UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended June 30, ~~2019~~2020



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

For the transition period from _____ to _____

Commission file number: 001-37363

Enviva Partners, LP

(Exact name of registrant as specified in its charter)



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

7200 Wisconsin ~~Ave,~~ Ave.

Suite 1000

Bethesda,

20814

(Address of principal executive offices)

~~20814~~

(Zip code)

~~(301)~~


(301)			657-5560

(Registrant’s telephone number, including area code)

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



Title of each class	Trading Symbol(s)	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 July 31, ~~2019, 33,456,811~~2020, 39,765,192 common units were outstanding.

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ENVIVA PARTNERS, LP

QUARTERLY REPORT ON FORM ~~10‑Q~~10-Q

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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~~“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~~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~~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~~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~~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 third-party acquisitions, including the associated contracts, or to realize the anticipated benefits of such acquisitions;

•failure of ~~the Partnership’s~~our customers, vendors and shipping partners to pay or perform their contractual obligations to ~~the Partnership;~~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;

~~our inability to complete acquisitions, including acquisitions from our sponsor and joint ventures,~~•unanticipated ground, grade or ~~to realize the anticipated benefits of such acquisitions;~~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 ~~timely~~ acquire or maintain necessary permits or rights for our production, transportation or terminaling ~~operations as well as expenditures associated therewith;~~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 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;

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

•our inability to borrow funds and access capital ~~markets.~~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, ~~2018.~~2019 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: any organic biological material derived from living organisms that stores energy from the sun.

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

~~net calorific value: commonly used in the power industry as the means of expressing fuel energy.~~

off-take contract: an agreement concerning the purchase and sale of a certain volume 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: wood pellets meeting minimum requirements generally specified by industrial consumers and produced and sold in sufficient quantities to satisfy industrial-scale consumption.

wood 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: energy-dense, low-moisture and ~~uniformly-sized~~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)


	June 30, 2019			December 31, 2018				June 30, 2020		December 31, 2019
	(unaudited)							(unaudited)
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	5,005		$	2,460		Cash and cash equivalents	$	98,101	$	9,053
Accounts receivable	61,818			54,794			Accounts receivable	82,543		72,421
Insurance receivables	2,258			5,140
Related-party receivables	5,687			1,392
Related-party receivables, net							Related-party receivables, net	8,625		—
Inventories	31,292			31,490			Inventories	39,723		32,998
Prepaid expenses and other current assets	3,069			2,235			Prepaid expenses and other current assets	8,932		5,617
Total current assets	109,129			97,511			Total current assets	237,924		120,089

Property, plant and equipment - in service, net	525,474			542,635
Construction in progress	198,616			14,393
Total property, plant and equipment, net	724,090			557,028

Operating lease right-of-use assets, net	33,877			—
Property, plant and equipment, net							Property, plant and equipment, net	784,523		751,780
Operating lease right-of-use assets							Operating lease right-of-use assets	31,737		32,830
Goodwill	85,615			85,615			Goodwill	85,615		85,615
Other long-term assets	6,858			8,616			Other long-term assets	10,247		4,504
Total assets	$	959,569		$	748,770		Total assets	$	1,150,046	$	994,818

Liabilities and Partners’ Capital							Liabilities and Partners’ Capital
Current liabilities:							Current liabilities:
Accounts payable	$	15,648		$	15,551		Accounts payable	$	20,358	$	18,985
Related-party payables and accrued liabilities	29,473			28,225
Deferred consideration for drop-downs due to related party	40,000			74,000
Related-party payables, net							Related-party payables, net	—		304
Deferred consideration for drop-down due to related-party							Deferred consideration for drop-down due to related-party	—		40,000
Accrued and other current liabilities	52,788			41,400			Accrued and other current liabilities	75,346		59,066
Current portion of interest payable	5,512			5,434			Current portion of interest payable	22,996		3,427
Current portion of long-term debt and finance lease obligations	2,733			2,722			Current portion of long-term debt and finance lease obligations	7,558		6,590
Total current liabilities	146,154			167,332			Total current liabilities	126,258		128,372
Long-term debt and finance lease obligations	523,348			429,933			Long-term debt and finance lease obligations	597,510		596,430
Long-term operating lease liabilities	33,849			—			Long-term operating lease liabilities	32,980		33,469
Long-term interest payable	1,070			1,010
Other long-term liabilities	1,991			3,779			Other long-term liabilities	2,818		3,971
Total liabilities	706,412			602,054			Total liabilities	759,566		762,242
Commitments and contingencies							Commitments and contingencies

Partners’ capital:							Partners’ capital:
Limited partners:							Limited partners:
Common unitholders—public (19,870,436 and 14,573,452 units issued and outstanding at June 30, 2019 and December 31, 2018, respectively)	323,883			207,612
Common unitholder—sponsor (13,586,375 and 11,905,138 units issued and outstanding at June 30, 2019 and December 31, 2018, respectively)	98,785			72,352
Common unitholders—public (26,178,817 and 19,870,436 units issued and outstanding at June 30, 2020 and December 31, 2019, respectively)							Common unitholders—public (26,178,817 and 19,870,436 units issued and outstanding at June 30, 2020 and December 31, 2019, respectively)	470,924		300,184
Common unitholder—sponsor (13,586,375 units issued and outstanding at June 30, 2020 and December 31, 2019)							Common unitholder—sponsor (13,586,375 units issued and outstanding at June 30, 2020 and December 31, 2019)	67,646		82,300
General partner (no outstanding units)	(121,422		)	(133,687		)	General partner (no outstanding units)	(99,899)		(101,739)
Accumulated other comprehensive income	103			439			Accumulated other comprehensive income	1		23
Total Enviva Partners, LP partners' capital	301,349			146,716
Total Enviva Partners, LP partners’ capital							Total Enviva Partners, LP partners’ capital	438,672		280,768
Noncontrolling interest	(48,192		)	—			Noncontrolling interest	(48,192)		(48,192)
Total partners’ capital	253,157			146,716
Total partners' capital							Total partners' capital	390,480		232,576
Total liabilities and partners’ capital	$	959,569		$	748,770		Total liabilities and partners’ capital	$	1,150,046	$	994,818

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per unit amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018				2020		2019		2020		2019
Product sales	$	167,202		$	133,168		$	323,801		$	255,490		Product sales	$	155,651	$	167,202	$	353,504	$	323,801
Other revenue ⁽¹⁾	877			2,428			2,647			5,430			Other revenue ⁽¹⁾	12,061		877		18,685		2,647
Net revenue	168,079			135,596			326,448			260,920			Net revenue	167,712		168,079		372,189		326,448
Cost of goods sold ⁽¹⁾	140,476			105,967			277,868			227,005			Cost of goods sold ⁽¹⁾	125,047		140,476		288,577		277,868
Depreciation and amortization	11,096			9,818			22,166			19,122			Depreciation and amortization	14,986		11,096		28,626		22,166
Total cost of goods sold	151,572			115,785			300,034			246,127			Total cost of goods sold	140,033		151,572		317,203		300,034
Gross margin	16,507			19,811			26,414			14,793			Gross margin	27,679		16,507		54,986		26,414
General and administrative expenses	2,241			3,829			7,865			6,577			General and administrative expenses	2,096		1,767		3,859		5,308
Related-party management services agreement fee	8,789			3,458			13,002			7,514
Related-party management services agreement fees													Related-party management services agreement fees	6,947		9,263		14,636		15,559
Total general and administrative expenses	11,030			7,287			20,867			14,091			Total general and administrative expenses	9,043		11,030		18,495		20,867
Income from operations	5,477			12,524			5,547			702			Income from operations	18,636		5,477		36,491		5,547
Other income (expense):
Other (expense) income:													Other (expense) income:
Interest expense	(9,196		)	(9,047		)	(18,829		)	(17,692		)	Interest expense	(10,124)		(9,196)		(20,518)		(18,829)
Other (expense) income, net	(82		)	67			558			1,199			Other (expense) income, net	(41)		(82)		131		558
Total other expense, net	(9,278		)	(8,980		)	(18,271		)	(16,493		)	Total other expense, net	(10,165)		(9,278)		(20,387)		(18,271)
Net (loss) income	$	(3,801	)	$	3,544		$	(12,724	)	$	(15,791	)
Net (loss) income per limited partner common unit:
Net income (loss)													Net income (loss)	$	8,471	$	(3,801)	$	16,104	$	(12,724)
Net income (loss) per limited partner common unit:													Net income (loss) per limited partner common unit:
Basic and diluted	$	(0.20	)	$	0.08		$	(0.59	)	$	(0.70	)	Basic and diluted	$	—	$	(0.20)	$	0.10	$	(0.59)
Net (loss) income per limited partner subordinated unit:

Weighted-average number of limited partner common units outstanding:													Weighted-average number of limited partner common units outstanding:
Basic and diluted	$	—		$	0.08		$	—		$	(0.70	)	Basic and diluted	34,082		33,400		33,816		30,098
Weighted-average number of limited partner units outstanding:
Common—basic	33,400			18,597			30,098			16,518
Common—diluted	33,400			19,728			30,098			16,518
Subordinated—basic and diluted	—			7,804			—			9,855

⁽¹⁾ See Note 13, Related-Party Transactions
⁽¹⁾ See Note 12, Related-Party Transactions													⁽¹⁾ See Note 12, 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) ~~Income~~

(In thousands)

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Net (loss) income $ (3,801 ) $ 3,544
$ (12,724 ) $ (15,791 )
Other comprehensive (loss) income:
Net unrealized (losses) gains on cash flow hedges (106 ) 4,365
(161 ) 3,037
Reclassification of net gains realized into net (loss) income (86 ) (64 ) (193 ) (63 )
Total other comprehensive (loss) income (192 ) 4,301
(354 ) 2,974
Total comprehensive (loss) income $ (3,993 ) $ 7,845
$ (13,078 ) $ (12,817 )


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income (loss)	$	8,471	$	(3,801)	$	16,104	$	(12,724)
Other comprehensive income (loss):
Net unrealized losses on cash flow hedges	—		(106)		—		(161)
Reclassification of net gains on cash flow hedges realized into net income (loss)	(2)		(86)		(22)		(193)
Currency translation adjustment	(3)		—		—		—
Total other comprehensive loss	(5)		(192)		(22)		(354)
Total comprehensive income (loss)	$	8,466	$	(3,993)	$	16,082	$	(13,078)

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated ~~Statement~~Statements of Changes in Partners’ Capital

(In thousands)

(Unaudited)

General
Partner
Interest Limited Partners’ Capital Accumulated
Other
Comprehensive
Income Non-controlling 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
—
—
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 its 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 First JV Drop-Down —
—
—
1,681
50,000
—
—
50,000
Non-cash Management Services Agreement expenses 11,226
—
1,013
—
—
—
—
12,239
Reimbursable charges 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


	General Partner Interest		Limited Partners’ Capital																Accumulated Other Comprehensive Income	Non-Controlling 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

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

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

(In thousands)

(Unaudited)


																									General Partner Interest		Limited Partners’ Capital																Accumulated Other Comprehensive Loss	Non-controlling interest		Total Partners' Capital
	General Partner Interest			Limited Partners’ Capital														Accumulated Other Comprehensive Loss			Total Partners' Capital									Common Units— Public								Common Units— Sponsor
				Common Units— Public				Common Units— Sponsor					Subordinated Units— Sponsor																	Units		Amount			Units			Amount							Total Partners' Capital
				Units	Amount			Units		Amount			Units		Amount
Partners' capital, December 31, 2017	$	(128,569	)	13,073	$	224,027		1,347		$	16,050		11,905		$	101,901		$	(3,040	)	$	210,369
Partners’ capital, December 31, 2018																								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	(1,130		)	—	(8,833		)	—		(785		)	—		(7,381		)	—			(18,129		)	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		)	99	(164		)	(82	)	(1,301		)	—		—			—			(3,594		)	Issuance of units through Long-Term Incentive Plan	(2,129)		94	659			—		—			—			—		(1,470)
Issuance of common units, net	—			8	241			—		—			—		—			—			241			Issuance of common units, net	—		3,509	96,661			—		—			—			—		96,661
Non-cash Management Services Agreement expenses	102			—	931			—		—			—		—			—			1,033			Non-cash Management Services Agreement expenses	136		—	2,072			—		—			—			—		2,208
Cumulative effect of accounting change - derivative instruments																								Cumulative effect of accounting change - derivative instruments	—		—	(10)			—		(8)			18			—		—
Other comprehensive loss	—			—	—			—		—			—		—			(1,327		)	(1,327		)	Other comprehensive loss	—		—	—			—		—			(162)			—		(162)
Net income (loss)	1,130			—	(10,233		)	—		(983		)	—		(9,249		)	—			(19,335		)	Net income (loss)	1,671		—	(5,880)			—		(4,714)			—			—		(8,923)
Partners' capital, March 31, 2018	(130,596		)	13,180	205,969			1,265		12,981			11,905		85,271			(4,367		)	169,258
Partners’ capital, March 31, 2019																								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																								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	(1,264		)	—	(9,750		)	—		—			—		(7,441		)	—			(18,455		)	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	(3,435		)	122	723			—		—			—		—			—			(2,712		)	Issuance of units through Long-Term Incentive Plan	247		2	(287)			—		—			—			—		(40)
Sale of common units	—			1,265	13,335			(1,265	)	(13,335		)	—		—			—			—
Conversion of subordinated units to common units	—			—	—			11,905		78,504			(11,905	)	(78,504		)	—			—
Issuance of common units, net																								Issuance of common units, net	—		1,692	49,641			—		—			—			—		49,641
Issuance of units associated with the Hamlet Drop-Down																								Issuance of units associated with the Hamlet Drop-Down	—		—	—			1,681		50,000			—			—		50,000
Non-cash Management Services Agreement expenses	210			—	2,480			—		—			—		—			—			2,690			Non-cash Management Services Agreement expenses	11,226		—	1,013			—		—			—			—		12,239
Other comprehensive income	—			—	—			—		—			—		—			4,301			4,301
Reimbursable amounts under Make-Whole Agreement																								Reimbursable amounts under Make-Whole Agreement	1,502		—	—			—		—			—			—		1,502
Other comprehensive loss																								Other comprehensive loss	—		—	—			—		—			(192)			—		(192)
Net income (loss)	1,264			—	1,252			—		354			—		674			—			3,544			Net income (loss)	2,271		—	(3,609)			—		(2,463)			—			—		(3,801)
Partners' capital, June 30, 2018	$	(133,821	)	14,567	$	214,009		11,905		$	78,504		—		$	—		$	(66	)	$	158,626
Partners’ capital, June 30, 2019																								Partners’ capital, June 30, 2019	$	(121,422)	19,870	$	323,883		13,586		$	98,785		$	103		$	(48,192)	$	253,157

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)


	Six Months ended June 30,							Six Months Ended June 30,
	2019			2018				2020		2019
Cash flows from operating activities:							Cash flows from operating activities:
Net loss	$	(12,724	)	$	(15,791	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net income (loss)							Net income (loss)	$	16,104	$	(12,724)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:							Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	22,456			19,439			Depreciation and amortization	29,204		22,456
MSA Fee Waivers	11,046			—			MSA Fee Waivers	4,757		11,046
Amortization of debt issuance costs, debt premium and original issue discounts	595			548			Amortization of debt issuance costs, debt premium and original issue discounts	813		595
Loss on disposal of assets	350			244			Loss on disposal of assets	760		350
Unit-based compensation	3,485			3,823			Unit-based compensation	4,256		3,485
Fair value changes in derivatives	(346		)	(2,923		)	Fair value changes in derivatives	(5,347)		(346)
Unrealized loss on foreign currency transactions, net	29			29
Unrealized (losses) gains on foreign currency transactions, net							Unrealized (losses) gains on foreign currency transactions, net	(138)		29
Change in operating assets and liabilities:							Change in operating assets and liabilities:
Accounts and insurance receivables	(4,167		)	33,806			Accounts and insurance receivables	(11,406)		(4,167)
Related-party receivables	(2,536		)	66			Related-party receivables	(2,843)		(2,536)
Prepaid expenses and other current and long-term assets	(340		)	(297		)	Prepaid expenses and other current and long-term assets	(14)		(340)
Inventories	(18		)	(12,021		)	Inventories	(6,270)		(18)
Derivatives	563			(947		)	Derivatives	(792)		563
Accounts payable, accrued liabilities and other current liabilities	(7,079		)	8,436			Accounts payable, accrued liabilities and other current liabilities	11,771		(7,079)
Related-party payables and accrued liabilities	(356		)	(3,445		)
Related-party payables							Related-party payables	—		(356)
Accrued interest	(578		)	60			Accrued interest	17,718		(578)
Deferred revenue							Deferred revenue	(3,152)		—
Operating lease liabilities	(2,472		)	—			Operating lease liabilities	(2,169)		(2,472)
Other long-term liabilities	(346		)	206			Other long-term liabilities	406		(346)
Net cash provided by operating activities	7,562			31,233			Net cash provided by operating activities	53,658		7,562
Cash flows from investing activities:							Cash flows from investing activities:
Purchases of property, plant and equipment	(49,892		)	(5,879		)	Purchases of property, plant and equipment	(58,839)		(49,892)
Payment in relation to the Enviva Wilmington Holdings, LLC Drop-Down	(74,700		)	—
Insurance proceeds from property loss	—			1,130
Payment in relation to the Hamlet Drop-Down							Payment in relation to the Hamlet Drop-Down	—		(74,700)
Other							Other	(3,769)		—
Net cash used in investing activities	(124,592		)	(4,749		)	Net cash used in investing activities	(62,608)		(124,592)
Cash flows from financing activities:							Cash flows from financing activities:
Proceeds from long-term debt and finance lease obligations, net	92,248			27,016
Proceeds from senior secured revolving credit facility, net							Proceeds from senior secured revolving credit facility, net	—		93,500
Principal payments on other long-term debt and finance lease obligations							Principal payments on other long-term debt and finance lease obligations	(2,081)		(1,252)
Cash paid related to debt issuance and deferred offering costs							Cash paid related to debt issuance and deferred offering costs	(1,310)		—
Proceeds from common unit issuances, net	96,970			241			Proceeds from common unit issuances, net	199,990		96,970
Payment of deferred consideration for Enviva Port of Wilmington, LLC Drop-Down	(24,300		)	—
Payment of deferred consideration for the Wilmington Drop-Down							Payment of deferred consideration for the Wilmington Drop-Down	—		(24,300)
Payments in relation to the Hamlet Drop-Down							Payments in relation to the Hamlet Drop-Down	(40,000)		—
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(43,473		)	(36,469		)	Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(54,874)		(43,473)
Payment to General Partner to purchase affiliate common units for Long-Term Incentive Plan vesting	—			(2,341		)
Payment for withholding tax associated with Long-Term Incentive Plan vesting	(1,870		)	(1,665		)	Payment for withholding tax associated with Long-Term Incentive Plan vesting	(3,727)		(1,870)
Net cash provided by (used in) financing activities	119,575			(13,218		)
Net cash provided by financing activities							Net cash provided by financing activities	97,998		119,575
Net increase in cash, cash equivalents and restricted cash	2,545			13,266			Net increase in cash, cash equivalents and restricted cash	89,048		2,545
Cash, cash equivalents and restricted cash, beginning of period	2,460			524			Cash, cash equivalents and restricted cash, beginning of period	9,053		2,460
Cash, cash equivalents and restricted cash, end of period	$	5,005		$	13,790		Cash, cash equivalents and restricted cash, end of period	$	98,101	$	5,005

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Continued)

(In thousands)

(Unaudited)

Six Months ended
June 30,
2019 2018
Non-cash investing and financing activities:
The Partnership acquired property, plant and equipment in non-cash transactions as follows:
Property, plant and equipment acquired included in accounts payable and accrued liabilities $ 6,200
$ 7,682
Property, plant and equipment acquired under finance lease obligations 1,080
960
Property, plant and equipment capitalized interest 716
—
Distributions included in liabilities 1,181
1,056
Withholding tax payable associated with Long-Term Incentive Plan vesting 40
2,715
Conversion of subordinated units to common units —
78,504
Common unit issuance for deferred consideration for Enviva Port of Wilmington, LLC Drop-Down 49,700
—
Common unit issuance for the Enviva Wilmington Holdings, LLC Drop-Down 50,000
—
Common unit issuance costs in accrued liabilities 339
—
Depreciation capitalized to inventories 350
1,075
Supplemental cash flow information:
Interest paid $ 18,867
$ 17,143


	Six Months Ended June 30,
	2020		2019
Non-cash investing and financing activities:
Property, plant and equipment acquired included in liabilities	$	21,296	$	6,200
Common unit issuance for deferred consideration for Wilmington Drop-Down	—		49,700
Common unit issuance for the Hamlet Drop-Down	—		50,000
Equity issuance and debt issuance costs included in liabilities	9,740		—
Supplemental cash flow information:
Interest paid, net of capitalized interest	$	(77)	$	18,151

See accompanying notes to condensed consolidated financial statements.

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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~~)

(Unaudited)

(1) Description of Business and Basis of Presentation

Description of Business

Enviva Partners, LP, together with its subsidiaries (“we,” “us,” “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 ~~to our principally European, and increasingly Japanese, customers~~ under long-term, take-or-pay ~~contracts.~~off-take contracts to our customers principally in the United Kingdom (the “U.K.”), Europe and increasingly Japan.

