UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~FORM~~

Form 10-Q


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

For the quarterly period ended ~~June 30, 2020~~March 31, 2021


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

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

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

~~Enviva Partners, LP~~


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


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

~~7200~~7272 Wisconsin Ave.

Suite ~~1000~~1800

Bethesda,

20814

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

(Zip code)


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

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

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


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading ~~Symbol(s)~~Symbol	Name of each exchange on which registered
Common Units	EVA	New York Stock Exchange

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

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

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

Large accelerated filer ☐

☒

Accelerated filer

☒☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☒☐

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

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

As of ~~July 31, 2020, 39,765,192~~April 23, 2021, 40,026,133 common units were outstanding.

Table of Contents

ENVIVA PARTNERS, LP

QUARTERLY REPORT ON FORM ~~10-Q~~10‑Q

TABLE OF CONTENTS


	~~Page~~
~~CAUTIONARY STATEMENT REGARDING FORWARD~~‑~~LOOKING STATEMENTS~~Cautionary Statement Regarding Forward‑Looking Statements				1
~~GLOSSARY OF TERMS~~Glossary of Terms				3
PART I—FINANCIAL INFORMATION				4
Item 1.		Financial Statements (unaudited)	4
		Condensed Consolidated Balance ~~Sheets~~Sheets	4
		Condensed Consolidated ~~Statements~~Statement s of Operations	5
		Condensed Consolidated Statements of Comprehensive ~~Income~~ (Loss) Income	6
		Condensed Consolidated Statements of Changes in Partners’ Capital	7
		Condensed Consolidated Statements of Cash Flows	98
		Notes to Condensed Consolidated Financial Statements	1110
Item 2.2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	2522
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	3832
Item 4.4 .		Controls and Procedures	3932
PART II—OTHER INFORMATION				4033
Item 1.		Legal Proceedings	4033
Item 1A.		Risk Factors	4033

Item 6.		Exhibits	4133

Table of Contents

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

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

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

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

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

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

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

•the creditworthiness of our contract counterparties;

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

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

•changes in prevailing economic conditions;

•unanticipated ground, grade or water conditions;

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

•fires, explosions or other accidents;

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

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

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

•changes in the price and availability of transportation;

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

•risks related to our indebtedness;

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

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

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

Table of Contents

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

~~Table of Contents~~

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

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

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

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

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

Table of Contents

GLOSSARY OF TERMS

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

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

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

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

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

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

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

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

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

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except number of units)


	March 31, 2021		December 31, 2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	3,388	$	10,004
Accounts receivable	83,257		124,212
Related-party receivables, net	0		2,414
Inventories	59,947		42,364
Prepaid expenses and other current assets	15,028		16,457
Total current assets	161,620		195,451
Property, plant and equipment, net	1,090,489		1,071,819
Operating lease right-of-use assets	50,509		51,434
Goodwill	99,660		99,660
Other long-term assets	9,629		11,248
Total assets	$	1,411,907	$	1,429,612
Liabilities and Partners’ Capital
Current liabilities:
Accounts payable	$	28,540	$	15,208
Related-party payables, net	10,986		0

Accrued and other current liabilities	79,637		108,976
Current portion of interest payable	11,706		24,642
Current portion of long-term debt and finance lease obligations	12,446		13,328
Total current liabilities	143,315		162,154
Long-term debt and finance lease obligations	955,347		912,721
Long-term operating lease liabilities	49,277		50,074
Deferred tax liabilities, net	13,199		13,217
Other long-term liabilities	13,011		15,419
Total liabilities	1,174,149		1,153,585
Commitments and contingencies	0		0
Partners’ capital:
Limited partners:
Common unitholders—public (26,439,758 and 26,209,862 units issued and outstanding at March 31, 2021 and December 31, 2020, respectively)	397,207		424,825
Common unitholder—sponsor (13,586,375 units issued and outstanding at March 31, 2021 and December 31, 2020)	27,948		41,816
General partner (1) (0 outstanding units)	(139,615)		(142,404)
Accumulated other comprehensive loss	(4)		(18)
Total Enviva Partners, LP partners’ capital	285,536		324,219
Noncontrolling interests	(47,778)		(48,192)
Total partners’ capital	237,758		276,027
Total liabilities and partners’ capital	$	1,411,907	$	1,429,612

June 30,
2020 December 31,
2019
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 98,101 $ 9,053
Accounts receivable 82,543 72,421
Related-party receivables, net 8,625 —
Inventories 39,723 32,998
Prepaid expenses and other current assets 8,932 5,617
Total current assets 237,924 120,089
Property, plant and equipment, net 784,523 751,780
Operating lease right-of-use assets 31,737 32,830
Goodwill 85,615 85,615
Other long-term assets 10,247 4,504
Total assets $ 1,150,046 $ 994,818
Liabilities and Partners’ Capital
Current liabilities:
Accounts payable $ 20,358 $ 18,985
Related-party payables, net — 304
Deferred consideration for drop-down due to related-party — 40,000
Accrued and other current liabilities 75,346 59,066
Current portion of interest payable 22,996 3,427
Current portion of long-term debt and finance lease obligations 7,558 6,590
Total current liabilities 126,258 128,372
Long-term debt and finance lease obligations 597,510 596,430
Long-term operating lease liabilities 32,980 33,469
Other long-term liabilities 2,818 3,971
Total liabilities 759,566 762,242
Commitments and contingencies
Partners’ capital:
Limited partners:
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) 67,646 82,300
General partner (no outstanding units) (99,899) (101,739)
Accumulated other comprehensive income 1 23
Total Enviva Partners, LP partners’ capital 438,672 280,768
Noncontrolling interest (48,192) (48,192)
Total partners' capital 390,480 232,576
Total liabilities and partners’ capital $ 1,150,046 $ 994,818
(1) Includes incentive distribution rights

See accompanying notes to condensed consolidated financial statements.

Table of Contents

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,
2020 2019 2020 2019
Product sales $ 155,651 $ 167,202 $ 353,504 $ 323,801
Other revenue ⁽¹⁾
12,061 877 18,685 2,647
Net revenue 167,712 168,079 372,189 326,448
Cost of goods sold ⁽¹⁾
125,047 140,476 288,577 277,868
Depreciation and amortization 14,986 11,096 28,626 22,166
Total cost of goods sold 140,033 151,572 317,203 300,034
Gross margin 27,679 16,507 54,986 26,414
General and administrative expenses 2,096 1,767 3,859 5,308
Related-party management services agreement fees 6,947 9,263 14,636 15,559
Total general and administrative expenses 9,043 11,030 18,495 20,867
Income from operations 18,636 5,477 36,491 5,547
Other (expense) income:
Interest expense (10,124) (9,196) (20,518) (18,829)
Other (expense) income, net (41) (82) 131 558
Total other expense, net (10,165) (9,278) (20,387) (18,271)
Net income (loss) $ 8,471 $ (3,801) $ 16,104 $ (12,724)
Net income (loss) per limited partner common unit:
Basic and diluted $ — $ (0.20) $ 0.10 $ (0.59)
Weighted-average number of limited partner common units outstanding:
Basic and diluted 34,082 33,400 33,816 30,098
⁽¹⁾ See Note 12, Related-Party Transactions


	Three Months Ended March 31,
	2021		2020
Product sales	$	224,530	$	197,853
Other revenue (1)	16,514		6,624
Net revenue	241,044		204,477
Cost of goods sold (1)	196,639		162,618
Loss on disposal of assets	1,644		912
Depreciation and amortization	20,452		13,640
Total cost of goods sold	218,735		177,170
Gross margin	22,309		27,307
General and administrative expenses	2,500		1,763
Related-party management services agreement fee	8,770		7,689
Total general and administrative expenses	11,270		9,452
Income from operations	11,039		17,855
Other (expense) income:
Interest expense	(12,632)		(10,394)
Other income, net	111		172
Total other expense, net	(12,521)		(10,222)
Net (loss) income before income tax benefit	(1,482)		7,633
Income tax benefit	(17)		0
Net (loss) income	(1,465)		7,633
Less net income attributable to noncontrolling interest	25		0
Net (loss) income attributable to Enviva Partners, LP	$	(1,490)	$	7,633
Net (loss) income per limited partner common unit:
Basic	$	(0.27)	$	0.10
Diluted	$	(0.27)	$	0.09
Weighted-average number of limited partner common units outstanding:
Common—basic	39,933		33,551
Common—diluted	39,933		35,436

Distributions declared per limited partner unit	$	0.7850	$	0.6800

(1) See Note 11, Related-Party Transactions

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

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

(In thousands)

(Unaudited)

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)


	Three Months Ended March 31,
	2021		2020
Net (loss) income	$	(1,465)	$	7,633
Other comprehensive income (loss), net of tax of $0:

Reclassification of net gains on cash flow hedges realized into net income	0		(20)
Currency translation adjustment	14		3
Total other comprehensive income (loss)	14		(17)
Total comprehensive (loss) income	(1,451)		7,616
Less comprehensive income attributable to noncontrolling interest	25		0
Comprehensive (loss) income attributable to Enviva Partners, LP partners	$	(1,476)	$	7,616

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Partners’ Capital

(In thousands)

(Unaudited)

General
Partner
Interest Limited Partners’ Capital Accumulated
Other
Comprehensive
Income 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.~~


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

(1) Includes incentive distribution rights.


			Limited Partners’ Capital
	General Partner Interest (1)		Common Units— Public			Common Units— Sponsor			Accumulated Other Comprehensive Income		Non-controlling Interest		Total Partners’ Capital
			Units	Amount		Units	Amount
Partners' capital December 31, 2019	$	(101,739)	19,870	$	300,184	13,586	$	82,300	$	23	$	(48,192)	$	232,576
Distributions to unitholders, distribution equivalent and incentive distribution rights	(3,289)		—	(14,798)		—	(9,172)		—		—		(27,259)
Payments for withholding tax and number of units issued associated with Long-Term Incentive Plan vesting	(3,356)		149	(371)		—	—		—		—		(3,727)
Non-cash Management Services Agreement expenses	3,484		—	2,158		—	—		—		—		5,642
Other comprehensive loss	—		—	—		—	—		(17)		—		(17)
Net income	3,289		—	2,585		—	1,759		—		—		7,633
Partners' capital, March 31, 2020	$	(101,611)	20,019	$	289,758	13,586	$	74,887	$	6	$	(48,192)	$	214,848

(1) Includes incentive distribution rights.

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

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

~~(In thousands)~~

~~(Unaudited)~~

General
Partner
Interest Limited Partners’ Capital Accumulated
Other
Comprehensive
Loss 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 noncontrolling interest 1,283 — — — — — (48,192) (46,909)
Distributions to unitholders, distribution equivalent and incentive distribution rights (2,271) — (13,720) — (8,763) — — (24,754)
Issuance of units through Long-Term Incentive Plan 247 2 (287) — — — — (40)
Issuance of common units, net — 1,692 49,641 — — — — 49,641
Issuance of units associated with the Hamlet Drop-Down — — — 1,681 50,000 — — 50,000
Non-cash Management Services Agreement expenses 11,226 — 1,013 — — — — 12,239
Reimbursable amounts under Make-Whole Agreement 1,502 — — — — — — 1,502
Other comprehensive loss — — — — — (192) — (192)
Net income (loss) 2,271 — (3,609) — (2,463) — — (3,801)
Partners’ capital, June 30, 2019 $ (121,422) 19,870 $ 323,883 13,586 $ 98,785 $ 103 $ (48,192) $ 253,157

See accompanying notes to condensed consolidated financial statements.

