UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended ~~March 31,~~September 30, 2021


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

Commission file number 001-37363


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


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

7272 Wisconsin Ave.

Suite 1800

Bethesda,

20814

(Address of principal executive offices)

(Zip code)


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


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

Title of each class	Trading Symbol	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 Act). Yes ☐ No ☒

As of ~~April 23,~~October 29, 2021, ~~40,026,133~~61,017,303 common units were outstanding.

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ENVIVA PARTNERS, LP

QUARTERLY REPORT ON FORM 10‑Q

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CAUTIONARY STATEMENT REGARDING FORWARD‑LOOKING STATEMENTS

Certain statements and information in this Quarterly Report on Form 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 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, complete and integrate ~~drop-down 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 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, unionization or similar collective actions;

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

•the ~~effects~~possibility of ~~the exit of the United Kingdom from the European Union on our~~cyber and ~~our customers’ businesses;~~malware attacks;

•our inability to borrow funds and access capital markets;

•the potential corporate conversion transaction we are considering may not occur, and even if it were to be completed, we may fail to realize the anticipated benefits; 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, 2020 and the risk factors included herein in Item 1A. Risk Factors. All forward-looking statements in this Quarterly Report are expressly qualified in their entirety by the foregoing cautionary statements.

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

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GLOSSARY OF TERMS

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

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

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

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

off-take 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.

stumpage: the price paid to the underlying timber resource owner for the raw material.

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

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

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

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except number of units)
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


	September 30, 2021		December 31, 2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	11,792	$	10,004
Accounts receivable	86,889		124,212
Related-party receivables, net	6,909		2,414
Inventories	53,814		42,364
Prepaid expenses and other current assets	16,055		16,457
Total current assets	175,459		195,451
Property, plant and equipment, net	1,395,506		1,071,819
Operating lease right-of-use assets	58,421		51,434
Goodwill	99,660		99,660
Other long-term assets	10,645		11,248
Total assets	$	1,739,691	$	1,429,612
Liabilities and Partners’ Capital
Current liabilities:
Accounts payable	$	24,698	$	15,208


Accrued and other current liabilities	130,543		108,976
Interest payable	12,486		24,642
Current portion of long-term debt and finance lease obligations	11,906		13,328
Total current liabilities	179,633		162,154
Long-term debt and finance lease obligations	1,134,706		912,721
Long-term operating lease liabilities	58,566		50,074

Deferred tax liabilities, net	13,157		13,217
Other long-term liabilities	26,105		15,419
Total liabilities	1,412,167		1,153,585
Commitments and contingencies	0		0
Partners’ capital:
Limited partners:
Common unitholders—public (31,430,928 and 26,209,862 units issued and outstanding at September 30, 2021 and December 31, 2020, respectively)	555,450		424,825
Common unitholder—sponsor (13,586,375 units issued and outstanding at September 30, 2021 and December 31, 2020)	1,060		41,816
General partner (1) (no outstanding units)	(181,293)		(142,404)
Accumulated other comprehensive income (loss)	1		(18)
Total Enviva Partners, LP partners’ capital	375,218		324,219
Noncontrolling interests	(47,694)		(48,192)
Total partners’ capital	327,524		276,027
Total liabilities and partners’ capital	$	1,739,691	$	1,429,612

(1) Includes incentive distribution ~~rights~~rights. See Note 18,

Subsequent Event.

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per unit amounts)

(Unaudited)