~~As of June 30, 2019, we owned~~We own and ~~operated six~~operate 7 industrial-scale wood pellet production plants located in the Mid-Atlantic and Gulf Coast regions of the United ~~States and are commissioning a seventh plant in Hamlet, North Carolina (the “Hamlet plant”).~~States. In addition to the volumes from our plants, we also procure wood pellets from third parties and ~~Enviva Pellets~~from a wood pellet production plant located in Greenwood, ~~LLC (“Greenwood”), a wholly owned subsidiary of Enviva JV Development Company, LLC~~South Carolina (the ~~“Second JV”~~“Greenwood plant”)~~, a limited liability company~~ owned by Enviva Holdings, LP (together with ~~its wholly owned subsidiaries~~ Enviva MLP Holdco, LLC and Enviva Development Holdings, LLC, where applicable, our “sponsor”). On July 1, 2020, we acquired the ~~“sponsor”) and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates.~~ Greenwood ~~owns a wood pellet production~~ plant, ~~in Greenwood, South Carolina (the “Greenwood plant”).~~see Note 17, Subsequent Events. Wood pellets are exported from our wholly owned ~~dry-bulk,~~ deep-water marine terminal inat the Port of Chesapeake, Virginia ~~(the “Chesapeake terminal”)~~ and terminal assets inat the Port of Wilmington, North Carolina (the “Wilmington terminal”), and from third-party deep-water marine terminals in Mobile, Alabama, and Panama City, Florida under a short-term and a long-term contract, respectively.

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. 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 ~~significant~~ 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.

We entered into an agreement with our sponsor effective as of September 30, 2019 pursuant to which the parties agreed to set off related-party receivables and payables; consequently, we intend to set off related-party receivables and payables, which are reflected net in related-party receivables or payables, in accordance with the agreement.

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, ~~2018.~~2019.

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.

Enviva Wilmington Holdings, LLC

InOn April 2, 2019, we acquired from ~~the~~our sponsor all of the issued and outstanding Class B Units in Enviva Wilmington Holdings, LLC (the ~~“First~~“Hamlet JV”), a limited liability company owned by ~~the~~our sponsor and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates (collectively, ~~the “Hancock Member”~~as applicable, “John Hancock”). AsOn the date of ~~April 2, 2019,~~acquisition (the “Hamlet Drop-Down”), we began to consolidate the ~~First~~Hamlet JV ~~because~~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 ~~represented~~represent a controlling interest in the ~~First~~Hamlet JV, so we ~~accounted~~account for the ~~First~~Hamlet JV as a consolidated subsidiary, not as a joint venture. The ~~First~~Hamlet JV owns ~~the~~a wood pellet production plant in Hamlet, ~~plant~~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 metric tons per year (“MTPY”) of wood pellets, following a ramp period.

~~On the date of our acquisition of the sponsor’s Class B Units in the First JV, we entered into the following transactions (collectively, the “JV 1.0 Drop-Down”):~~

~~We commenced an associated terminal services agreement to handle contracted volumes from the~~ The Hamlet ~~plant.~~

We entered into an agreement with the sponsor, pursuant to which (1) the sponsor will guarantee certain cash flows from the Hamlet plant until June 30, 2020, (2) the sponsor will reimburse us for construction cost overruns in excess of budgeted capital expenditures for the Hamlet plant, subject to certain exceptions, (3) we will pay to the sponsor quarterly incentive payments for any wood pellets produced by the Hamlet plant in excess of forecast production

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~~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~~)

~~levels through June 30, 2020, and (4) the sponsor will retain liability for certain claims payable, if any, by the First JV (the “Make-Whole Agreement”).~~

The First JV entered into an agreement with Enviva Management to waive the obligation to pay an aggregate of approximately $2.7 million of management fees payable to Enviva Management under the management services agreement (the “First JV MSA”) between the First JV and Enviva Management Company, LLC, a Delaware limited liability company and wholly owned subsidiary of the sponsor (“Enviva Management”), through and including the later of July 1, 2019 and the commencement of commercial operations (“COD”) of the Hamlet plant (the “First JV MSA Fee Waiver”).

We entered into an agreement with Enviva Management to waive the obligation to pay an aggregate of approximately $13.0 million in fees payable under our management services agreement (the “EVA MSA,” and together with the First JV MSA, the “MSAs”) with Enviva Management with respect to the period from the date of the JV 1.0 Drop-Down through the second quarter of 2020 (the “EVA MSA Fee Waiver”).

~~We assumed the sponsor’s position as lender under a credit agreement between the First JV, as borrower, and the sponsor, as lender (the “First JV Revolver”).~~

Fees through the MSAs are expensed as incurred and, to the extent any amount is associated with the First JV MSA Fee Waiver and the EVA MSA Fee Waiver, the related amount is recorded as an increase to partners’ capital.

The $165.0 million purchase price for the JV 1.0 Drop-Down consisted of (1) a 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, or $50.0 million of common units, (3) $50.0 million in cash paid on June 28, 2019, (4) $40.0 million in cash to be paid on January 2, 2020 and (5) the elimination of $3.7 million of net related-party receivables and payables included in the net assets on the date of acquisition. As the holder of the Class B Units, Enviva, LP became a member of the First JV (the “Enviva Member”) on the acquisition date. During the three and six month ended June 30, 2019, we incurred and expensed $0.5 million and $1.2 million, respectively, in acquisition costs to acquire the First JV which were recognized as general and administrative expenses.

As the Enviva Member, we are the managing member of the First JV. We included all accounts of the First JV in our consolidated results as of April 2, 2019 as the Class B Units represent a controlling interest in the First JV. The JV 1.0 Drop-Down was an asset acquisition of entities under common control and accounted for on the carryover basis of accounting. ~~Pursuant~~Accordingly, the consolidated financial statements for the period beginning April 2019 reflect the acquisition.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to ~~the First JV MSA, Enviva Management provides services to the First JV, including those necessary or incidental to the operation~~Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit amounts and ~~management of the First JV’s business. The Enviva Member is responsible for managing the activities of the First JV, including the development, construction and operation of the Hamlet plant.~~unless otherwise noted)

(Unaudited)

(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, ~~2018 except for our adoption on and as of January 1, 2019 of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02,~~ ~~Leases (Topic 842)~~ ~~and ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.~~2019.

Use of Estimates

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~~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~~)

Recently Adopted Accounting Standards ~~Adopted~~

~~Leases~~

ASU 2016-02 established a right-of-use (“ROU”) model that requires lessees to recognize a ROU asset and corresponding lease liability on the balance sheet for all leases with a term of longer than 12 months and classify leases as operating or finance. Operating lease expense is recorded in a single financial statement line item on a straight-line basis over the lease term. Amortization of the ROU asset is the calculated difference between straight-line lease expense and the accretion of interest on the lease liability each period.

We adopted ASU 2016-02 on and as of January 1, 2019 using the modified retrospective transition method, which we applied to all leases existing at the date of initial application of the ASU. We elected to use the effective date as the date of initial application, as opposed to the beginning of the earliest comparative period presented in the financial statements; consequently, financial information and disclosures are not presented under the new standard for periods prior to January 1, 2019. We elected the package of three practical expedients under the transition guidance within the new standard, which permitted us to reassess our prior conclusions under the previous guidance concerning lease identification, lease classification and initial direct leasing costs. We elected the practical expedient to not evaluate existing or expired land easements that were not accounted for as leases under previous guidance. We did not, however, elect the separate practical expedient pertaining to the use of hindsight in determining the lease term for existing leases. We have a significant contract containing both lease and nonlease components, which are accounted for separately. As this contract has fixed payments, the allocation of lease and nonlease components is based on relative standalone price.

The adoption of the new standard as of January 1, 2019 resulted in the recognition of operating lease ROU assets of $27.4 million, net of $2.1 million of deferred rent liabilities existing as of December 31, 2018, and operating lease liabilities of $29.5 million for operating leases related to real estate, machinery and equipment and other operating leases with terms of longer than 12 months. The amounts recognized as of January 1, 2019 were based on the present value of the remaining minimum rental payments under previous leasing standards for existing operating leases. The classification of a lease affects the pattern and classification of expense recognition in the income statement, which is unchanged from under the previous accounting method. The adoption of the new standard did not change our accounting for finance leases (which were described as “capital leases” under the previous standard) or impact our results of operations and cash flows. See Note 9, ~~Leases~~.

~~Derivative Instruments~~

~~We adopted ASU 2017-12 on and~~as of January 1, 2019 using the modified retrospective method, which requires the recognition of the cumulative effect of the change on the opening balance of each affected component of equity in the statement of changes in partner’s capital as of the date of adoption of the new standard. Upon adoption of ASU 2017-12, we no longer measure and recognize ineffectiveness related to designated and qualifying cash flow hedges in earnings; as a result, any ineffectiveness is included in accumulated other comprehensive income. On January 1, ~~2019,~~2020, we ~~recorded~~adopted Accounting Standards Update 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which changes how entities measure credit losses for most financial assets. The adoption did not have a ~~nominal cumulative effect adjustment to accumulated other comprehensive income and common units in partners’ capital. See Note 10,~~ ~~Derivatives~~.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 the financial position, results of operations or cash flows of the Partnership.

(3) Transactions Between Entities Under Common Control

The JV 1.0 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 2, 2019 reflect the acquisition.

~~The~~$165.0 million purchase price for the ~~JV 1.0~~Hamlet Drop-Down in April 2019 consisted of ~~$165.0 million, which included~~(1) an initial cash payment of $24.7 million, net of a purchase price adjustment of $0.3 million, ~~and~~(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 ~~in cash, which will be~~ paid on January 2, ~~2020~~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 ~~third~~Class B Units represent a controlling interest in the Hamlet JV and ~~final payment.~~

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(In thousands, except number of units, per unit amounts~~we are generally unrestricted in managing the assets and ~~unless otherwise noted)~~

~~(Unaudited~~)

~~The changes in net assets at carryover basis on April 2, 2019 included $121.6 million net assets~~cash flows of the ~~First~~Hamlet JV; however, certain decisions, such as those relating to the issuance and redemption of equity interests in the Hamlet JV, ~~net~~guarantees of indebtedness and fundamental changes, including mergers and acquisitions, asset sales and liquidation and dissolution of the ~~elimination~~Hamlet JV, require the approval of ~~$3.7 million~~the members of ~~net related-party receivables and payables. The following table outlines~~ the ~~changes in consolidated net assets resulting from the JV 1.0 Drop-Down on April 2, 2019.~~Hamlet JV.

Assets:
Cash and cash equivalents $ 3,426
Related-party receivables 945
Prepaid expenses and other current assets 22
Property, plant and equipment, net 140,446
Other long-term assets 8
Total assets 144,847

Liabilities:
Accounts payable 6,395
Related-party payables 1,923
Accrued and other current liabilities 14,965
Capital lease obligations 3
Total liabilities 23,286
Net assets contributed to Partnership $ 121,561

(4) Revenue

We disaggregate our revenue into two categories: product sales and other revenue. 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 June 30, ~~2019,~~2020, the aggregate amount of revenues from contracts with customers allocated to performance obligations that were unsatisfied or partially satisfied was approximately ~~$9.5~~$8.6 billion. This amount excludes forward prices related to variable consideration including inflation and foreign currency and commodity prices. Also, this amount excludes the effects of related foreign currency derivative contracts as they do not represent contracts with customers. As of ~~July 1, 2019~~June 30, 2020, we expect to recognize approximately ~~4.0%~~5.0% of our remaining performance obligations as revenue during the remainder of ~~2019,~~2020, approximately ~~9.0%~~12.0% in ~~2020~~2021 and the balance thereafter. Our off-take contracts expire at various times through 2040 and our terminal services contracts extend into 2026.

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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)

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 six months ended June 30, 2020 and not material for the three and six months ended June 30, 2019, ~~and 2018,~~ 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 ~~and~~months ended June 30, 2020, we reversed an insignificant amount of revenue related to performance obligations satisfied in previous periods. For the six months ended June 30, ~~2019,~~2020 we recognized ~~$0.3~~$0.1 million ~~and $0.4 million. respectively,~~ of revenue related to performance obligations satisfied in previous periods. For the three and six months ended June 30, ~~2018,~~2019 we recognized ~~an insignificant amount~~$0.3 million and $0.4 million of revenue related to performance obligations satisfied in previous periods.

~~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~~)

Contract Balances

Accounts receivable related to product sales as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were ~~$59.9~~$80.9 million and ~~$51.3~~$67.7 million, respectively. ~~We had $0.1 million and $0.3 million of deferred revenue as~~As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had $1.0 million and $4.1 million, respectively, of deferred revenue for future performance obligations associated with off-take contracts.

Other

Accrued and other current liabilities included approximately $19.1 million and $7.6 million at June 30, 2020 and December 31, 2019, respectively, for amounts associated with purchased shipments from third-party suppliers that were resold in back-to-back transactions.

(5) 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 ~~European Union,~~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.

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Customer A	40	%	60 %		37	%	50 %
Customer B	13	%	9 %		11	%	10 %
Customer C	40	%	23 %		31	%	20 %
Customer D	—	%	—	%	8	%	12 %

Three Months Ended
June 30, Six Months ended
June 30, 2019
2019 2018 2019 2018
Customer A 60 % 69 % 50 % 54 %
Customer B 9 % 12 % 10 % 10 %
Customer C 23 % 15 % 20 % 11 %
Customer D — % — % 12 % 16 %

~~(6) Inventory Impairment and Asset Disposal~~

On February 27, 2018, a fire occurred at the Chesapeake terminal, causing damage to equipment and approximately 43,000 MT of wood pellets (the “Chesapeake Incident”). The Chesapeake terminal returned to operations on June 28, 2018. During the three and six months ended June 30, 2018, we incurred $20.3 million and $48.7 million, respectively, in costs as a result of the Chesapeake Incident related to asset impairment, inventory write-off and disposal costs, emergency response costs, asset repair costs and business continuity costs, the latter of which represented incremental costs to commission temporary wood pellet storage and handling and ship loading operations at nearby locations to meet our contractual obligations to our customers. As of June 30, 2018, we had recovered $26.3 million related to the Chesapeake Incident, which included $1.1 million of lost profits. As of December 31, 2018, $3.8 million of probable insurance recoveries for the then-remaining costs not yet recovered were included in insurance receivables; we received the $3.8 million in probable insurance recoveries (plus $0.5 million recognized as other income in 2019) in February 2019.

~~(7) Inventories~~

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

June 30,
2019 December 31,
2018
Raw materials and work-in-process $ 8,226
$ 4,936
Consumable tooling 18,542
17,561
Finished goods 4,524
8,993
Total inventories $ 31,292
$ 31,490

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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~~)

(Unaudited)

(6) Inventories

~~(8)~~Inventories consisted of the following as of:


	June 30, 2020		December 31, 2019
Raw materials	$	10,050	$	9,795
Consumable tooling	21,287		20,485
Finished goods	8,386		2,718
Total inventories	$	39,723	$	32,998

(7) Property, Plant and Equipment

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


	June 30, 2020		December 31, 2019
Land	$	15,226	$	15,226
Land improvements	56,778		56,637
Buildings	217,163		217,167
Machinery and equipment	605,290		588,447
Vehicles	724		635
Furniture and office equipment	6,822		6,822
Leasehold improvements	1,029		1,029
Property, plant and equipment	903,032		885,963
Less accumulated depreciation	(232,725)		(203,695)
Property, plant and equipment, net	670,307		682,268
Construction in progress	114,216		69,512
Total property, plant and equipment, net	$	784,523	$	751,780

June 30,
2019 December 31,
2018
Land $ 15,227
$ 13,492
Land improvements 44,990
44,990
Buildings 196,574
196,574
Machinery and equipment 437,696
434,776
Vehicles 635
635
Furniture and office equipment 6,198
6,148
Leasehold improvements 987
987
Property, plant and equipment - in service 702,307
697,602
Less accumulated depreciation (176,833 ) (154,967 )
Property, plant and equipment - in service, net 525,474
542,635
Construction in progress 198,616
14,393
Total property, plant and equipment, net $ 724,090
$ 557,028

Total depreciation expense was $15.2 million and $29.2 million for the three and six months ended June 30, 2020, respectively. Total depreciation expense was $11.3 million and $22.5 million ~~respectively,~~ for the three and six months ended June 30, ~~2019. Total depreciation expense was $10.0 million and $19.3 million, respectively, for~~2019, respectively. For the three and six months ended June 30, ~~2018. Total~~2020, total interest capitalized related to construction in progress was $1.3 million and $2.4 million, respectively. For the three and six months ended June 30, 2019, total interest capitalized related to construction in progress was $0.6 million and $0.7 million, ~~respectively, for the three and six months ended June 30, 2019 and was insignificant for the three and six months ended June 30, 2018.~~respectively. Accrued amounts for property, plant and equipment and construction in progress included in accrued and other current liabilities were ~~$17.0~~$10.5 million and ~~$6.3~~$9.4 million at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

~~(9)~~(8) Leases

We have operating 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. ~~Amortization~~Leases with an initial term of ~~the ROU asset is calculated as the difference between straight-line lease expense and the accretion of interest~~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 ~~liability each period.~~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 2827 years, some of which include options to extend the leases for up to 5five years. Our leases are generally ~~noncancellable.~~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.

~~A discount~~

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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 ~~is applied~~ to our leases for balance sheet measurement. As ~~rates are~~most of our leases do not ~~explicitly defined in~~provide an implicit rate, we generally use the ~~operating and finance~~estimated rate of interest for a collateralized borrowing over a similar term of the lease ~~agreements, we use~~payments at the lease commencement date as our incremental borrowing rate for purposes of measuring the ROU assets and lease liabilities for recognized leases. This is a secured interest rate which takes into account our credit rating, the term of our leases, as well as the economic environment in which we operate. Each lease uses a secured interest rate with a term commensurate to the identified lease term.rate.

Operating leases are included in operating lease ~~right-of-use~~ROU assets, accrued and other current liabilities and long-term operating lease liabilities on our condensed consolidated balance sheets. Finance leases are included in property, plant 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 ~~right-of-use~~ROU assets and operating lease liabilities are included net in change in operating lease liabilities on the condensed consolidated statement of cash flows.

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


	June 30, 2020		December 31, 2019
Operating leases:
Operating lease right-of-use assets	$	31,737	$	32,830

Current portion of operating lease liabilities	$	1,141	$	1,439
Long-term operating lease liabilities	32,980		33,469
Total operating lease liabilities	$	34,121	$	34,908

Finance leases:
Property, plant and equipment, net	$	8,117	$	7,398

Current portion of long-term finance lease obligations	$	5,556	$	4,584
Long-term finance lease obligations	3,472		2,954
Total finance lease liabilities	$	9,028	$	7,538

Operating and finance lease costs were as follows:


		Three Months Ended June 30,						Six Months Ended June 30,
Lease Cost	Classification	2020		2019		2020		2019
Operating lease cost:
Fixed lease cost	Cost of goods sold	$	1,239	$	1,243	$	2,506	$	2,277
Variable lease cost	Cost of goods sold	—		20		—		26
Short-term lease costs	Cost of goods sold	1,980		—		3,915		—
	Total operating lease costs	$	3,219	$	1,263	$	6,421	$	2,303
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	$	1,560	$	765	$	2,992	$	1,484
Variable lease cost	Cost of goods sold	114		(4)		116		—
Interest on lease liabilities	Interest expense	115		57		218		109
	Total finance lease costs	$	1,789	$	818	$	3,326	$	1,593
	Total lease costs	$	5,008	$	2,081	$	9,747	$	3,896

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~~)(Unaudited)

~~Operating lease ROU assets and liabilities and finance leases were as follows as of June 30, 2019:~~

Operating leases:
Operating lease ROU assets, gross $ 36,965
Accumulated amortization (3,088 )
Operating lease ROU assets, net $ 33,877

Long-term operating lease liabilities $ 33,849
Current portion of operating lease liabilities 1,751
Total operating lease liabilities $ 35,600

Finance leases:
Property, plant and equipment, gross $ 8,914
Accumulated depreciation (4,198 )
Property plant and equipment, net $ 4,716

Current portion of long-term finance lease obligations $ 2,724
Long-term finance lease obligations 1,668
Total finance lease liabilities $ 4,392

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

Lease Cost Classification
Three Months Ended
June 30, 2019

Six Months Ended
June 30, 2019
Operating lease cost:
Fixed lease cost Cost of goods sold $ 1,243
$ 2,277
Variable lease cost Cost of goods sold 20
26
Short-term lease costs Cost of goods sold —
—
Total operating lease costs $ 1,263
$ 2,303
Finance lease cost:
Amortization of leased assets Depreciation and amortization 765
1,484
Variable lease cost Cost of goods sold (4 ) —
Interest on lease liabilities Interest expense 57
109
Total finance lease costs $ 818
$ 1,593
Total lease costs $ 2,081
$ 3,896

~~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~~)

Operating and finance lease cash flow information was as follows:


				Six Months Ended June 30,
	Six Months Ended June 30, 2019			2020		2019
Cash paid for amounts included in the measurement of lease liabilities:			Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,472	Operating cash flows from operating leases	$	2,169	$	2,472
Operating cash flows from financing leases	109		Operating cash flows from financing leases	218		109
Financing cash flows from financing leases	1,248		Financing cash flows from financing leases	2,076		1,248

Assets obtained in exchange for lease obligations:			Assets obtained in exchange for lease obligations:
Operating leases	$	7,467	Operating leases	$	—	$	7,467
Financing leases	1,080		Financing leases	$	3,784	$	1,080

The future minimum lease payments and the aggregate maturities of operating and finance lease liabilities are as follows as of June 30, ~~2019:~~2020:

Years Ending December 31, Operating
Leases Finance
Leases Total
Remainder of 2019 $ 2,223
$ 1,660
$ 3,883
2020 4,140
2,153
6,293
2021 3,890
683
4,573
2022 3,719
46
3,765
2023 3,710
43
3,753
Thereafter 65,110
3
65,113
Total lease payments 82,792
4,588
87,380
Less: imputed interest (47,192 ) (196 ) (47,388 )
Total present value of lease liabilities $ 35,600
$ 4,392
$ 39,992

~~The future minimum lease payments as of December 31, 2018 for operating and finance lease liabilities were $73.8 million and $4.8 million, respectively.~~


Years Ending December 31,	Operating Leases		Finance Leases		Total
Remainder of 2020	$	1,934	$	3,202	$	5,136
2021	3,890		4,062		7,952
2022	3,719		964		4,683
2023	3,710		568		4,278
2024	3,581		199		3,780
Thereafter	61,529		193		61,722
Total lease payments	78,363		9,188		87,551
Less: imputed interest	(44,242)		(160)		(44,402)
Total present value of lease liabilities	$	34,121	$	9,028	$	43,149

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 June 30, ~~2019:~~

2020:



Weighted average remaining lease term (years):
Operating leases	24		22
Finance leases	2
Weighted average discount rate:
Operating leases	8	%
Finance leases	56	%

~~(10)~~(9) 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 on ~~our~~ expected future cash flows and interest rate swaps to offset some of the interest rate risk on ~~our~~ expected future cash flows ~~from~~on certain borrowings. ~~Our derivative instruments expose us to credit risk to the extent that~~The preponderance of our ~~hedge counterparties may be unable to meet the terms of the applicable derivative instrument. We seek to mitigate such risks by limiting our counterparties to major financial~~

~~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~~)

institutions. In addition, we monitor the potential risk of loss with any one counterparty resulting from credit risk. Management does not expect material losses as a result of defaults by counterparties. We use derivative instruments to manage cash flow and not for speculative or trading purposes.

