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| ENVIVA PARTNERS, LP AND SUBSIDIARIES |
| Index to Unaudited Pro Forma Consolidated Financial Statements |
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| Page |
| Unaudited Pro Forma Consolidated Balance Sheet | |
| Unaudited Pro Forma Consolidated Statements of Operations for the Nine Months ended September 30, 2021 | |
| Unaudited Pro Forma Consolidated Statements of Operations for the Year ended December 31, 2020 | |
| Unaudited Pro Forma Consolidated Statements of Operations for the Year ended December 31, 2019 | |
| Unaudited Pro Forma Consolidated Statements of Operations for the Year ended December 31, 2018 | |
| Notes to Unaudited Pro Forma Consolidated Financial Statements | |
ENVIVA PARTNERS, LP AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Balance Sheet
September 30, 2021
(In thousands)
| | | | | | | | | | | | | | | | | |
| Enviva Holdings, LP | | Pro Forma
Adjustments | | Enviva Partners, LP
Pro Forma |
| Assets | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | $ | 334,311 | | | $ | — | | | $ | 334,311 | |
| Accounts receivable | 86,889 | | | — | | | 86,889 | |
| Other receivables | 14,657 | | | — | | | 14,657 | |
| Inventories | 58,538 | | | — | | | 58,538 | |
| Prepaid expenses and other current assets | 6,602 | | | — | | | 6,602 | |
| Total current assets | 500,997 | | | — | | | 500,997 | |
| Property, plant and equipment, net | 1,442,007 | | | — | | | 1,442,007 | |
| Operating lease right-of-use assets | 107,629 | | | — | | | 107,629 | |
| Goodwill | 99,660 | | | — | | | 99,660 | |
| Restricted cash | 1,717 | | | — | | | 1,717 | |
| Other long-term assets | 12,297 | | | — | | | 12,297 | |
| Total assets | $ | 2,164,307 | | | $ | — | | | $ | 2,164,307 | |
| Liabilities and Partners' Capital | | | | | |
| Current liabilities: | | | | | |
| Accounts payable | $ | 26,516 | | | $ | — | | | $ | 26,516 | |
| Related-party payables | 900 | | | — | | | 900 | |
| Accrued and other current liabilities | 159,862 | | | 15,301 | | (a) | 175,163 | |
| Interest payable | 13,564 | | | — | | | 13,564 | |
| Current portion of long-term debt and finance lease obligations | 12,955 | | | — | | | 12,955 | |
| Total current liabilities | 213,797 | | | 15,301 | | | 229,098 | |
| Long-term debt and finance lease obligations | 1,443,959 | | | — | | | 1,443,959 | |
| Long-term operating lease liabilities | 121,397 | | | — | | | 121,397 | |
| Deferred tax liabilities, net | 21,344 | | | — | | | 21,344 | |
| Other long-term liabilities | 37,062 | | | — | | | 37,062 | |
| Total liabilities | 1,837,559 | | | 15,301 | | | 1,852,860 | |
| Commitments and contingencies | | | | | |
| Partners' capital | | | | | |
| Total Enviva Holdings, LP or Enviva Partners, LP partners' capital | (182,263) | | | (15,301) | | (a) | |
| | | 556,705 | | (b) | 359,141 | |
| Noncontrolling interests | 509,011 | | | (556,705) | | (b) | (47,694) | |
| Total partners' capital | 326,748 | | | (15,301) | | | 311,447 | |
| Total liabilities and partners’ capital | $ | 2,164,307 | | | $ | — | | | $ | 2,164,307 | |
ENVIVA PARTNERS, LP AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months ended September 30, 2021
(In thousands, except per unit amounts)
| | | | | | | | | | | | | | | | | |
| Enviva Holdings, LP | | Pro Forma
Adjustments | | Enviva Partners, LP
Pro Forma |
| Product sales | $ | 725,470 | | | $ | — | | | $ | 725,470 | |
| Other revenue | 39,940 | | | — | | | 39,940 | |
| Net revenue | 765,410 | | | — | | | 765,410 | |
| Cost of goods sold, excluding depreciation and amortization | 639,460 | | | — | | | 639,460 | |
| Depreciation and amortization | 63,823 | | | — | | | 63,823 | |