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Product sales	Product sales	$	224,530	$	197,853	Product sales	$	229,698	$	216,187	$	725,470	$	569,691
Other revenue (1)	Other revenue (1)	16,514		6,624		Other revenue (1)	7,700		9,393		38,014		28,078
Net revenue	Net revenue	241,044		204,477		Net revenue	237,398		225,580		763,484		597,769
Cost of goods sold (1)	Cost of goods sold (1)	196,639		162,618		Cost of goods sold (1)	186,019		178,088		616,813		465,113
Loss on disposal of assets	Loss on disposal of assets	1,644		912		Loss on disposal of assets	3,907		1,684		7,255		3,236
Depreciation and amortization	Depreciation and amortization	20,452		13,640		Depreciation and amortization	21,463		20,237		63,784		48,863
Total cost of goods sold	Total cost of goods sold	218,735		177,170		Total cost of goods sold	211,389		200,009		687,852		517,212
Gross margin	Gross margin	22,309		27,307		Gross margin	26,009		25,571		75,632		80,557
General and administrative expenses	General and administrative expenses	2,500		1,763		General and administrative expenses	5,357		6,425		10,444		10,284
Related-party management services agreement fee	Related-party management services agreement fee	8,770		7,689		Related-party management services agreement fee	10,134		6,196		28,150		20,832
Total general and administrative expenses	Total general and administrative expenses	11,270		9,452		Total general and administrative expenses	15,491		12,621		38,594		31,116
Income from operations	Income from operations	11,039		17,855		Income from operations	10,518		12,950		37,038		49,441
Other (expense) income:	Other (expense) income:					Other (expense) income:
Interest expense	Interest expense	(12,632)		(10,394)		Interest expense	(10,624)		(11,950)		(35,903)		(32,468)
Other income, net		111		172
Other (expense) income, net						Other (expense) income, net	(31)		136		(85)		267
Total other expense, net	Total other expense, net	(12,521)		(10,222)		Total other expense, net	(10,655)		(11,814)		(35,988)		(32,201)
Net (loss) income before income tax benefit	Net (loss) income before income tax benefit	(1,482)		7,633		Net (loss) income before income tax benefit	(137)		1,136		1,050		17,240
Income tax benefit	Income tax benefit	(17)		0		Income tax benefit	(66)		(275)		(59)		(275)
Net (loss) income	Net (loss) income	(1,465)		7,633		Net (loss) income	(71)		1,411		1,109		17,515
Less net income attributable to noncontrolling interest	Less net income attributable to noncontrolling interest	25		0		Less net income attributable to noncontrolling interest	27		—		109		—
Net (loss) income attributable to Enviva Partners, LP	Net (loss) income attributable to Enviva Partners, LP	$	(1,490)	$	7,633	Net (loss) income attributable to Enviva Partners, LP	$	(98)	$	1,411	$	1,000	$	17,515
Net (loss) income per limited partner common unit:
Basic		$	(0.27)	$	0.10
Diluted		$	(0.27)	$	0.09
Net loss per limited partner common unit:						Net loss per limited partner common unit:
Basic and diluted						Basic and diluted	$	(0.28)	$	(0.18)	$	(0.77)	$	(0.11)

Weighted-average number of limited partner common units outstanding:	Weighted-average number of limited partner common units outstanding:					Weighted-average number of limited partner common units outstanding:
Common—basic		39,933		33,551
Common—diluted		39,933		35,436
Basic and diluted						Basic and diluted	45,015		39,767		42,079		35,814

Distributions declared per limited partner unit		$	0.7850	$	0.6800

(1) See Note 11, Related-Party Transactions
Distributions declared per limited partner common unit						Distributions declared per limited partner common unit	$	0.8400	$	0.7750	$	2.4400	$	2.2200

(1) See Note 13, Related-Party Transactions						(1) See Note 13, Related-Party Transactions

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

(Unaudited)


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Net (loss) income	Net (loss) income	$	(1,465)	$	7,633	Net (loss) income	$	(71)	$	1,411	$	1,109	$	17,515
Other comprehensive income (loss), net of tax of $0:	Other comprehensive income (loss), net of tax of $0:					Other comprehensive income (loss), net of tax of $0:

Reclassification of net gains on cash flow hedges realized into net income	Reclassification of net gains on cash flow hedges realized into net income	0		(20)		Reclassification of net gains on cash flow hedges realized into net income	—		—		—		(22)
Currency translation adjustment	Currency translation adjustment	14		3		Currency translation adjustment	9		(9)		19		(9)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	14		(17)		Total other comprehensive income (loss)	9		(9)		19		(31)
Total comprehensive (loss) income	Total comprehensive (loss) income	(1,451)		7,616		Total comprehensive (loss) income	(62)		1,402		1,128		17,484
Less comprehensive income attributable to noncontrolling interest	Less comprehensive income attributable to noncontrolling interest	25		0		Less comprehensive income attributable to noncontrolling interest	27		—		109		—
Comprehensive (loss) income attributable to Enviva Partners, LP partners	Comprehensive (loss) income attributable to Enviva Partners, LP partners	$	(1,476)	$	7,616	Comprehensive (loss) income attributable to Enviva Partners, LP partners	$	(89)	$	1,402	$	1,019	$	17,484

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Partners’ Capital

(In thousands)

(Unaudited)