~~Cash Flow Hedges~~

For qualifying cash flow hedges, the effective and ineffective portion of the gain or loss on the change in fair value is initially reported as a component of accumulated other comprehensive income in partners’ capital and subsequently reclassified into earnings when the hedged exposure affects earnings. Prior to January 1, 2019 and the adoption of ASU 2017-12 (see Note 2, ~~Significant Accounting Policies~~), the ineffective portion of the gain or loss, if any, was reported in earnings in the current period. We considered our cash flow hedges to be highly effective at inception. Changes in fair value for derivative instruments not designated as hedging instrumentsoff-take contracts are ~~recognized in earnings.~~

~~Foreign Currency Exchange Risk~~

US Dollar-denominated. We are primarily exposed to fluctuations in foreign currency exchange rates related to 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 ~~have entered~~seek to mitigate such risks by limiting our counterparties to major financial institutions. In addition, we monitor the potential risk of loss with any one counterparty resulting from credit risk. Management does 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 ~~may continue~~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 ~~foreign currency forward contracts, purchased option contracts~~derivative instruments for speculative or ~~other instruments to partially manage this risk and, prior to August 2018, had designated certain of these instruments as cash flow hedges.~~

~~Interest Rate Risk~~trading purposes.

We ~~are exposed to fluctuations in interest rates on borrowings under our senior secured revolving credit facility. We have~~ entered into a pay-fixed, receive-variable interest rate ~~swap~~swaps that ~~expires~~expire in ~~April 2020~~September 2021 and October 2021 to hedge ~~the~~ interest rate risk associated with our variable rate borrowings under our senior secured revolving credit ~~facility. The interest rate swap is~~facility that are not designated and ~~qualifies~~accounted for as a cash flow ~~hedge.~~hedges.

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 June 30, 2020 and December 31, 2019 was as follows:


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

Interest rate swap:
	Accrued and other current liabilities	$	(137)	$	—
	Other long-term liabilities	(49)		—

Foreign currency exchange contracts:
	Other current assets	2,260		408
	Other long-term assets	4,493		1,774
	Accrued and other current liabilities	—		(735)
	Other long-term liabilities	—		(1,055)
Total derivatives not designated as hedging instruments		$	6,567	$	392

Unrealized losses related to the change in fair market value of interest rate swaps are recorded in interest expense and were $0.1 million and $0.2 million for the three and six months ended June 30, 2020, respectively. Our interest rate swap outstanding at and during the three and six months ended June 30, 2019 ~~and December 31, 2018 were~~was designated as ~~follows:~~

Asset (Liability)
Balance Sheet Classification
June 30,
2019

December 31,
2018
Designated as hedging instruments:
Interest rate swap
Other current assets $ 202
$ 508
Other long-term assets —
118
Total derivatives designated as hedging instruments $ 202
$ 626

Not designated as hedging instruments:
Foreign currency exchange forward contracts:
Prepaid and other current assets $ 1,490
$ 794
Other long-term assets 1,205
1,810
Accrued and other current liabilities (44 ) (68 )
Other long-term liabilities (23 ) (179 )
Foreign currency purchased option contracts:
Prepaid and other current assets 84
22
Other long-term assets 2,866
3,348
Total derivatives not designated as hedging instruments $ 5,578
$ 5,727
a hedging instrument.

Net unrealized losses related to the change in fair market value of foreign currency derivatives were $0.1 million during the three months ended June 30, 2020 and were included in product sales. Net unrealized gains related to the change in fair market value of ~~derivative instruments not designated as hedging instruments~~foreign currency derivatives were $6.7 million during the six months ended June 30, 2020 and were included in product sales. Net unrealized gains related to the change in fair market value of foreign currency derivatives were $2.3 million and $0.3 million ~~respectively,~~ during the three and six months ended June 30, 2019, respectively, and ~~are~~were included in product sales.

~~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~~)

~~Net~~Realized gains related to ~~the change in fair market value of derivative instruments not designated as hedging instruments~~derivatives settled were ~~$3.5~~insignificant and $0.2 million ~~and $2.7 million, respectively,~~ during the three and six months ended June 30, ~~2018~~2020, respectively, and ~~are~~were included in product sales. Realized losses ~~and gains~~ related to derivatives settled were insignificant during the three months ended June 30, 2019 and ~~2018~~ were ~~insignificant.~~included in product sales. Realized gains related to derivatives settled ~~during the period~~ were $0.1 ~~million and $0.3~~ million during the six months ended June 30, 2019 and ~~2018, and are~~were included in product sales.

The effects of instruments that were designated as cash flow hedges and the related changes in accumulated other comprehensive loss and the gains and losses recognized in earnings for the three months ended June 30, 2019 were as follows:

Amount of Loss in Other
Comprehensive
Loss on
Derivative Location of
Gain
Reclassified from
Accumulated Other
Comprehensive
Loss Amount of
Gain
Reclassified from
Accumulated Other
Comprehensive
Loss
into Earnings
Interest rate swap $ (106 ) Interest expense $ 86

Amount of Gain
in Other
Comprehensive
Income on
Derivative
(Effective Portion) Location of
Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income
(Effective Portion) Amount of
Gain
Reclassified from
Accumulated Other
Comprehensive
Income
into Income
(Effective Portion) Location of (Loss) Gain
Recognized in
Income on Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness Testing) Amount of Gain
(Loss) Recognized in
Earnings on Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness Testing)
Foreign currency exchange forward contracts $ 3,950
Product sales $ —
Product sales $ (3 )
Foreign currency exchange purchased option contracts 307
Product sales —
Product sales —
Interest rate swap 108
Interest expense 64
Interest expense 1

Amount of Gain
(Loss) in Other
Comprehensive
Income on
Derivative
(Effective Portion) Location of
Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income
(Effective Portion) Amount of
Gain
Reclassified from
Accumulated Other
Comprehensive
Income
into Earnings
(Effective Portion) Location of Gain
(Loss) Recognized in
Earnings on Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness Testing) Amount of Gain
(Loss) Recognized in
Earnings on Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness Testing)
Foreign currency exchange forward contracts $ 2,625
Product sales $ —
Product sales $ (5 )
Foreign currency exchange purchased option contracts (16 ) Product sales —
Product sales —
Interest rate swap 428
Other income (expense) 63
Other income (expense) 1

We enter into master netting arrangements ~~which are~~ designed to permit net settlement of derivative transactions among the respective counterparties. If we had settled all transactions with our respective counterparties at June 30, ~~2019,~~2020, we would have

~~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~~)

received a net settlement termination payment of ~~$5.8~~$6.6 million, which differs insignificantly 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 June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were as follows:


	June 30, 2020		December 31, 2019
Foreign exchange forward contracts in GBP	£	40,425	£	50,575
Foreign exchange purchased option contracts in GBP	£	42,165	£	43,415
Foreign exchange forward contracts in EUR	€	2,500	€	—
Foreign exchange purchased option contracts in EUR	€	—	€	1,200
Interest rate swap	$	70,000	$	34,354

June 30,
2019 December 31,
2018
Foreign exchange forward contracts in GBP £ 35,885
£ 42,170
Foreign exchange purchased option contracts in GBP £ 39,365
£ 39,365
Foreign exchange forward contracts in EUR € 7,000
€ 14,300
Foreign exchange purchased option contracts in EUR € 1,675
€ 1,675
Interest rate swap $ 37,091
$ 39,829

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

~~(11)~~Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(10) Fair Value Measurements

The amounts reported in the unaudited condensed consolidated balance sheets as cash and cash equivalents, accounts receivable, ~~insurance receivables, related-party receivables,~~ prepaid expenses and other current assets, accounts payable, related-party receivables, net, related-party payables, ~~and accrued liabilities,~~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 ~~(see Note 12,~~ ~~Long-Term Debt and Finance Lease Obligations – Senior Notes Due 2021~~) was determined based on observable market prices in a less 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 classified as Level 2 was determined based on the usage of market prices not quoted on 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 approximates fair value.

The carrying amount and estimated fair value of long-term debt and finance lease obligations as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were as follows:


	June 30, 2020						December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2026 Notes	$	594,038	$	627,750	$	593,476	$	644,250
Other long-term debt and finance lease obligations	11,030		11,030		9,544		9,544
Total long-term debt and finance lease obligations	$	605,068	$	638,780	$	603,020	$	653,794

June 30, 2019 December 31, 2018

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value
Senior notes $ 353,178
$ 367,378
$ 352,843
$ 359,943
Other long-term debt and finance lease obligations 172,903
172,903
79,812
79,812
Total long-term debt and finance lease obligations $ 526,081
$ 540,281
$ 432,655
$ 439,755

~~(12)~~(11) Long-Term Debt and Finance Lease Obligations

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


	June 30, 2020		December 31, 2019
2026 Notes, net of unamortized discount, premium and debt issuance of $6.0 million as of June 30, 2020 and $6.5 million as of December 31, 2019	$	594,038	$	593,476
Other loans	2,002		2,006
Finance leases	9,028		7,538
Total long-term debt and finance lease obligations	605,068		603,020
Less current portion of long-term debt and finance lease obligations	(7,558)		(6,590)
Long-term debt and finance lease obligations, excluding current installments	$	597,510	$	596,430

June 30,
2019 December 31,
2018
Senior notes, net of unamortized discount, premium and debt issuance of $1.8 million as of June 30, 2019 and $2.2 million as of December 31, 2018 $ 353,178
$ 352,843
Senior secured revolving credit facility 166,500
73,000
Other loans 2,011
2,015
Finance leases 4,392
4,797
Total long-term debt and finance lease obligations 526,081
432,655
Less current portion of long-term debt and finance lease obligations (2,733 ) (2,722 )
Long-term debt and finance lease obligations, excluding current installments $ 523,348
$ 429,933

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

2026 Notes ~~to Condensed Consolidated Financial Statements~~

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

~~(Unaudited~~)

~~Senior Notes Due 2021~~

As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we were in compliance with all covenants and restrictions associated with, and no events of default existed under, ~~our 8.5%~~the indenture dated as of December 9, 2019 governing the 2026 Notes. The 2026 Notes are guaranteed jointly and severally on a senior unsecured ~~notes due 2021. Our obligations under the senior notes are~~basis by our existing subsidiaries (excluding Enviva Partners Finance Corp.) that guarantee certain of our indebtedness and may be guaranteed by certain ~~of our~~future restricted subsidiaries.

Senior Secured Revolving Credit Facility

As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we were in compliance with all covenants and restrictions associated with, and no events of default existed under, our senior secured revolving credit ~~facility due October 2023.~~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. The~~assets; however, the senior secured revolving credit facility is not guaranteed by the ~~First~~Hamlet JV or secured by liens on its assets. We had 0 borrowings under our senior secured revolving credit facility at June 30, 2020 and December 31, 2019.

~~(13)~~

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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) Related-Party Transactions

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


	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018		2019		2018			2020		2019		2020		2019
Other revenue	$	235	$	1,072	$	827	$	2,304	Other revenue	$	658	$	235	$	1,264	$	827
Cost of goods sold	34,623		20,912		54,621		36,051		Cost of goods sold	39,739		34,623		75,996		54,621
General and administrative expenses	8,789		3,458		13,002		7,514		General and administrative expenses	6,947		9,263		14,636		15,559

Management Services Agreements

~~Pursuant~~Enviva Partners, LP and the Hamlet JV are parties to management services agreements (together, the ~~MSAs,~~“MSAs”) 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”). Enviva Management provides us with operations, general administrative, management and other services. We ~~are required to~~ reimburse Enviva Management for ~~the amount of~~ all direct or indirect internal or third-party expenses ~~incurred by Enviva Management~~it incurs in connection with the provision of such services. The MSAs include rent-related amounts for ~~non-cancelable~~noncancelable operating leases for office space in Maryland and North Carolina held by ~~the~~our sponsor.

Under the ~~First~~Hamlet JV’s management services agreement (the “Hamlet JV ~~MSA,~~MSA”), the Hamlet JV pays an annual management fee to Enviva Management and 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 Hamlet Drop-Down, Enviva Management waived the Hamlet JV’s obligation to pay approximately $2.7 million of management fees payable to Enviva Management from the date thereof until July 1, 2020 (the “Hamlet JV MSA Fee Waiver”).

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


	June 30, 2020		December 31, 2019
Finished goods inventory	$	1,325	$	419
Related party payables	8,047		18,703


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Cost of goods sold	$	14,613	$	20,159	$	30,513	$	33,713
Related-party management services agreement fees	6,947		9,263		14,636		15,559

During the three and six months ended June 30, ~~2019, $20.1~~2020, $0.6 million and ~~$33.7~~$1.3 million, respectively, ~~related~~of fees expensed under the Hamlet JV MSA were waived pursuant to the ~~MSAs was included in cost of goods sold~~Hamlet JV MSA Fee Waiver and ~~$8.8 million and $13.0 million, respectively, was included in general and administrative expenses. As of June 30, 2019, $0.7 million incurred under the MSAs was included in finished goods inventory.~~

~~During the three and six months ended June 30, 2018, $13.8 million and $22.5 million, respectively, related~~recorded as an increase to ~~the MSAs was included in cost of goods sold and $3.5 million and $7.5 million, respectively, was included in general and administrative expenses.~~

partners’ capital. During the three and six months ended June 30, 2019, $0.9 million of fees expensed under the ~~First~~Hamlet JV MSA ~~was in excess of the required payment and recorded to partner’s capital.~~

~~As of June 30, 2019 and December 31, 2018, we had $18.3 million and $19.0 million, respectively, included in related-party payables primarily related~~were waived pursuant to the ~~MSAs.~~

~~EVA~~Hamlet JV MSA Fee Waiver

~~Under the EVA MSA, during the three and six months ended June 30, 2019, $4.7 million of EVA MSA fees expensed were waived~~ and recorded as an increase to partners’ capital. ~~During~~

Hamlet Drop-Down Agreements

On the ~~three and six months ended~~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, ~~2018, no EVA MSA~~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 “Make-Whole Agreement”).

•We entered into an agreement with Enviva Management to waive our obligation to pay an aggregate of approximately $13.0 million in fees ~~were waived.~~

payable under our management services agreement with Enviva Management

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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~~)

(Unaudited)

(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”).

•The Hamlet JV entered into an interim services agreement (the “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 metric ton (“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 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 all obligations of Hamlet Operator under the ISA.

Pursuant to the agreements we entered into on the date of the Hamlet Drop-Down, during the three and six months ended June 30, 2020, $1.0 million and $3.5 million, respectively, was recorded as an increase to partners’ capital consisting of expenses waived under the First EVA MSA Fee Waiver. 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 Make-Whole Agreement as a result of Hamlet Operator’s failure to meet specified production levels, offset by the agreed-upon price due to Hamlet Operator for the wood pellets produced by the Hamlet plant that we have sold. Additionally, at June 30, 2020 and December 31, 2019, $1.3 million and $0.5 million, respectively, was included in finished goods inventory. As of June 30, 2020, included in related-party receivables, net are $16.1 million related to the ISA and $1.2 million related to the Make-Whole Agreement.

Second EVA MSA Fee Waiver

In June 2019, we entered into an ~~additional~~ agreement with Enviva Management ~~where~~(the “Second EVA MSA Fee Waiver”) pursuant to which we received a $5.0 million waiver of fees under the EVA MSA ~~fees~~ 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 six months ended June 30, 2019, $2.7 million of EVA MSA fees expensed were waived and recorded as an increase to partners’ ~~capital. During~~capital pursuant to the ~~three and six months ended June 30, 2018, no~~Second EVA MSA ~~fees were waived.~~

~~First JV MSA~~ Fee ~~Waiver~~

Under the First JV MSA, during the three and six months ended June 30, 2019, $2.7 million of First JV MSA fees expensed were waived and recorded as an increase to partners’ capital. During the three and six months ended June 30, 2018, no First JV MSA fees were waived.

~~Make-Whole Agreement~~

During the three and six months ended June 30, 2019, we had $2.1 million of reimbursable charges from the sponsor under the Make-Whole Agreement, of which $1.5 million was related to construction costs and is included in partners’ capital on the consolidated statements of changes in partners’ capital and $0.6 million is related to wood pellet production costs and is included in cost of goods sold on the consolidated statements of operations. During the three and six months ended June 30, 2018, no reimbursements related to the Make-Whole Agreement were received. As of June 30, 2019, $2.1 million is included in related-party receivables related to the Make-Whole Agreement.

~~Wilmington Drop-Down - Deferred Consideration~~

In October 2017, we acquired from the First JV all of the issued and outstanding limited liability company interests in Enviva Port of Wilmington, LLC (“Wilmington”), which owns the Wilmington terminal assets (the “Wilmington Drop-Down”), for total consideration of $130.0 million, subject to certain conditions. The Wilmington Drop-Down included the Wilmington terminal assets and a long-term terminal services agreement with our sponsor (the “Holdings TSA”) to handle throughput volumes sourced from Greenwood. The purchase price included $74.0 million of deferred consideration, which was paid in full in April 2019 and consisted of $24.3 million in cash, of which $22.8 million was distributed to the Hancock Member and the issuance of 1,691,627 common units, or approximately $49.7 million in common units, which were distributed to the Hancock Member. The $74.0 million of deferred consideration was reflected on the condensed consolidated balance sheets as of December 31, 2018.Waiver.

Greenwood Contract

~~In February 2018, we entered into~~We are a party to a contract with Greenwood to purchase wood pellets produced by the Greenwood plant through March 2022 (the “Greenwood contract”) and ~~we have~~had a take-or-pay obligation with respect to 550,000 MTPY of wood pellets from July 2019 through March ~~2022.~~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.

During the three months ended 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 six months ended and June 30, 2019, we purchased $13.7 million and $24.2 million, respectively, of wood pellets from Greenwood and recorded a cost of cover deficiency fee ~~from Greenwood~~ of approximately $0.3 million and $3.3 million, respectively, from Greenwood as ~~Greenwood~~it was unable to satisfy certain commitments. Of

As of June 30, 2020 and 2019, the net ~~$13.4~~purchased amounts related to the Greenwood contract of $18.5 million and $20.9 million, respectively, ~~$13.7~~included $18.1 million and ~~$24.1~~$20.8 million, respectively, ~~is included~~ in cost of goods sold and $0.4 million and $0.1 million, ~~is included~~respectively, in finished goods inventory as of June 30, 2019. During the three and six months ended June 30, 2018, we purchased $5.2 million and $8.3 million, respectively, of wood pellets from Greenwood, which is included in cost of goods sold.

As of June 30, 2019, $4.2 million is included in related-party payables related to our wood pellet purchases from Greenwood and $1.0 million is included in related-party receivables related to Greenwood’s cost of cover deficiency fee. As of December 31, 2018, $7.9 million is included in related-party payables related to our wood pellet purchases from Greenwood.inventory.

Holdings TSA

~~The Wilmington Drop-Down included~~We have a long-term terminal services agreement with our sponsor (the “Holdings TSA”). 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 remains in effect until September 1, 2026. ~~We did not record any terminal services revenue from our~~

The Holdings TSA was amended and assigned to Greenwood and deficiency payments are due to Wilmington if quarterly

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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~~)

(Unaudited)

sponsor during the three months ended June 30, 2018. During the six months ended June 30, 2018, we recorded $0.8 million as terminal services revenue from our sponsor, which is included in other revenue.

~~In February 2018, our sponsor amended and assigned the Holdings TSA to Greenwood. Deficiency payments are due to Wilmington if quarterly~~ minimum throughput requirements are not met. During the three and six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, we recorded $0.7 million and $1.3 million and $0.2 million and $0.8 ~~million, respectively, and $1.1 million and $1.5~~ million, respectively, of deficiency fees from Greenwood, which isare included in other revenue.