Table of ~~Contents~~Content s

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six Months Ended
June 30,
2020 2019
Cash flows from operating activities:
Net income (loss) $ 16,104 $ (12,724)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 29,204 22,456
MSA Fee Waivers 4,757 11,046
Amortization of debt issuance costs, debt premium and original issue discounts 813 595
Loss on disposal of assets 760 350
Unit-based compensation 4,256 3,485
Fair value changes in derivatives (5,347) (346)
Unrealized (losses) gains on foreign currency transactions, net (138) 29
Change in operating assets and liabilities:
Accounts and insurance receivables (11,406) (4,167)
Related-party receivables (2,843) (2,536)
Prepaid expenses and other current and long-term assets (14) (340)
Inventories (6,270) (18)
Derivatives (792) 563
Accounts payable, accrued liabilities and other current liabilities 11,771 (7,079)
Related-party payables — (356)
Accrued interest 17,718 (578)
Deferred revenue (3,152) —
Operating lease liabilities (2,169) (2,472)
Other long-term liabilities 406 (346)
Net cash provided by operating activities 53,658 7,562
Cash flows from investing activities:
Purchases of property, plant and equipment (58,839) (49,892)
Payment in relation to the Hamlet Drop-Down — (74,700)
Other (3,769) —
Net cash used in investing activities (62,608) (124,592)
Cash flows from financing activities:
Proceeds from senior secured revolving credit facility, net — 93,500
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 (1,310) —
Proceeds from common unit issuances, net 199,990 96,970
Payment of deferred consideration for the Wilmington Drop-Down — (24,300)
Payments in relation to the Hamlet Drop-Down (40,000) —
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder (54,874) (43,473)
Payment for withholding tax associated with Long-Term Incentive Plan vesting (3,727) (1,870)
Net cash provided by financing activities 97,998 119,575
Net increase in cash, cash equivalents and restricted cash 89,048 2,545
Cash, cash equivalents and restricted cash, beginning of period 9,053 2,460
Cash, cash equivalents and restricted cash, end of period $ 98,101 $ 5,005


	Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net (loss) income	$	(1,465)	$	7,633
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	20,882		13,965
MSA Fee Waivers	8,723		3,186
Amortization of debt issuance costs, debt premium and original issue discounts	1,753		407
Loss on disposal of assets	1,644		912
Unit-based compensation	2,656		2,158
Fair value changes in derivatives	166		(5,829)
Unrealized gains (losses) on foreign currency transactions, net	119		(35)
Change in operating assets and liabilities:
Accounts and insurance receivables	42,568		(7,604)
Related-party receivables	14,041		0
Prepaid expenses and other current and long-term assets	(124)		113
Inventories	(17,636)		(7,847)
Derivatives	1,033		(883)
Accounts payable, accrued liabilities and other current liabilities	(20,838)		9,526
Related-party payables	0		5,281
Deferred revenue	(4,818)		(2,257)
Accrued interest	(8,911)		9,751
Operating lease liabilities	(1,619)		(1,021)
Other long-term liabilities	(461)		448
Net cash provided by operating activities	37,713		27,904
Cash flows from investing activities:
Purchases of property, plant and equipment	(37,142)		(25,691)
Other	0		(3,769)
Net cash used in investing activities	(37,142)		(29,460)
Cash flows from financing activities:
Proceeds from senior secured revolving credit facility	46,000		70,000
Principal payments on other long-term debt and finance lease obligations	(4,029)		(903)
Cash paid related to debt issuance costs and deferred offering costs	0		(985)
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(41,082)		(26,571)
Payment for withholding tax associated with Long-Term Incentive Plan vesting	(8,076)		(3,727)
Payments in relation to the Hamlet Drop-Down	0		(40,000)
Net cash used in financing activities	(7,187)		(2,186)
Net decrease in cash, cash equivalents and restricted cash	(6,616)		(3,742)
Cash, cash equivalents and restricted cash, beginning of period	10,004		9,053
Cash, cash equivalents and restricted cash, end of period	$	3,388	$	5,311

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Continued)

(In thousands)

(Unaudited)

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


	Three Months Ended March 31,
	2021		2020
Non-cash investing and financing activities:
Property, plant and equipment acquired included in accounts payable and accrued liabilities	$	3,742	$	19,435

Supplemental information:
Interest paid, net of capitalized interest	$	23,934	$	723

See accompanying notes to condensed consolidated financial statements.

109

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

~~(Unaudited)~~

(1) Description of Business and Basis of Presentation

Description of Business

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

We own and operate 79 industrial-scale wood pellet production plants located in the ~~Mid-Atlantic and Gulf Coast regions of the~~Southeast United States. In addition to the volumes from our plants, we also procure wood pellets from third parties and from a wood pellet production plant located in Greenwood, South Carolina (the “Greenwood plant”) owned by Enviva Holdings, LP (together with Enviva MLP Holdco, LLC and Enviva Development Holdings, LLC, where applicable, our “sponsor”). On July 1, 2020, we acquired the Greenwood plant, see Note 17, Subsequent Events.parties. Wood pellets are exported from our wholly owned deep-water marine ~~terminal~~terminals at the Port of Chesapeake, Virginia and terminal assets at the Port of Wilmington, North Carolina (the “Wilmington terminal”), and from third-party deep-water marine terminals in Mobile, Alabama, ~~and~~ Panama City, Florida and Savannah, Georgia under a short-term ~~and~~contract, a long-term contract and a lease and associated terminal services agreement, 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 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, ~~2019.~~2020.

~~Reclassification~~Enviva Pellets Greenwood

~~Certain prior year amounts have been reclassified~~On July 1, 2020, we acquired from ~~general~~our sponsor all of the limited liability company interests in Enviva Pellets Greenwood Holdings II, LLC, the indirect owner of Enviva Pellets Greenwood, LLC (“Greenwood”), which owns a wood pellet production plant located in Greenwood, South Carolina (the “Greenwood plant” and ~~administrative expenses to related-party management services agreement fees to conform to current period presentation~~such transaction, the “Greenwood Drop-Down”). The Greenwood Drop-Down was an asset acquisition between entities under common control and accounted for on the ~~condensed consolidated statements~~carryover basis of ~~operations.~~accounting. Accordingly, we recorded net assets of $67.8 million as of July 31, 2020 to reflect the Greenwood Drop-Down.

Georgia Biomass Holding LLC

On July 31, 2020, Enviva Pellets Waycross Holdings, LLC, a wholly owned subsidiary of the Partnership, acquired all of the limited liability company interests in Georgia Biomass Holding LLC, a Georgia limited liability company (“Georgia Biomass” and such transaction, the “Georgia Biomass Acquisition”) and the indirect owner of a wood pellet production plant located in Waycross, Georgia (the “Waycross plant”). In August 2020, Georgia Biomass converted to a limited liability company organized under the laws of the State of Delaware under the name Enviva Pellets Waycross Holdings Sub, LLC. The Georgia Biomass Acquisition was recorded as a business combination and accounted for using the acquisition method. Assets acquired and liabilities assumed were recognized at fair value on the acquisition date of July 31, 2020, and the difference between the consideration transferred, excluding acquisition-related costs, and the fair values of the assets acquired and liabilities assumed was recognized as goodwill. Accordingly, we recorded net identifiable assets acquired and liabilities assumed of $150.0 million and goodwill of $14.0 million as of July 31, 2020 to reflect the Georgia Biomass Acquisition.

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)

Enviva Wilmington Holdings, LLC

On April 2, 2019, we acquired (the “Hamlet Drop-Down”) from our sponsor all of the issued and outstanding Class B Units in Enviva Wilmington Holdings, LLC (the “Hamlet JV”), a limited liability company owned by our sponsor and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates (collectively, as applicable, “John Hancock”). On the date of acquisition, ~~(the “Hamlet Drop-Down”),~~ we began to consolidate the Hamlet JV as a variable interest entity of which we are the primary beneficiary. As managing member, we have the sole power to direct the activities that most impact the economics of the Hamlet JV. Additionally, as the Class B Units represent a controlling interest in the Hamlet JV, we account for the Hamlet JV as a consolidated subsidiary, not as a joint venture. The Hamlet JV owns a wood pellet production plant in Hamlet, North Carolina (the “Hamlet plant”) and a firm, 15-year take-or-pay off-take contract with a customer for the delivery of nearly 1.0 million metric tons per year (“MTPY”) of wood pellets, following a ramp period. The Hamlet Drop-Down was an asset acquisition ofbetween entities under common control and accounted for on the carryover basis of accounting. Accordingly, the consolidated financial statements for the period beginning April 2019 reflect the acquisition.

~~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)~~

(2) Significant Accounting Policies

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

Use of Estimates

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

Recently Adopted Accounting Standards

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

Recently Issued Accounting Standards not yet Adopted

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

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

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

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

~~(4)~~ Revenue

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

Performance Obligations

As of ~~June 30, 2020,~~March 31, 2021, the aggregate amount of ~~revenues~~consideration from contracts with customers allocated to the performance obligations that were unsatisfied or partially satisfied was approximately ~~$8.6~~$14.1 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 the related foreign currency derivative contracts as they do not represent contracts with customers. As of ~~June 30, 2020,~~April 1, 2021, we expect to recognize approximately 5.0% of our remaining performance obligations as revenue during the remainder of ~~2020, approximately 12.0%~~2021, an additional 9.0% in ~~2021~~2022 and the balance thereafter. Our off-take contracts expire at various times through ~~2040~~2043 and our terminal services contract expires in 2021.

Variable Consideration

Variable consideration from off-take contracts ~~extend into 2026.~~arises from several pricing features 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

1211

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)~~

~~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 our 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,~~contract arises from price increases based on agreed inflation indices and from above-minimum throughput quantities or services.

~~We allocate~~ There was no variable consideration ~~under~~from our ~~off-take and~~ terminal services ~~contracts entirely to each performance obligation to which variable consideration relates. The estimate of variable consideration represents~~contract for the ~~amount that is not more likely than not to be reversed.~~ three months ended March 31, 2021 and 2020.

For the three 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,~~March 31, 2021 and 2020, we recognized ~~$0.1 million of revenue related to performance obligations satisfied in previous periods. For the three and six months ended June 30, 2019 we recognized $0.3~~$0.4 million and ~~$0.4~~$0.2 million, respectively, of product sales revenue related to performance obligations satisfied in previous periods.

Contract Balances

Accounts receivable related to product sales as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were ~~$80.9~~$77.1 million and ~~$67.7~~$108.5 million, respectively. AsOf these amounts, $59.2 million and $95.0 million, as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, related to amounts that were not yet billable under our contracts with customers pending finalization of prerequisite billing documentation. The amounts that had not been billed are billed upon receipt of prerequisite billing documentation, where substantially all is typically billed one to two weeks after full loading of the vessel and where the remaining balance is typically billed one to two weeks after discharge of the vessel.

As of March 31, 2021 and December 31, 2020, we had ~~$1.0~~$0.1 million and ~~$4.1~~$4.9 million, respectively of deferred revenue for future performance obligations under contracts associated with off-take contracts.

Other

Accrued and other current liabilities included approximately ~~$19.1~~$23.4 million and ~~$7.6~~$50.6 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, for amounts associated with ~~purchased shipments from third-party suppliers that were resold in back-to-back transactions.~~our product sales.

~~(5)~~(4) Significant Risks and Uncertainties, Including Business and Credit Concentrations

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

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


		Three Months Ended June 30,						Six Months Ended June 30,				Three Months Ended March 31,
		2020		2019		2020		2019		2021	2020
Customer A	Customer A	40	%	60 %		37	%	50 %	Customer A	29%	35%
Customer B		13	%	9 %		11	%	10 %

Customer C	Customer C	40	%	23 %		31	%	20 %	Customer C	16%	24%
Customer D	Customer D	—	%	—	%	8	%	12 %	Customer D	19%	15%
Customer E									Customer E	16%	6%

(5) Inventories

Inventories consisted of the following as of:


	March 31, 2021		December 31, 2020
Raw materials and work-in-process	$	15,416	$	12,500
Consumable tooling	20,912		21,855
Finished goods	23,619		8,009
Total inventories	$	59,947	$	42,364

1312

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)~~

(6) ~~Inventories~~Property, Plant and Equipment, net

~~Inventories~~Property, plant and equipment, net 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


	March 31, 2021		December 31, 2020
Land	$	22,570	$	22,611
Land improvements	61,276		60,110
Buildings	321,675		316,706
Machinery and equipment	796,308		799,881
Vehicles	3,118		3,105
Furniture and office equipment	8,326		8,202
Leasehold improvements	1,029		1,029
Property, plant and equipment	1,214,302		1,211,644
Less accumulated depreciation	(316,593)		(295,921)
Property, plant and equipment, net	897,709		915,723
Construction in progress	192,780		156,096
Total property, plant and equipment, net	$	1,090,489	$	1,071,819

~~(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

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 for the three and six months ended June 30, 2019, respectively. For the three and six months ended June 30, 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. Accrued amounts for property, plant and equipment and construction in progress included in accrued and other current liabilities were ~~$10.5~~$12.7 million and ~~$9.4~~$10.8 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

Total depreciation expense was $21.0 million and $14.0 million for the three months ended March 31, 2021 and 2020, respectively. Total interest capitalized related to construction in progress was $2.1 million and $1.1 million for the three months ended March 31, 2021 and 2020, respectively.

~~(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. Leases with an initial term of longer than 12 months are recorded on the balance sheet and classified as either operating or finance.