| Total cost of goods sold | 703,283 | | | — | | | 703,283 | |
| Gross margin | 62,127 | | | — | | | 62,127 | |
| General, administrative and development expenses | 102,913 | | | 11,814 | | (e) | 114,727 | |
| Related-party monitoring fee | 1,047 | | | — | | | 1,047 | |
| Loss from operations | (41,833) | | | (11,814) | | | (53,647) | |
| Other (expense) income: | | | | | |
| Interest expense | (46,321) | | | — | | | (46,321) | |
| Other income, net | 471 | | | — | | | 471 | |
| Total other expense, net | (45,850) | | | — | | | (45,850) | |
| Loss from operations before income tax benefit | (87,683) | | | (11,814) | | | (99,497) | |
| Income tax benefit | (3,834) | | | — | | | (3,834) | |
| Net loss | $ | (83,849) | | | $ | (11,814) | | | $ | (95,663) | |
| | | | | |
| Enviva Partners, LP | | Pro Forma
Adjustments | | Enviva Partners, LP
Pro Forma |
| Net loss per Enviva Partners, LP limited partner common unit: | | | | | |
| Basic and diluted | $ | (0.77) | | | $ | (0.28) | | (f) | |
| | | (2.02) | | (g) | |
| | | 0.73 | | (h) | |
| | | — | | (k) | |
| | | 0.67 | | (i), (j) | $ | (1.67) | |
| Weighted-average number of Enviva Partners, LP limited partner common units outstanding: | | | | | |
| Basic and diluted | 42,079 | | | 16,000 | | (i) | |
| | | 908 | | (j) | 58,987 | |
ENVIVA PARTNERS, LP AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Operations
Year ended December 31, 2020
(In thousands, except per unit amounts)
| | | | | | | | | | | | | | | | | |
| Enviva Holdings, LP | | Pro Forma
Adjustments | | Enviva Partners, LP
Pro Forma |
| Product sales | $ | 830,528 | | | $ | — | | | $ | 830,528 | |
| Other revenue | 44,434 | | | — | | | 44,434 | |
| Net revenue | 874,962 | | | — | | | 874,962 | |
| Cost of goods sold, excluding depreciation and amortization | 719,901 | | | — | | | 719,901 | |
| Depreciation and amortization | 82,523 | | | — | | | 82,523 | |
| Total cost of goods sold | 802,424 | | | — | | | 802,424 | |
| Gross margin | 72,538 | | | — | | | 72,538 | |
| General, administrative and development expenses | 131,779 | | | 15,301 | | (c) | |
| | | 17,391 | | (d) | |
| | | 15,752 | | (e) | 180,223 | |
| Related-party monitoring fee | 1,189 | | | — | | | 1,189 | |
| Loss from operations | (60,430) | | | (48,444) | | | (108,874) | |
| Other (expense) income: | | | | | |
| Interest expense | (45,996) | | | — | | | (45,996) | |
| Other income, net | 271 | | | — | | | 271 | |
| Total other expense, net | (45,725) | | | — | | | (45,725) | |
| Loss from operations before income tax expense | (106,155) | | | (48,444) | | | (154,599) | |
| Income tax expense | 169 | | | — | | | 169 | |
| Net loss | $ | (106,324) | | | $ | (48,444) | | | $ | (154,768) | |
| | | | | |
| Enviva Partners, LP | | Pro Forma
Adjustments | | Enviva Partners, LP
Pro Forma |
| Net loss per Enviva Partners, LP limited partner common unit: | | | | | |
| Basic and diluted | $ | (0.36) | | | $ | (1.32) | | (f) | |
| | | (3.35) | | (g) | |
| | | 0.73 | | (h) | |
| | | — | | (k) | |
| | | 1.32 | | (i), (j) | $ | (2.98) | |
| Weighted-average number of Enviva Partners, LP limited partner common units outstanding: | | | | | |
| Basic and diluted | 36,813 | | | 16,000 | | (i) | |
| | | 321 | | (j) | 53,134 | |
ENVIVA PARTNERS, LP AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Operations
Year ended December 31, 2019
(In thousands, except per unit amounts)
| | | | | | | | | | | | | | | | | |
| Enviva Holdings, LP | | Pro Forma
Adjustments | | Enviva Partners, LP
Pro Forma |
| Product sales | $ | 674,251 | | | $ | — | | | $ | 674,251 | |
| Other revenue | 9,317 | | | — | | | 9,317 | |
| Net revenue | 683,568 | | | — | | | 683,568 | |
| Cost of goods sold, excluding depreciation and amortization | 605,447 | | | — | | | 605,447 | |