~~Biomass Option Agreement – Enviva Holdings, LP~~

Enviva, LP purchased $1.7 million of wood pellets from the sponsor during the six months ended June 30, 2018 pursuant to a biomass option agreement. The wood pellet purchase amounts are included in cost of goods sold. The biomass option agreement terminated in accordance with its terms in March 2018.

Enviva FiberCo, LLC

We purchase raw materials from Enviva FiberCo, LLC (“FiberCo”), a wholly owned subsidiary of our ~~sponsor.~~sponsor, including through a wood supply agreement that provided for deficiency fees in the event that FiberCo did not satisfy certain volume commitments. Raw materials purchased and included in cost of goods sold during the three and six months ended June 30, 2020, was $0.8 million and $2.2 million, respectively. NaN cost of cover deficiency fees were recognized during the three and six months ended June 30, 2020. During the three and six months ended June 30, 2019, we purchased raw materials of $1.7 million and $3.6 million, respectively, from FiberCo. NoNaN cost of cover deficiency fees were recognized during the three months ended June 30, 2019. Offsetting ~~the~~our raw material purchases during the six months ended June 30, 2019, we recognized $2.9 million of cost of cover deficiency fees, ~~from FiberCo under a wood supply master agreement as FiberCo was unable to satisfy certain commitments,~~ which is included in related-party receivables as of June 30, 2019. During the three and six months ended June 30, 2018 we purchased raw materials of $1.8 million and $3.5 million, respectively, from FiberCo. No cost of cover deficiency fees were recognized during the three months ended June 30, 2018.

~~JV 1.0 Drop-Down~~

In connection with the JV 1.0 Drop-Down, the sponsor assigned to us all of its rights and obligations under the First JV Revolver. On the date of assignment, $4.1 million was outstanding from the First JV to the sponsor. As a result of the assignment, the balance on the First JV Revolver became due from the First JV to the Partnership. As of June 30, ~~2019, $4.1 million is included in related-party payable and is due to the sponsor.~~

~~Long-Term Incentive Plan Vesting~~

~~As of June 30, 2019, we had~~2020, an insignificant amount is included in related-party payables related to ~~withholding tax amounts due to Enviva Management associated with the vesting of time-based phantom units under the Enviva Partners, LP Long-Term Incentive Plan (“LTIP”).~~raw material purchased from FiberCo.

~~(14)~~(13) Partners’ Capital

Private Placements of Common Units ~~- Issuance~~and Shelf Registration Statement

~~During March 2019,~~On June 18, 2020, we ~~issued 3,508,778~~entered into a Common Unit Purchase Agreement (the “Unit Purchase Agreement”) with certain investors to sell 6,153,846 common units in a ~~registered direct offering~~private placement at a price of $32.50 per common unit for gross proceeds of $200.0 million (the “Private Placement”). We received net proceeds of ~~approximately $97.0~~$190.8 million, net of ~~$3.0~~$9.2 million of issuance ~~costs.~~

~~On April 1, 2019,~~costs, which were accrued as ~~deferred consideration for~~of June 30, 2020, in the ~~Wilmington Drop-Down,~~Private Placement, which closed on June 23, 2020. Pursuant to the Unit Purchase Agreement, we ~~issued 1,691,627~~entered into a registration rights agreement (the “Registration Rights Agreement”) pursuant to which we agreed to file and maintain a registration statement with respect to the resale of the common units ~~or $49.7 million in~~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 a shelf registration statement on Form S-3 with the SEC to register the common units ~~to the First JV, which common units were distributed to the Hancock Member. On April 2, 2019,~~issued in connection with the ~~JV 1.0 Drop-Down, we issued 1,681,237 common units, or $50.0 million in common units, to~~Private Placement, which was declared effective by the ~~sponsor.~~SEC on July 20, 2020.

Allocations of Net Income

The Partnership’s partnership agreement contains provisions for the allocation of net income and loss to the unitholders of the Partnership and ~~the~~ Enviva Partners GP, LLC (“General ~~Partner.~~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.

~~Table~~Prior to the Hamlet Drop-Down, John Hancock had received all of ~~Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

~~Notes~~its capital contributions and substantially all of its preference amount and the historical net losses of the Hamlet JV had been allocated to ~~Condensed Consolidated Financial Statements~~

~~(In thousands, except number~~the members of ~~units, per unit amounts~~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. The Partnership has not received repayment of revolving borrowings from the Hamlet JV pursuant to the Hamlet JV Revolver or its capital contributions and ~~unless otherwise noted)~~

~~(Unaudited~~)

preference amount as of June 30, 2020; 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 non-controlling interest balance attributable to John Hancock that was acquired by the Partnership.

Incentive Distribution Rights

Incentive distribution rights (“IDRs”) represent the right to receive increasing percentages (from 15.0% to 50.0%) of quarterly distributions from operating surplus after distributions in amounts exceeding specified target distribution levels have been achieved by the Partnership. Our ~~general partner (“~~General ~~Partner”)~~Partner currently holds the IDRs, but may transfer ~~these rights~~them at any time.

~~At-the-Market Offering Program~~

Pursuant to an equity distribution agreement dated August 8, 2016, we may offer and sell common units from time to time through a group of managers, subject to the terms and conditions set forth in such agreement, of up to an aggregate sales amount of $100.0 million (the “ATM Program”).

During the three and six months ended June 30, 2019, we did not sell common units under the ATM Program. During the three months ended June 30, 2018, we did not sell common units under the ATM Program. During the six months ended June 30, 2018, we sold ~~8,408~~ ~~common units under the ATM Program for net proceeds of~~ ~~$0.2 million, net of an insignificant amount of commissions. Net proceeds from sales under the ATM Program were used for general partnership purposes.~~

~~First JV~~

~~The capital of the First JV is divided into two classifications: (1) Class A Units and (2) Class B Units, issued at a price of $1.00 per unit for each class.~~

~~Class A Units - Noncontrolling Interests~~

~~Class A Units were issued to the Hancock Member in exchange for capital contributions at a price of $1.00 for each Class A Unit.~~

The Hancock Member had a total capital commitment of $235.2 million and, as of June 30, 2019, the Hancock Member held 227.0 million Class A Units with a remaining capital commitment amount of $8.2 million.

~~Class B Units - Controlling Interests~~

~~Class B Units were issued to the Enviva Member in exchange for capital contributions at a price of $1.00 for each Class B Unit.~~

~~The Enviva Member had a total capital commitment of $232.2 million and, as of June 30, 2019, the Enviva Member held 224.0 million Class B Units with a remaining commitment amount of $8.2 million.~~

Pursuant to the limited liability company agreement of the First JV (the “First JV LLCA”), we are the managing member of the First JV and have the authority to manage the business and affairs of the First JV and take actions on its behalf, including adopting annual budgets, entering into agreements, effecting asset sales or biomass purchase agreements, making capital calls, incurring debt and taking other actions, subject to consent of the Hancock Member in certain circumstances. The First JV LLCA also sets forth the capital commitments and limitations thereon from each of the members, and provides for the allocation of sale proceeds and distributions among the holders of outstanding Class A Units and Class B Units.

~~We included all accounts of the First JV in our consolidated results as of April 2, 2019 as the Class B Units represent a controlling interest in the First JV.~~

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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~~)

(Unaudited)

~~Distribution Rights~~Cash Distributions to Unitholders

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


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









June 30, 2019	July 31, 2019	August 15, 2019	August 29, 2019	$	0.6600	$	22.1	$	2.8
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	August 5, 2020	August 14, 2020	August 28, 2020	$	0.7650	$	30.4	$	7.5

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 ~~reasonable discretion~~current period calculation of cash available for distribution are allocated to each class of equity that will receive the ~~Enviva Member and~~distribution. Any unpaid cumulative distributions are ~~governed by the waterfall provisions of the First JV LLCA, which provides that distributions, after repayment of the First JV Revolver borrowings, are to be made as follows:~~

~~First: To the members in proportion to their relative unreturned capital contributions, then to the members in proportion to their relative unpaid preference amount.~~

~~Thereafter: 25% to the Hancock Member and 75% to the Enviva Member.~~

Prior to the JV 1.0 Drop-Down, at the discretion of the Enviva Member, the Hancock Member had received all of its capital contributions and substantially all of its preference amount. Given that and the historical net losses of the First JV having been previously allocated to the ~~Enviva Member~~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 ~~Hancock Member~~distribution waterfall set forth in ~~proportion to their unreturned capital contributions,~~our partnership agreement. Net earnings for the balance of the First JV members’ capital attributable had become negative as of the JV 1.0 Drop-Down. Additionally, given that and the extent to which the Enviva Member has yet to receive repayment of its revolver borrowings, capital contributions and preference amount as of June 30, 2019, none of the net loss of the First JV has beenquarter are allocated to each class of partnership interest based on the ~~Hancock Member subsequent~~distributions to ~~the date of the JV 1.0 Drop-Down. Thus, no change has been recognized to the negative noncontrolling interest balance that we acquired.~~be made.

~~(15)~~(14) 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 the Partnership:


														Time-Based Phantom Units				Performance-Based Phantom Units					Total Affiliate Grant Phantom Units
	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)
	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, 2018	723,940		$	25.91	239,512		$	27.65	963,452		$	26.34
Nonvested December 31, 2019													Nonvested December 31, 2019	874,286	$	28.90	435,270	$	28.84	1,309,556	$	28.88
Granted	372,007		$	30.39	214,437		$	30.25	586,444		$	30.34	Granted	534,882	$	37.91	379,431	$	37.98	914,313	$	37.94
Forfeitures	(35,459	)	$	27.55	(7,607	)	$	29.57	(43,066	)	$	27.91	Forfeitures	(97,693)	$	32.74	(82,632)	$	30.09	(180,325)	$	31.53
Vested	(145,506	)	$	18.30	—		$	—	(145,506	)	$	18.30	Vested	(189,312)	$	25.40	(53,645)	$	25.39	(242,957)	$	25.39
Nonvested June 30, 2019	914,982		$	28.88	446,342		$	28.86	1,361,324		$	28.87
Nonvested June 30, 2020													Nonvested June 30, 2020	1,122,163	$	33.45	678,424	$	34.08	1,800,587	$	33.69


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

As(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 June 30, ~~2019, an insignificant amount is included in related-party payables to Enviva Management to satisfy tax-withholding requirements associated with time-based phantom awards that vested under~~2020 was $19.6 million, which will be recognized over the LTIP during the six months ended June 30, 2019. During the six months ended June 30, 2018, we paid $2.3 million to the General Partner, which acquired common units from a wholly owned subsidiary of our sponsor for delivery to the recipients under the LTIP. We also paid $1.7 million during the six months ended June 30, 2018 to Enviva Management to satisfy the tax-withholding requirements associated with such common units under the MSAs.

remaining vesting period.

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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~~)(Unaudited)

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
	Time-Based Phantom Units					Units	Weighted-Average Grant Date Fair Value (per unit)(1)
	Units		Weighted- Average Grant Date Fair Value (per unit)(1)
Nonvested December 31, 2018	13,964		$	28.65
Nonvested December 31, 2019					Nonvested December 31, 2019	13,264	$	30.16
Granted	13,444		$	30.16	Granted	12,112	$	37.98
Vested	(13,964	)	$	28.65	Vested	(13,264)	$	30.16
Nonvested June 30, 2019	13,444		$	30.16
Nonvested June 30, 2020					Nonvested June 30, 2020	12,112	$	37.98

In February ~~2019,~~2020, Director Grants valued at ~~$0.4~~$0.5 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, ~~2018~~2019 vested, and common units were issued in respect of such vested Director Grants.

~~Distribution Equivalent Rights~~

~~There were~~ no ~~paid DER distributions related to time-based Affiliate Grants for~~ During the three ~~months ended June 30, 2019. Paid DER distributions related to time-based Affiliate Grants were $0.9 million for the~~and six months ended June 30, 2019. Paid DER distributions related to the time-based Affiliate Grants were $1.2 million for the six months ended June 30, 2018. Paid DER distributions were insignificant for the three months ended June 30, 2018. At June 30, 2019 and December 31, 2018, $1.22020 we recognized $0.1 million and ~~$0.9~~$0.2 million, respectively, of ~~DER distributions were included in related-party accrued liabilities.~~

~~Unpaid distribution equivalent rights (“DERs”) amounts related~~unit based compensation expense with respect to the ~~performance-based Affiliate~~Director Grants. The unrecognized estimated compensation expense relating to outstanding Director Grants at June 30, 2019 were $1.3 million, of which $0.5 million are included in accrued liabilities and $0.8 million are included in other long-term liabilities on the condensed consolidated balance sheets. Unpaid DER amounts related to the performance-based Affiliate Grants at December 31, 2018 were $0.7 million, of which $0.4 million are included in accrued liabilities and2020 was $0.3 million, ~~are included in other long-term liabilities.~~which will be recognized over the remaining vesting period.

~~(16)~~(15) Income Taxes

Our operations are organized as limited partnerships and entities that are disregarded entities for federal and state income tax purposes. As a result, we are not subject to U.S. federal and most state income taxes. The unitholders of the Partnership 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 condensed consolidated financial statements and have been included in other income (expense) as incurred.

As of June 30, ~~2019,~~2020, the only periods subject to examination for federal and state income tax returns are ~~2015~~2016 through 2018. 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, no0 reserves for uncertain tax positions or interest and penalties have been recorded. For the three and six months ended June 30, 2020 and 2019, ~~and 2018, no~~0 provision for federal or state income taxes has been recorded in the condensed consolidated financial statements.

~~(17)~~(16) 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 ~~outstanding common units.~~units outstanding. 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.

~~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~~)

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.

On May 30, 2018, the requirements under our partnership agreement for the conversion of all of our subordinated units into common units were satisfied and the subordination period for such subordinated units ended. As a result, all of our 11,905,138 outstanding subordinated units converted into common units on a one-for-one basis. The conversion did not impact the amount of the cash distribution paid or the total number of our outstanding units representing limited partner interests. Our net income (loss) was allocated to the General Partner and the limited partners, including the holders of the subordinated units and IDR holders, in accordance with our partnership agreement.

In addition to the common units, we have ~~also~~ identified the IDRs and phantom units as participating securities and ~~use~~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 and subordinated~~ 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. ~~Basic and diluted earnings~~

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except number of units, per unit ~~previously applicable to subordinated limited partner units were the same because there are no potentially dilutive subordinated units outstanding.~~amounts and unless otherwise noted)

(Unaudited)

The following computation of net income (loss) available per limited partner unit is as follows for the three and six months ended June 30, ~~2019~~2020 and ~~2018:~~2019:


	Three Months Ended June 30, 2020										Six Months Ended June 30, 2020
	Common Units		General Partner		Total		Common Units		General Partner		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	$	—					$	0.10


	Three Months Ended June 30, 2019										Six Months Ended June 30, 2019
	Common Units		General Partner		Total		Common Units		General Partner		Total
Distributions declared	$	22,081	$	2,773	$	24,854	$	43,661	$	5,043	$	48,704
Earnings less than distributions	(28,655)		—		(28,655)		(61,428)		��		(61,428)
Net (loss) income available to partners	$	(6,574)	$	2,773	$	(3,801)	$	(17,767)	$	5,043	$	(12,724)
Weighted-average units outstanding—basic and diluted	33,400						30,098
Net loss per limited partner unit—basic and diluted	$	(0.20)					$	(0.59)

(17) Subsequent Events

Greenwood Drop-Down and Georgia Biomass Acquisition

On June 18, 2020, we and our sponsor entered into a contribution agreement (the “Contribution Agreement”) pursuant to which our sponsor agreed to contribute to us all of the limited liability company interests in Enviva Pellets Greenwood Holdings II, LLC (“Greenwood Holdings II”), which wholly indirectly owns Enviva Pellets Greenwood, LLC, for a purchase price of $132.0 million, subject to certain adjustments (such transaction, the “Greenwood Drop-Down”). The Greenwood Drop-Down closed on July 1, 2020.

In connection with the consummation of the Greenwood Drop-Down, (1) we and our sponsor entered into a make-whole agreement, 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 and (2) we and Enviva Management entered into an agreement pursuant to which (a) an aggregate of approximately $37.0 million in management services and other fees that otherwise would be owed by us under the EVA MSA will be waived with respect to the period from the closing of the Greenwood Drop-Down through the fourth quarter of 2021 and (b) Enviva Management will 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 metric tons in any calendar month, in each case, to provide cash flow support to us during the planned expansion of the Greenwood plant.

On June 18, 2020, we entered into a Membership Interest Purchase and Sale Agreement (the “Georgia Biomass Purchase Agreement” ) to acquire all of the limited liability company interests in Georgia Biomass Holding LLC, a Georgia limited liability company (“Georgia Biomass”), and the indirect owner of a wood pellet production plant located in Waycross, Georgia (the “Waycross plant”), for total consideration of $175.0 million in cash, subject to certain adjustments. The closing occurred on July 31, 2020. We refer to this transaction as the “Georgia Biomass Acquisition.”

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.



	~~Three Months Ended June 30, 2019~~
	~~Common~~ ~~Units~~	~~General~~ ~~Partner~~
~~Weighted-average common units outstanding—basic~~	~~33,400~~	—
~~Effect of nonvested phantom units~~	—	—
~~Weighted-average common units outstanding—diluted~~	~~33,400~~	—

Three Months Ended June 30, 2019

Common
Units

General
Partner
Total
Distributions declared $ 22,081
$ 2,773
$ 24,854
Earnings less than distributions (28,655 ) —
(28,655 )
Net (loss) income attributable to partners $ (6,574 ) $ 2,773
$ (3,801 )
Weighted-average units outstanding—basic and diluted 33,400

Net loss per limited partner unit—basic and diluted $ (0.20 )



	~~Six Months Ended June 30, 2019~~
	~~Common~~ ~~Units~~	~~General~~ ~~Partner~~
~~Weighted-average common units outstanding—basic~~	~~30,098~~	—
~~Effect of nonvested phantom units~~	—	—
~~Weighted-average common units outstanding—diluted~~	~~30,098~~	—

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~~)

Six Months Ended June 30, 2019
Common
Units General
Partner Total
Distributions declared $ 43,661
$ 5,043
$ 48,704
Earnings less than distributions (61,428 ) —
(61,428 )
Net (loss) income attributable to partners $ (17,767 ) $ 5,043
$ (12,724 )
Weighted-average units outstanding—basic and diluted 30,098

Net loss per limited partner unit—basic and diluted $ (0.59 )

Three Months Ended June 30, 2018

Common
Units

Subordinated
Units

General
Partner
Weighted-average common units outstanding—basic 18,597
7,804
—
Effect of nonvested phantom units 1,131
—
—
Weighted-average common units outstanding—diluted 19,728
7,804
—

Three Months Ended June 30, 2018

Common
Units

Subordinated
Units

General
Partner
Total
Distributions declared $ 11,750
$ 4,931
$ 1,400
$ 18,081
Earnings less than distributions (10,240 ) (4,297 ) —
(14,537 )
Net income attributable to partners $ 1,510
$ 634
$ 1,400
$ 3,544
Weighted-average units outstanding—basic 18,597
7,804

Weighted-average units outstanding—diluted 19,728
7,804

Net income per limited partner unit—basic $ 0.08
$ 0.08

Net income per limited partner unit—diluted $ 0.08
$ 0.08

Six Months Ended June 30, 2018
Common
Units Subordinated
Units General
Partner
Weighted-average common units outstanding—basic 16,518
9,855
—
Effect of nonvested phantom units —
—
—
Weighted-average common units outstanding—diluted 16,518
9,855
—

Six Months Ended June 30, 2018
Common
Units Subordinated
Units General
Partner Total
Distributions declared $ 20,788
$ 12,403
$ 2,664
$ 35,855
Earnings less than distributions (32,347 ) (19,299 ) —
(51,646 )
Net (loss) income attributable to partners $ (11,559 ) $ (6,896 ) $ 2,664
$ (15,791 )
Weighted-average units outstanding—basic and diluted 16,518
9,855

Net loss per limited partner unit—basic and diluted $ (0.70 ) $ (0.70 )

~~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~~)

~~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 amounts):

Quarter Ended
Declaration
Date

Record
Date

Payment
Date

Distribution
Per Unit

Total Cash
Distribution

Total
Payment to
General
Partner for
Incentive
Distribution
Rights
June 30, 2018 August 1, 2018 August 15, 2018 August 29, 2018 $ 0.6300
$ 16.7
$ 1.4
September 30, 2018 October 31, 2018 November 15, 2018 November 29, 2018 $ 0.6350
$ 16.8
$ 1.5
December 31, 2018 January 29, 2019 February 15, 2019 February 28, 2019 $ 0.6400
$ 17.0
$ 1.7
March 31, 2019 May 2, 2019 May 20, 2019 May 29, 2019 $ 0.6450
$ 21.6
$ 2.3
June 30, 2019 July 31, 2019 August 15, 2019 August 29, 2019 $ 0.6600
$ 22.1
$ 2.8

Distributions to be 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 common 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. On May 30, 2018, the subordination period ended in accordance with our partnership agreement and the subordinated units were converted into common units on a one-for-one basis.