						Limited Partners’ Capital																											Limited Partners’ Capital
		General Partner Interest (1)				Common Units— Public						Common Units— Sponsor						Accumulated Other Comprehensive Loss		Non- controlling Interests				Total Partners Capital				General Partner Interest (1)					Common Units— Public							Common Units— Sponsor						Accumulated Other Comprehensive (Loss) Income				Non- controlling Interests				Total Partners Capital
				Units			Amount			Units			Amount										Units							Amount					Units				Amount
Partners' capital December 31, 2020	Partners' capital December 31, 2020			$	(142,404)		26,210			$	424,825		13,586			$	41,816					$	(18)			$	(48,192)				$	276,027		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	Distributions to unitholders, distribution equivalent and incentive distribution rights	(8,120)				—		(22,238)				—		(10,598)				—		—				(40,956)			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	Payments for withholding tax and number of units issued associated with Long-Term Incentive Plan vesting	(6,352)				230		(1,724)				—		—				—		—				(8,076)			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	Issuance of common units, net	—				—		28				—		—				—		—				28			Issuance of common units, net	—					—				28			—			—			—				—				28
Non-cash Management Services Agreement expenses	Non-cash Management Services Agreement expenses	9,141				—		2,656				—		—				—		—				11,797			Non-cash Management Services Agreement expenses	9,141					—				2,656			—			—			—				—				11,797
Other comprehensive income	Other comprehensive income	—				—		—				—		—				14		—				14			Other comprehensive income	—					—				—			—			—			14				—				14
Contribution of assets	Contribution of assets	—				—		—				—		—				—		389				389			Contribution of assets	—					—				—			—			—			—				389				389
Net income (loss)	Net income (loss)	8,120				—		(6,340)				—		(3,270)				—		25				(1,465)			Net income (loss)	8,120					—				(6,340)			—			(3,270)			—				25				(1,465)
Partners' capital, March 31, 2021	Partners' capital, March 31, 2021	$	(139,615)			26,440		$	397,207			13,586		$	27,948			$	(4)	$	(47,778)			$	237,758		Partners' capital, March 31, 2021	$	(139,615)				26,440				$	397,207		13,586			$	27,948		$	(4)			$	(47,778)			$	237,758
Distributions to unitholders, distribution equivalent and incentive distribution rights																											Distributions to unitholders, distribution equivalent and incentive distribution rights	(8,322)					—				(22,229)			—			(10,665)			—				—				(41,216)
Payments for withholding tax and number of units issued associated with Long-Term Incentive Plan vesting																											Payments for withholding tax and number of units issued associated with Long-Term Incentive Plan vesting	(1,971)					57				(507)			—			—			—				—				(2,478)
Issuance of common units, net																											Issuance of common units, net	—					4,925				214,534			—			—			—				—				214,534
Non-cash Management Services Agreement expenses																											Non-cash Management Services Agreement expenses	6,709					—				2,577			—			—			—				—				9,286
Other comprehensive loss																											Other comprehensive loss	—					—				—			—			—			(4)				—				(4)
Net income (loss)																											Net income (loss)	8,322					—				(3,845)			—			(1,889)			—				57				2,645
Partners' capital, June 30, 2021																											Partners' capital, June 30, 2021	$	(134,877)				31,422				$	587,737		13,586			$	15,394		$	(8)			$	(47,721)			$	420,525
Excess consideration over the net assets of Enviva Pellets Lucedale, LLC, Enviva Port of Pascagoula, LLC and Enviva Development Finance Company, LLC																											Excess consideration over the net assets of Enviva Pellets Lucedale, LLC, Enviva Port of Pascagoula, LLC and Enviva Development Finance Company, LLC	(67,752)					—				—			—			—			—				—				(67,752)
Distributions to unitholders, distribution equivalent and incentive distribution rights																											Distributions to unitholders, distribution equivalent and incentive distribution rights	(10,708)					—				(27,004)			—			(11,073)			—				—				(48,785)
Payments for withholding tax and number of units issued associated with Long-Term Incentive Plan vesting																											Payments for withholding tax and number of units issued associated with Long-Term Incentive Plan vesting	(135)					9				(67)			—			—			—				—				(202)
Issuance of common units, net																											Issuance of common units, net	—					—				(49)			—			—			—				—				(49)
Non-cash Management Services Agreement expenses																											Non-cash Management Services Agreement expenses	21,471					—				2,378			—			—			—				—				23,849
Other comprehensive income																											Other comprehensive income	—					—				—			—			—			9				—				9
Net income (loss)																											Net income (loss)	10,708					—				(7,545)			—			(3,261)			—				27				(71)
Partners' capital, September 30, 2021																											Partners' capital, September 30, 2021	$	(181,293)				31,431				$	555,450		13,586			$	1,060		$	1			$	(47,694)			$	327,524

(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)~~ See Note 18, ~~Includes incentive distribution rights.~~Subsequent Event

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Partners’ Capital

(In thousands)

(Unaudited)



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

(1) Includes incentive distribution rights.