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

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

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

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

~~(Unaudited)~~

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

Operating leases are included in operating lease 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 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)~~

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

Six Months Ended
June 30,
2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 2,169 $ 2,472
Operating cash flows from financing leases 218 109
Financing cash flows from financing leases 2,076 1,248
Assets obtained in exchange for lease obligations:
Operating leases $ — $ 7,467
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, 2020:~~

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, 2020:


~~Weighted average remaining lease term (years):~~
~~Operating leases~~	22
~~Finance leases~~	2
~~Weighted average discount rate:~~
~~Operating leases~~	8	%
~~Finance leases~~	6	%

~~(9)~~(7) Derivative Instruments

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

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

~~(Unaudited)~~

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

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

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)

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~~March 31, 2021 and December 31, ~~2019 was~~2020 were as follows:


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

Interest rate swap:
		Accrued and other current liabilities	$	(137)	$	—
		Other long-term liabilities	(49)		—
Not designated as hedging instruments:							Not designated as hedging instruments:
Interest rate swaps							Interest rate swaps	Accrued and other current liabilities	$	(84)	$	(119)

Foreign currency exchange contracts:	Foreign currency exchange contracts:						Foreign currency exchange contracts:
		Other current assets	2,260		408			Prepaid and other current assets	$	545	$	308
		Other long-term assets	4,493		1,774			Other long-term assets	665		924
		Accrued and other current liabilities	—		(735)			Accrued and other current liabilities	(3,302)		(2,224)
		Other long-term liabilities	—		(1,055)			Other long-term liabilities	(3,568)		(3,508)
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments		$	6,567	$	392	Total derivatives not designated as hedging instruments		$	(5,744)	$	(4,619)

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~~insignificant, respectively, for the three ~~and six~~ months ended ~~June 30, 2020, respectively. Our interest rate swap outstanding at~~March 31, 2021 and ~~during~~2020.

During the three ~~and six~~ months ended ~~June 30, 2019 was designated as a hedging instrument.~~

~~Net~~March 31, 2021 and 2020, product sales included net unrealized losses of $1.2 million and net unrealized gains of $6.8 million, respectively, related to the change in fair market value of foreign currency derivatives.

Included in product sales on the condensed consolidated statements of operations are realized losses related to foreign currency derivatives ~~were $0.1~~settled of $1.0 million during the three months ended ~~June 30, 2020~~March 31, 2021 and ~~were included in product sales. Net unrealized~~realized gains ~~related to the change in fair market value~~ of 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 during the three and six months ended June 30, 2019, respectively, and were included in product sales.

~~Realized gains related to derivatives settled were insignificant and~~ $0.2 million during the three ~~and six~~ months ended June 30, 2020, respectively, and were included in product sales. Realized losses related to derivatives settled were insignificant during the three months ended June 30, 2019 and were included in product sales. Realized gains related to derivatives settled were $0.1 million during the six months ended June 30, 2019 and were included in product sales.March 31, 2020.

We enter into master netting arrangements designed to permit net settlement of derivative transactions among the respective counterparties. If we had settled all transactions with our respective counterparties at ~~June 30, 2020,~~March 31, 2021, we would have ~~received~~had to pay a net settlement termination payment of ~~$6.6~~$5.9 million, which differs ~~insignificantly~~by $0.2 million 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, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Foreign exchange forward contracts in GBP	Foreign exchange forward contracts in GBP	£	40,425	£	50,575	Foreign exchange forward contracts in GBP	£	178,839	£	143,565
Foreign exchange purchased option contracts in GBP	Foreign exchange purchased option contracts in GBP	£	42,165	£	43,415	Foreign exchange purchased option contracts in GBP	£	30,621	£	51,601
Foreign exchange forward contracts in EUR	Foreign exchange forward contracts in EUR	€	2,500	€	—	Foreign exchange forward contracts in EUR	€	24,503	€	12,968
Foreign exchange purchased option contracts in EUR		€	—	€	1,200
Interest rate swap		$	70,000	$	34,354
Interest rate swaps						Interest rate swaps	$	70,000	$	70,000

(8) Fair Value Measurements

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

Derivative instruments and long-term debt including the current portion are classified as Level 2 instruments. Derivatives are classified as Level 2 as they are fair valued using inputs that are observable in active markets such as benchmark interest rates and foreign exchange rates (see Note 7, Derivative Instruments). The fair value of our 2026 Notes was determined based on observable market prices in an active market and was categorized as Level 2 in the fair value hierarchy. The fair value of our Seller Note is classified as Level 2 and is estimated on discounted cash flow analyses based on observable inputs in active markets for debt with similar terms and remaining maturities. The carrying amount of other long-term debt, which is primarily composed of the senior secured revolving credit facility that resets based on a market rate, approximates fair value.

1714

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)~~

~~(10) Fair Value Measurements~~

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

Derivative instruments and long-term debt and finance lease obligations, including the current portion, are classified as Level 2 instruments. The fair value of our senior notes was determined based on observable market prices in a less 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, 2020~~March 31, 2021 and December 31, ~~2019 were~~2020 was 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


	March 31, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2026 Notes	$	747,004	$	788,437	$	746,875	$	796,875
Seller Note	35,421		37,376		37,571		40,405
Other long-term debt	168,000		168,000		122,000		122,000
Total long-term debt	$	950,425	$	993,813	$	906,446	$	959,280

~~(11)~~(9) Intangibles

Intangible assets (liabilities) consisted of the following as of March 31, 2021:


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Favorable customer contracts	$	6,200	$	(5,606)	$	594
Assembled workforce	1,856		(1,368)		488
Unfavorable customer contract	(600)		91		(509)
Unfavorable shipping contract	(6,300)		775		(5,525)
Total intangible liabilities, net	$	1,156	$	(6,108)	$	(4,952)

(10) Long-Term Debt and Finance Lease Obligations

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


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
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
2026 Notes, net of unamortized discount, premium and debt issuance of $3.0 million and $3.1 million as of March 31, 2021 and December 31, 2020, respectively						2026 Notes, net of unamortized discount, premium and debt issuance of $3.0 million and $3.1 million as of March 31, 2021 and December 31, 2020, respectively	$	747,004	$	746,875
Senior secured revolving credit facility						Senior secured revolving credit facility	166,000		120,000
Seller Note, net of unamortized discount of $2.1 million and $2.4 million as of March 31, 2021 and December 31, 2020, respectively						Seller Note, net of unamortized discount of $2.1 million and $2.4 million as of March 31, 2021 and December 31, 2020, respectively	35,421		37,571
Other loans	Other loans	2,002		2,006		Other loans	2,000		2,000
Finance leases	Finance leases	9,028		7,538		Finance leases	17,368		19,603
Total long-term debt and finance lease obligations	Total long-term debt and finance lease obligations	605,068		603,020		Total long-term debt and finance lease obligations	967,793		926,049
Less current portion of long-term debt and finance lease obligations	Less current portion of long-term debt and finance lease obligations	(7,558)		(6,590)		Less current portion of long-term debt and finance lease obligations	(12,446)		(13,328)
Long-term debt and finance lease obligations, excluding current installments	Long-term debt and finance lease obligations, excluding current installments	$	597,510	$	596,430	Long-term debt and finance lease obligations, excluding current installments	$	955,347	$	912,721

2026 Notes

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

Senior Secured Revolving Credit Facility

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)

revolving credit facility are guaranteed by certain of our subsidiaries and secured by liens on substantially all of our assets; however, the senior secured revolving credit facility is not guaranteed by the Hamlet JV or secured by liens on its assets. We

At March 31, 2021 and December 31, 2020, we had ~~0 borrowings~~a letter of credit outstanding under our senior secured revolving credit facility ~~at June 30,~~of $0.3 million.

(11) Related-Party Transactions

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


	Three Months Ended March 31,
	2021		2020
Other revenue	$	0	$	606
Cost of goods sold	30,442		33,617
General and administrative expenses	8,770		7,689

Management Services Agreements

Enviva Partners, LP and the Hamlet JV are each parties to separate management services agreements (“MSA” or “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 Company”). Enviva Management Company provides us with operations, general administrative, management and other services. The MSAs include rent and related amounts for noncancelable operating leases for office space in Maryland and North Carolina held by our sponsor. We believe the costs allocated to us have been made on a reasonable basis and are the best estimate of the costs that we would have incurred on a stand-alone basis.

Enviva Partners reimburses Enviva Management Company for all direct or indirect internal or third-party expenses it incurs in connection with the provision of such services.

Under the Hamlet JV’s MSA (the “Hamlet JV MSA”), the Hamlet JV pays an annual management fee to Enviva Management Company; to the extent allocated costs exceed the annual management fee, the additional costs are recorded with an increase to partners’ capital. In connection with the Hamlet Drop-Down, Enviva Management Company waived the Hamlet JV’s obligation to pay approximately $2.7 million of management fees payable to Enviva Management Company from the date thereof until July 1, 2020 (the “Hamlet JV MSA Fee Waiver”).

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


	March 31, 2021		December 31, 2020
Finished goods inventory	$	3,301	$	907
Related-party payables	8,419		8,650

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


	Three Months Ended March 31,
	2021		2020
Cost of goods sold	$	24,301	$	13,260
General and administrative expenses	8,770		7,689

During the three months ended March 31, 2021 and ~~December 31, 2019.~~2020, $0.7 million of fees expensed under the Hamlet JV MSA were waived and recorded as an increase to partners’ capital.

1816

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)~~

~~(12) Related-Party Transactions~~

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

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Other revenue $ 658 $ 235 $ 1,264 $ 827
Cost of goods sold 39,739 34,623 75,996 54,621
General and administrative expenses 6,947 9,263 14,636 15,559

~~Management Services~~Drop-Down Agreements

~~Enviva Partners, LP and~~Greenwood Drop-Down

On the ~~Hamlet JV are parties~~date of the Greenwood Drop-Down:

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

•We entered into an agreement with Enviva Management Company ~~LLC , a Delaware limited liability company and wholly owned subsidiary of our sponsor (together with its affiliates that provide services~~pursuant to ~~us, as applicable, “Enviva Management”).~~which (1) Enviva Management ~~provides us with operations, general administrative,~~Company waived our obligation to pay an aggregate of approximately $37.0 million in management services and other services. We reimburse Enviva Management for all direct or indirect internal or third-party expenses it incurs in connection with the provision of such services. The MSAs include rent-related amounts for noncancelable operating leases for office space in Maryland and North Carolina held byfees payable under our ~~sponsor.~~

~~Under the Hamlet JV’s~~ management services agreement ~~(the “Hamlet JV MSA”), the Hamlet JV pays an annual management fee to~~with Enviva Management Company for the period from July 1, 2020 through the fourth quarter of 2021 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,~~(2) Enviva Management ~~waived the Hamlet JV’s~~Company will waive our obligation to pay ~~approximately $2.7 million~~certain management services and other fees during 2022 unless and until the Greenwood plant’s production volumes equal or exceed 50,000 metric tons (“MT”) in any calendar month, in each case, to provide cash flow support to us during the planned expansion of ~~management fees payable to Enviva Management from~~ the ~~date thereof until July 1, 2020~~Greenwood plant (the ~~“Hamlet JV~~“Third EVA 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, 2020, $0.6 million and $1.3 million, respectively, of fees expensed under the Hamlet JV MSA were waived pursuant~~Pursuant to the ~~Hamlet JV~~Third EVA MSA Fee Waiver, ~~and~~during the three months ended March 31, 2021, $8.0 million was recorded as an increase to partners’ ~~capital. During the three and six months ended June 30, 2019, $0.9 million~~capital consisting of ~~fees expensed~~expenses waived under the ~~Hamlet JV MSA were waived pursuant to the Hamlet JV MSA Fee Waiver and recorded as an increase to partners’ capital.~~agreement.

Hamlet Drop-Down ~~Agreements~~

On the date of the Hamlet Drop-Down:

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

•We entered into an agreement with Enviva Management Company to waive our obligation to pay an aggregate of approximately $13.0 million in fees payable under our ~~management services agreement~~MSA with Enviva Management

~~Table of Contents~~

~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

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

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

~~(Unaudited)~~

~~(the~~ Company (the “EVA MSA”) with respect to the period from the date of the Hamlet Drop-Down through the second quarter of 2020 (the “First EVA MSA Fee Waiver”).

•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”)~~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~~guaranteed all obligations of Hamlet Operator under the ISA.