~~(18) Supplemental Guarantor Information~~

The Partnership and its wholly owned finance subsidiary, Enviva Partners Finance Corp., are the co-issuers of our senior notes on a joint and several basis. The senior notes are guaranteed on a senior unsecured basis by certain of the Partnership’s direct and indirect wholly owned subsidiaries (excluding Enviva Partners Finance Corp. and certain immaterial subsidiaries) and will be guaranteed by the Partnership’s future restricted subsidiaries that guarantee certain of its other indebtedness (collectively, the “Subsidiary Guarantors”). The guarantees are full and unconditional and joint and several. Each of the Subsidiary Guarantors is directly or indirectly 100% owned by the Partnership. Enviva Partners Finance Corp. is a finance subsidiary formed for the purpose of being the co-issuer of the senior notes. Other than certain restrictions arising under the senior secured revolving credit facility and the indenture governing the senior notes (see Note 12, ~~Long-Term Debt and Finance Lease Obligations~~), there are no significant restrictions on the ability of any restricted subsidiary to (i) pay dividends or make any other distributions to the Partnership or any of its restricted subsidiaries or (ii) make loans or advances to the Partnership or any of its restricted subsidiaries. As of June 30, 2019, in accordance with Rule 3-10 of Regulation S-X, supplemental consolidating financial statements have been prepared from our financial information on the same basis of accounting as our consolidated financial statements. In periods prior to June 30, 2019, condensed consolidating financial information required under Rule 3-10 was not provided as our non-guarantor subsidiaries were considered minor or were not required to be presented.

~~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~~)

Condensed Consolidated Balance Sheet
June 30, 2019

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Assets
Current assets:
Cash and cash equivalents $ 3,629
$ 1,376
$ —
$ 5,005
Accounts receivable 61,812
6
—
61,818
Insurance receivables 2,258
—
—
2,258
Related-party receivables 14,322
8,370
(17,005 ) 5,687
Inventories 30,985
307
—
31,292
Prepaid expenses and other current assets 2,847
222
—
3,069
Total current assets 115,853
10,281
(17,005 ) 109,129

Property, plant and equipment - in service, net 523,691
1,783
—
525,474
Construction in progress 39,300
159,496
(180 ) 198,616
Total Property, plant and equipment, net 562,991
161,279
(180 ) 724,090

Operating lease right-of-use assets, net 26,935
6,942
—
33,877
Related-party note receivable 26,989
—
(26,989 ) —
Goodwill 85,615
—
—
85,615
Investment in subsidiaries 118,543
—
(118,543 ) —
Other long-term assets 7,038
—
(180 ) 6,858
Total assets $ 943,964
$ 178,502
$ (162,897 ) $ 959,569

Liabilities and Partners’ Capital
Current liabilities:
Accounts payable $ 12,706
$ 2,942
$ —
$ 15,648
Related-party payables and accrued liabilities 35,766
10,712
(17,005 ) 29,473
Deferred consideration for drop-downs due to related party 40,000
—
—
40,000
Accrued and other current liabilities 38,000
14,788
—
52,788
Current portion of interest payable 5,512
—
—
5,512
Current portion of long-term debt and finance lease obligations 2,733
—
—
2,733
Total current liabilities 134,717
28,442
(17,005 ) 146,154
Long-term debt and finance lease obligations 523,348
—
—
523,348
Related-party long-term debt —
26,989
(26,989 ) —
Long-term operating lease liabilities 27,726
6,123
—
33,849
Long-term interest payable 1,070
—
—
1,070
Long-term interest related-party payable —
180
(180 ) —
Other long-term liabilities 1,991
—
—
1,991
Total liabilities 688,852
61,734
(44,174 ) 706,412
Total Enviva Partners, LP partners' capital 255,112
164,960
(118,723 ) 301,349
Noncontrolling interest —
(48,192 ) —
(48,192 )
Total partners’ capital 255,112
116,768
(118,723 ) 253,157
Total liabilities and partners’ capital $ 943,964
$ 178,502
$ (162,897 ) $ 959,569

~~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~~)

Condensed Consolidated Balance Sheet
December 31, 2018

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Assets
Current assets:
Cash and cash equivalents $ 2,396
$ 64
$ —
$ 2,460
Accounts receivable 54,792
2
—
54,794
Insurance receivables 5,140
—
—
5,140
Related-party receivables 6,453
4,944
(10,005 ) 1,392
Inventories 31,490
—
—
31,490
Prepaid expenses and other current assets 2,235
—
—
2,235
Total current assets 102,506

5,010

(10,005 ) 97,511

Property, plant and equipment - in service, net 542,635
—
—
542,635
Construction in progress 14,393
—
—
14,393
Total Property, plant and equipment, net 557,028
—
—
557,028

Goodwill 85,615
—
—
85,615
Investment in subsidiaries 652
—
(652 ) —
Other long-term assets 8,616
—
—
8,616
Total assets $ 754,417
$ 5,010
$ (10,657 ) $ 748,770

Liabilities and Partners’ Capital
Current liabilities:
Accounts payable $ 15,551
$ —
$ —
$ 15,551
Related-party payables and accrued liabilities 33,169
5,061
(10,005 ) 28,225
Deferred consideration for drop-downs due to related party 74,000
—
—
74,000
Accrued and other current liabilities 41,395
5
—
41,400
Current portion of interest payable 5,434
—
—
5,434
Current portion of long-term debt and finance lease obligations 2,722
—
—
2,722
Total current liabilities 172,271
5,066
(10,005 ) 167,332
Long-term debt and finance lease obligations 429,933
—
—
429,933
Long-term interest payable 1,010
—
—
1,010
Other long-term liabilities 3,779
—
—
3,779
Total liabilities 606,993
5,066
(10,005 ) 602,054
Total partners’ capital 147,424
(56 ) (652 ) 146,716
Total liabilities and partners’ capital $ 754,417
$ 5,010
$ (10,657 ) $ 748,770

~~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~~)

Condensed Consolidated Statement of Operations
For the Three Months Ended June 30, 2019

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Product sales $ 167,202
$ —
$ —
$ 167,202
Other revenue 1,552
—
(675 ) 877
Net revenue 168,754
—
(675 ) 168,079
Cost of goods sold 140,476
—
—
140,476
Depreciation and amortization 11,096
—
—
11,096
Total cost of goods sold 151,572
—
—
151,572
Gross margin 17,182
—
(675 ) 16,507
General and administrative expenses 1,253
1,663
(675 ) 2,241
Related-party management services agreement fee 5,114
3,675
—
8,789
Total general and administrative expenses 6,367
5,338
(675 ) 11,030
Income (loss) from operations 10,815
(5,338 ) —
5,477
Other (expense) income:
Interest expense (9,169 ) (27 ) —
(9,196 )
Other income (expense), net 47
51
(180 ) (82 )
Total other (expense) income, net (9,122 ) 24
(180 ) (9,278 )
Net income (loss) $ 1,693
$ (5,314 ) $ (180 ) $ (3,801 )

Condensed Consolidated Statement of Operations
For the Three Months Ended June 30, 2018

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Product sales $ 133,168
$ —
$ —
$ 133,168
Other revenue 2,428
—
—
2,428
Net revenue 135,596
—
—
135,596
Cost of goods sold 105,967
—
—
105,967
Depreciation and amortization 9,818
—
—
9,818
Total cost of goods sold 115,785
—
—
115,785
Gross margin 19,811
—
—
19,811
General and administrative expenses 3,811
18
—
3,829
Related-party management services agreement fee 3,458
—
—
3,458
Total general and administrative expenses 7,269
18
—
7,287
Income (loss) from operations 12,542
(18 ) —
12,524
Other (expense) income:
Interest expense (9,047 ) —
—
(9,047 )
Other income (expense), net 161
(94 ) —
67
Total other expense, net (8,886 ) (94 ) —
(8,980 )
Net income (loss) $ 3,656
$ (112 ) $ —
$ 3,544

~~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~~)

Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 2019

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Product sales $ 323,801
$ —
$ —
$ 323,801
Other revenue 3,322
—
(675 ) 2,647
Net revenue 327,123
—
(675 ) 326,448
Cost of goods sold 277,868
—
—
277,868
Depreciation and amortization 22,166
—
—
22,166
Total cost of goods sold 300,034
—
—
300,034
Gross margin 27,089
—
(675 ) 26,414
General and administrative expenses 6,871
1,669
(675 ) 7,865
Related-party management services agreement fee 9,327
3,675
—
13,002
Total general and administrative expenses 16,198
5,344
(675 ) 20,867
Income (loss) from operations 10,891
(5,344 ) —
5,547
Other (expense) income:
Interest expense (18,802 ) (27 ) —
(18,829 )
Other income (expense), net 687
51
(180 ) 558
Total other expense, net (18,115 ) 24
(180 ) (18,271 )
Net loss $ (7,224 ) $ (5,320 ) $ (180 ) $ (12,724 )

Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 2018

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Product sales $ 255,490
$ —
$ —
$ 255,490
Other revenue 5,430
—
—
5,430
Net revenue 260,920
—
—
260,920
Cost of goods sold 227,005
—
—
227,005
Depreciation and amortization 19,122
—
—
19,122
Total cost of goods sold 246,127
—
—
246,127
Gross margin 14,793
—
—
14,793
General and administrative expenses 6,557
20
—
6,577
Related-party management services agreement fee 7,514
—
—
7,514
Total general and administrative expenses 14,071
20
—
14,091
Income (loss) from operations 722
(20 ) —
702
Other (expense) income:
Interest expense (17,692 ) —
—
(17,692 )
Other income (expense), net 1,293
(94 ) —
1,199
Total other expense, net (16,399 ) (94 ) —
(16,493 )
Net loss $ (15,677 ) $ (114 ) $ —
$ (15,791 )

~~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~~)

Condensed Consolidated Statement of Comprehensive Income (Loss)
For the Three Months Ended June 30, 2019

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Net income (loss) $ 1,693
$ (5,314 ) $ (180 ) $ (3,801 )
Other comprehensive loss:
Net unrealized losses on cash flow hedges (106 ) —
—
(106 )
Reclassification of net gains realized into net income (loss) (86 ) —
—
(86 )
Total other comprehensive loss (192 )
—

—
(192 )
Total comprehensive income (loss) $ 1,501
$ (5,314 ) $ (180 ) $ (3,993 )

Condensed Consolidated Statement of Comprehensive Income (Loss)
For the Three Months Ended June 30, 2018

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Net income (loss) $ 3,656
$ (112 ) $ —
$ 3,544
Other comprehensive income (loss):
Net unrealized gains on cash flow hedges 4,365
—
—
4,365
Reclassification of net gains realized into net income (loss) (64 ) —
—
(64 )
Total other comprehensive income 4,301
—
—
4,301
Total comprehensive income (loss) $ 7,957
$ (112 ) $ —
$ 7,845

~~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~~)

Condensed Consolidated Statement of Comprehensive Loss
For the Six Months Ended June 30, 2019

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Net loss $ (7,224 ) $ (5,320 ) $ (180 ) $ (12,724 )
Other comprehensive loss:
Net unrealized losses on cash flow hedges (161 ) —
—
(161 )
Reclassification of net gains realized into net loss (193 ) —
—
(193 )
Total other comprehensive loss (354 ) —
—
(354 )
Total comprehensive loss $ (7,578 ) $ (5,320 ) $ (180 ) $ (13,078 )

Condensed Consolidated Statement of Comprehensive Loss
For the Six Months Ended June 30, 2018

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Net loss $ (15,677 ) $ (114 ) $ —
$ (15,791 )
Other comprehensive income (loss):
Net unrealized gains on cash flow hedges 3,037
—
—
3,037
Reclassification of net gains realized into net loss (63 ) —
—
(63 )
Total other comprehensive income 2,974
—
—
2,974
Total comprehensive loss $ (12,703 ) $ (114 ) $ —
$ (12,817 )

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~~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~~)

Condensed Consolidated Statement of Cash Flows
For the Six Months Ended June 30, 2019

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Cash flows from operating activities:
Net loss $ (7,224 ) $ (5,320 ) $ (180 ) $ (12,724 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 22,426
30
—
22,456
MSA Fee Waivers 7,400
3,646
—
11,046
Amortization of debt issuance costs, debt premium and original issue discounts 595
—
—
595
Loss on disposal of assets 350
—
—
350
Unit-based compensation 2,936
549
—
3,485
Fair value changes in derivatives (346 ) —
—
(346 )
Unrealized loss on foreign currency transactions, net 29
—
—
29
Change in operating assets and liabilities:
Accounts and insurance receivables (4,163 ) (4 ) —
(4,167 )
Related-party receivables (17,529 ) (2,012 ) 17,005
(2,536 )
Prepaid expenses and other current and long-term assets (139 ) (201 ) —
(340 )
Inventories 287
(305 ) —
(18 )
Derivatives 563
—
—
563
Accounts payable, accrued liabilities and other current liabilities (2,449 ) (4,630 ) —
(7,079 )
Related-party payables and accrued liabilities 14,045
2,604
(17,005 ) (356 )
Accrued interest (1,650 ) 1,072
—
(578 )
Operating lease liabilities (1,690 ) (782 ) —
(2,472 )
Other long-term liabilities 196
(542 ) —
(346 )
Net cash provided by (used in) operating activities 13,637

(5,895 )
(180 ) 7,562
Cash flows from investing activities:
Purchases of property, plant and equipment (30,823 ) (19,069 ) —
(49,892 )
Payment in relation to the Enviva Wilmington Holdings, LLC Drop-Down (74,700 ) —
—
(74,700 )
Net cash used in investing activities (105,523 )
(19,069 )
—
(124,592 )
Cash flows from financing activities:
Proceeds from long-term debt and finance lease obligations, net 92,248
—
—
92,248
Proceeds from common unit issuances 96,970
—
—
96,970
First JV Revolver (22,850 ) 22,850
—
—
Payment of deferred consideration for Enviva Port of Wilmington, LLC Drop-Down (24,300 ) —
—
(24,300 )
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder (43,473 ) —
—
(43,473 )
Payment for withholding tax associated with Long-Term Incentive Plan vesting (1,870 ) —
—
(1,870 )
Net cash provided by financing activities 96,725
22,850
—
119,575
Net increase (decrease) in cash, cash equivalents and restricted cash 4,839
(2,114 ) (180 ) 2,545
Cash, cash equivalents and restricted cash, beginning of period (1,030 ) 3,490
—
2,460
Cash, cash equivalents and restricted cash, end of period $ 3,809
$ 1,376
$ (180 ) $ 5,005

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~~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~~)

Condensed Consolidated Statement of Cash Flows
For the Six Months Ended June 30, 2018

Guarantor Subsidiaries Non-
Guarantor Subsidiaries Eliminations Consolidated
Cash flows from operating activities:
Net loss $ (15,677 ) $ (114 ) $ —
$ (15,791 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 19,439
—
—
19,439
Amortization of debt issuance costs, debt premium and original issue discounts 548
—
—
548
Loss on disposal of assets 244
—
—
244
Unit-based compensation 3,823
—
—
3,823
Fair value changes in derivatives (2,923 ) —
—
(2,923 )
Unrealized loss on foreign currency transactions, net 29

—
29
Change in operating assets and liabilities:
Accounts and insurance receivables 33,806
—
—
33,806
Related-party receivables (4,052 ) (2,899 ) 7,017
66
Prepaid expenses and other current and long-term assets (297 ) —
—
(297 )
Inventories (12,021 ) —
—
(12,021 )
Derivatives (947 ) —
—
(947 )
Accounts payable, accrued liabilities and other current liabilities 8,435
1
—
8,436
Related-party payables and accrued liabilities (546 ) 4,118
(7,017 ) (3,445 )
Accrued interest 60
—
—
60
Other long-term liabilities 206
—
—
206
Net cash provided by operating activities 30,127
1,106
—
31,233
Cash flows from investing activities:
Purchases of property, plant and equipment (5,879 ) —
—
(5,879 )
Insurance proceeds from property loss 1,130
—
—
1,130
Net cash used in investing activities (4,749 ) —
—
(4,749 )
Cash flows from financing activities:
Proceeds from long-term debt and finance lease obligations, net 27,016
—
—
27,016
Proceeds from common unit issuances 241
—
—
241
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder (36,469 ) —
—
(36,469 )
Payment to General Partner to purchase affiliate common units for Long-Term Incentive Plan vesting (2,341 ) —
—
(2,341 )
Payment for withholding tax associated with Long-Term Incentive Plan vesting (1,665 ) —
—
(1,665 )
Net cash used in financing activities (13,218 ) —
—
(13,218 )
Net increase in cash, cash equivalents and restricted cash 12,160
1,106
—
13,266
Cash, cash equivalents and restricted cash, beginning of period 524
—
—
524
Cash, cash equivalents and restricted cash, end of period $ 12,684
$ 1,106
$ —
$ 13,790

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, ~~together with~~including its ~~subsidiaries (“we,” “us,” “our” or the “Partnership”), is a Delaware limited partnership formed on November 12, 2013. Our sponsor is~~consolidated subsidiaries. References to “our sponsor” refer to Enviva Holdings, LP ~~(and,~~and, where applicable, its wholly owned subsidiaries Enviva MLP Holdco, LLC and Enviva Development Holdings, ~~LLC) and references~~LLC. References to ~~our~~“our General ~~Partner~~Partner” refer to Enviva Partners GP, LLC, a wholly owned subsidiary of Enviva Holdings, LP. References to “Enviva Management” refer to Enviva Management Company, LLC, a wholly owned subsidiary of Enviva Holdings, LP, and references to “our employees” refer to the employees of Enviva ~~Management.~~Management and its affiliates who provide services to the Partnership. References to the ~~“First~~“Sponsor JV” refer to Enviva ~~Wilmington Holdings,~~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. References to the “Second JV” refer to~~ a joint venture between our sponsor and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates.

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, ~~2018~~2019 as filed with the U.S. Securities and Exchange Commission (the “SEC”). Our ~~2018~~2019 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 ~~2018~~2019 Form 10-K 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 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 ~~2018~~2019 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 ~~Europe. We own~~increasingly Japan. As of July 1, 2020, we owned and ~~operate seven~~operated eight wood pellet production plants (collectively, “our plants”) with a combined production capacity of ~~over 3.5~~approximately 4.1 million metric tons (“MT”) of wood pellets per year in Virginia, North Carolina, South Carolina, Florida, and Mississippi, ~~and Florida. In addition, we~~the production of which is fully contracted through 2025. Our combined production capacity as of July 1, 2020 increased as a result of our acquisition of a wood pellet production plant with a production capacity of 800,000 metric tons per year located in Waycross, Georgia on July 31, 2020. We export wood pellets through our wholly owned dry-bulk, deep-water marine ~~terminals~~terminal at the Port of Chesapeake, Virginia (the “Chesapeake terminal”) and terminal assets at the Port of Wilmington, North Carolina ~~(the “Wilmington terminal”)~~ and from third-party deep-water marine terminals in Mobile, Alabama and Panama City, Florida. In April 2019, we acquired our sponsor’s interest the First JV. The First JV owns the Hamlet plant and a firm, 15-year take-or-pay off-take contract to supply nearly 1.0 million metric tons per year (“MTPY”Florida (the “Panama City terminal”) of wood pellets, following a ramp period. The Hamlet plant is now operating, and we expect the plant to exit 2019 with a production run-rate of approximately 500,000 MTPY and to reach its nameplate production capacity of approximately 600,000 MTPY in 2021.. 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~~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 ~~should enable us to increase our per-unit cash distributions over time, which is our primary business objective.~~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.~~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 ~~2019,~~2020, production capacity from our plants and wood pellets sourced from ~~a production plant in Greenwood, South Carolina (the “Greenwood plant”) owned by the Second JV~~our affiliates and ~~from~~ third parties ~~are~~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 ~~2.9 million MT of wood pellets in 2019~~$15.3 billion and have a total weighted-average remaining term of ~~10.4~~12.7 years from July 1, ~~2019.~~2020. 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 $19.7 billion and the total weighted-average remaining term from July 1, 2020 would increase to 13.6 years.

Our customers 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 ~~intend~~have built our operations and assets to ~~continue expanding~~deliver and certify the highest levels of product quality and our ~~business by taking advantage~~proven track record of reliable deliveries enables us to charge premium prices for this certainty. In addition to our

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customers’ focus on the reliability of supply, they are concerned about the combustion efficiency of the ~~growing demand~~wood pellets and their 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 product that is driven by conversion of coal-fired power generation and combined heat and power plants to co-fired or dedicated biomass-fired plants and construction of newly dedicated biomass-fired plants, principally in Europe and increasingly in Japan.contract specifications.

Recent Developments

~~Hamlet Transaction~~Georgia Biomass Purchase Agreement

~~In April 2019, we acquired from~~On June 18, 2020, the ~~sponsor~~Partnership entered into a Membership Interest Purchase and Sale Agreement (the “Georgia Biomass Purchase Agreement”) to acquire all of the ~~issued~~limited liability company interests in Georgia Biomass Holding LLC, a Georgia limited liability company (“Georgia Biomass”), and ~~outstanding Class B Units~~the indirect owner of ~~the First JV~~a wood pellet production plant located in Waycross, Georgia (the “Waycross plant”), for total consideration of ~~$165.0~~$175.0 million in cash, subject to certain adjustments. The production capacity of the Waycross plant is 800,000 MTPY. The closing occurred on July 31, 2020. We refer to this transaction as the “Georgia Biomass Acquisition.”

Greenwood Contribution Agreement

On June 18, 2020, Partnership and our sponsor entered into a contribution agreement (the “Contribution Agreement”) pursuant to which our sponsor agreed to contribute to the Partnership all of the limited liability company interests in Enviva Pellets Greenwood Holdings II, LLC (“Greenwood Holdings II”), which wholly indirectly owns Enviva Pellets Greenwood, LLC (“Greenwood”), for a purchase price of $132.0 million, subject to certain adjustments ~~(the “Hamlet Transaction”~~(such transaction, the “Greenwood Drop-Down”). ~~The First JV~~Greenwood owns a wood pellet production plant located in Greenwood, South Carolina (the “Greenwood plant”).