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					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:
Net income						Net income	$	1,109	$	17,515
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	20,882		13,965		Depreciation and amortization	65,237		49,801
MSA Fee Waivers	MSA Fee Waivers	8,723		3,186		MSA Fee Waivers	36,150		13,963
Amortization of debt issuance costs, debt premium and original issue discounts	Amortization of debt issuance costs, debt premium and original issue discounts	1,753		407		Amortization of debt issuance costs, debt premium and original issue discounts	1,861		1,471
Loss on disposal of assets	Loss on disposal of assets	1,644		912		Loss on disposal of assets	7,255		3,236
Unit-based compensation	Unit-based compensation	2,656		2,158		Unit-based compensation	7,756		6,602
Fair value changes in derivatives	Fair value changes in derivatives	166		(5,829)		Fair value changes in derivatives	3,968		(3,022)
Unrealized gains (losses) on foreign currency transactions, net		119		(35)
Unrealized (losses) gains on foreign currency transactions, net						Unrealized (losses) gains on foreign currency transactions, net	(13)		73
Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:
Accounts and insurance receivables		42,568		(7,604)
Related-party receivables		14,041		0
Accounts and other receivables						Accounts and other receivables	38,138		(14,361)
Related-party activity, net						Related-party activity, net	(4,674)		(6,621)
Prepaid expenses and other current and long-term assets	Prepaid expenses and other current and long-term assets	(124)		113		Prepaid expenses and other current and long-term assets	1,640		12,238
Inventories	Inventories	(17,636)		(7,847)		Inventories	(11,560)		(17,505)
Derivatives	Derivatives	1,033		(883)		Derivatives	(7,649)		(250)
Accounts payable, accrued liabilities and other current liabilities	Accounts payable, accrued liabilities and other current liabilities	(20,838)		9,526		Accounts payable, accrued liabilities and other current liabilities	(3,274)		16,771
Related-party payables		0		5,281
Deferred revenue	Deferred revenue	(4,818)		(2,257)		Deferred revenue	(4,918)		(4,139)
Accrued interest	Accrued interest	(8,911)		9,751		Accrued interest	(15,083)		4,820
Operating lease liabilities	Operating lease liabilities	(1,619)		(1,021)		Operating lease liabilities	(4,951)		(3,832)
Other long-term liabilities	Other long-term liabilities	(461)		448		Other long-term liabilities	(292)		(17,570)
Net cash provided by operating activities	Net cash provided by operating activities	37,713		27,904		Net cash provided by operating activities	110,700		59,190
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(37,142)		(25,691)		Purchases of property, plant and equipment	(151,023)		(76,887)
Payments in relation to the Lucedale-Pascagoula Drop-Down, net of cash acquired						Payments in relation to the Lucedale-Pascagoula Drop-Down, net of cash acquired	(245,652)		—
Payments in relation to the Greenwood Drop-Down, net of cash acquired						Payments in relation to the Greenwood Drop-Down, net of cash acquired	—		(129,631)
Payments in relation to the Georgia Biomass Acquisition, net of cash acquired						Payments in relation to the Georgia Biomass Acquisition, net of cash acquired	—		(163,299)
Other	Other	0		(3,769)		Other	—		(3,769)
Net cash used in investing activities	Net cash used in investing activities	(37,142)		(29,460)		Net cash used in investing activities	(396,675)		(373,586)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from senior secured revolving credit facility		46,000		70,000
Proceeds from senior secured revolving credit facility, net						Proceeds from senior secured revolving credit facility, net	224,500		105,000
Proceeds from debt issuance						Proceeds from debt issuance	—		155,625
Principal payments on other long-term debt and finance lease obligations	Principal payments on other long-term debt and finance lease obligations	(4,029)		(903)		Principal payments on other long-term debt and finance lease obligations	(9,235)		(3,708)
Cash paid related to debt issuance costs and deferred offering costs	Cash paid related to debt issuance costs and deferred offering costs	0		(985)		Cash paid related to debt issuance costs and deferred offering costs	(1,639)		(3,838)
Proceeds from common unit issuances, net						Proceeds from common unit issuances, net	214,831		191,113
Payments in relation to the Hamlet Drop-Down						Payments in relation to the Hamlet Drop-Down	—		(40,000)
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(41,082)		(26,571)		Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(129,938)		(93,634)
Payment for withholding tax associated with Long-Term Incentive Plan vesting	Payment for withholding tax associated with Long-Term Incentive Plan vesting	(8,076)		(3,727)		Payment for withholding tax associated with Long-Term Incentive Plan vesting	(10,756)		(3,869)
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)
Net cash provided by financing activities						Net cash provided by financing activities	287,763		306,689
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	1,788		(7,707)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	10,004		9,053		Cash, cash equivalents and restricted cash, beginning of period	10,004		9,053
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	3,388	$	5,311	Cash, cash equivalents and restricted cash, end of period	$	11,792	$	1,346