~~Pursuant~~The Hamlet Make-Whole Agreement, First EVA MSA Fee Waiver and ISA expired pursuant to their terms on June 30, 2020. For the ~~agreements we entered into on the date~~three months ended March 31, 2020, $2.5 million of fees expensed under the Hamlet ~~Drop-Down, during the three~~JV MSA 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~~Waiver were recorded as an increase to partners’ capital. For the three months ended March 31, 2020, cost of goods sold included ~~$14.6~~$10.6 million ~~and $25.2 million, respectively,~~ net of a cost of cover deficiency fee from our sponsor pursuant to the Hamlet Make-Whole Agreement as a result of Hamlet Operator’s failure to meet specified production levels, offset by the agreed-upon price due to Hamlet Operator for the wood pellets produced by the Hamlet plant that we ~~have~~ sold. ~~Additionally, at June 30, 2020~~As of March 31, 2021 and December 31, ~~2019, $1.3~~2020, related-party receivables included $0.4 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~~$12.3 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 agreement with Enviva Management (the “Second EVA MSA Fee Waiver”) pursuant to which we received a $5.0 million waiver of fees under the EVA MSA through September 30, 2019 as consideration for an assignment of two shipping contracts to our sponsor to rebalance our and our sponsor’s respective shipping obligations under our existing off-take contracts. During the three and six months ended June 30, 2019, $2.7 million of EVA MSA fees expensed were waived and recorded as an increase to partners’ capital pursuant to the Second EVA MSA Fee Waiver.ISA.

Greenwood Contract

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

Drop-Down. 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 of approximately $0.3 million and $3.3 million, respectively, from Greenwood as it was unable to satisfy certain commitments.

As of June 30, 2020 and 2019, the net purchased amounts related to the Greenwood contract of $18.5 million and $20.9 million, respectively, included $18.1 million and $20.8 million, respectively, in cost of goods sold and $0.4 million and $0.1 million, respectively, in finished goods inventory.

~~Holdings TSA~~

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.

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

2017

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

~~(Unaudited)~~

the three months ended March 31, 2020, we purchased $9.9 million of wood pellets from Greenwood and recorded a cost of cover deficiency fee of approximately $0.4 million as Greenwood was unable to satisfy certain commitments. As of March 31, 2020, of the net purchased amount of $9.5 million related to the Greenwood contract, $8.4 million was included in cost of goods sold and $1.1 million was included in finished goods inventory.

Holdings TSA

Prior to its termination on the date of the Greenwood Drop-Down, we were party to a long-term terminal services agreement with our sponsor (the “Holdings TSA”). The Holdings TSA was amended and assigned to Greenwood and provided for deficiency payments if quarterly minimum throughput requirements ~~are~~were not met. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2020, ~~and 2019,~~ we recorded ~~$0.7~~$0.6 million ~~and $1.3 million and $0.2 million and $0.8 million, respectively,~~ of deficiency fees from Greenwood, which ~~are~~was included in other revenue.

Enviva FiberCo, LLC

We purchase raw materials from Enviva FiberCo, LLC (“FiberCo”), a wholly owned subsidiary of our sponsor, including through a wood supply agreement that provided for deficiency fees in the event ~~that~~ FiberCo did not satisfy certain volume commitments. ~~Raw~~Purchased raw materials ~~purchased and~~net of cost of cover deficiency fees are included in cost of goods ~~sold~~sold. Raw materials purchased 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~~March 31, 2021 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.$6.0 million. NaN cost of cover deficiency fees were recognized during the three months ended ~~June 30, 2019. Offsetting our raw material purchases during~~March 31, 2021. During the ~~six~~three months ended ~~June 30, 2019, we recognized $2.9~~March 31, 2020, included in cost of goods sold was $1.4 million of ~~cost of cover deficiency fees, which is included in related-party receivables as of June 30, 2019.~~raw materials purchased. As of ~~June 30, 2020, an insignificant amount~~March 31, 2021, related-party payables of $0.8 million is included in related-party payables related to raw ~~material~~materials purchased from FiberCo. At December 31, 2020, related-party payables included $0.3 million related to raw materials purchased from FiberCo.

Hamlet JV Revolver

As of March 31, 2021 and December 31, 2020, the Hamlet JV had a revolver outstanding balance to Enviva, LP, of $43.9 million and $41.7 million, respectively, both of which were eliminated upon consolidation.

Railcar Subleases

Effective February 2021, we agreed to sublease certain railcars from Enviva Pellets Lucedale, LLC, a wholly owned subsidiary of our sponsor. The sublease agreements terminate no later than August 30, 2021. During the three months ended March 31, 2021, cost of goods sold includes expense related to the railcar subleases and railcar deliveries of $0.1 million. At March 31, 2021, we had $0.1 million included in related-party payables.

(12) Income Taxes

As of March 31, 2021, the only periods subject to examination for U.S. federal and state income tax returns are 2017 through 2019. We believe our income tax filing positions, including our status as a pass-through entity, would be sustained on audit and do not anticipate any adjustments that would result in a material change to our condensed consolidated balance sheet. Therefore, no reserves for uncertain tax positions or interest and penalties have been recorded.

Our condensed consolidated statements of operations for the three months ended March 31, 2021 included an insignificant income tax benefit. For the three months ended March 31, 2020, 0 provision for income tax was recorded in the condensed consolidated financial statements.

(13) Partners’ Capital

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

On June 18, 2020, we entered into a Common Unit Purchase Agreement (the “Unit Purchase Agreement”) with certain investors to sell 6,153,846 common units in a private placement at a price of $32.50 per common unit for gross proceeds of $200.0 million (the “Private Placement”). We received net proceeds of $190.8 million, net of $9.2 million of issuance costs, which were accrued as of June 30, 2020, in the Private Placement, which closed on June 23, 2020. Pursuant to the Unit Purchase Agreement, we 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 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 issued in connection with the Private Placement, which was declared effective by the SEC on July 20, 2020.

Allocations of Net Income (Loss)

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

Prior to the Hamlet Drop-Down, John Hancock had received all of its capital contributions and substantially all of its preference amount and the historical net losses of the Hamlet JV had been allocated to the members of the Hamlet JV in proportion to their unreturned capital contributions; consequently, the balance of members’ capital attributable to John Hancock was negative at the time of the Hamlet Drop-Down. The Partnership has not received repayment of revolving borrowings from the Hamlet JV pursuant to the Hamlet JV Revolver or its capital contributions and 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 currently holds the IDRs, but may transfer them at any time.

2118

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)~~

proportion to their unreturned capital contributions; consequently, the balance of members’ capital attributable to John Hancock was negative at the time of the Hamlet Drop-Down. We have not received full repayment of revolving borrowings from the Hamlet JV pursuant to the Hamlet JV Revolver or its capital contributions and full preference amount as of March 31, 2021; as a result, none of the earnings of the Hamlet JV have been allocated to John Hancock following the Hamlet Drop-Down and no change has been recognized to the negative noncontrolling interest balance attributable to John Hancock that we acquired.

Incentive Distribution Rights

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

Cash Distributions to Unitholders

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


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

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	March 31, 2020	April 29, 2020	May 15, 2020	May 29, 2020	$	0.6800	$	22.9	$	3.5	March 31, 2020	April 29, 2020	May 15, 2020	May 29, 2020	$	0.6800	$	22.9	$	3.5
June 30, 2020	June 30, 2020	August 5, 2020	August 14, 2020	August 28, 2020	$	0.7650	$	30.4	$	7.5	June 30, 2020	August 5, 2020	August 14, 2020	August 28, 2020	$	0.7650	$	30.4	$	7.5
September 30, 2020											September 30, 2020	October 30, 2020	November 13, 2020	November 27, 2020	$	0.7750	$	30.8	$	7.9
December 31, 2020											December 31, 2020	January 29, 2021	February 15, 2021	February 26, 2021	$	0.7800	$	31.2	$	8.1
March 31, 2021											March 31, 2021	April 28, 2021	May 14, 2021	May 28, 2021	$	0.7850	$	31.4	$	8.3

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

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

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

(14) Equity-Based Awards

Long-Term Incentive Plan

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


		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, 2019		874,286	$	28.90	435,270	$	28.84	1,309,556	$	28.88
Nonvested December 31, 2020											Nonvested December 31, 2020	1,061,885		$	33.52	648,514	$	34.07	1,710,399	$	33.73
Granted	Granted	534,882	$	37.91	379,431	$	37.98	914,313	$	37.94	Granted	287,769		$	48.35	159,313	$	48.35	447,082	$	48.35
Forfeitures	Forfeitures	(97,693)	$	32.74	(82,632)	$	30.09	(180,325)	$	31.53	Forfeitures	(22,543)		$	40.46	(6,913)	$	41.41	(29,456)	$	40.68
Vested	Vested	(189,312)	$	25.40	(53,645)	$	25.39	(242,957)	$	25.39	Vested	(158,165)		$	28.65	(129,592)	$	28.91	(287,757)	$	28.77
Nonvested June 30, 2020		1,122,163	$	33.45	678,424	$	34.08	1,800,587	$	33.69
Nonvested March 31, 2021											Nonvested March 31, 2021	1,168,946		$	37.69	671,322	$	38.38	1,840,268	$	37.94

(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, 2020 was $19.6 million, which will be recognized over the remaining vesting period.~~

2219

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

~~(Unaudited)~~

The unrecognized estimated unit-based compensation cost relating to outstanding Affiliate Grants at March 31, 2021 was $20.9 million, which will be recognized over the remaining vesting period.

Director Grants

The following table summarizes information regarding phantom unit awards to ~~certain non-employee~~independent 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, 2019		13,264	$	30.16
Nonvested December 31, 2020					Nonvested December 31, 2020	14,987	$	38.37
Granted	Granted	12,112	$	37.98	Granted	11,895	$	48.35
Vested	Vested	(13,264)	$	30.16	Vested	(12,112)	$	37.99
Nonvested June 30, 2020		12,112	$	37.98
Nonvested March 31, 2021					Nonvested March 31, 2021	14,770	$	46.72

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

In ~~February 2020,~~January 2021, Director Grants valued at ~~$0.5~~$0.6 million were granted, ~~and~~which vest on the first anniversary of the grant date. In ~~February 2019,~~January 2021, the Director Grants that were ~~nonvested~~unvested at December 31, ~~2019~~2020 vested and common units were ~~issued in respect of such vested Director Grants.~~ issued.

During the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021, we ~~recognized $0.1 million and~~recorded $0.2 million ~~respectively,~~ of ~~unit based~~unit-based compensation expense with respect to the Director Grants. The unrecognized estimated unit-based compensation ~~expense~~cost relating to outstanding Director Grants at ~~June 30, 2020 was $0.3~~March 31, 2021 is $0.5 million ~~which~~and will be recognized over the remaining vesting period.

(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, 2020, the only periods subject to examination for federal and state income tax returns are 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, 0 reserves for uncertain tax positions or interest and penalties have been recorded. For the three and six months ended June 30, 2020 and 2019, 0 provision for federal or state income taxes has been recorded in the condensed consolidated financial statements.

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

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

The computation of net income (loss) available per limited partner unit is as follows for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
	Common Units	General Partner	Common Units	General Partner
Weighted-average common units outstanding—basic	39,933	—	33,551	—
Effect of nonvested phantom units	—	—	1,885	—
Weighted-average common units outstanding—diluted	39,933	—	35,436	—

Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

~~(Unaudited)~~

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


	Three Months Ended March 31, 2021
	Common Units		Incentive Distribution Rights		Total
Distributions declared	$	31,426	$	8,322	$	39,748
Earnings less than distributions	(42,162)		—		(42,162)
Net (loss) income available to partners	$	(10,736)	$	8,322	$	(2,414)
Weighted-average units outstanding—basic and diluted	39,933

Net loss per limited partner unit—basic and diluted	$	(0.27)


		Three Months Ended June 30, 2020										Six Months Ended June 30, 2020							Three Months Ended March 31, 2020
		Common Units		General Partner		Total		Common Units		General Partner		Total			Common Units		Incentive Distribution Rights		Total
Distributions declared	Distributions declared	$	30,422	$	7,471	$	37,893	$	53,278	$	10,929	$	64,207	Distributions declared	$	22,856	$	3,457	$	26,313
Earnings less than distributions	Earnings less than distributions	(30,290)		—		(30,290)		(49,794)		—		(49,794)		Earnings less than distributions	(19,503)		—		(19,503)
Net income available to partners	Net income available to partners	$	132	$	7,471	$	7,603	$	3,484	$	10,929	$	14,413	Net income available to partners	$	3,353	$	3,457	$	6,810
Weighted-average units outstanding—basic and diluted		34,082						33,816
Net income per limited partner unit—basic and diluted		$	—					$	0.10
Weighted-average units outstanding—basic														Weighted-average units outstanding—basic	33,551
Weighted-average units outstanding—diluted														Weighted-average units outstanding—diluted	35,436
Net income per limited partner unit—basic														Net income per limited partner unit—basic	$	0.10
Net income per limited partner unit—diluted														Net income per limited partner unit—diluted	$	0.09

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)~~(16) 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.Senior Secured Revolving Credit Facility

In ~~connection with~~April 2021, we amended our senior secured revolving credit facility to increase the ~~consummation~~revolving credit commitments from $350.0 million to $525.0 million, to extend the maturity from October 2023 to April 2026, to increase the letter of credit commitment from $50.0 million to $80.0 million0 and to reduce 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~~cost 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 owedborrowing 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.25 basis points.