On July 1, 2020, the ~~Hamlet plant~~

and a firm, 15-year take-or-pay off-take contract to supply nearly one million MTPY of wood pellets, following a ramp period. The contract commences in 2019, ramps to full supply volumes in 2021 and continues through 2034. The Partnership already had off-take contracts with the First JV to supply 470,000 MTPYclosing of the ~~volumes to be supplied to the First JV prior to the Hamlet Transaction; as a result, the Partnership will have 500,000 MTPY in incremental sales volumes as a result thereof.~~

~~On the date of our acquisition of the sponsor’s Class B Units in the First JV:~~

~~We commenced an associated terminal services agreement to handle contracted volumes from the Hamlet plant.~~

~~We entered into an agreement with the sponsor,~~Greenwood Drop-Down occurred, pursuant to which ~~(1)~~ the ~~sponsor will pay us certain~~Partnership paid cash ~~flows from the Hamlet plant until June 30, 2020, (2) the sponsor will reimburse us for construction cost overruns in excess~~consideration of ~~budgeted capital expenditures for the Hamlet plant, subject to certain exceptions, (3)~~$131.6 million, net of an initial purchase price adjustment of $0.4 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 ~~will pay~~assumed at closing.

Pursuant to the Contribution Agreement and the Greenwood Drop-Down, our sponsor ~~quarterly incentive payments~~assigned five biomass off-take agreements to the Partnership (collectively, the “Associated Off-Take Contracts”). The Associated Off-Take Contracts call for ~~any~~aggregate annual deliveries of 1.4 million 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 the Partnership. The Associated Off-Take Contracts were assigned to fully contract wood pellets produced by the ~~Hamlet~~Greenwood plant and Waycross plant. The shipping contracts were assigned to facilitate transportation of those produced wood pellets.

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

Greenwood Make-Whole Agreement

In connection with the Greenwood Drop-Down, the Partnership and our sponsor entered into a make-whole agreement, pursuant to which our sponsor agreed to reimburse the Partnership for any construction costs incurred for the planned expansion of the Greenwood plant in excess of ~~forecast production levels through June 30, 2020,~~$28.0 million.

Greenwood Management Services Fee Waiver

In connection with the Greenwood Drop-Down, the Partnership and ~~(4) the sponsor will retain liability for certain claims payable, if any, by the First JV (the “Make-Whole Agreement”).~~

~~The First JV~~Enviva Management entered into an agreement ~~with Enviva Management~~pursuant to ~~waive the obligation to pay~~which (1) an aggregate of approximately ~~$2.7~~$37.0 million ofin management services and other fees ~~payable to Enviva Management~~that otherwise would be otherwise be owed by the Partnership under the ~~First JV~~EVA MSA will be waived with respect to the period from the ~~date~~closing of ~~acquisition~~the Greenwood Drop-Down through the fourth quarter of 2021 and (2) Enviva Management will continue to waive certain management services and other fees during 2022 unless and until the ~~later of July 1, 2019 and COD~~Greenwood plant’s production volumes equal or exceed 50,000 metric tons in any calendar month, in each case, to provide cash flow support to the Partnership during the planned expansion of the ~~Hamlet plant (the “First JV MSA Fee Waiver”).~~Greenwood plant.

Tack-On Notes Issuance

Private Placement of Common Units

On June 18, 2020, the Partnership entered into ~~an agreement~~a Common Unit Purchase Agreement (the “Unit Purchase Agreement”) with ~~Enviva Management~~

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certain investors to ~~waive~~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”). The Partnership used the ~~obligation~~net proceeds of $190.8 million from the Private Placement to ~~pay an aggregate~~fund a portion of ~~approximately $13.0 million in fees payable under our management services~~the consideration for each of the Greenwood Drop-Down and the Georgia Biomass Acquisition, and intends to use the remaining portion to fund a portion of the Greenwood plant expansion and for general partnership purposes. The closing of the Private Placement was completed on June 23, 2020.

Pursuant to the Unit Purchase Agreement, the Partnership entered into a registration rights agreement (the ~~“EVA MSA,” and together~~“Registration Rights Agreement”) with the ~~First JV MSA,~~investors in connection with the ~~“MSAs”~~closing of the Private Placement, pursuant to which the Partnership agreed to file and maintain a registration statement (the “Shelf Registration Statement”) ~~with Enviva Management~~ with respect to the ~~period~~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, the Partnership filed the Shelf Registration Statement and on July 20, 2020, the Shelf Registration Statement was declared effective.

Financing Activities

Our net proceeds from the ~~date~~$190.8 million Placement and the net proceeds of the ~~JV 1.0 Drop-Down through~~tack-on offering of the ~~second quarter~~2026 Notes of ~~2020 (the “EVA MSA Fee Waiver”).~~

~~We assumed the sponsor’s position as lender under a credit agreement between the First JV, as borrower, and the sponsor, as lender (the “First JV Revolver”).~~

~~We refer~~$153.6 million were used to ~~these transactions as the “JV 1.0 Drop-Down.”~~

The purchase price of $165.0 million for the JV 1.0 Drop-Down consisted of (1) a 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, or $50.0repay $90.0 million of ~~common units, (3) $50.0 million in cash paid on June 28, 2019, (4) $40.0 million in cash~~the revolving borrowings under our senior secured revolving credit facility and to ~~be paid on January 2, 2020 and (5)~~pay the elimination of $3.7 million of net related-party receivables and payables included in the net assets on the date of acquisition. As the holder of the Class B Units, Enviva, LP became a member of the First JV (the “Enviva Member”) on the acquisition date.

~~Wilmington Terminal Second Payment~~

~~The Partnership made an initial payment of $56.0 million to the First JV as partial payment of the $130.0~~$132.0 million purchase price for the ~~Wilmington terminal in October 2017 (the “Wilmington Acquisition”).~~

~~On April 1, 2019,~~Greenwood Drop-Down, with the ~~Partnership made the second and final payment of $74.0 million in deferred consideration~~remaining amount being used to to partially pay for the Wilmington Acquisition consisting of 1,691,627 common units at a price of $29.38 per common unit (which was the 20-day volume-weighted average price as of the closing of the Wilmington Acquisition), or approximately $50.0$175.0 million ~~in common units, subject to certain adjustments, and approximately $24.0 million in cash (the “Second Payment”).~~Georgia Biomass Acquisition.

Mid-Atlantic Expansions

During 2019, we ~~expect~~started construction to increase the aggregate wood pellet production capacity of our plants in Northampton, North Carolina, and Southampton, Virginia (the “Mid-Atlantic Expansions”) by approximately 400,000 ~~MTPY in the aggregate, subject to receiving the necessary permits.~~MTPY. We expect to invest a total of approximately $130.0 million in additional wood pellet production assets and emissions control equipment for the ~~expansions~~Mid-Atlantic Expansions, of which we have spent $99.9 million through June 30, 2020. We have begun commissioning equipment and commencing the production ramp for the Northampton plant expansion and expect to ~~complete~~begin commissioning and commencing the production ramp for the Southampton plant expansion ~~activities in~~over the ~~first half of 2020 with startup shortly thereafter. Capital expenditures on~~next several months. We expect to benefit from the full 400,000 MTPY increased production from the Mid-Atlantic Expansions ~~through June 30, 2019 were approximately $44.5 million.~~

~~Financing Activities~~

In addition to the approximately $100.0 million in common units issued as partial consideration for the Hamlet Transaction and the Second Payment, the Partnership issued an aggregate of 3,508,778 common units to investors in exchange for proceeds

of $100.0 million in a registered direct offering (the “RDO”) pursuant to an effective registration statement on file with the SEC at a purchase price of $28.50 per unit, representing a 4.2 percent discount to the 20-day volume-weighted average price as of March 20, 2019.

We used proceeds from the RDO, along with borrowings under the Partnership’s existing $350.0 million senior secured revolving credit facility and the common units issued as consideration for the Hamlet Transaction and the Second Payment, to partially finance (i) the $165.0 million purchase price for the Hamlet Transaction, (ii) the $74.0 million in deferred consideration for the Wilmington Acquisition, and will use proceeds to partially finance (iii) the $24.0 million in capital expenditures, net of payments under the Make-Whole Agreement, expected to be required to complete construction of the Hamlet plant and (iv) the approximately $130.0 million expected to be required for the Mid-Atlantic Expansions.during 2021.

Contracted Backlog

As of ~~August 5, 2019~~July 1, 2020, we had approximately ~~$9.6~~$15.3 billion of product sales backlog for firm contracted product sales to our long-term off-take customers and have a total weighted-average remaining term of ~~10.4~~12.7 years, compared to approximately ~~$5.8~~$9.6 billion and a total weighted-average remaining term of ~~9.0~~10.4 years as of ~~July 1, 2018. Backlog~~August 5, 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 ~~August 5, 2019~~July 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 ~~August 5, 2019~~July 1, 2020 is as follows (in millions):

Period from August 5, 2019 to December 31, 2019 $ 298
Year ending December 31, 2020 913
Year ending December 31, 2021 and thereafter 8,340
Total product sales contracted backlog $ 9,551


Period from July 1, 2020 to December 31, 2020	$	472
Year ending December 31, 2021	1,175
Year ending December 31, 2022 and thereafter	13,634
Total product sales contracted backlog	$	15,281

Assuming all volumes under the firm and contingent off-take contracts held by our sponsor and ~~the Second JV~~its joint ventures were included with our product sales contracted backlog for firm contracted product sales, the total weighted-average remaining term as of ~~August 5, 2019~~July 1, 2020 would increase to ~~13.2~~13.6 years and the product sales backlog would increase to ~~$17.9~~$19.7 billion as follows (in millions):


Period from July 1, 2020 to December 31, 2020	$	472
Year ending December 31, 2021	1,175
Year ending December 31, 2022 and thereafter	18,068
Total product sales contracted backlog	$	19,715

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Period from August 5, 2019 to December 31, 2019 $ 298
Year ending December 31, 2020 913
Year ending December 31, 2021 and thereafter 16,685
Total product sales contracted backlog $ 17,896
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 is unknown and rapidly evolving, to date, our operations have not been significantly impacted by the outbreak.

We have taken assertive 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, thanks to low incident rates of COVID-19 and low levels of community spread where our plants and ports are located, 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 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 operate a portfolio of nine wood pellet production plants geographically dispersed in areas with low population density 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 significantly 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 June 30, 2020, we had no borrowings under our $350.0 million senior secured revolving credit facility and have no debt maturities until 2023. 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, our off-take contracts have a weighted-average remaining term of 12.7 years and a product sales contracted backlog of $15.3 billion as of July 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 supply to our energy generating customers, each of whom is in compliance 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.”

Factors Impacting Comparability of Our Financial Results

~~Inventory Impairment and Asset Disposal~~Private Placement of Common Units

In June 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 ~~February 27, 2018,~~April 2, 2019, we acquired from our sponsor all of the Class B units of Enviva Wilmington Holdings, LLC (the “Hamlet JV,” and such acquisition, the “Hamlet Drop-Down”). We are the managing member of the Hamlet JV, which is partially owned by John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates (collectively, where applicable, “John Hancock”).

The Hamlet JV owns a ~~fire occurred at the Chesapeake terminal, causing damage~~wood pellet production plant in Hamlet, North Carolina (the “Hamlet plant”) and has a firm 15-year take-or-pay off-take contract to ~~equipment and approximately 43,000 MT~~supply a customer with nearly 1.0 million MTPY of wood pellets ~~(the “Chesapeake Incident”).~~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 ~~Chesapeake terminal returned to operations on June 28, 2018. During~~Hamlet plant became operational during the ~~three and six months ended June 30, 2018, we incurred $20.3 million and $48.7 million, respectively, in costs~~second quarter of 2019.

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We accounted for the Hamlet JV as a ~~result~~consolidated subsidiary, not as a joint venture, following the Hamlet Drop-Down on April 2, 2019. We included all accounts of the ~~Chesapeake Incident related to asset impairment, inventory write-off and disposal costs, emergency response costs, asset repair costs and business continuity costs,~~Hamlet JV in our consolidated results as of April 2, 2019 as the latter of which represented incremental costs to commission temporary wood pellet storage and handling and ship loading operations at nearby locations to meet our contractual obligations to our customers. As of June 30, 2018, we had recovered $26.3 million related toClass B Units represent a controlling interest in the ~~Chesapeake Incident, which included $1.1 million of lost profits. As of December 31, 2018, $3.8 million of probable insurance recoveries for~~Hamlet JV. We are generally unrestricted in managing the then-remaining costs not yet recovered were included in insurance receivables; we received the $3.8 million in probable insurance recoveries (plus $0.5 million recognized as other income in 2019) in February 2019.

In addition, we incurred other losses and costs associated with the Chesapeake Incident during and since the three and six months ended June 30, 2018 and are pursuing outstanding claims of approximately $25.0 million related to such amounts. Consequently, our results of operationsassets and cash flows of the Hamlet JV; however, certain decisions, such as ~~well as our financial measures not presented in accordance with accounting principles generally accepted~~those relating to the issuance and redemption of equity interests in the ~~United States (“GAAP”~~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, see Note 1, Description of Business and Basis of Presentation-Basis of Presentation-Enviva Wilmington, Holdings, LLC and Note 12, Related-Party Transactions-Hamlet Drop-Down Agreements.

2026 Notes

During December 2019, we issued $600.0 million in principal amount of 6.5% senior unsecured notes due January 15, 2026 (the “2026 Notes”)~~, or non-GAAP financial measures, may not be comparable~~ in private placements under Rule 144A and Regulation S of the Securities Act of 1933, as amended (the “Securities Act”). We received gross proceeds of approximately $601.8 million from the offerings and net proceeds of approximately $595.8 million after deducting commissions and expenses. We used the net proceeds from the offerings (1) to ~~those~~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 ~~reported periods before or after the three~~general partnership purposes. Interest payments are due semi-annually in arrears on January 15 and ~~six months ended June 30, 2018.~~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) ~~Income~~

We define adjusted net income (loss) ~~income~~ as net income (loss) ~~income~~ excluding certain expenses incurred related to a fire that occurred in February 2018 at the Chesapeake ~~Incident~~terminal (the “Chesapeake Incident”) and ~~the Hurricane Events,~~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 the effect of certain sales and marketing, scheduling, sustainability, consultation, shipping, and risk management services (collectively, the “Commercial Services”), and including certain non-cash waivers of fees for management services provided to us by our sponsor (collectively, the “MSA Fee Waivers”)~~, and interest expense associated with incremental borrowings related to the Chesapeake Incident.~~. We believe that adjusted net income (loss) ~~income~~ enhances investors’ ability to compare the past 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 per Metric Ton

We ~~use~~define adjusted gross margin per metric ton ~~to measure our financial performance. We define adjusted~~as gross margin ~~as gross margin~~per metric ton excluding asset disposals, depreciation and amortization, changes in unrealized derivative instruments related to hedged items included in gross margin, ~~MSA Fee Waivers, and~~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.~~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 the effect of Commercial Services and including MSA Fee Waivers. We believe adjusted gross margin per metric ton is a meaningful measure because it compares our revenue-generating activities to our operating costs for a view of profitability and performance on a per metric ton basis. 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 production plants and the 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, early retirement of debt obligations, ~~MSA Fee Waivers and~~non-cash unit compensation expense, asset impairments and disposals, changes in unrealized derivative instruments related to hedged items included in gross margin and other income and expense, ~~and~~ certain items of income or loss that we characterize as unrepresentative of our ongoing operations, including certain expenses incurred related to

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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.~~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 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, income tax expense 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 the ~~cash‑generating~~cash-generating performance of the Partnership from period to period and to compare the ~~cash‑generating~~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) ~~income,~~, adjusted gross margin per metric ton, adjusted EBITDA, and distributable cash flow are not financial measures presented in accordance with ~~GAAP.~~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) ~~income,~~, 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.

Results of Operations

Three Months ~~ended~~Ended June 30, ~~2019~~2020 Compared to Three Months ~~ended~~Ended June 30, ~~2018~~2019


	Three Months Ended June 30,
	2020		2019		Change
	(in thousands)
Product sales	$	155,651	$	167,202	$	(11,551)
Other revenue ⁽¹⁾	12,061		877		11,184
Net revenue	167,712		168,079		(367)
Cost of goods sold ⁽¹⁾	125,047		140,476		(15,429)
Depreciation and amortization	14,986		11,096		3,890
Total cost of goods sold	140,033		151,572		(11,539)
Gross margin	27,679		16,507		11,172
General and administrative expenses	2,096		1,767		329
Related-party management services agreement fees	6,947		9,263		(2,316)
Total general and administrative expenses	9,043		11,030		(1,987)
Income from operations	18,636		5,477		13,159
Interest expense	(10,124)		(9,196)		(928)
Other income (expense)	(41)		(82)		41
Net income (loss)	$	8,471	$	(3,801)	$	12,272
⁽¹⁾ See Note 12, Related-Party Transactions

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Three Months ended June 30, Change Chesapeake Incident and Hurricane Events Net Change
2019 2018
(in thousands)
Product sales $ 167,202
$ 133,168
$ 34,034
$ —
$ 34,034
Other revenue ⁽¹⁾
877
2,428
(1,551 ) —
(1,551 )
Net revenue 168,079
135,596
32,483
—
32,483
Cost of goods sold, excluding depreciation and
amortization ⁽¹⁾
140,476
105,967
34,509
522
33,987
Depreciation and amortization 11,096
9,818
1,278
—
1,278
Total cost of goods sold 151,572
115,785
35,787
522
35,265
Gross margin 16,507
19,811
(3,304 ) (522 ) (2,782 )
General and administrative expenses 2,241
3,829
(1,588 ) —
(1,588 )
Related-party management services agreement fee 8,789
3,458
5,331
—
5,331
Total general and administrative expenses 11,030
7,287
3,743
—
3,743
Income from operations 5,477
12,524
(7,047 ) (522 ) (6,525 )
Interest expense (9,196 ) (9,047 ) (149 ) —
(149 )
Other (expense) income (82 ) 67
(149 ) —
(149 )
Net (loss) income $ (3,801 ) $ 3,544
$ (7,345 ) $ (522 ) $ (6,823 )

⁽¹⁾ See Note 13, Related-Party Transactions

Net revenue

~~Product sales~~

~~Revenue related~~Net revenue decreased to ~~product sales for wood pellets produced or procured by us increased to $167.2~~$167.7 million for the three months ended June 30, ~~2019~~2020 from ~~$133.2~~$168.1 million for the three months ended June 30, ~~2018.~~2019. The ~~$34.0~~de minimis change was primarily attributable to the increase in sold volumes produced by the Partnership offset by the reduction in sales volumes procured from third parties. Other revenue for the three months ended June 30, 2020 included $8.9 million under the make-whole provisions under an existing long-term off-take contract with a customer that did not take delivery of certain contracted volumes. Had the customer taken delivery of such volumes, the associated revenue would have been included in product sales. Other revenue also included $1.9 million from the Commercial Services during the three months ended June 30, 2020. The $8.9 million and $1.9 million in other revenue was recognized under a breakage model based on when the pellets would have been loaded.

Cost of goods sold

Cost of goods sold decreased to $140.0 million for the three months ended June 30, 2020 from $151.6 million for the three months ended June 30, 2019. The $11.5 million, or ~~26%~~8%, ~~increase~~decrease was primarily attributable to a ~~24% increase~~2% decrease in sales volumes during the three months ended June 30, ~~2019~~2020 as compared to the three months ended June 30, ~~2018.~~2019.

~~Other revenue~~Gross margin

~~Other revenue decreased by $1.6~~Gross margin increased to $27.7 million for the three months ended June 30, 2020 from $16.5 million for the three months ended June 30, 2019. The gross margin increase of $11.2 million during the three months ended June 30, ~~2019~~2020 as compared to the three months ended June 30, ~~2018. The decrease is~~2019 was primarily attributable to ~~$1.2~~the increase in sold volumes produced by the Partnership, which had a higher gross margin, and a reduction in sales volumes procured from third parties, which had a lower gross margin.

Adjusted gross margin per metric ton


	Three Months Ended June 30,
	2020		2019		Change
	(in thousands except per metric ton)
Reconciliation of gross margin to adjusted gross margin per metric ton:
Gross margin	$	27,679	$	16,507	$	11,172
Asset impairments and disposals	640		350		290
Non-cash unit compensation expense	473		—		473
Depreciation and amortization	14,986		11,096		3,890
Chesapeake Incident and Hurricane Events⁽¹⁾	—		(281)		281
Changes in unrealized derivative instruments	121		(2,334)		2,455
MSA Fee Waivers	—		2,700		(2,700)
Commercial Services	(1,882)		—		(1,882)
Adjusted gross margin	$	42,017	$	28,038	$	13,979
Metric tons sold	848		869		(21)
Adjusted gross margin per metric ton	$	49.55	$	32.26	$	17.29

(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 $42.0 million, ~~in fees received from a customer requesting scheduling accommodations during the three months ended June 30, 2018.~~

~~Cost of goods sold~~

~~Cost of goods sold increased to $151.6 million~~or $49.55 per MT, for the three months ended June 30, 2019 from $115.8 million for the three months ended June 30, 2018. The $35.8 million, or 31%, increase was primarily attributable to a 24% increase in sales volumes and a 5% increase in costs primarily due to seasonal factors that were more significant and longer lasting than during the three months ended June 30, 2018. These seasonal factors were largely behind us at the end of the second quarter.

~~Gross margin~~

Gross margin decreased to $16.5 million for the three months ended June 30, 2019 from $19.8 million for the three months ended June 30, 2018. The gross margin decrease of $3.3 million was primarily attributable to a $6.1 million increase in costs. The increase in costs was partially offset by a gross margin increase of $2.9 million due to a 24% increase in sales volumes during the three months ended June 30, 2019 as compared to the three months ended June 30, 2018.