| Depreciation and amortization | 61,987 | | | — | | | 61,987 | |
| Total cost of goods sold | 667,434 | | | — | | | 667,434 | |
| Gross margin | 16,134 | | | — | | | 16,134 | |
| General, administrative and development expenses | 101,270 | | | — | | | 101,270 | |
| Related-party monitoring fee | 1,106 | | | — | | | 1,106 | |
| Loss from operations | (86,242) | | | — | | | (86,242) | |
| Other (expense) income: | | | | | |
| Interest expense | (42,042) | | | — | | | (42,042) | |
| Early retirement of debt obligation | (9,042) | | | — | | | (9,042) | |
| Other income, net | 410 | | | — | | | 410 | |
| Total other expense, net | (50,674) | | | — | | | (50,674) | |
| Loss from operations before income tax benefit | (136,916) | | | — | | | (136,916) | |
| Income tax benefit | (1,932) | | | — | | | (1,932) | |
| Net loss | $ | (134,984) | | | $ | — | | | $ | (134,984) | |
| | | | | |
| Enviva Partners, LP | | Pro Forma
Adjustments | | Enviva Partners, LP
Pro Forma |
| Net loss per Enviva Partners, LP limited partner common unit: | | | | | |
| Basic and diluted | $ | (0.54) | | | $ | — | | | $ | (0.54) | |
| Weighted-average number of Enviva Partners, LP limited partner common units outstanding: | | | | | |
| Basic and diluted | 31,791 | | | — | | | 31,791 | |
ENVIVA PARTNERS, LP AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Operations
Year ended December 31, 2018
(In thousands, except per unit amounts)
| | | | | | | | | | | | | | | | | |
| Enviva Holdings, LP | | Pro Forma
Adjustments | | Enviva Partners, LP
Pro Forma |
| Product sales | $ | 564,010 | | | $ | — | | | $ | 564,010 | |
| Other revenue | 6,186 | | | — | | | 6,186 | |
| Net revenue | 570,196 | | | — | | | 570,196 | |
| Cost of goods sold, excluding depreciation and amortization | 476,929 | | | — | | | 476,929 | |
| Loss on disposal of assets | 2,397 | | | — | | | 2,397 | |
| Depreciation and amortization | 50,281 | | | — | | | 50,281 | |
| Total cost of goods sold | 529,607 | | | — | | | 529,607 | |
| Gross margin | 40,589 | | | — | | | 40,589 | |
| General, administrative and development expenses | 78,313 | | | — | | | 78,313 | |
| Disposal and impairment of assets held for sale | 94 | | | — | | | 94 | |
| Related-party monitoring fee | 1,106 | | | — | | | 1,106 | |
| Loss from operations | (38,924) | | | — | | | (38,924) | |
| Other expense: | | | | | |
| Interest expense | (38,760) | | | — | | | (38,760) | |
| Early retirement of debt obligation | (751) | | | — | | | (751) | |
| Other expense, net | (1,664) | | | — | | | (1,664) | |
| Total other expense, net | (41,175) | | | — | | | (41,175) | |
| Loss from operations before income tax benefit | (80,099) | | | — | | | (80,099) | |
| Income tax benefit | (3,154) | | | — | | | (3,154) | |
| Net loss | $ | (76,945) | | | $ | — | | | $ | (76,945) | |
| | | | | |
| Enviva Partners, LP | | Pro Forma
Adjustments | | Enviva Partners, LP
Pro Forma |
| Net income per Enviva Partners, LP limited partner common unit: | | | | | |
| Basic and diluted | $ | 0.04 | | | $ | — | | | $ | 0.04 | |
| Net income per Enviva Partners, LP limited partner subordinated unit: | | | | | |
| Basic and diluted | $ | 0.04 | | | $ | — | | | $ | 0.04 | |
| Weighted-average number of Enviva Partners, LP limited partner units outstanding: | | | | | |
| Common-basic | 21,533 | | | — | | | 21,533 | |
| Common-diluted | 22,553 | | | — | | | 22,553 | |
| Subordinated-basic and diluted | 4,893 | | | — | | | 4,893 | |
ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Unaudited Pro Forma Combined Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited)
(1) Basis of Presentation