2421

Table of Contents

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

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

The following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis (“MD&A”) in Part II-Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 as filed with the U.S. Securities and Exchange Commission (the “SEC”). Our ~~2019~~2020 Form 10-K contains a discussion of other matters not included herein, such as disclosures regarding critical accounting policies and estimates and contractual obligations. You should also read the following discussion and analysis together with the risk factors set forth in the ~~2019~~2020 Form 10-K, Item 1A. “Risk Factors” 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 ~~2019~~2020 Form 10-K. Among other things, those financial statements and the related notes include more detailed information regarding the basis of presentation for the following information.

Business Overview

We aggregate a natural resource, wood fiber and process it into a transportable form, wood pellets. We sell a significant majority of our wood pellets through long-term, take-or-pay off-take contracts with creditworthy customers in the United Kingdom, Europe and increasingly in Japan. ~~As of July 1, 2020, we owned~~We own and ~~operated eight wood pellet production~~operate nine plants (collectively, “our plants”) with a combined production capacity of approximately ~~4.1~~5.3 million metric tons (“MT”) of wood pellets per year (“MTPY”) in Virginia, North Carolina, South Carolina, Georgia, Florida and Mississippi, the production of which is fully contracted through 2025. 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 terminal at the Port of Chesapeake, Virginia (the “Chesapeake terminal”) and terminal assets at the Port of Wilmington, North Carolina and from third-party deep-water marine terminals in Savannah, Georgia, Mobile, Alabama and Panama City, ~~Florida (the “Panama City terminal”).~~Florida. All of our facilities are located in geographic regions with low input costs and favorable transportation logistics. Owning these cost-advantaged assets, the output from which is fully contracted, in a rapidly expanding industry provides us with a platform to generate stable and growing cash flows. Our plants are sited in robust fiber baskets providing stable pricing for the low-grade fiber used to produce wood pellets. Our raw materials are byproducts of traditional timber harvesting, principally low-value wood materials, such as trees generally not suited for sawmilling or other manufactured forest products, and tree tops and limbs, understory, brush and slash that are generated in a harvest.

Our strategy is to fully contract the wood pellet production from our plants under long-term, take-or-pay off-take contracts with a diversified and creditworthy customer base. Our long-term off-take contracts typically provide for fixed-price deliveries that may include provisions that escalate the price over time and provide for other margin protection. During ~~2020,~~2021, production capacity from our wood pellet production plants and wood pellets sourced from our affiliates and third parties were approximately equal to the contracted volumes under our existing long-term, take-or-pay off-take contracts. Our long-term, take-or-pay off-take contracts provide for a product sales backlog of ~~$15.3~~$14.5 billion and have a total weighted-average remaining term of ~~12.7~~12.8 years from ~~July~~April 1, ~~2020.~~2021. Under our current product sales backlog, our plants are fully contracted through 2025. Assuming all volumes under the firm and contingent long-term off-take contracts held by our sponsor ~~and its joint venture~~ were included with our product sales backlog for firm and contingent contracted product sales, our product sales backlog would increase to ~~$19.7~~$20.0 billion and the total weighted-average remaining term from ~~July~~April 1, ~~2020~~2021 would increase to ~~13.6~~14.2 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 have built our operations and assets to deliver and certify the highest levels of product quality and our proven track record of reliable deliveries enables us to charge premium prices for this certainty. In addition to ~~our~~

2522

Table of Contents

our customers’ focus on the reliability of supply, they are concerned about the combustion efficiency of the 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 contract specifications.

Recent Developments

~~Georgia Biomass Purchase Agreement~~Development Activities

~~On June 18, 2020,~~We are well underway with commissioning activities for the ~~Partnership entered into a Membership Interest Purchase~~recently constructed expansion projects at our Northampton, North Carolina, 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 aSouthampton, Virginia wood pellet production plants (the “Mid-Atlantic Expansions”). We continue to expect each plant ~~located in Waycross, Georgia (the “Waycross plant”), for total consideration of $175.0 million in cash, subject~~ to ~~certain adjustments. The~~reach its expanded nameplate 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~~approximately 750,000 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 (such transaction, the “Greenwood Drop-Down”). Greenwood owns a wood pellet production plant located in Greenwood, South Carolina (the “Greenwood plant”).

On July 1, 2020, the closing of the Greenwood Drop-Down occurred, pursuant to which the Partnership paid cash consideration of $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 assumed at closing.

Pursuant to the Contribution Agreement and the Greenwood Drop-Down, our sponsor assigned five biomass off-take agreements to the Partnership (collectively, the “Associated Off-Take Contracts”). The Associated Off-Take Contracts call for aggregate annual deliveries of 1.4 million760,000 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 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 MTPYrespectively, by the end of ~~2021,~~2021.

We have commenced a series of additional growth projects (the “Multi-Plant Expansions”) at our wood pellet production plants in Sampson, North Carolina, Hamlet, North Carolina and Cottondale, Florida. We expect to invest approximately $50.0 million to de-bottleneck manufacturing processes, eliminate certain costs and increase production capacity. We expect to fund the Multi-Plant Expansions in accordance with our 50/50 equity/debt capital structure and to complete the Multi-Plant Expansions by the end of 2022, 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 $28.0 million.

~~Greenwood Management Services Fee Waiver~~

In connection with the Greenwood Drop-Down, the Partnership and Enviva Management entered into an agreement pursuant to which (1) an aggregate of approximately $37.0 million in management services and other fees that otherwise would be otherwise be owed by the Partnership 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 (2) 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 the Partnership during the planned expansion of the Greenwood plant.

~~Tack-On Notes Issuance~~

~~Private Placement of Common Units~~

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

~~Table of Contents~~

certain investors to sell 6,153,846 common units in a private placement at a price of $32.50 per common unit for gross proceeds of $200.0 million (the “Private Placement”). The Partnership used the net proceeds of $190.8 million from the Private Placement to fund a portion of the consideration for each of the Greenwood Drop-Down and the Georgia Biomass Acquisition, 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 “Registration Rights Agreement”) with the investors in connection with the closing of the Private Placement, pursuant to which the Partnership agreed to file and maintain a registration statement (the “Shelf Registration Statement”) with respect to the resale of the common units on the terms set forth therein. The Registration Rights Agreement also provides certain investors with customary piggyback registration rights. On July 10, 2020, 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 $190.8 million Placement and the net proceeds of the tack-on offering of the 2026 Notes of $153.6 million were used to repay $90.0 million of the revolving borrowings under~~In April 2021, we amended our senior secured revolving credit facility ~~and to pay the $132.0 million purchase price for the Greenwood Drop-Down, with the remaining amount being used to to partially pay for the $175.0 million Georgia Biomass Acquisition.~~

~~Mid-Atlantic Expansions~~

~~During 2019, we started construction~~ to increase the ~~aggregate wood pellet production capacity~~revolving credit commitments from $350.0 million to $525.0 million, to extend the maturity from October 2023 to April 2026, to increase the letter of credit commitment from $50.0 million to $80.0 million, and to reduce the cost of borrowing by 25 basis points.

Commitment to Achieve Carbon-Neutral Operations

Consistent with our mission to displace coal, grow more trees and fight climate change, we and our sponsor recently announced our commitment to become “net-zero” in greenhouse gas (“GHG”) emissions from our operations by 2030. The product we manufacture helps reduce the lifecycle GHG emissions of our ~~plants in Northampton, North Carolina, and Southampton, Virginia (the “Mid-Atlantic Expansions”) by approximately 400,000 MTPY.~~customers, but we believe we must also do our part within our operations to mitigate the impacts of climate change. We expect to invest a total of approximately $130.0 million in additional wood pellet production assets and emissions control equipment for the 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 begin commissioning and commencing the production ramp for the Southampton plant expansion over the next several months. We expect to benefit from the full 400,000 MTPY increased production from the Mid-Atlantic Expansions during 2021.

~~Contracted Backlog~~

~~As of July 1, 2020, we had approximately $15.3 billion of product sales backlog for firm contracted product sales~~accomplish neutrality with respect to our ~~long-term off-take customers~~Scope 1 emissions (i.e., direct emissions from our manufacturing) by improving energy efficiency and ~~have a total weighted-average remaining term~~adopting lower-carbon processes, as well as through investment in carbon offsets. We also plan to neutralize our Scope 2 emissions (i.e., indirect emissions from energy we purchase) by using 100% renewable energy by 2030 through the purchase of ~~12.7 years, compared~~renewable electricity and/or onsite generation where practicable. Moreover, we will seek to approximately $9.6 billion and a total weighted-average remaining term of 10.4 years as of 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 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 July 1, 2020 is 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~~	~~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 its joint ventures were included~~proactively engage with our ~~product sales contracted backlog for firm contracted product sales,~~suppliers, transportation partners and other stakeholders to drive innovative improvements in our supply chain to reduce our Scope 3 emissions (i.e., indirect emissions in our value chain). We intend to report our Scopes 1, 2 and 3 emissions annually and fully meet the ~~total weighted-average remaining term~~requirements of CDP (formerly known as the Carbon Disclosure Project) by 2022. Although it is difficult to project the incremental cost to our operations in 2030, we do not expect any material impact to our financial performance as a result of ~~July 1, 2020 would increase~~our efforts to ~~13.6 years and the product sales backlog would increase to $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~~

~~Table of Contents~~

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

Outbreak of the Novel Coronavirus

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

We have taken ~~assertive~~prescriptive safety measures including social distancing, hygienic policies and procedures and other steps recommended by the Centers for Disease Control and Prevention (the “CDC”), and adopted the CDC’s risk management approach, since the beginning of the outbreak, and have established risk levels based on the degree to which the virus has spread in a given community and the nature of the work performed at that location. Within our field operations, ~~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 also have facilitated access for our employees to receive vaccines at our locations.

We specifically designed our operations and logistics systems with flexibility and redundancies so they are capable of effectively responding to unforeseen events. ~~As of July 31, 2020, we~~We operate a portfolio of nine wood pellet production plants geographically dispersed ~~in areas with low population density~~ across the Southeast ~~U.S.~~United States. We export our product from a portfolio of ~~four~~five 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.

Table of Contents

As of ~~June 30, 2020,~~March 31, 2021, we had ~~no borrowings~~liquidity, which included cash on hand and availability under our $350.0 million ~~senior secured~~ revolving credit facility of $187.1 million. In April 2021, we increased our revolving credit facility to $525.0 million and ~~have no debt maturities until 2023.~~extended the maturity from October 2023 to April 2026. 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,~~As of March 31, 2021, each of ~~whom is~~our customers was 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

~~Private Placement of Common Units~~Georgia Biomass Acquisition

~~In June~~On July 31, 2020, we ~~issued 6,153,846 common units~~acquired all of the limited liability company interests in Georgia Biomass Holding LLC, a ~~private placement offering~~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 $164.0 million in cash, after accounting for certain adjustments (the “Georgia Biomass Acquisition”). The Waycross plant has been in operation since 2011 and has a production capacity of 800,000 MTPY. The Waycross plant terminals its production at a two-dome pellet export terminal with a storage capacity of 50,000 MT at the Port of Savannah, Georgia pursuant to a lease and associated terminal services agreement effective through 2028. Approximately 500,000 MTPY of the Waycross plant’s production is contracted under separate agreements to one of our existing customers through 2024. In August 2020, Georgia Biomass converted to a limited liability company organized under the laws of the State of Delaware under the name Enviva Pellets Waycross Holdings Sub, LLC (“Waycross”).

The Georgia Biomass Acquisition was recorded as a business combination and accounted for using the acquisition method. Assets acquired and liabilities assumed were recognized at fair value on the acquisition date of July 31, 2020, and the difference between the fair value of consideration transferred, which excludes acquisition-related costs, and the fair values of the identified net ~~proceeds~~assets acquired, was recognized as goodwill. For more information regarding the Georgia Biomass Acquisition, see Note 1, Description of ~~approximately $190.8 million, net~~Business and Basis of ~~$9.2 million of issuance costs.~~Presentation-Georgia Biomass Holding LLC.

