2017, by Enviva Partners GP, LLC (Exhibit 3.1, Form 8-K filed December 21, ~~2017, File No. 001-37363)~~2017)
3.4		Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Enviva Partners, LP, effective as of January 1, 2019 ~~(Exhibit~~(Exhibit 3.4, Form 10-K filed February 27, ~~2020, File No. 001-37363)~~
~~4.1~~	~~Registration Rights Agreement, dated as of June 23, 2020, by and among the Partnership and the Investors named therein (Exhibit 4.1, Form 8-K filed June 24, 2020, File No. 001-37363)~~
~~4.2~~	Indenture, dated as of December 9, 2019, by and among Enviva Partners, LP, Enviva Partners Finance Corp., the subsidiary guarantors party thereto, and Wilmington Trust, National Association, as trustee (incorporated by reference herein to Exhibit 4.1 to the Partnership’s Form 8-K filed on December 9, 2019, File No. 001-37363)
~~4.3~~	~~Form of 6.500% 2026 Notes (included in Exhibit 4.2)~~
~~4.4~~	Registration Rights Agreement, dated May 4, 2015, by and among Enviva Partners, LP, Enviva MLP Holdco, LLC and Enviva Cottondale Acquisition I, LLC (Exhibit 4.1, Form 8‑K filed May 4, 2015, File No. 001‑37363)
~~4.5~~	~~Registration Rights Agreement by and between Enviva Partners, LP and John Hancock Life Insurance Company (U.S.A.), dated April 1, 2019 (Exhibit 4.1, Form 10-Q filed August 8, 2019, File No. 001-37363)~~2020)
10.1			~~Common Unit Purchase~~Sixth Amendment to Credit Agreement, dated as of ~~June 18, 2020, by and among Enviva Partners, LP and the Purchasers named on Schedule A therein~~April 16, 2021 (Exhibit 10.1, Form 8-K filed ~~June 19, 2020,~~April 20, 2021, File No. 001-37363)
~~10.2~~ 10.2†			Purchase Agreement, dated as of June 29, 2020, by and among Enviva Partners, LP, Enviva Partners Finance Corp., the subsidiary guarantors party thereto and Barclays Capital Inc., as representative of the initial purchasers named therein (Exhibit 10.1, Form 8-K filed June 29, 2020, File No. 001-37363)
~~10.3~~	First Amendment and Issuing Bank Designation Agreement by and among the New Issuing Banks party thereto, Enviva Partners, LP and Barclays Bank plc, dated as of July 22, 2020 (Exhibit 10.1, Form 8-K filed July 24, 2020, File No. 001-37363)
~~10.4†~~	Management Services Agreement Fee Waiver, dated July 1, ~~2020,~~2021, by and among Enviva Partners, LP, Enviva Partners GP, LLC and the other parties named therein (Exhibit ~~10.4,~~10.1, Form ~~10-Q~~8-K filed ~~August 5, 2020,~~July 1, 2021, File No. 001-37363)
~~10.5†~~10.3†	Make-Whole Agreement, dated July 1, ~~2020,~~2021, by and between Enviva Holdings, LP and Enviva, LPLP. (Exhibit 10.~~(Exhibit 10.4,~~ 2 , Form ~~10-Q~~ 8-K filed ~~August 5, 2020,~~July 1, 2021, File No. 001-37363)
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the ~~Sarbanes-Oxley~~Sarbanes‑Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the ~~Sarbanes-Oxley~~Sarbanes‑Oxley Act of 2002
32.1**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the ~~Sarbanes-Oxley~~Sarbanes‑Oxley Act of 2002

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101	The following financial information from Enviva Partners, ~~LP.’s Quarterly~~LP’s Annual Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2020~~2021 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of ~~Operations,~~Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, ~~(Loss),~~ (iv) the Condensed Consolidated Statements of Changes in Partners’ Capital, (v) the Condensed Consolidated Statements of Cash Flows and (vi) Notes to the Condensed Consolidated Financial Statements.