The unaudited pro forma consolidated financial statements of Enviva Partners, LP and subsidiaries (“we,” “us,” “our,” “EVA,” or the “Partnership”) consist of a consolidated balance sheet at September 30, 2021 and consolidated statements of operations for the nine months ended September 30, 2021 and the years ended December 31, 2020, 2019 and 2018, which reflect the acquisition of all of the limited partner interests in Enviva Holdings, LP (“Holdings”) and all of the limited liability company interests in Enviva Holdings GP, LLC and general partner of Holdings (“Holdings GP”) on October 14, 2021 and the incentive distribution rights (“IDRs”) directly held by Enviva MLP Holdco, LLC, a wholly owned subsidiary of Holdings (“MLP Holdco”), were cancelled and eliminated (collectively, the “Drop Merger”). We were a consolidated subsidiary of Holdings prior to the Drop Merger. As such, our pro forma financial statements begin with the financial statements of Holdings which include the financial statements of EVA after elimination of intercompany balances. Following the Drop Merger, we directly or indirectly won a 100% equity interest in Holdings and Holdings GP.
The unaudited pro forma consolidated financial statements included herein have been derived from the following historical financial statements:
•the audited consolidated statements of operations of Holdings for the years ended December 31, 2020, 2019 and 2018, which include the audited consolidated statements of operations of EVA for the years ended December 31, 2020, 2019 and 2018 after elimination of intercompany balances; and
•the unaudited condensed consolidated financial statements of Holdings at September 30, 2021 and for the nine months ended September 30, 2021, which include the unaudited condensed consolidated financial statements of EVA at September 30, 2021 and for the nine months ended September 30, 2021 after elimination of intercompany balances.
The unaudited condensed consolidated statement of operations of the Partnership for the nine months ended September 30, 2021 includes approximately $1.9 million of general and administrative expense for transaction costs that will not recur beyond October 14, 2022, which is 12 months after the Drop Merger closing on October 14, 2021.
In connection with the Drop Merger, the existing management service agreements fee waivers and other Holdings support agreements associated with our earlier acquisitions of the Greenwood and Lucedale plants and Pascagoula terminal were consolidated, fixed and novated to certain of the former owners of our former sponsor. As a result, under the consolidated support agreement, we will receive payments in an aggregate amount of $55.5 million, which are expected during each quarter from the first quarter of 2022 through the first quarter of 2024. This is not reflected in a pro forma adjustment as cash will be received at dates after the Drop Merger with no impact to earnings.
The unaudited pro forma consolidated balance sheet has been prepared as if the Drop Merger had occurred on September 30, 2021. The unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2021 and for the years ended December 31, 2020, 2019 and 2018 have been prepared as if the Drop Merger had occurred on January 1, 2020. The unaudited pro forma consolidated financial statements should be read in conjunction with the related notes, which are included herein, the financial statements and notes included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2021, the audited financial statements of Holdings as of and for the years ended December 31, 2020 and 2019 and the unaudited condensed consolidated financial statements of Holdings at September 30, 2021 and for the nine months ended September 30, 2021.