~~Hamlet~~Greenwood Drop-Down

On ~~April 2, 2019,~~July 1, 2020, we acquired from our sponsor all of the ~~Class B units~~limited liability company interests in Enviva Pellets Greenwood Holdings II, LLC (“Greenwood Holdings II”), the indirect owner of Enviva ~~Wilmington Holdings,~~Pellets Greenwood, LLC, ~~(the “Hamlet JV,”~~which owns the Greenwood plant, for a purchase price of $129.7 million, after accounting for certain adjustments and ~~such acquisition,~~assumption of a $40.0 million third-party promissory note bearing interest at 2.5% per year that we assumed at closing (such transaction, the ~~“Hamlet~~“Greenwood Drop-Down”). ~~We are the managing member of the Hamlet JV, which is partially owned by John Hancock Life Insurance Company (U.S.A.)~~The Greenwood Drop-Down was an asset acquisition between entities under common control and ~~certain of its affiliates (collectively, where applicable, “John Hancock”).~~

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

~~Table of Contents~~

We accounted for on the ~~Hamlet JV as a~~carryover basis of accounting. Accordingly, the consolidated ~~subsidiary, not as a joint venture, following~~financial statements for the ~~Hamlet Drop-Down on April 2, 2019. We included all accounts of~~period beginning July 1, 2020 reflect the Hamlet JV in our consolidated results as of April 2, 2019 as the Class B Units represent a controlling interest in the Hamlet JV. We are generally unrestricted in managing the assets and cash flows of the Hamlet JV; however, certain decisions, such as those relating to the issuance and redemption of equity interests in the Hamlet JV, guarantees of indebtedness and fundamental changes, including mergers and acquisitions, asset sales and liquidation and dissolution of the Hamlet JV, require the approval of the members of the Hamlet JV. For more information regarding the Hamlet Drop-Down,acquisition, see Note 1, Description of Business and Basis of Presentation-Basis of Presentation-Enviva ~~Wilmington, Holdings, LLC~~ ~~and Note 12,~~ ~~Related-Party Transactions-Hamlet Drop-Down Agreements~~.Pellets Greenwood.

~~2026 Notes~~On the date of and in connection with the Greenwood Drop-Down, our sponsor assigned five biomass off-take contracts to us (collectively, the “Associated Off-Take Contracts”). The Associated Off-Take Contracts call for aggregate annual deliveries of 1.4 million MTPY and mature between 2031 and 2041. Our sponsor also assigned to us fixed-rate shipping contracts with aggregate annual shipping volume of 1.4 million MTPY. The Associated Off-Take Contracts were assigned to fully contract wood pellets produced by the Greenwood plant and Waycross plant. The shipping contracts were assigned to facilitate transportation of those produced wood pellets.

~~During December 2019,~~The Greenwood plant current production capacity is 500,000 MTPY of wood pellets and transports its production via rail service to our terminal assets at the Port of Wilmington, North Carolina. We expect to invest a total of $28.0 million to expand the Greenwood plant’s production capacity to 600,000 MTPY. We expect to complete the expansion, which is currently underway, by year-end 2021.

Greenwood Make-Whole Agreement

On the date of the Greenwood Drop-Down, we ~~issued $600.0~~entered into a make-whole agreement with our sponsor, pursuant to which our sponsor agreed to reimburse us for any construction costs incurred for the planned expansion of the Greenwood plant in excess of $28.0 million.

Greenwood Management Services Fee Waiver

On the date of the Greenwood Drop-Down, we entered into an agreement with Enviva Management Company pursuant to which (1) an aggregate of approximately $37.0 million in ~~principal amount~~management services and other fees that otherwise would be owed by

Table of ~~6.5% senior unsecured notes due January 15, 2026 (the “2026 Notes”~~Contents

us under our management services agreement (“MSA”) ~~in private placements under Rule 144A and Regulation S~~with Enviva Management Company will be waived with respect to the period from the closing of the ~~Securities Act~~Greenwood Drop-Down through the fourth quarter of ~~1933, as amended (the “Securities Act”). We received~~2021 and (2) Enviva Management Company 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 MT in any calendar month, in each case, to provide cash flow support to us during the planned expansion of the Greenwood plant. During the year ended December 31, 2020, $18.0 million of MSA fees were waived, of which $9.9 million was included in cost of goods sold and $8.1 million was included in related-party management services fees in general and administrative expenses.

Private Placement of Common Units

On June 18, 2020, we sold 6,153,846 common units in a private placement at a price of $32.50 per common unit for gross proceeds of ~~approximately $601.8 million from the offerings and net proceeds of approximately $595.8 million after deducting commissions and expenses.~~$200.0 million. We used the net proceeds ~~from the offerings (1)~~of $190.8 million to ~~redeem our existing $355.0 million principal amount of 8.5% senior unsecured notes due 2021, including payment~~fund a portion of the ~~related redemption premium, (2) to repay borrowings under our senior secured revolving credit facility, including payment~~consideration for each of the ~~related accrued interest~~Greenwood Drop-Down and ~~(3) for general partnership purposes. Interest payments are due semi-annually in arrears on January 15 and~~the Georgia Biomass Acquisition.

Tack-On Notes Issuance

On July 15, ~~of each year, commencing July 15, 2020.~~

~~As discussed above in “Recent Developments,”~~2020, we issued an additional $150.0 million in aggregate principal amount of our 6.5% senior unsecured notes due January 15, 2026 (the “2026 Notes ~~in July 2020.~~”) at an offering price of 103.75% of the principal amount, which implied an effective yield to maturity of approximately 5.7%. We received net proceeds of approximately $153.6 million from the offering after deducting discounts and commissions and offering costs.

How We Evaluate Our Operations

Adjusted Net Income ~~(Loss)~~

We define adjusted net income ~~(loss)~~ as net income ~~(loss)~~ excluding ~~certain expenses incurred~~interest expense associated with incremental borrowings related to a fire that occurred in February 2018 at the Chesapeake terminal (the “Chesapeake Incident”) and Hurricanes Florence and Michael (the “Hurricane Events”), consisting of emergency response expenses, expenses related to the disposal of inventory, and asset disposal and repair costs, offset by insurance recoveries received, as well as employee compensation and other related costs allocated to us in respect of the Chesapeake Incident and Hurricane Events pursuant to our management services agreement with an affiliate of our sponsor for services that could otherwise have been dedicated to our ongoing operations, interest expense associated with incremental borrowings related to the Chesapeake Incident and Hurricane Events, early retirement of debt obligation and acquisition and integration and other costs, adjusting for the effect of certain sales and marketing, scheduling, sustainability, consultation, shipping, and risk management services (collectively, ~~the~~ “Commercial Services”), and including certain non-cash waivers of fees for management services provided to us by our sponsor (collectively, ~~the “MSA~~“MSA Fee Waivers”). We believe that adjusted net income ~~(loss)~~ enhances investors’ ability to compare the past financial ~~performance~~performance of our underlying operations with our current performance separate from certain items of gain or loss that we characterize as unrepresentative of our ongoing operations.

Adjusted Gross Margin and Adjusted Gross Margin per Metric Ton

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

Adjusted EBITDA

We define adjusted EBITDA as net income ~~or loss~~ excluding depreciation and amortization, interest expense, income tax expense (benefit), early retirement of debt ~~obligations,~~obligation, non-cash unit compensation expense, ~~asset impairments and disposals,~~loss on disposal of assets, changes in unrealized derivative instruments related to hedged items included in gross margin and other income and expense, ~~certain items of income or loss that we characterize as unrepresentative of our ongoing operations, including certain expenses incurred related to~~

~~Table of Contents~~

~~the Chesapeake Incident~~ and Hurricane Events, consisting of emergency response expenses, expenses related to the disposal of inventory, and asset disposal and repair costs, offset by insurance recoveries received, as well as employee compensation and other related costs allocated to us in respect of the Chesapeake Incident and Hurricane Events pursuant to our management services agreement with an affiliate of our sponsor for services that could otherwise have been dedicated to our ongoing operations, acquisition and integration costs and other, adjusting for the effect of Commercial Services, and including MSA Fee Waivers. Adjusted EBITDA is a supplemental measure used by our management and other users of our financial statements, such as investors, commercial banks and research analysts, to assess the financial performance of our assets without regard to financing methods or capital structure.

Distributable Cash Flow

We define distributable cash flow as adjusted EBITDA less maintenance capital expenditures, cash income tax ~~expense~~expenses and interest expense net of amortization of debt issuance costs, debt premium, original issue discounts and the impact from incremental borrowings related to the Chesapeake Incident and Hurricane Events. We use distributable cash flow as a performance metric to compare ~~the~~our cash-generating performance ~~of the Partnership~~ from period to period and to compare the cash-generating

Table of Contents

performance for specific periods to the cash distributions (if any) that are expected to be paid to our unitholders. We do not rely on distributable cash flow as a liquidity measure.

Limitations of Non-GAAP Financial Measures

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

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

Results of Operations

Three Months Ended ~~June 30, 2020~~March 31, 2021 Compared to Three Months Ended ~~June 30, 2019~~March 31, 2020


		Three Months Ended June 30,										Three Months Ended March 31,										Change
		2020		2019		Change					2021				2020
		(in thousands)														(in thousands)
Product sales	Product sales	$	155,651	$	167,202	$	(11,551)	Product sales	$		224,530			$	197,853					$	26,677
Other revenue ⁽¹⁾	Other revenue ⁽¹⁾	12,061		877		11,184		Other revenue (1)	16,514			6,624							9,890
Net revenue	Net revenue	167,712		168,079		(367)		Net revenue	241,044			204,477					36,567
Cost of goods sold ⁽¹⁾	Cost of goods sold ⁽¹⁾	125,047		140,476		(15,429)		Cost of goods sold(1)	196,639			162,618					34,021
Loss on disposal of assets								Loss on disposal of assets	1,644			912					732
Depreciation and amortization	Depreciation and amortization	14,986		11,096		3,890		Depreciation and amortization	20,452			13,640					6,812
Total cost of goods sold	Total cost of goods sold	140,033		151,572		(11,539)		Total cost of goods sold	218,735			177,170					41,565
Gross margin	Gross margin	27,679		16,507		11,172		Gross margin	22,309			27,307					(4,998)
General and administrative expenses	General and administrative expenses	2,096		1,767		329		General and administrative expenses	2,500			1,763					737
Related-party management services agreement fees		6,947		9,263		(2,316)
Related-party management services agreement fee								Related-party management services agreement fee	8,770			7,689					1,081
Total general and administrative expenses	Total general and administrative expenses	9,043		11,030		(1,987)		Total general and administrative expenses	11,270			9,452					1,818
Income from operations	Income from operations	18,636		5,477		13,159		Income from operations	11,039			17,855					(6,816)
Interest expense	Interest expense	(10,124)		(9,196)		(928)		Interest expense	(12,632)			(10,394)					(2,238)
Other income (expense)		(41)		(82)		41
Net income (loss)		$	8,471	$	(3,801)	$	12,272
⁽¹⁾ See Note 12, Related-Party Transactions
Other income								Other income	111			172					(61)
Net (loss) income before income tax benefit								Net (loss) income before income tax benefit	(1,482)			7,633					(9,115)
Income tax benefit								Income tax benefit	(17)			—					(17)
Net (loss) income								Net (loss) income	(1,465)			7,633					(9,098)
Less net income attributable to noncontrolling interest								Less net income attributable to noncontrolling interest	25			—					25
Net (loss) income attributable to Enviva Partners, LP								Net (loss) income attributable to Enviva Partners, LP	$	(1,490)		$	7,633				$	(9,123)
(1) See Note 11, Related-Party Transactions								(1) See Note 11, Related-Party Transactions

Net Revenue

Revenue related to product sales for wood pellets produced or procured by us increased to $224.5 million for three months ended March 31, 2021 from $197.9 million for three months ended March 31, 2020. The $26.7 million, or 13%, increase was primarily attributable to a 14% increase in product sales volumes and improved pricing based on contract mix, offset by

3026

Table of Contents

~~Net revenue~~

~~Net revenue decreased to $167.7~~approximately $9.1 million less in unrealized and realized gains from the fair value of foreign currency derivative instruments, for the three months ended ~~June 30, 2020 from $168.1 million for~~March 31, 2021 as compared to the three months ended ~~June 30, 2019. The 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.~~ March 31, 2020.

Other revenue for the three months ended ~~June 30, 2020~~March 31, 2021 included ~~$8.9~~$16.1 million in payments to us for adjusting deliveries under ~~the make-whole provisions under an existing long-term~~our take-or-pay 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~~contracts, which otherwise would have been included in product sales. ~~Other~~During the three months ended March 31, 2020, other revenue ~~also~~ included ~~$1.9~~$2.3 million from the Commercial ~~Services during the three months ended June 30, 2020.~~Services. The ~~$8.9~~$16.1 million and ~~$1.9~~$2.3 million in other revenue was recognized under a breakage model based on when the pellets would have been loaded.

Cost of goods sold

~~Cost~~Total cost of goods sold ~~decreased~~increased to ~~$140.0~~$218.7 million for the three months ended ~~June 30, 2020~~March 31, 2021 from ~~$151.6~~$177.2 million for the three months ended ~~June 30, 2019. The $11.5~~March 31, 2020, an increase of $41.6 million, or ~~8%, decrease~~23%. The increase was primarily attributable to a ~~2% decrease~~14% increase in sales volumes and an increase in depreciation and amortization expense, mainly associated with the acquisitions in July 2020, during the three months ended ~~June 30,~~March 31, 2021 compared to the three months ended March 31, 2020.