104		Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)

____________________________________________

* Filed herewith.

** Furnished herewith.

† Management Contract or Compensatory Plan or ~~Arrangement.~~Arrangement

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, ~~thereunto~~hereunto duly authorized.

~~Date: November 4, 2020~~


	~~ENVIVA PARTNERS, LP~~

	ENVIVA PARTNERS, LP

	By:	Enviva Partners GP, LLC, as its sole general partner

Date: July 28, 2021	By:	/s/ SHAI S. EVEN
		~~Name:~~	Shai S. Even
		Title:	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

5139


	General Partner Interest		Limited Partners’ Capital						Accumulated Other Comprehensive Income		Noncontrolling Interest		Total Partners' Capital
			Common Units— Public			Common Units— Sponsor
			Units	Amount		Units	Amount
Partners' capital, December 31, 2019	$	(101,739)	19,870	$	300,184	13,586	$	82,300	$	23	$	(48,192)	$	232,576
Distributions to unitholders, distribution equivalent and incentive distribution rights	(3,289)		—	(14,798)		—	(9,172)		—		—		(27,259)
Issuance of units through Long-Term Incentive Plan	(3,356)		149	(371)		—	—		—		—		(3,727)
Non-cash Management Services Agreement expenses	3,484		—	2,158		—	—		—		—		5,642
Other comprehensive loss	—		—	—		—	—		(17)		—		(17)
Net income	3,289		—	2,585		—	1,759		—		—		7,633
Partners' capital, March 31, 2020	(101,611)		20,019	289,758		13,586	74,887		6		(48,192)		214,848
Distributions to unitholders, distribution equivalent and incentive distribution rights	(3,458)		—	(14,777)		—	(9,239)		—		—		(27,474)
Issuance of units through Long-Term Incentive Plan	(160)		6	17		—	—		—		—		(143)
Issuance of common units, net	—		6,154	190,813		—	—		—		—		190,813
Non-cash Management Services Agreement expenses	1,872		—	2,098		—	—		—		—		3,970
Other comprehensive loss	—		—	—		—	—		(5)		—		(5)
Net income	3,458		—	3,015		—	1,998		—		—		8,471
Partners' capital, June 30, 2020	(99,899)		26,179	470,924		13,586	67,646		$	1	(48,192)		390,480
Excess consideration over Enviva Pellets Greenwood, Holdings II, LLC net assets	(61,830)		—	—		—	—		—		—		(61,830)
Distributions to unitholders, distribution equivalent and incentive distribution rights	(7,471)		—	(21,354)		—	(10,394)		—		—		(39,219)
Issuance of units through Long-Term Incentive Plan	(63)		2	39		—	—		—		—		(24)
Issuance of common units, net	—		—	(228)		—	—		—		—		(228)
Non-cash Management Services Agreement expenses	9,512		—	2,299		—	—		—		—		11,811
Other comprehensive loss	—		—	—		—	—		(9)		—		(9)
Net income	7,471		—	(3,990)		—	(2,070)		—		—		1,411
Partners' capital September 30, 2020	$	(152,280)	26,181	$	447,690	13,586	$	55,182	$	(8)	$	(48,192)	$	302,392


	Nine Months Ended September 30, 2020		Year Ended December 31, 2019
Revenue	$	596,505	$	682
Net loss	(4,596)		(46,323)


	September 30, 2020		December 31, 2019
Raw materials	$	11,719	$	9,795
Consumable tooling	27,824		20,485
Finished goods	22,435		2,718
Total inventories	$	61,978	$	32,998


Year Ending December 31:
Remainder of 2020	$	3,011
2021	(1,433)
2022	(1,780)
2023	(1,911)
2024	(1,911)
Thereafter	(1,163)
Total	$	(5,187)