The pro forma consolidated financial statements do not necessarily reflect what the Partnership’s consolidated financial condition or results of operations would have been had the acquisition and the related financing occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the Partnership. Our actual financial condition and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
Drop Merger
On October 14, 2021, in consideration for the Drop Merger, we issued 16.0 million common units to the limited partners of Holdings (the “Holdings Limited Partners”), which were comprised of Riverstone Echo Continuation Holdings, L.P. (the
ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Unaudited Pro Forma Combined Financial Statements (Continued)
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited)
“Continuation Fund”), Riverstone Echo Rollover Holdings, L.P. (the “Rollover Fund”), and certain members of management. Of the 16.0 million common units issued, the Holdings Limited Partners committed to reinvest the distributions earned on 9 million common units into EVA limited partner units (the “DRIP units”).
As a result of the Drop Merger, we acquired certain assets under development, including planned wood pellet production plants, as well as off-take contracts for such plants already executed or in varying stages of negotiation. We also cancelled and eliminated all of our outstanding IDRs.
(2) Pro Forma Adjustments and Assumptions
The pro forma adjustments are based upon currently available information and certain estimates and assumptions. The actual effect of the transactions ultimately may differ from the pro forma adjustments included herein. However, management believes that the assumptions used to prepare the pro forma adjustments provide a reasonable basis for presenting the significant effects of the transactions as currently contemplated and that the pro forma adjustments are factually supportable, give appropriate effect to the expected impact of events that are directly attributable to the transactions, and reflect those items expected to have a continuing impact on the Partnership. The pro forma financial information reflects all adjustments that are, in the opinion of management, necessary to a fair statement of the pro forma financial information presented. The unaudited pro forma consolidated financial statements may not be indicative of the results that actually would have occurred if the Partnership had completed the transactions on the dates indicated or that could be achieved in the future.
The Drop Merger was deemed a transaction among entities under common control and accounted for as a business combination. As a result, our historical financial statements will be recast to reflect the net assets of Holdings acquired and the results of operations of Holdings as if the Drop Merger occurred at the beginning of the periods presented. The net assets acquired were consolidated at the historical carrying amounts for Holdings.
Adjustments to the Unaudited Pro Forma Consolidated Balance Sheet:
(a) Reflects $15.3 million of transaction costs incurred or estimated to be incurred subsequent to September 30, 2021.
(b) Reflects the reclassification of noncontrolling interests in Enviva Partners, LP reported by Enviva Holdings, LP.
Adjustments to the Unaudited Pro Forma Consolidated Statements of Operations:
(c) Reflects transaction costs incurred or estimated to be incurred subsequent to September 30, 2021. Transaction costs are estimated to total approximately $17.2 million, including $1.9 million incurred and expensed during the nine months ended September 30, 2021.
(d) Reflects noncash unit-based compensation expense for the fair value of unvested Series B units of Holdings whose vesting was accelerated as a result of the Drop Merger.
(e) Reflects noncash unit-based compensation expense related to restricted units of EVA issued to management of Holdings based on the schedule for the restricted units to become unrestricted as if granted on January 1, 2020.
(f) Reflects the impact to net income (loss) per Enviva Partners, LP limited partner common unit from the above adjustments to the unaudited pro forma consolidated statements of operations.
(g) Reflects the impact to net income (loss) per Enviva Partners, LP limited partner common unit from the excess of the historical net loss of Enviva Holdings, LP over the historical net income or loss of Enviva Partners, LP.
(h) Reflects the impact to net income (loss) per Enviva Partners, LP limited partner common unit assuming the cancellation and elimination of IDRs as part of the Drop Merger occurred as of January 1, 2020 through reversal of the historical impact to our earnings per common unit of the associated quarterly EVA cash distributions to the holder of the IDRs from before the Drop Merger.
(i) Reflects the impact to net income (loss) per Enviva Partners, LP limited partner common unit assuming the issuance of 16.0 million EVA common units in consideration for the Drop Merger occurred as of January 1, 2020.
ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Unaudited Pro Forma Combined Financial Statements (Continued)
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited)
(j) Reflects the impact to net income (loss) per Enviva Partners, LP limited partner common unit related to additional EVA common units issued to holders of the DRIP units.
(k) Reflects the impact to net income (loss) per Enviva Partners, LP limited partner common unit assuming the distributions historically declared by EVA per EVA common unit were also paid to holders of the non-DRIP units issued in connection with the Drop Merger. No adjustments were made related to the DRIP units, as these units will not earn cash distributions.