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Continued)

(In thousands)

(Unaudited)


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Property, plant and equipment acquired included in accounts payable and accrued liabilities	Property, plant and equipment acquired included in accounts payable and accrued liabilities	$	3,742	$	19,435	Property, plant and equipment acquired included in accounts payable and accrued liabilities	$	16,411	$	18,270

Supplemental information:	Supplemental information:					Supplemental information:
Interest paid, net of capitalized interest	Interest paid, net of capitalized interest	$	23,934	$	723	Interest paid, net of capitalized interest	$	20,545	$	22,666

See accompanying notes to condensed consolidated financial statements.

910

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(1) Description of Business and Basis of Presentation

Description of Business

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

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

Basis of Presentation

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

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

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

2020, which include the names of legal entities that are our subsidiaries, entities of which we are a subsidiary or to which we are a related party, and which also include defined terms used in the unaudited financial statements. During 2021, the following entities became our wholly owned subsidiaries: Enviva Pellets Lucedale, LLC (“Lucedale”), Enviva Port of Pascagoula, LLC (“Pascagoula”) and Enviva Development Finance Company, LLC (“Development Finance”).

Reclassification

Certain prior year amounts have been reclassified to conform to current period presentation on the condensed consolidated statements of operations and statements of cash flows.

Lucedale-Pascagoula Drop-Down

On July 1, 2021, we acquired from our sponsor all of the issued and outstanding limited liability company interests in Lucedale, Pascagoula and Development Finance, three long-term take-or-pay off-take contracts and related shipping contracts (the “Lucedale-Pascagoula Drop-Down”) for a purchase price of $259.5 million, after accounting for certain adjustments.

Lucedale and Pascagoula are constructing the Lucedale plant and Pascagoula terminal, respectively. The three off-take agreements represent incremental deliveries of 630,000 MTPY to Japan, mature between 2034 and 2044 and have an aggregate revenue backlog of $1.9 billion. The related shipping contracts will facilitate the transportation of incremental deliveries under the off-take contracts. See Note 3, Transactions Between Entities Under Common Control.

Greenwood Drop-Down

On July 1, 2020, we acquired from 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 such~~), for a purchase price of $129.7 million, after accounting for certain adjustments (such transaction, the “Greenwood Drop-Down”). The Greenwood Drop-Down was an asset acquisition

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

between entities under common control and accounted for on the carryover basis of accounting. Accordingly, we recorded net assets of $67.8 million as of July ~~31,~~1, 2020 to reflect the Greenwood Drop-Down.

Georgia Biomass ~~Holding LLC~~Acquisition

On July 31, 2020, ~~Enviva Pellets Waycross Holdings, LLC, a wholly owned subsidiary of the Partnership,~~we acquired all of the limited liability company interests in Georgia Biomass Holding LLC ~~a Georgia limited liability company (“Georgia Biomass” and such transaction, the~~(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.Georgia. 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.

Hamlet JV

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

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

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

~~Enviva Wilmington Holdings, LLC~~

~~On April 2, 2019, we acquired (the “Hamlet Drop-Down”) from our sponsor~~We own all of the issued and outstanding Class B Units in Enviva Wilmington Holdings, LLC (the “Hamlet JV”), a limited liability company owned by ~~our sponsor~~us and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates (collectively, as applicable, “John Hancock”). ~~On the date of acquisition, we began to~~We consolidate the Hamlet JV as a variable interest entity of which we are the primary beneficiary. As managing member, we have the sole power to direct the activities that most impact the economics of the Hamlet JV. Additionally, as the Class B Units represent a controlling interest in the Hamlet JV, we account for the Hamlet JV as a consolidated subsidiary, not as a joint venture. The Hamlet Drop-Down was an asset acquisition between entities under common control and accounted for on the carryover basis of accounting. Accordingly, the consolidated financial statements for the period beginning April 2019 reflect the acquisition.