2020. Adjusted gross margin ~~per metric ton~~

Three Months ended June 30,
2019 2018 Change
(in thousands except per metric ton)
Reconciliation of gross margin to adjusted gross margin per metric ton:
Gross margin $ 16,507
$ 19,811
$ (3,304 )
Loss on disposal of assets 350
244
106
Depreciation and amortization 11,096
9,818
1,278
Chesapeake Incident and Hurricane Events (281 ) (804 ) 523
Changes in unrealized derivative instruments (2,334 ) (3,463 ) 1,129
MSA Fee Waivers 2,700
—
2,700
Adjusted gross margin $ 28,038
$ 25,606
$ 2,432
Metric tons sold 869
699
170
Adjusted gross margin per metric ton $ 32.26
$ 36.63
$ (4.37 )

~~We earned adjusted gross margin of~~was $28.0 million, or $32.26 per MT, for the three months ended June 30, 2019. ~~Adjusted gross margin was $25.6 million, or $36.63 per MT, for the three months ended June 30, 2018.~~ The ~~factors impacting the change~~increase in adjusted gross margin ~~include those described~~is primarily due factors discussed above under the heading “Gross margin.” ~~Additionally,~~

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 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.

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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 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, 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, with $1.9 million of the $4.1 reduction occurring during the three months ended June 30, 2019 compared to the three months ended June 30, 2018 due to the waiver of $2.7 million of management services fees by the sponsor as consideration for an assignment of two shipping contracts to our sponsor to rebalance our and our sponsor’s respective shipping obligations under existing off-take contracts.2020.

General and administrative expenses

General and administrative expenses were $9.0 million for the three months ended June 30, 2020 and $11.0 million for the three months ended June 30, ~~2019 and $7.3~~2019. The $2.0 million ~~for the three months ended June 30, 2018. The $3.7 million increase~~decrease in general and administrative expenses is primarily attributable to the consolidation of the ~~First~~Hamlet JV following the ~~JV 1.0~~Hamlet Drop-Down on April 2, ~~2019.~~2019, as expenses were incurred while the plant was being constructed until mid-2019 to prepare for its operations that could not be included in cost of goods sold and could not be capitalized as construction costs of the plant.

Interest expense

We incurred $10.1 million of interest expense during the three months ended June 30, 2020 and $9.2 million of interest expense during the three months ended June 30, ~~2019 and $9.0 million of interest expense during the three months ended June 30, 2018.~~2019. The increase in interest expense was primarily attributable to an increase in borrowings under our 2026 Notes, partially offset by the decrease in borrowings under our senior secured revolving credit ~~facility.~~facility during the three months ended June 30, 2020, as compared to the same period in 2019.

Adjusted net income


											Three Months Ended June 30,
	Three Months ended June 30,										2020		2019		Change
	2019			2018			Change				(in thousands)
	(in thousands)
Reconciliation of net (loss) income to adjusted net income:
Net (loss) income	$	(3,801	)	$	3,544		$	(7,345	)
Reconciliation of net income (loss) to adjusted net income:										Reconciliation of net income (loss) to adjusted net income:
Net income (loss)										Net income (loss)	$	8,471	$	(3,801)	$	12,272
Chesapeake Incident and Hurricane Events	(281		)	(804		)	523			Chesapeake Incident and Hurricane Events	—		(281)		281
MSA Fee Waivers	11,046			—			11,046			MSA Fee Waivers	1,572		11,046		(9,474)
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events										Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	548		—		548
Commercial Services										Commercial Services	(1,882)		—		(1,882)
Adjusted net income	$	6,964		$	2,740		$	4,224		Adjusted net income	$	8,709	$	6,964	$	1,745

We generated adjusted net income of $8.7 million for the three months ended June 30, 2020 and $7.0 million for the three months ended June 30, ~~2019 and $2.7 million for the three months ended June 30, 2018.~~2019. The ~~$4.2~~$1.7 million increase in adjusted net income was primarily attributable to the factors described below under the heading “Adjusted ~~EBITDA,~~EBITDA.” ~~partially offset by a $1.3 million increase in depreciation and amortization expense and a $1.1 million increase in changes in unrealized derivative instruments.~~

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Adjusted EBITDA


											Three Months Ended June 30,
	Three Months ended June 30,										2020		2019		Change
	2019			2018			Change				(in thousands)
	(in thousands)
Reconciliation of net (loss) income to adjusted EBITDA:
Net (loss) income	$	(3,801	)	$	3,544		$	(7,345	)
Reconciliation of net income (loss) to adjusted EBITDA:										Reconciliation of net income (loss) to adjusted EBITDA:
Net income (loss)										Net income (loss)	$	8,471	$	(3,801)	$	12,272
Add:										Add:
Depreciation and amortization	11,248			10,031			1,217			Depreciation and amortization	15,297		11,248		4,049
Interest expense	9,196			9,047			149			Interest expense	10,124		9,196		928
Non-cash unit compensation expense	1,013			2,480			(1,467		)	Non-cash unit compensation expense	2,098		1,013		1,085
Asset impairments and disposals	350			244			106			Asset impairments and disposals	640		350		290
Chesapeake Incident and Hurricane Events	(281		)	(804		)	523			Chesapeake Incident and Hurricane Events	—		(281)		281
Changes in the fair value of derivative instruments	(2,334		)	(3,463		)	1,129			Changes in the fair value of derivative instruments	121		(2,334)		2,455
MSA Fee Waivers	11,046			—			11,046			MSA Fee Waivers	1,572		11,046		(9,474)
Acquisition costs	525			(7		)	532			Acquisition costs	957		525		432
Commercial Services										Commercial Services	(1,882)		—		(1,882)
Adjusted EBITDA	$	26,962		$	21,072		$	5,890		Adjusted EBITDA	$	37,398	$	26,962	$	10,436

We generated adjusted EBITDA of $37.4 million for the three months ended June 30, 2020 compared to adjusted EBITDA of $27.0 million for the three months ended June 30, ~~2019 compared to adjusted EBITDA of $21.1 million for the three months ended June 30, 2018.~~2019. The ~~$5.9~~$10.4 million increase was primarily attributable to the factors described above under the heading “Adjusted Gross margin per metric ton,” ~~as well as $8.3~~offset by the receipt of $9.5 million ofin other MSA Fee Waivers ~~for general and administrative expenses.~~

in the second quarter of 2019 relative to the same period in 2020.

Distributable Cash Flow

~~The following is a reconciliation~~


	Three Months Ended June 30,
	2020		2019		Change
	(in thousands)
Adjusted EBITDA	$	37,398	$	26,962	$	10,436
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	9,169		8,897		272
Maintenance capital expenditures	2,311		836		1,475
Distributable cash flow attributable to Enviva Partners, LP	25,918		17,229		8,689
Less: Distributable cash flow attributable to incentive distribution rights	7,471		2,773		4,698
Distributable cash flow attributable to Enviva Partners, LP limited partners	$	18,447	$	14,456	$	3,991

Table of ~~adjusted EBITDA to distributable cash flow:~~Contents

Three Months ended June 30,
2019 2018 Change
(in thousands)
Adjusted EBITDA $ 26,962
$ 21,072
$ 5,890
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 8,897
8,772
125
Maintenance capital expenditures 836
1,226
(390 )
Distributable cash flow attributable to Enviva Partners, LP 17,229
11,074
6,155
Less: Distributable cash flow attributable to incentive distribution rights 2,773
1,400
1,373
Distributable cash flow attributable to Enviva Partners, LP limited partners $ 14,456
$ 9,674
$ 4,782

Results of Operations

Six Months Ended June 30, ~~2019~~2020 Compared to Six Months Ended June 30, ~~2018~~2019


	Six Months Ended June 30,						Change
	2020		2019
	(in thousands)
Product sales	$	353,504	$	323,801	$	29,703
Other revenue ⁽¹⁾	18,685		2,647		16,038
Net revenue	372,189		326,448		45,741
Cost of goods sold ⁽¹⁾	288,577		277,868		10,709
Depreciation and amortization	28,626		22,166		6,460
Total cost of goods sold	317,203		300,034		17,169
Gross margin	54,986		26,414		28,572
General and administrative expenses	3,859		5,308		(1,449)
Related-party management services agreement fees	14,636		15,559		(923)
Total general and administrative expenses	18,495		20,867		(2,372)
Income from operations	36,491		5,547		30,944
Interest expense	(20,518)		(18,829)		(1,689)
Other income	131		558		(427)
Net income (loss)	$	16,104	$	(12,724)	$	28,828

⁽¹⁾ See Note 12, Related-Party Transactions

Six Months Ended June 30, Change Chesapeake Incident and Hurricane Events Net Change
2019 2018
(in thousands)
Product sales $ 323,801
$ 255,490
$ 68,311
$ —
$ 68,311
Other revenue ⁽¹⁾
2,647
5,430
(2,783 ) —
(2,783 )
Net revenue 326,448
260,920
65,528
—
65,528
Cost of goods sold, excluding depreciation and
amortization ⁽¹⁾
277,868
227,005
50,863
(15,708 ) 66,571
Depreciation and amortization 22,166
19,122
3,044
—
3,044
Total cost of goods sold 300,034
246,127
53,907
(15,708 ) 69,615
Gross margin 26,414
14,793
11,621
15,708
(4,087 )
General and administrative expenses 7,865
6,577
1,288
391
897
Related-party management services agreement fee 13,002
7,514
5,488
—
5,488
Total general and administrative expenses 20,867
14,091
6,776
391
6,385
Income from operations 5,547
702
4,845
15,317
(10,472 )
Interest expense (18,829 ) (17,692 ) (1,137 ) (490 ) (647 )
Other income 558
1,199
(641 ) —
(641 )
Net loss $ (12,724 ) $ (15,791 ) $ 3,067
$ 14,827
$ (11,760 )
⁽¹⁾ See Note 13, Related-Party Transactions

Net revenue

~~Product sales~~

~~Revenue related to product sales for wood pellets produced or procured by us~~Net revenue increased to ~~$323.8~~$372.2 million for the six months ended June 30, ~~2019~~2020 from ~~$255.5~~$326.4 million for the six months ended June 30, ~~2018.~~2019. The ~~increase of $68.3~~$45.7 million, or ~~27%~~14%, increase was primarily attributable to a ~~27%~~8% increase in sales volumes. The six months ended June 30, 2020 also included a $6.9 million increase in the fair value of derivatives that are not designated for hedge accounting. Other revenue for the six months ended June 30, 2020 included $8.9 million under make-whole provisions related to the take-or-pay obligation of a customer under an existing long-term off-take contract who did not take delivery of contracted volumes. Had the customer taken delivery of such volumes, the associated revenue would have been included in product sales. Other revenue also included $4.1 million from the Commercial Services during the six months ended June 30, 2020. The $8.9 million and $4.1 million in other revenue was recognized under a breakage model based on when the pellets would have been loaded.

Cost of goods sold

Cost of goods sold increased to $317.2 million for the six months ended June 30, 2020 from $300.0 million for the six months ended June 30, 2019. The $17.2 million, or 6%, increase was primarily attributable to a 8% increase in sales volumes during the six months ended June 30, ~~2019~~2020 as compared to the six months ended June 30, ~~2018.~~2019.

~~Other~~Gross margin

Gross margin increased to $55.0 million for the six months ended June 30, 2020 from $26.4 million for the six months ended June 30, 2019. The gross margin increase of $28.6 million was primarily attributable to a 8% increase in sales volumes and increases in the fair value of foreign currency-related derivatives and in other revenue

~~Other revenue decreased by $2.8 million~~ during the six months ended June 30, ~~2019~~2020 as compared to the six months ended June 30, ~~2018. The decrease is primarily attributable~~2019.

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Adjusted gross margin per metric ton


	Six Months Ended June 30,
	2020		2019		Change
	(in thousands except per metric ton)
Reconciliation of gross margin to adjusted gross margin per metric ton:
Gross margin	$	54,986	$	26,414	$	28,572
Asset impairments and disposals	1,552		350		1,202
Non-cash unit compensation expense	944		—		944
Depreciation and amortization	28,626		22,166		6,460
Chesapeake Incident and Hurricane Events⁽¹⁾	—		78		(78)
Changes in unrealized derivative instruments	(6,674)		(324)		(6,350)
MSA Fee Waivers	—		2,700		(2,700)
Acquisition costs	—		4,243		(4,243)
Commercial Services	(4,139)		—		(4,139)
Adjusted gross margin	$	75,295	$	55,627	$	19,668
Metric tons sold	1,852		1,712		140
Adjusted gross margin per metric ton	$	40.66	$	32.49	$	8.17

(1) In February 2018, a fire occurred at the Chesapeake terminal, causing damage to ~~$2.2~~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 $75.3 million, ~~in fees received from a customer requesting scheduling accommodations during the six months ended June 30, 2018.~~

~~Cost of goods sold~~

~~Cost of goods sold increased to $300.0 million~~or $40.66 per MT, for the six months ended June 30, 2019 from $246.1 million for the six months ended June 30, 2018, an increase of $53.9 million, or 22%. Excluding the $22.4 million of expenses incurred during the six months ended June 30, 2018 related to the Chesapeake Incident, cost of goods sold would have increased by 34%, which is primarily attributable to a 27% increase in sales volumes during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.

~~Gross margin~~

Gross margin increased to $26.4 million for the six months ended June 30, 2019 from $14.8 million for the six months ended June 30, 2018. The gross margin increase of $11.6 million was primarily attributable to the following factors:

~~$22.4 million of expenses related to the Chesapeake Incident incurred during the six months ended June 30, 2018.~~

~~a $9.7 million increase due to a 27% increase in sales volumes during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.~~

~~Offsetting the above were:~~

~~A $9.0 million increase in costs primarily due to seasonal factors that were more significant and longer lasting than during the six months ended June 30, 2018~~

~~Costs in connection with a potential acquisition, discussed below under the heading “Adjusted gross margin per metric ton,” decreased gross margin by $4.2 million.~~

~~An increase in depreciation and amortization expense of $3.0 million.~~

~~A decrease in other revenue of $2.8 million as described above.~~

2020. Adjusted gross margin ~~per metric ton~~

Six Months Ended June 30,
2019 2018 Change
(in thousands except per metric ton)
Reconciliation of gross margin to adjusted gross margin per metric ton:
Gross margin $ 26,414
$ 14,793
$ 11,621
Loss on disposal of assets 350
244
106
Depreciation and amortization 22,166
19,122
3,044
Chesapeake Incident and Hurricane Events 78
15,786
(15,708 )
Changes in unrealized derivative instruments (324 ) (2,694 ) 2,370
MSA Fee Waivers 2,700
—
2,700
Acquisition costs 4,243
—
4,243
Adjusted gross margin $ 55,627
$ 47,251
$ 8,376
Metric tons sold 1,712
1,347
365
Adjusted gross margin per metric ton $ 32.49
$ 35.08
$ (2.59 )

~~We earned adjusted gross margin of~~was $55.6 million, or $32.49 per MT, for the six months ended June 30, 2019. As described below, the increase in adjusted gross margin is primarily due to the increase in sales volumes.

Adjusted gross margin ~~was $47.3 million, or $35.08 per MT,~~ for the six months ended June 30, 2018. The factors impacting the change in adjusted gross margin include those described above under the heading “Gross margin,” offset by an increase of $3.0 million related to depreciation and amortization expense, a decrease of $15.7 million related to the Chesapeake Incident and Hurricane Events and an increase of $2.4 million related to changes in unrealized derivative instruments. Additionally, adjusted gross margin increased during the six months ended June 30, 2019 compared to the six months ended June 30, 2018 due to the waiver of $2.7 million of management services fees from our sponsor as consideration for an assignment of two shipping contracts to our sponsor to rebalance our and our sponsor’s respective shipping obligations under existing off-take contracts. In addition, the six months ended June 30, 2019 includesexcludes $4.2 million of incremental costs, which are unrepresentative of our ongoing operations, in connection with our evaluation of a third-party wood pellet production plant we ~~previously had~~ considered ~~and were considering,~~ 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.

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 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, 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, with $2.3 million of the $4.1 reduction occurring during the first three months of 2020.

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General and administrative expenses

General and administrative expenses were $18.5 million for the six months ended June 30, 2020 and $20.9 million for the six months ended June 30, ~~2019 and $14.1~~2019. The $2.4 million ~~for the six months ended June 30, 2018. The $6.8 million increase~~decrease in general and administrative expenses is primarily attributable to ~~$5.3 million resulting from~~ the consolidation of the ~~First~~Hamlet JV following the ~~JV 1.0~~Hamlet Drop-Down on April 2, 2019, ~~$1.2 million~~as expenses were incurred while the plant was being constructed until mid-2019 to prepare for its operations that could not be included in cost of ~~transaction expenses related to~~goods sold and could not be capitalized as construction costs of the ~~Hamlet Transaction and $0.4 million of legal fees related to the Chesapeake Incident.~~plant.

Interest expense

We incurred $20.5 million of interest expense during the six months ended June 30, 2020 and $18.8 million of interest expense during the six months ended June 30, ~~2019 and $17.7 million of interest expense during the six months ended June 30, 2018.~~2019. The increase in interest expense was primarily attributable to an increase in borrowings under our 2026 Notes, partially offset by the decrease in borrowings under our senior secured revolving credit ~~facility.~~facility during the six months ended June 30, 2020, as compared to the same period in 2019.

Adjusted net ~~loss~~income (loss)


											Six Months Ended June 30,
	Six Months Ended June 30,										2020		2019		Change
	2019			2018			Change				(in thousands)
	(in thousands)
Reconciliation of net loss to adjusted net loss:
Net loss	$	(12,724	)	$	(15,791	)	$	3,067
Reconciliation of net income (loss) to adjusted net income (loss):										Reconciliation of net income (loss) to adjusted net income (loss):
Net income (loss)										Net income (loss)	$	16,104	$	(12,724)	$	28,828
Chesapeake Incident and Hurricane Events	8			15,786			(15,778		)	Chesapeake Incident and Hurricane Events	—		8		(8)
MSA Fee Waivers	11,046			—			11,046			MSA Fee Waivers	4,757		11,046		(6,289)
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	490			—			490			Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	1,118		490		628
Adjusted net loss	$	(1,180	)	$	(5	)	$	(1,175	)
Commercial Services										Commercial Services	(4,139)		—		(4,139)
Adjusted net income (loss)										Adjusted net income (loss)	$	17,840	$	(1,180)	$	19,020

We generated adjusted net income of $17.8 million for the six months ended June 30, 2020 and adjusted net loss of $1.2 million for the six months ended June 30, 2019. The ~~$1.2~~$19.0 million increase in adjusted net ~~loss~~income was ~~attributable to the $15.8 million decrease in adjustments related to the Chesapeake Incident and Hurricane Events, offset by MSA Fee Waivers of $11.0 million and a $3.1 million, decrease in net loss~~ primarily attributable to the factors described ~~above.~~below under the heading “Adjusted EBITDA.”

Adjusted EBITDA


											Six Months Ended June 30,
	Six Months Ended June 30,										2020		2019		Change
	2019			2018			Change				(in thousands)
	(in thousands)
Reconciliation of net loss to adjusted EBITDA:
Net loss	$	(12,724	)	$	(15,791	)	$	3,067
Reconciliation of net income (loss) to adjusted EBITDA:										Reconciliation of net income (loss) to adjusted EBITDA:
Net income (loss)										Net income (loss)	$	16,104	$	(12,724)	$	28,828
Add:										Add:
Depreciation and amortization	22,456			19,439			3,017			Depreciation and amortization	29,247		22,456		6,791
Interest expense	18,829			17,692			1,137			Interest expense	20,518		18,829		1,689
Non-cash unit compensation expense	3,485			3,823			(338		)	Non-cash unit compensation expense	4,256		3,485		771
Asset impairments and disposals	350			244			106			Asset impairments and disposals	1,552		350		1,202
Chesapeake Incident and Hurricane Events	8			15,786			(15,778		)	Chesapeake Incident and Hurricane Events	—		8		(8)
Changes in the fair value of derivative instruments	(324		)	(2,694		)	2,370			Changes in the fair value of derivative instruments	(6,674)		(324)		(6,350)
MSA Fee Waivers	11,046			—			11,046			MSA Fee Waivers	4,757		11,046		(6,289)
Acquisition costs	5,452			146			5,306			Acquisition costs	957		5,452		(4,495)
Commercial Services										Commercial Services	(4,139)		—		(4,139)
Adjusted EBITDA	$	48,578		$	38,645		$	9,933		Adjusted EBITDA	$	66,578	$	48,578	$	18,000

We generated adjusted EBITDA of $66.6 million for the six months ended June 30, 2020 compared to adjusted EBITDA of $48.6 million for the six months ended June 30, ~~2019 compared to adjusted EBITDA of $38.6 million for the six months ended June 30, 2018.~~2019. The ~~$9.9~~$18.0 million increase was primarily attributable to the factors described above under the heading “Gross margin,” including the $5.4 million of expenses incurred, net of insurance recoveries, related to business continuity activities following the Chesapeake Incident during the three months ended June 30, 2018 as well as the $4.2 million in acquisition costs described above under the heading “Adjusted gross margin per metric ~~ton”~~ton,” offset by $6.3 million of MSA Fee Waivers for general and ~~an additional $1.2 million in costs, primarily in legal fees related to the Hamlet Transaction.~~administrative expenses.