Gross margin was $22.3 million for the three months ended March 31, 2021 as compared to $27.3 million for the three months ended March 31, 2020, a decrease of $5.0 million, or 18%. The $5.0 million decrease in gross margin was principally attributable to a 14% increase in product sales volumes, more than offset by increases in depreciation and amortization expense associated with the acquisitions in July 2020 and approximately $8.0 million less in unrealized gains from the fair value of derivative instruments during the three months ended March 31, 2021 as compared to the three months ended ~~June 30, 2019.~~March 31, 2020.

~~Gross margin~~

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, 2020 as compared to the three months ended June 30, 2019 was primarily attributable to the increase in sold volumes produced by the Partnership, which had a higherAdjusted gross margin and ~~a reduction in sales volumes procured from third parties, which had a lower gross margin.~~

~~Adjusted~~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”.)


	Three Months Ended March 31,
	2021		2020		Change
	(in thousands, except per metric ton)
Reconciliation of gross margin to adjusted gross margin and adjusted gross margin per metric ton:
Gross margin	$	22,309	$	27,307	$	(4,998)
Loss on disposal of assets	1,644		912		732
Non-cash unit compensation expense	472		471		1
Depreciation and amortization	20,452		13,640		6,812
Changes in unrealized derivative instruments	1,160		(6,795)		7,955
MSA Fee Waivers	3,059		—		3,059

Commercial Services	—		(2,257)		2,257
Adjusted gross margin	$	49,096	$	33,278	$	15,818
Metric tons sold	1,149		1,004		145
Adjusted gross margin per metric ton	$	42.73	$	33.15	$	9.58

We earned an adjusted gross margin of ~~$42.0~~$49.1 million, or ~~$49.55~~$42.73 per MT, for the three months ended ~~June 30, 2020. Adjusted gross margin was $28.0~~March 31, 2021 compared to $33.3 million, or ~~$32.26~~$33.15 per MT, for the three months ended ~~June 30, 2019.~~March 31, 2020. The increase in adjusted gross margin was primarily due a 14% increase in product sales volume and favorable pricing attributable to customer contract mix and the $3.1 million in increased MSA Fee Waivers compared to the three months ended March 31, 2020 and the $2.3 million reduction to adjusted net income for Commercial Services only during the three months ended March 31, 2020.

General and administrative expenses

Total general and administrative expenses were $11.3 million for the three months ended March 31, 2021 and $9.5 million for the three months ended March 31, 2020. The $1.8 million increase total general and administrative expenses is primarily associated with increased compensation, including non-cash unit-based compensation, and other costs between the three months ended March 31, 2021 compared to the three months ended March 31, 2020, due ~~factors discussed above under~~to our increased size and activities resulting from the ~~heading “Gross margin.”~~acquisitions in July 2020.

~~During the quarter~~Interest expense

We incurred $12.6 million of interest expense during three months ended ~~December~~March 31, ~~2019, we received a non-refundable payment of $5.6~~2021 and $10.4 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~~three months ended March 31, 2020. The increase in interest expense from the ~~scope~~prior year was primarily attributable to an increase in borrowings as a result of our ~~existing take-or-pay off-take contract. The customer had requested the Commercial Services, among other things,~~acquisitions 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 ofJuly 2020 ~~pursuant~~compared 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.three months ended March 31, 2020.

3127

Table of Contents

We 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 netan insignificant 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 occurringtax benefit during the three months ended ~~June 30, 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. The $2.0 million decrease in general and administrative expenses is primarily attributable to the consolidation of the Hamlet JV following the Hamlet Drop-Down on April 2, 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. The increase in interest expense was primarily attributableMarch 31, 2021 related to an ~~increase~~entity acquired in ~~borrowings under our 2026 Notes, partially offset by~~ the ~~decrease in borrowings under our senior secured revolving credit facility during the three months ended June 30, 2020, as compared to the same period in 2019.~~Georgia Biomass Acquisition.

Adjusted net income

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


	Three Months Ended March 31,
	2021		2020		Change
	(in thousands)
Reconciliation of net (loss) income to adjusted net income:
Net (loss) income	$	(1,465)	$	7,633	$	(9,098)
Acquisition and integration costs and other	134		—		134
MSA Fee Waivers	8,723		3,185		5,538
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	—		570		(570)
Commercial Services	—		(2,257)		2,257
Adjusted net income	$	7,392	$	9,131	$	(1,739)

We generated adjusted net income of ~~$8.7~~$7.4 million for the three months ended ~~June 30, 2020 and $7.0~~March 31, 2021 compared to $9.1 million for the three months ended ~~June 30, 2019.~~March 31, 2020. The ~~$1.7 million increase~~decrease in adjusted net income for the three months ended March 31, 2021 was primarily attributable to the ~~factors described below under~~decrease in net income from the ~~heading “Adjusted EBITDA.”~~

~~Table~~three months ended March 31, 2020, which was mainly driven by an increase in depreciation and amortization expense of ~~Contents~~

$6.9 million, an $8.0 million decrease in gains on unrealized derivative instruments and offset by the $5.5 million increase attributable to MSA Fee Waivers compared to the three months ended March 31, 2020.

Adjusted EBITDA


		Three Months Ended June 30,									Three Months Ended March 31,
		2020		2019		Change			2021		2020			Change
		(in thousands)											(in thousands)
Reconciliation of net income (loss) to adjusted EBITDA:
Net income (loss)		$	8,471	$	(3,801)	$	12,272
Reconciliation of net (loss) income to adjusted EBITDA:								Reconciliation of net (loss) income to adjusted EBITDA:
Net (loss) income								Net (loss) income	$	(1,465)	$	7,633				$	(9,098)
Add:	Add:							Add:
Depreciation and amortization	Depreciation and amortization	15,297		11,248		4,049		Depreciation and amortization	20,881		13,950					6,931
Interest expense	Interest expense	10,124		9,196		928		Interest expense	12,632		10,394			2,238

Non-cash unit compensation expense	Non-cash unit compensation expense	2,098		1,013		1,085		Non-cash unit compensation expense	2,656		2,158			498
Asset impairments and disposals		640		350		290
Chesapeake Incident and Hurricane Events		—		(281)		281
Changes in the fair value of derivative instruments		121		(2,334)		2,455
Income tax benefit								Income tax benefit	(17)		—			(17)
Loss on disposal of assets								Loss on disposal of assets	1,644		912			732
Changes in unrealized derivative instruments								Changes in unrealized derivative instruments	1,160		(6,795)			7,955
MSA Fee Waivers	MSA Fee Waivers	1,572		11,046		(9,474)		MSA Fee Waivers	8,723		3,185			5,538
Acquisition costs		957		525		432
Acquisition and integration costs and other								Acquisition and integration costs and other	134		—			134
Commercial Services	Commercial Services	(1,882)		—		(1,882)		Commercial Services	—		(2,257)			2,257
Adjusted EBITDA	Adjusted EBITDA	$	37,398	$	26,962	$	10,436	Adjusted EBITDA	$	46,348	$	29,180		$	17,168

We generated adjusted EBITDA of ~~$37.4~~$46.3 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~adjusted EBITDA of $27.0~~$29.2 million for the three months ended June 30, 2019. The $10.4 million increase was primarily attributable to the factors described above under the heading “Adjusted Gross margin per metric ton,” offset by the receipt of $9.5 million in other MSA Fee Waivers in the second quarter of 2019 relative to the same period in 2020.

~~Distributable Cash Flow~~

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 Contents~~

~~Results of Operations~~

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

~~Net revenue~~

Net revenue increased to $372.2 million for the six months ended June 30, 2020 from $326.4 million for the six months ended June 30, 2019. The $45.7 million, or 14%, increase was primarily attributable to a 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,March 31, 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, 2020 as compared to the six months ended June 30, 2019.~~

~~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 during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019.

~~Table of Contents~~

~~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

We earned adjusted gross margin of $75.3 million, or $40.66 per MT, for the six months ended June 30, 2020. Adjusted gross margin 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 for the six months ended June 30, 2019 excludes $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 considered purchasing (the “Potential Target”). When we commenced our review, the Potential Target had recently returned to operations following an extended shutdown during a bankruptcy proceeding with the intent of demonstrating favorable operations prior to proceeding to an auction sale process; however, the Potential Target had not yet established a logistics chain through a viable export terminal, given that the terminal through which the plant historically had exported was not operational at the time and was not reasonably certain to become operational in the future. Accordingly, as part of our diligence of the Potential Target, we developed an alternative logistics chain to bring the Potential Target’s wood pellets to market and began purchasing the production of the Potential Target for a trial period. The incremental costs associated with the establishment and evaluation of this new logistics chain primarily consist of barge, freight, trucking, storage and shiploading services. We have completed our evaluation of the alternative logistics chain and, therefore, do not expect to incur additional costs of this nature in the future.

During the quarter ended December 31, 2019, we received a non-refundable payment of $5.6 million from a customer in consideration for our performance during the quarter of certain sales and marketing, scheduling, sustainability, consultation, shipping and risk management services (collectively, “Commercial Services”) that were outside of the scope of our existing take-or-pay off-take contract. The customer had requested the Commercial Services, among other things, in order to avoid its exposure to market price volatility associated with its anticipated failure to take required deliveries of certain wood pellet volumes during the fourth quarter of 2019 and first half of 2020 pursuant to the off-take contract. The Commercial Services had a value to the customer of $5.6 million. We included the entire non-refundable payment of $5.6 million in our publicly stated guidance for 2019 in our press release issued October 30, 2019.

~~Under GAAP, we recognized $1.5 million of the $5.6 million payment as revenue during the fourth quarter of 2019, under the breakage model of Accounting Standards Codification (“ASC”) Topic 606,~~ ~~Revenue from Contracts with Customers~~ (“ASC 606”), and recorded the remaining $4.1 million as deferred revenue as of December 31, 2019, to be recognized as revenue during the first six months of 2020 in accordance with the original product sales schedule under the off-take contract. For presentation of our non-GAAP measures, we included the $4.1 million in adjusted net income, adjusted gross margin per metric ton and adjusted EBITDA for 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.

~~Table of Contents~~

~~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. The $2.4 million decrease in general and administrative expenses is primarily attributable to the consolidation of the Hamlet JV following the Hamlet Drop-Down on April 2, 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 $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. 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 during the six months ended June 30, 2020, as compared to the same period in 2019.

~~Adjusted net income (loss)~~

Six Months Ended June 30,
2020 2019 Change
(in thousands)
Reconciliation of net income (loss) to adjusted net income (loss):
Net income (loss) $ 16,104 $ (12,724) $ 28,828
Chesapeake Incident and Hurricane Events — 8 (8)
MSA Fee Waivers 4,757 11,046 (6,289)
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events 1,118 490 628
Commercial Services (4,139) — (4,139)
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 $19.0 million increase in adjusted net income was primarily attributable to the factors described below under the heading “Adjusted EBITDA.”

~~Adjusted EBITDA~~

Six Months Ended June 30,
2020 2019 Change
(in thousands)
Reconciliation of net income (loss) to adjusted EBITDA:
Net income (loss) $ 16,104 $ (12,724) $ 28,828
Add:
Depreciation and amortization 29,247 22,456 6,791
Interest expense 20,518 18,829 1,689
Non-cash unit compensation expense 4,256 3,485 771
Asset impairments and disposals 1,552 350 1,202
Chesapeake Incident and Hurricane Events — 8 (8)
Changes in the fair value of derivative instruments (6,674) (324) (6,350)
MSA Fee Waivers 4,757 11,046 (6,289)
Acquisition costs 957 5,452 (4,495)
Commercial Services (4,139) — (4,139)
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. The $18.0~~ million increase was primarily attributable to the factors described above under the heading “Adjusted gross margin per metric ~~ton,” offset by $6.3~~ton” as well as an increase of approximately $2.5 million ofin MSA Fee Waivers that impacted adjusted EBITDA for ~~general and administrative expenses.~~the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

3628

Table of Contents

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


	Three Months Ended March 31,
	2021		2020		Change
	(in thousands)
Adjusted EBITDA	$	46,348	$	29,180	$	17,168
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	12,023		9,418		2,605
Maintenance capital expenditures	3,904		1,134		2,770
Distributable cash flow attributable to Enviva Partners, LP	30,421		18,628		11,793
Less: Distributable cash flow attributable to incentive distribution rights	8,322		3,457		4,865
Distributable cash flow attributable to Enviva Partners, LP limited partners	$	22,099	$	15,171	$	6,928

Liquidity and Capital Resources

Overview

Our primary sources of liquidity include cash and cash equivalent balances, cash generated from operations, borrowings under our revolving credit commitments and, from time to time, debt and equity offerings. Our primary liquidity requirements are to fund working capital, service our debt, maintain cash reserves, finance plant acquisitions 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, we intend to pay to holders of our common units cash distributions of at least the minimum quarterly distribution isof $0.4125 per common unit per quarter, which equates to approximately ~~$16.4~~$16.5 million per quarter, or approximately ~~$65.6~~$66.0 million per year, based on the number of common units outstanding as of ~~July 31, 2020.~~April 23, 2021.