	September 30, 2020		December 31, 2019
Operating leases:
Operating lease right-of-use assets	$	52,417	$	32,830

Current portion of operating lease liabilities	$	3,506	$	1,439
Long-term operating lease liabilities	50,891		33,469
Total operating lease liabilities	$	54,397	$	34,908

Finance leases:
Property, plant and equipment, net	$	19,251	$	7,398

Current portion of long-term finance lease obligations	$	7,111	$	4,584
Long-term finance lease obligations	7,195		2,954
Total finance lease liabilities	$	14,306	$	7,538


		Three Months Ended September 30,				Nine Months Ended September 30,
Lease Cost	Classification	2020		2019		2020		2019
Operating lease cost:
Fixed lease cost	Cost of goods sold	$	1,502	$	1,269	$	4,008	$	3,546
Variable lease cost	Cost of goods sold	1		3		1		29
Short-term lease costs	Cost of goods sold	2,474		15		6,389		15
	Total operating lease costs	$	3,977	$	1,287	$	10,398	$	3,590
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	$	2,227	$	1,094	$	5,219	$	2,578
Variable lease cost	Cost of goods sold	53		4		169		4
Interest on lease liabilities	Interest expense	145		70		363		179
	Total finance lease costs	$	2,425	$	1,168	$	5,751	$	2,761
	Total lease costs	$	6,402	$	2,455	$	16,149	$	6,351


Years Ending December 31,	Operating Leases		Finance Leases		Total
Remainder of 2020	$	1,701	$	2,525	$	4,226
2021	6,756		6,061		12,817
2022	6,466		2,667		9,133
2023	6,718		1,577		8,295
2024	6,190		502		6,692
Thereafter	72,754		1,651		74,405
Total lease payments	100,585		14,983		115,568
Less: imputed interest	(46,188)		(677)		(46,865)
Total present value of lease liabilities	$	54,397	$	14,306	$	68,703


	Time-Based Phantom Units			Performance-Based Phantom Units			Total Affiliate Grant Phantom Units
	Units	Weighted-Average Grant Date Fair Value (per unit)(1)		Units	Weighted-Average Grant Date Fair Value (per unit)(1)		Units	Weighted-Average Grant Date Fair Value (per unit)(1)
Nonvested December 31, 2019	874,286	$	28.90	435,270	$	28.84	1,309,556	$	28.88
Granted	550,540	$	37.97	387,060	$	38.02	937,600	$	37.99
Forfeitures	(120,176)	$	32.97	(103,053)	$	30.78	(223,229)	$	31.96
Vested	(193,522)	$	25.49	(53,645)	$	25.39	(247,167)	$	25.47
Nonvested September 30, 2020	1,111,128	$	33.55	665,632	$	34.16	1,776,760	$	33.78


	Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020
	Common Units		General Partner		Total		Common Units		General Partner		Total
Distributions declared	$	30,821	$	7,869	$	38,690	$	84,100	$	18,798	$	102,898
Earnings less than distributions	(38,150)		0		(38,150)		(87,931)		0		(87,931)
Net (loss) income available to partners	$	(7,329)	$	7,869	$	540	$	(3,831)	$	18,798	$	14,967
Weighted-average units outstanding—basic and diluted	39,767						35,814
Net loss per limited partner unit—basic and diluted	$	(0.18)					$	(0.11)


	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
	Common Units		General Partner		Total		Common Units		General Partner		Total
Distributions declared	$	22,416	$	3,107	$	25,523	$	66,077	$	8,150	$	74,227
Earnings less than distributions	(17,275)		0		(17,275)		(79,925)		0		(79,925)
Net income (loss) available to partners	$	5,141	$	3,107	$	8,248	$	(13,848)	$	8,150	$	(5,698)
Weighted-average units outstanding—basic and diluted	33,457						31,230
Net income (loss) per limited partner unit—basic and diluted	$	0.15					$	(0.44)