(2) Significant Accounting Policies

During interim periods, we follow the accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 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 condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Recently Adopted Accounting Standards

On January 1, 2021, we adopted ASU ~~2019-12-~~2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, 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 a consolidated group. The adoption did not have a material impact on the financial statements.

Recently Issued Accounting Standards not yet Adopted

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

(3) Transactions Between Entities Under Common Control

The Lucedale-Pascagoula Drop-Down closed on July 1, 2021, and was an asset acquisition of entities under common control where the financial statements of the acquiring entity reflect the transferred assets and liabilities at the historical cost of the parent of the entities under common control. Accordingly, the consolidated financial statements for the period beginning July 1, 2021 reflect the Lucedale-Pascagoula Drop-Down. The purchase price of $259.5 million, after accounting for certain adjustments, was paid in cash.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

The change in net assets on July 1, 2021 from the Lucedale-Pascagoula Drop-Down included $191.8 million of net assets acquired at carryover basis. The following table outlines the changes in consolidated net assets resulting from the Lucedale-Pascagoula Drop-Down on July 1, 2021.


Assets:
Cash	$	13,879
Other current assets	40
Property, plant and equipment	224,421
Operating lease right-of-use assets	9,865
Total assets	248,205

Liabilities:
Accounts payable	8,340
Related-party payables, net	810
Accrued construction in progress	19,469
Accrued and other current liabilities	2,974
Long-term operating lease liabilities	10,882
Other long-term liabilities	13,927
Total liabilities	56,402
Net assets contributed to Partnership	$	191,803

The unaudited combined revenue and net (loss) income presented below have been prepared as if the Lucedale-Pascagoula Drop-Down had occurred on January 1, 2020. The unaudited pro forma financial information has been derived from the consolidated statements of operations of the Partnership and combined statements of operations for Lucedale, Pascagoula and Development Finance for the below periods. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the Lucedale-Pascagoula Drop-Down had taken place on January 1, 2020.

The unaudited pro forma combined revenue and net loss are as follows:


	Nine Months Ended September 30, 2021		Year Ended December 31, 2020
	(unaudited)		(unaudited)
Revenue	$	763,484	$	875,079
Net (loss) income	(6,346)		5,512

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(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 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 ~~March 31,~~September 30, 2021, the aggregate amount of consideration from contracts with customers allocated to the performance obligations that were unsatisfied or partially satisfied was approximately ~~$14.1~~$15.6 billion. This amount excludes forward prices related to variable consideration including inflation, 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 ~~April~~October 1, 2021, we expect to recognize approximately ~~5.0%~~2.0% of our remaining performance obligations as revenue during the remainder of 2021, an additional ~~9.0%~~8.0% in 2022 and the balance thereafter. Our off-take contracts expire at various times through ~~2043~~2044 and our terminal services contract expires in 2021.

Variable Consideration

Variable consideration from off-take contracts 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

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

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

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

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 contract arises from price increases based on agreed inflation indices and from above-minimum throughput quantities or services. There was no variable consideration from our terminal services contract for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020.

For the three and nine months ended ~~March 31,~~September 30, 2021, ~~and 2020,~~ we recognized ~~$0.4~~$0.1 million and ~~$0.2~~$0.4 million, respectively, of product sales revenue related to performance obligations satisfied in previous periods. For the three months ended September 30, 2020, revenue was reduced by $0.1 million related to performance obligations satisfied in previous periods. For the nine months ended September 30, 2020, we recognized $0.1 million of revenue related to performance obligations satisfied in previous periods.

Contract Balances

Accounts receivable related to product sales as of ~~March 31,~~September 30, 2021 and December 31, 2020 were ~~$77.1~~$82.1 million and $108.5 million, respectively. Of these amounts, ~~$59.2~~$60.9 million and $95.0 million, ~~as of March 31,~~at September 30, 2021 and December 31, 2020, respectively, related to amounts that were not yet billable under our contracts with customers pending finalization of prerequisite billing documentation. The amounts that had not been billed are billed upon receipt of prerequisite billing documentation, where substantially all is typically billed one to two weeks after full loading of the vessel and where the remaining balance is typically billed one to two weeks after discharge of the vessel.