Financing Activities

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

Capital Requirements

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

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

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

Table of Contents

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

We expect to invest ~~approximately $130.0~~a total of $28.0 million ~~in additional wood pellet~~to expand the Greenwood plant’s production ~~assets and emissions control equipment for the Mid-Atlantic Expansions,~~capacity to 600,000 MTPY (the “Greenwood Expansion”), of which we have ~~spent $99.9~~paid approximately $6.0 million through ~~June 30, 2020.~~March 31, 2021. We ~~have begun commissioning equipment and commencing the production ramp for the Northampton plant expansion and~~ expect to ~~begin~~complete the expansion, which is currently underway, by year-end 2021.

We expect to ~~commissioning~~invest approximately $50.0 million in connection with the Multi-Plant Expansions to de-bottleneck manufacturing processes, eliminate certain costs and increase production capacity, of which we have paid approximately $6.0 million through March 31, 2021. We expect to complete the Multi-Plant Expansions by the end of 2022, subject to receiving the necessary permits.

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

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

~~Table of Contents~~

Cash Flows

The following table sets forth a summary of our net cash flows from operating, investing and financing activities for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019, respectively:~~2020:


		Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019			2021		2020
		(in thousands)							(in thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	53,658	$	7,562		$	37,713	$	27,904
Net cash used in investing activities	Net cash used in investing activities	(62,608)		(124,592)		Net cash used in investing activities	(37,142)		(29,460)
Net cash provided by financing activities		97,998		119,575
Net increase in cash, cash equivalents and restricted cash		$	89,048	$	2,545
Net cash used in financing activities						Net cash used in financing activities	(7,187)		(2,186)
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	$	(6,616)	$	(3,742)

Cash Provided by Operating Activities

Net cash provided by operating activities was ~~$53.7~~$37.7 million and $27.9 million for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~compared to $7.6~~respectively. The $9.8 million ~~for the six months ended June 30, 2019. The~~ increase in cash provided by operating activities ~~of $46.1 million~~during three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily due to ~~the~~an increase of $13.0 million in net ~~income.~~income after considering non-cash adjustments to reconcile to net cash provided by operating activities, offset by a decrease of $3.2 million due to changes in operating assets and liabilities

Cash Used in Investing Activities

Net cash used in investing activities was ~~$62.6~~$37.1 million and $29.5 million for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~compared to $124.6~~respectively. The $7.7 million ~~for the six months ended June 30, 2019. The decrease~~increase in cash used in investing activities ~~of $62.0 million is~~during three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily due to capital expenditures related to the Mid-Atlantic Expansions, the Greenwood Expansion, and the Multi-Plant Expansions, as well as increases in other capital expenditures resulting from our addition of two new wood pellet production plants to our fleet in July 2020.

Cash Used in Financing Activities

Net cash used in financing activities was $7.2 million and $2.2 million for the three months ended March 31, 2021 and 2020, respectively.

The $5.0 million increase in net cash used in financing activities in 2021, as compared to 2020, is primarily attributable to a ~~$74.7~~decrease of $27.1 million in net proceeds from debt, a $14.5 million increase in payments for cash ~~payment~~distributions, and a $4.4 million increase in payments for withholding tax associated with the vesting of phantom units under the LTIP, offset by $40.0 million in payments in relation to the Hamlet JV Drop-Down during the ~~six~~three months ended ~~June 30, 2019 offset by cash used for capital expenditures associated with the Mid-Atlantic Expansions during the six months ended June 30,~~March 31, 2020.

~~Cash 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. The decrease in cash provided by financing activities of $21.6 million is primarily attributable to a $93.5 million decrease of net borrowings under our senior secured revolving credit facility, $40.0 million payment related to the Hamlet Drop-Down, offset by an increase of net proceeds from common unit issuances of $103.0 million.

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

As of ~~June 30, 2020,~~March 31, 2021, we did not have any ~~off-balance~~off‑balance sheet arrangements.

Table of Contents

Critical Accounting Policies and Estimates

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

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

~~Foreign Currency Exchange Risk~~

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

~~As of June 30, 2020, we had notional amounts of 40.4 million GBP under foreign currency forward contracts and 42.2 million GBP and 2.5 million EUR under foreign currency swap contracts that expire 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.~~

~~Table of Contents~~

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, 2020.~~March 31, 2021.

Changes in Internal Control Over Financial Reporting

~~During the quarter ended June 30, 2020,~~Other than changes that have resulted or may result from acquisitions of entities under common control and business combinations, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

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

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

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

We source our wood fiber from, and operate wood pellet plants and terminals in the Mid-Atlantic and Gulf Coast regions of the United States. On March 13, 2020, the United States declared the COVID-19 pandemic a national emergency, and several states and municipalities, including states in which we own assets or conduct business, have declared public health emergencies. In addition, international, federal, state and local public health and government authorities have taken extraordinary and wide-ranging actions to contain and combat the outbreak and spread of COVID-19, including “stay-at-home” orders and similar mandates in the United States (“Orders”) for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. The Orders generally refer to the United States Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) guidance designating businesses in the forest products and energy (biomass) sectors, such as ours, as essential critical infrastructure. We have not been 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 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.

~~Table of Contents~~

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.2020.

Item 6. Exhibits

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

4133

Table of Contents

~~Exhibit Index~~EXHIBIT INDEX


Exhibit Number	~~Description~~Exhibit

~~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 8-K filed March 25, 2019, File No. 001-037363).
~~2.2~~	~~Contribution Agreement, dated as of June 18, 2020, by and among Enviva Development Holdings, LLC, Enviva Partners, LP~~ ~~and Enviva Holdings, LP (Exhibit 2.1, Form 8-K filed June 19, 2020, 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)~~2017)
3.4		Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Enviva Partners, LP, effective as of January 1, 2019 ~~(Exhibit~~(Exhibit 3.4, Form 10-K filed February 27, ~~2020, File No. 001-37363)~~
~~4.1~~	~~Registration Rights Agreement, dated as of June 23, 2020, by and among the Partnership and the Investors named therein (Exhibit 4.1, Form 8-K filed June 24, 2020, File No. 001-37363)~~
~~4.2~~	Indenture, dated as of December 9, 2019, by and among Enviva Partners, LP, Enviva Partners Finance Corp., the subsidiary guarantors party thereto, and Wilmington Trust, National Association, as trustee (incorporated by reference herein to Exhibit 4.1 to the Partnership’s Form 8-K filed on December 9, 2019, File No. 001-37363)
~~4.3~~	~~Form of 6.500% 2026 Notes (included in Exhibit 4.2)~~
~~4.4~~	Registration Rights Agreement, dated May 4, 2015, by and among Enviva Partners, LP, Enviva MLP Holdco, LLC and Enviva Cottondale Acquisition I, LLC (Exhibit 4.1, Form 8‑K filed May 4, 2015, File No. 001‑37363)
~~4.5~~	~~Registration Rights Agreement by and between Enviva Partners, LP and John Hancock Life Insurance Company (U.S.A.), dated April 1, 2019 (Exhibit 4.1, Form 10-Q filed August 8, 2019, File No. 001-37363)~~
~~10.1~~	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 June 19, 2020, File No. 001-37363)2020)
10.2		Purchase Agreement, dated as of June 29, 2020, by and among Enviva Partners, LP, Enviva Partners Finance Corp., the subsidiary guarantors party thereto and Barclays Capital Inc., as representative of the initial purchasers named therein (Exhibit 10.1, Form 8-K filed June 29, 2020, File No. 001-37363)
~~10.3~~	First Amendment and Issuing Bank Designation Agreement by and among the New Issuing Banks party thereto, Enviva Partners, LP and Barclays Bank plc, dated as of July 22, 2020 (Exhibit 10.1, Form 8-K filed July 24, 2020, File No. 001-37363)
~~10.4*†~~	~~Management Services Agreement Fee Waiver, dated July 1, 2020, by and among Enviva Partners, LP, Enviva Partners GP, LLC and the~~ ~~other~~ ~~parties~~ ~~named therein~~
~~10.5*†~~	~~Make-Whole Agreement, dated July 1, 2020, by and~~ ~~between~~ Second Amendment to Enviva ~~Holdings,~~Partners, LP ~~and Enviva, LP~~Long-Term Incentive Plan (Exhibit 10.1, form 8-K filed January 29, 2021, File No. 001-37363)
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the ~~Sarbanes-Oxley~~Sarbanes‑Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the ~~Sarbanes-Oxley~~Sarbanes‑Oxley Act of 2002
32.1**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the ~~Sarbanes-Oxley~~Sarbanes‑Oxley Act of 2002
101		The following financial information from Enviva Partners, ~~LP.’s Quarterly~~LP’s Annual Report on Form 10-Q for the quarter ended ~~June 30, 2020~~March 31, 2021 formatted in Inline XBRL (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.





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

____________________________________________

* Filed herewith.

** Furnished herewith.

~~Table of Contents~~

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

4334

Table of Contents

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~~hereunto duly authorized.

~~Date: August 5, 2020~~

~~ENVIVA PARTNERS, LP~~

ENVIVA PARTNERS, LP

By:

Enviva Partners GP, LLC, as its sole general partner

Date: April 28, 2021

By:

/s/ SHAI S. EVEN

~~Name:~~

Shai S. Even

Title:

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


	June 30, 2020		December 31, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	98,101	$	9,053
Accounts receivable	82,543		72,421
Related-party receivables, net	8,625		—
Inventories	39,723		32,998
Prepaid expenses and other current assets	8,932		5,617
Total current assets	237,924		120,089
Property, plant and equipment, net	784,523		751,780
Operating lease right-of-use assets	31,737		32,830
Goodwill	85,615		85,615
Other long-term assets	10,247		4,504
Total assets	$	1,150,046	$	994,818
Liabilities and Partners’ Capital
Current liabilities:
Accounts payable	$	20,358	$	18,985
Related-party payables, net	—		304
Deferred consideration for drop-down due to related-party	—		40,000
Accrued and other current liabilities	75,346		59,066
Current portion of interest payable	22,996		3,427
Current portion of long-term debt and finance lease obligations	7,558		6,590
Total current liabilities	126,258		128,372
Long-term debt and finance lease obligations	597,510		596,430
Long-term operating lease liabilities	32,980		33,469
Other long-term liabilities	2,818		3,971
Total liabilities	759,566		762,242
Commitments and contingencies
Partners’ capital:
Limited partners:
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)	67,646		82,300
General partner (no outstanding units)	(99,899)		(101,739)
Accumulated other comprehensive income	1		23
Total Enviva Partners, LP partners’ capital	438,672		280,768
Noncontrolling interest	(48,192)		(48,192)
Total partners' capital	390,480		232,576
Total liabilities and partners’ capital	$	1,150,046	$	994,818


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Product sales	$	155,651	$	167,202	$	353,504	$	323,801
Other revenue ⁽¹⁾	12,061		877		18,685		2,647
Net revenue	167,712		168,079		372,189		326,448
Cost of goods sold ⁽¹⁾	125,047		140,476		288,577		277,868
Depreciation and amortization	14,986		11,096		28,626		22,166
Total cost of goods sold	140,033		151,572		317,203		300,034
Gross margin	27,679		16,507		54,986		26,414
General and administrative expenses	2,096		1,767		3,859		5,308
Related-party management services agreement fees	6,947		9,263		14,636		15,559
Total general and administrative expenses	9,043		11,030		18,495		20,867
Income from operations	18,636		5,477		36,491		5,547
Other (expense) income:
Interest expense	(10,124)		(9,196)		(20,518)		(18,829)
Other (expense) income, net	(41)		(82)		131		558
Total other expense, net	(10,165)		(9,278)		(20,387)		(18,271)
Net income (loss)	$	8,471	$	(3,801)	$	16,104	$	(12,724)
Net income (loss) per limited partner common unit:
Basic and diluted	$	—	$	(0.20)	$	0.10	$	(0.59)

Weighted-average number of limited partner common units outstanding:
Basic and diluted	34,082		33,400		33,816		30,098

⁽¹⁾ See Note 12, Related-Party Transactions


	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


	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


	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


		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


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


	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)