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Distributable Cash Flow

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


	Six Months Ended June 30,
	2020		2019		Change
	(in thousands)
Adjusted EBITDA	$	66,578	$	48,578	$	18,000
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	18,587		17,745		842
Maintenance capital expenditures	3,445		1,764		1,681
Distributable cash flow attributable to Enviva Partners, LP	44,546		29,069		15,477
Less: Distributable cash flow attributable to incentive distribution rights	10,928		5,043		5,885
Distributable cash flow attributable to Enviva Partners, LP limited partners	$	33,618	$	24,026	$	9,592

Six Months Ended June 30,
2019 2018 Change
(in thousands)
Adjusted EBITDA $ 48,578
$ 38,645
$ 9,933
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 17,745
17,145
600
Maintenance capital expenditures 1,764
1,614
150
Distributable cash flow attributable to Enviva Partners, LP 29,069
19,886
9,183
Less: Distributable cash flow attributable to incentive distribution rights 5,043
2,664
2,379
Distributable cash flow attributable to Enviva Partners, LP limited partners $ 24,026
$ 17,222
$ 6,804

Liquidity and Capital Resources

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 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 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.

Cash Distributions

To the extent we have sufficient cash from our operations after establishment of cash reserves and payment of fees and expenses, our minimum quarterly distribution is $0.4125 per common unit per quarter, which equates to approximately ~~$13.8~~$16.4 million per quarter, or approximately ~~$55.2~~$65.6 million per year, based on the number of common units outstanding as of ~~June 30, 2019.~~July 31, 2020.

Capital Requirements

We operate in a capital-intensive industry, which requires significant investments to maintain and upgrade existing capital assets. Our capital requirements 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 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 million in additional wood pellet production assets and emissions control equipment for the Mid-Atlantic ~~Expansions.~~Expansions, of which we have spent $99.9 million through June 30, 2020. We have begun commissioning equipment and commencing the production ramp for the Northampton plant expansion and expect to ~~complete construction in~~begin to commissioning equipment and commencing the ~~first half~~production ramp for the Southampton plant expansion over the next several months.

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

Table of ~~2020, subject to receiving the necessary permits, with startup shortly thereafter.~~Contents

Cash Flows

The following table sets forth a summary of our net cash flows from operating, investing and financing activities for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively:


	Six Months Ended June 30,							Six Months Ended June 30,
	2019			2018				2020		2019
	(in thousands)							(in thousands)
Net cash provided by operating activities	$	7,562		$	31,233		Net cash provided by operating activities	$	53,658	$	7,562
Net cash used in investing activities	(124,592		)	(4,749		)	Net cash used in investing activities	(62,608)		(124,592)
Net cash provided by (used in) financing activities	119,575			(13,218		)
Net cash provided by financing activities							Net cash provided by financing activities	97,998		119,575
Net increase in cash, cash equivalents and restricted cash	$	2,545		$	13,266		Net increase in cash, cash equivalents and restricted cash	$	89,048	$	2,545

Cash Provided by Operating Activities

Net cash provided by operating activities was $53.7 million for the six months ended June 30, 2020 compared to $7.6 million for the six months ended June 30, ~~2019 compared to $31.2 million for the six months ended June 30, 2018.~~2019. The ~~decrease~~increase in cash provided by operating activities of ~~$23.7~~$46.1 million was ~~largely~~primarily due to ~~changes~~the increase in ~~working capital, primarily attributable to the Chesapeake Incident during the six months ended June 30, 2018.~~net income.

Cash Used in Investing Activities

Net cash used in investing activities was $62.6 million for the six months ended June 30, 2020 compared to $124.6 million for the six months ended June 30, ~~2019 compared to $4.7~~2019. The decrease in cash used in investing activities of $62.0 million ~~for the six months ended June 30, 2018. The $119.8 million increase~~ is primarily due to ~~the payment of~~a $74.7 million cash payment in ~~connection with~~relation to the ~~JV 1.0 Drop-Down. The $49.9 million of cash used for property, plant and equipment~~Hamlet Drop-Down during the six months ended June 30, 2019 ~~includes approximately $43.0 million of~~offset by cash used for capital expenditures ~~related to the Hamlet plant and~~associated with the Mid-Atlantic Expansions ~~$5.1 million related to projects intended to increase~~during the ~~operating income or operating capacity of our plants and $1.8 million of capital expenditures to maintain operations.~~six months ended June 30, 2020.

Cash ~~Used in~~Provided by Financing Activities

Net cash provided by financing activities was $98.0 million for the six months ended June 30, 2020 compared to $119.6 million for the six months ended June 30, ~~2019 compared to net cash used~~2019. The decrease in ~~financing activities of $13.2 million for the six months ended June 30, 2018. The net~~ cash provided by financing activities of $21.6 million is primarily ~~consisted of approximately $97.0 million in issued common units and~~attributable to a $93.5 million decrease of net borrowings under our senior secured revolving credit facility, ~~net, during~~$40.0 million payment related to the ~~six months ended June 30, 2019. Net cash provided by financing activities was~~Hamlet Drop-Down, offset by ~~$43.5 million~~an increase of ~~distributions paid to our unitholders and by the payment~~net proceeds from common unit issuances of ~~$24.3 million of deferred consideration for the Wilmington Drop-Down~~$103.0 million.

Net cash used in financing activities for the six months ended June 30, 2018 primarily consisted of $36.5 million of distributions paid to our unitholders, $2.3 million paid to the General Partner to purchase performance-based phantom units for the LTIP and $1.7 million paid to satisfy the withholding tax requirements associated with the LTIP vesting. Net cash used in financing activities was offset by $30.0 million of borrowings under our senior secured revolving credit facility, net, during the six months ended June 30, 2018.

Off-Balance Sheet Arrangements

As of June 30, ~~2019,~~2020, we did not have any 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 ~~2018~~2019 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, ~~2018.~~2019.

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, ~~2018~~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 June 30, ~~2019,~~2020, we had notional amounts of ~~35.9~~40.4 million GBP ~~and 7.0 million EUR~~ under foreign currency forward contracts and ~~39.4~~42.2 million GBP and ~~1.7~~2.5 million EUR under foreign currency ~~purchased options~~swap contracts that expire ~~between 2019 and 2023.~~in 2020.

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

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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) and 15(d)‑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 June 30, ~~2019.~~2020.

Changes in Internal Control Over Financial Reporting

During the quarter ended June 30, ~~2019,~~2020, 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.

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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, ~~2018.~~2019.

Item 1A. Risk Factors

~~There have been no material changes with respect~~In addition to the risk factors ~~disclosed~~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 in our Annual Report on Form 10-K for the year ended December 31, ~~2018 or~~2019, and the risk factors included in our ~~Quarterly~~Current Report on Form ~~10-Q~~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 significantly 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 ~~three months ended March 31, 2019.~~health and well-being of our employees or contractors or requested or mandated by government authorities, may significantly 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 significantly 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.

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 Number		Description

2.1		Contribution Agreement by and among Enviva Development Holdings, LLC, Enviva Holdings, LP and Enviva Partners, LP dated March 21, 2019 (Exhibit 2.1, Form ~~10-K~~8-K filed March 25, 2019, File No. 001-037363).
~~3.1~~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, File No. 001-37363)
2.3		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‑~~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 8‑8 -K filed May 4, 2015, File No. ~~001‑~~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)
4.1*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 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)
10.1		~~Third Amendment to Credit~~Common Unit Purchase Agreement, dated as of June 18, 2020, by and among Enviva Partners, LP and the Purchasers named on Schedule A therein (Exhibit 10.1, Form 8-K filed ~~September 17, 2018,~~June 19, 2020, File No. 001-37363)
10.2		~~Form~~Purchase Agreement, dated as of ~~Subscription Agreement~~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 ~~March 25, 2019,~~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, by and among Enviva Partners, LP, Enviva Partners GP, LLC Enviva Pellets Ahoskie, LLC, Enviva Pellets Amory, LLC, Enviva Pellets Northampton, LLC, Enviva Pellets Cottondale, LLC, Enviva Port of Chesapeake, LLC, Enviva Energy Services, LLC, Enviva Pellets Sampson, LLC, Enviva Pellets Southampton, LLC, Enviva Port of Panama City, LLC, Enviva Port of Wilmington, LLC and ~~Enviva Management Company, LLC dated April 2, 2019~~the ~~(Exhibit 10.3, Form 10-Q filed May 9, 2019, File No. 001-37363)~~other parties named therein
~~10.4~~10.5*†			~~Second Amended and Restated Credit~~Make-Whole Agreement, dated July 1, 2020, by and between ~~Enviva Wilmington Holdings, LLC and Enviva, LP dated April 2, 2019~~ ~~(Exhibit 10.4, Form 10-Q filed May 9, 2019, File No. 001-37363)~~
~~10.5~~	~~Make-Whole Agreement by and between~~ Enviva Holdings, LP and Enviva, LP ~~dated April 2, 2019~~ ~~(Exhibit 10.5, Form 10-Q filed May 9, 2019, 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
101.INS*101		The following financial information from Enviva Partners, LP.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 formatted in Inline XBRL ~~Instance Document~~(Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (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.
101.SCH*				~~XBRL Schema Document~~
101.CAL*				~~XBRL Calculation Linkbase Document~~
101.DEF*				~~XBRL Definition Linkbase Document~~
101.LAB*				~~XBRL Labels Linkbase Document~~
101.PRE*
104		Cover Page Interactive Data File - (formatted as Inline XBRL ~~Presentation Linkbase Document~~and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

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† Management Contract or Compensatory Plan or Arrangement.

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SIGNATURE

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

Date: August ~~7, 2019~~

5, 2020

ENVIVA PARTNERS, LP

By:

Enviva Partners GP, LLC, as its sole general partner

By:

~~/s/~~/s/ SHAI S. EVEN

Name:

Shai S. Even

Title:

Executive Vice President and Chief Financial Officer (Principal Financial Officer)

5444



	Page
CAUTIONARY STATEMENT REGARDING ~~FORWARD‑~~FORWARD ‑LOOKING STATEMENTS				1
GLOSSARY OF TERMS				3
PART I—FINANCIAL INFORMATION				4
Item 1.		Financial Statements (unaudited)	4
		Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Operations	5
		Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)	6
		Condensed Consolidated Statements of Changes in Partners’ Capital	7
		Condensed Consolidated Statements of Cash Flows	9
		Notes to Condensed Consolidated Financial Statements	11
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	3925
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	5138
Item 4.		Controls and Procedures	5139
PART II—OTHER INFORMATION				5240
Item 1.		Legal Proceedings	5240
Item 1A.		Risk Factors	5240

Item 6.		Exhibits	5341



Assets:
Cash and cash equivalents	$	3,426
Related-party receivables	945
Prepaid expenses and other current assets	22
Property, plant and equipment, net	140,446
Other long-term assets	8
Total assets	144,847

Liabilities:
Accounts payable	6,395
Related-party payables	1,923
Accrued and other current liabilities	14,965
Capital lease obligations	3
Total liabilities	23,286
Net assets contributed to Partnership	$	121,561



	June 30, 2019		December 31, 2018
Raw materials and work-in-process	$	8,226	$	4,936
Consumable tooling	18,542		17,561
Finished goods	4,524		8,993
Total inventories	$	31,292	$	31,490



Operating leases:
Operating lease ROU assets, gross	$	36,965
Accumulated amortization	(3,088		)
Operating lease ROU assets, net	$	33,877

Long-term operating lease liabilities	$	33,849
Current portion of operating lease liabilities	1,751
Total operating lease liabilities	$	35,600

Finance leases:
Property, plant and equipment, gross	$	8,914
Accumulated depreciation	(4,198		)
Property plant and equipment, net	$	4,716

Current portion of long-term finance lease obligations	$	2,724
Long-term finance lease obligations	1,668
Total finance lease liabilities	$	4,392



Lease Cost	Classification	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Operating lease cost:
Fixed lease cost	Cost of goods sold	$	1,243		$	2,277
Variable lease cost	Cost of goods sold	20			26
Short-term lease costs	Cost of goods sold	—			—
	Total operating lease costs	$	1,263		$	2,303
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	765			1,484
Variable lease cost	Cost of goods sold	(4		)	—
Interest on lease liabilities	Interest expense	57			109
	Total finance lease costs	$	818		$	1,593
	Total lease costs	$	2,081		$	3,896



	Amount of Loss in Other Comprehensive Loss on Derivative			Location of Gain Reclassified from Accumulated Other Comprehensive Loss	Amount of Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings
Interest rate swap	$	(106	)	Interest expense	$	86



	Amount of Gain in Other Comprehensive Income on Derivative (Effective Portion)		Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Effective Portion)	Amount of Gain Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)		Location of (Loss) Gain Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Earnings on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Foreign currency exchange forward contracts	$	3,950	Product sales	$	—	Product sales	$	(3	)
Foreign currency exchange purchased option contracts	307		Product sales	—		Product sales	—
Interest rate swap	108		Interest expense	64		Interest expense	1



	June 30, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior notes	$	353,178	$	367,378	$	352,843	$	359,943
Other long-term debt and finance lease obligations	172,903		172,903		79,812		79,812
Total long-term debt and finance lease obligations	$	526,081	$	540,281	$	432,655	$	439,755



	June 30, 2019			December 31, 2018
Senior notes, net of unamortized discount, premium and debt issuance of $1.8 million as of June 30, 2019 and $2.2 million as of December 31, 2018	$	353,178		$	352,843
Senior secured revolving credit facility	166,500			73,000
Other loans	2,011			2,015
Finance leases	4,392			4,797
Total long-term debt and finance lease obligations	526,081			432,655
Less current portion of long-term debt and finance lease obligations	(2,733		)	(2,722		)
Long-term debt and finance lease obligations, excluding current installments	$	523,348		$	429,933



	Three Months Ended June 30, 2019
	Common Units			General Partner		Total
Distributions declared	$	22,081		$	2,773	$	24,854
Earnings less than distributions	(28,655		)	—		(28,655		)
Net (loss) income attributable to partners	$	(6,574	)	$	2,773	$	(3,801	)
Weighted-average units outstanding—basic and diluted	33,400
Net loss per limited partner unit—basic and diluted	$	(0.20	)



	Three Months Ended June 30, 2018
	Common Units	Subordinated Units	General Partner
Weighted-average common units outstanding—basic	18,597	7,804	—
Effect of nonvested phantom units	1,131	—	—
Weighted-average common units outstanding—diluted	19,728	7,804	—



	Six Months Ended June 30, 2018
	Common Units	Subordinated Units	General Partner
Weighted-average common units outstanding—basic	16,518	9,855	—
Effect of nonvested phantom units	—	—	—
Weighted-average common units outstanding—diluted	16,518	9,855	—



Quarter Ended	Declaration Date	Record Date	Payment Date	Distribution Per Unit		Total Cash Distribution		Total Payment to General Partner for Incentive Distribution Rights
June 30, 2018	August 1, 2018	August 15, 2018	August 29, 2018	$	0.6300	$	16.7	$	1.4
September 30, 2018	October 31, 2018	November 15, 2018	November 29, 2018	$	0.6350	$	16.8	$	1.5
December 31, 2018	January 29, 2019	February 15, 2019	February 28, 2019	$	0.6400	$	17.0	$	1.7
March 31, 2019	May 2, 2019	May 20, 2019	May 29, 2019	$	0.6450	$	21.6	$	2.3
June 30, 2019	July 31, 2019	August 15, 2019	August 29, 2019	$	0.6600	$	22.1	$	2.8



Condensed Consolidated Balance Sheet
June 30, 2019

	Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	3,629	$	1,376		$	—		$	5,005
Accounts receivable	61,812		6			—			61,818
Insurance receivables	2,258		—			—			2,258
Related-party receivables	14,322		8,370			(17,005		)	5,687
Inventories	30,985		307			—			31,292
Prepaid expenses and other current assets	2,847		222			—			3,069
Total current assets	115,853		10,281			(17,005		)	109,129

Property, plant and equipment - in service, net	523,691		1,783			—			525,474
Construction in progress	39,300		159,496			(180		)	198,616
Total Property, plant and equipment, net	562,991		161,279			(180		)	724,090

Operating lease right-of-use assets, net	26,935		6,942			—			33,877
Related-party note receivable	26,989		—			(26,989		)	—
Goodwill	85,615		—			—			85,615
Investment in subsidiaries	118,543		—			(118,543		)	—
Other long-term assets	7,038		—			(180		)	6,858
Total assets	$	943,964	$	178,502		$	(162,897	)	$	959,569

Liabilities and Partners’ Capital
Current liabilities:
Accounts payable	$	12,706	$	2,942		$	—		$	15,648
Related-party payables and accrued liabilities	35,766		10,712			(17,005		)	29,473
Deferred consideration for drop-downs due to related party	40,000		—			—			40,000
Accrued and other current liabilities	38,000		14,788			—			52,788
Current portion of interest payable	5,512		—			—			5,512
Current portion of long-term debt and finance lease obligations	2,733		—			—			2,733
Total current liabilities	134,717		28,442			(17,005		)	146,154
Long-term debt and finance lease obligations	523,348		—			—			523,348
Related-party long-term debt	—		26,989			(26,989		)	—
Long-term operating lease liabilities	27,726		6,123			—			33,849
Long-term interest payable	1,070		—			—			1,070
Long-term interest related-party payable	—		180			(180		)	—
Other long-term liabilities	1,991		—			—			1,991
Total liabilities	688,852		61,734			(44,174		)	706,412
Total Enviva Partners, LP partners' capital	255,112		164,960			(118,723		)	301,349
Noncontrolling interest	—		(48,192		)	—			(48,192		)
Total partners’ capital	255,112		116,768			(118,723		)	253,157
Total liabilities and partners’ capital	$	943,964	$	178,502		$	(162,897	)	$	959,569



Condensed Consolidated Statement of Operations
For the Three Months Ended June 30, 2019

	Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Product sales	$	167,202		$	—		$	—		$	167,202
Other revenue	1,552			—			(675		)	877
Net revenue	168,754			—			(675		)	168,079
Cost of goods sold	140,476			—			—			140,476
Depreciation and amortization	11,096			—			—			11,096
Total cost of goods sold	151,572			—			—			151,572
Gross margin	17,182			—			(675		)	16,507
General and administrative expenses	1,253			1,663			(675		)	2,241
Related-party management services agreement fee	5,114			3,675			—			8,789
Total general and administrative expenses	6,367			5,338			(675		)	11,030
Income (loss) from operations	10,815			(5,338		)	—			5,477
Other (expense) income:
Interest expense	(9,169		)	(27		)	—			(9,196		)
Other income (expense), net	47			51			(180		)	(82		)
Total other (expense) income, net	(9,122		)	24			(180		)	(9,278		)
Net income (loss)	$	1,693		$	(5,314	)	$	(180	)	$	(3,801	)



Condensed Consolidated Statement of Operations
For the Three Months Ended June 30, 2018

	Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Product sales	$	133,168		$	—		$	—	$	133,168
Other revenue	2,428			—			—		2,428
Net revenue	135,596			—			—		135,596
Cost of goods sold	105,967			—			—		105,967
Depreciation and amortization	9,818			—			—		9,818
Total cost of goods sold	115,785			—			—		115,785
Gross margin	19,811			—			—		19,811
General and administrative expenses	3,811			18			—		3,829
Related-party management services agreement fee	3,458			—			—		3,458
Total general and administrative expenses	7,269			18			—		7,287
Income (loss) from operations	12,542			(18		)	—		12,524
Other (expense) income:
Interest expense	(9,047		)	—			—		(9,047		)
Other income (expense), net	161			(94		)	—		67
Total other expense, net	(8,886		)	(94		)	—		(8,980		)
Net income (loss)	$	3,656		$	(112	)	$	—	$	3,544



Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 2019

	Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Product sales	$	323,801		$	—		$	—		$	323,801
Other revenue	3,322			—			(675		)	2,647
Net revenue	327,123			—			(675		)	326,448
Cost of goods sold	277,868			—			—			277,868
Depreciation and amortization	22,166			—			—			22,166
Total cost of goods sold	300,034			—			—			300,034
Gross margin	27,089			—			(675		)	26,414
General and administrative expenses	6,871			1,669			(675		)	7,865
Related-party management services agreement fee	9,327			3,675			—			13,002
Total general and administrative expenses	16,198			5,344			(675		)	20,867
Income (loss) from operations	10,891			(5,344		)	—			5,547
Other (expense) income:
Interest expense	(18,802		)	(27		)	—			(18,829		)
Other income (expense), net	687			51			(180		)	558
Total other expense, net	(18,115		)	24			(180		)	(18,271		)
Net loss	$	(7,224	)	$	(5,320	)	$	(180	)	$	(12,724	)



Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 2018

	Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Product sales	$	255,490		$	—		$	—	$	255,490
Other revenue	5,430			—			—		5,430
Net revenue	260,920			—			—		260,920
Cost of goods sold	227,005			—			—		227,005
Depreciation and amortization	19,122			—			—		19,122
Total cost of goods sold	246,127			—			—		246,127
Gross margin	14,793			—			—		14,793
General and administrative expenses	6,557			20			—		6,577
Related-party management services agreement fee	7,514			—			—		7,514
Total general and administrative expenses	14,071			20			—		14,091
Income (loss) from operations	722			(20		)	—		702
Other (expense) income:
Interest expense	(17,692		)	—			—		(17,692		)
Other income (expense), net	1,293			(94		)	—		1,199
Total other expense, net	(16,399		)	(94		)	—		(16,493		)
Net loss	$	(15,677	)	$	(114	)	$	—	$	(15,791	)



Period from August 5, 2019 to December 31, 2019	$	298
Year ending December 31, 2020	913
Year ending December 31, 2021 and thereafter	8,340
Total product sales contracted backlog	$	9,551