As of ~~March 31,~~September 30, 2021 ~~and~~there was no deferred revenue for future performance obligations under contracts associated with off-take contracts. As of December 31, 2020, ~~we had $0.1 million~~accrued and other current liabilities included $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 ~~$23.4~~$36.3 million and $50.6 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, for amounts associated with our product ~~sales.~~

~~(4) Significant Risks~~sales, consisting primarily of wood pellet purchases 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 the Netherlands. Product sales to third-party customers that accounted for 10% or a greater share of consolidated product sales were as follows:

Three Months Ended March 31,
2021 2020
Customer A 29% 35%
Customer C 16% 24%
Customer D 19% 15%
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
distribution costs.

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Notes to Condensed Consolidated Financial Statements (Continued)

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

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

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

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Customer A	25	%	35	%	34	%	36	%
Customer B	3	%	10	%	5	%	10	%
Customer C	21	%	26	%	19	%	29	%

Customer E	19	%	12	%	18	%	5	%

(6) Inventories

Inventories consisted of the following as of:


	September 30, 2021		December 31, 2020
Raw materials and work-in-process	$	15,282	$	12,500
Consumable tooling	22,007		21,855
Finished goods	16,525		8,009
Total inventories	$	53,814	$	42,364

(7) Property, Plant and Equipment, net

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


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Land	Land	$	22,570	$	22,611	Land	$	23,802	$	22,611
Land improvements	Land improvements	61,276		60,110		Land improvements	61,843		60,110
Buildings	Buildings	321,675		316,706		Buildings	321,810		316,706
Machinery and equipment	Machinery and equipment	796,308		799,881		Machinery and equipment	853,376		799,881
Vehicles	Vehicles	3,118		3,105		Vehicles	3,183		3,105
Furniture and office equipment	Furniture and office equipment	8,326		8,202		Furniture and office equipment	9,816		8,202
Leasehold improvements	Leasehold improvements	1,029		1,029		Leasehold improvements	2,660		1,029
Property, plant and equipment	Property, plant and equipment	1,214,302		1,211,644		Property, plant and equipment	1,276,490		1,211,644
Less accumulated depreciation	Less accumulated depreciation	(316,593)		(295,921)		Less accumulated depreciation	(357,006)		(295,921)
Property, plant and equipment, net	Property, plant and equipment, net	897,709		915,723		Property, plant and equipment, net	919,484		915,723
Construction in progress	Construction in progress	192,780		156,096		Construction in progress	476,022		156,096
Total property, plant and equipment, net	Total property, plant and equipment, net	$	1,090,489	$	1,071,819	Total property, plant and equipment, net	$	1,395,506	$	1,071,819

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

Total depreciation expense and capitalized interest related to construction in progress were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Depreciation expense	$	22,179	$	18,722	$	65,735	$	47,969
Capitalized interest related to construction in progress	4,648		1,671		8,991		4,098

Accrued amounts for property, plant and equipment and construction in progress included in accrued and other current liabilities were ~~$12.7~~$23.6 million and $10.8 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

(8) Leases

Operating lease right-of-use assets and liabilities and finance leases consisted of the following as of:


	September 30, 2021		December 31, 2020
Operating leases:
Operating lease right-of-use assets	$	58,421	$	51,434

Current portion of operating lease liabilities	$	3,711	$	3,450
Long-term operating lease liabilities	58,566		50,074
Total operating lease liabilities	$	62,277	$	53,524

Finance leases:
Property plant and equipment, net	$	20,355	$	24,246

Current portion of long-term finance lease obligations	$	7,406	$	8,828
Long-term finance lease obligations	9,342		10,775
Total finance lease liabilities	$	16,748	$	19,603

Pascagoula leases certain real estate on which it is constructing a marine export terminal facility (the “Enviva System”). In addition, Pascagoula is party to an exclusive lease for terminal assets, on which the Enviva system will depend, to be constructed by Jackson County Port Authority (the “JCPA system”). The leases each have a 20-year term, with 4 five-year renewal options. Total ~~depreciation expense was $21.0 million and $14.0 million~~future minimum lease payments over the 40-year life of the Enviva System lease are estimated to be $27.6 million. For the JCPA System, there are two payment options for the ~~three months ended March 31,~~exclusive right to use it for what is expected to be approximately $24.0 million plus interest. The JCPA system lease is accounted for as a “build-to-suit” lease and is recorded as construction-in-progress with a related long-term liability in the consolidated balance sheet at $15.2 million as of September 30, 2021.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

As of September 30, 2021, future minimum lease payments and ~~2020, respectively. Total interest capitalized related to construction in progress was $2.1 million~~the aggregate maturities of operating and ~~$1.1 million for the three months ended March 31, 2021 and 2020, respectively.~~finance lease liabilities were:


Years Ending December 31,	Operating Leases		Finance Leases		Total
Remainder of 2021	$	2,443	$	2,954	$	5,397
2022	7,411		6,930		14,341
2023	7,310		3,575		10,885
2024	7,134		1,310		8,444
2025	7,128		939		8,067
Thereafter	94,285		2,669		96,954
Total lease payments	125,711		18,377		144,088
Less: imputed interest	(63,434)		(1,629)		(65,063)
Total present value of lease liabilities	$	62,277	$	16,748	$	79,025

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

We use derivative instruments to partially offset our business exposure to foreign currency exchange ~~and interest rate risk. We may enter into foreign currency forward and option contracts to offset some of the foreign currency exchange~~ risk onfrom expected future cash flows and interest rate ~~swaps to offset some of the interest rate~~ risk ~~on expected future cash flows on~~resulting from certain borrowings. ~~The~~Although the preponderance of our off-take contracts are U.S. ~~Dollar-denominated. We~~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”). ~~Our derivative instruments expose us to credit risk to the extent that hedge counterparties may be unable to meet the terms of the applicable derivative instrument.~~

We seek to mitigate ~~such risks~~the credit risk associated with derivative instruments by limiting our counterparties to major financial institutions. ~~In addition,~~Although we monitor the potential risk of loss ~~with any one counterparty resulting from~~due to credit ~~risk. Management does~~risk, we do not expect 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~~foreign currency exchange risk. ~~In 2020, we entered into~~We are party to 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.

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 was as follows as of:


		Asset (Liability)
	Balance Sheet Classification	September 30, 2021		December 31, 2020
Not designated as hedging instruments:
Interest rate swaps	Accrued and other current liabilities	$	(5)	$	(119)


Foreign currency exchange contracts:
	Prepaid and other current assets	$	1,178	$	308
	Other long-term assets	469		924
	Accrued and other current liabilities	(1,515)		(2,224)
	Other long-term liabilities	(1,066)		(3,508)
Total derivatives not designated as hedging instruments		$	(939)	$	(4,619)

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

~~Derivative instruments are classified as Level 2 assets or liabilities based on inputs such as spot~~Net unrealized and ~~forward benchmark interest rates (such as LIBOR)~~net realized gains and ~~foreign exchange rates. The fair value of derivative instruments at March 31, 2021 and December 31, 2020~~(losses) recorded to earnings were as follows:

Asset (Liability)
Balance Sheet Classification March 31, 2021 December 31, 2020
Not designated as hedging instruments:
Interest rate swaps Accrued and other current liabilities $ (84) $ (119)
Foreign currency exchange contracts:
Prepaid and other current assets $ 545 $ 308
Other long-term assets 665 924
Accrued and other current liabilities (3,302) (2,224)
Other long-term liabilities (3,568) (3,508)
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 insignificant, respectively, for the three months ended March 31, 2021 and 2020.

During the three months ended 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 settled of $1.0 million during the three months ended March 31, 2021 and realized gains of $0.2 million during the three months ended March 31, 2020.


			Three Months Ended September 30,				Nine Months Ended September 30,
Classification	Derivative Instrument		2021		2020		2021		2020
Product sales	Foreign currency derivatives	Unrealized	$	4,364	$	(2,616)	$	3,566	$	4,058
Product sales	Foreign currency derivatives	Realized	(1,141)		95		(3,658)		304
Interest expense	Interest rate swap	Unrealized	42		8		114		(159)

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 ~~March 31,~~September 30, 2021, we would have had to pay a net settlement termination payment of ~~$5.9~~$1.0 million, which differs ~~by $0.2 million~~insignificantly from the recorded fair value of the derivatives. We present our derivative assets and liabilities at their gross fair values.

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


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Foreign exchange forward contracts in GBP	Foreign exchange forward contracts in GBP	£	178,839	£	143,565	Foreign exchange forward contracts in GBP	£	85,350	£	108,825
Foreign exchange purchased option contracts in GBP	Foreign exchange purchased option contracts in GBP	£	30,621	£	51,601	Foreign exchange purchased option contracts in GBP	£	23,515	£	40,365
Foreign exchange forward contracts in EUR	Foreign exchange forward contracts in EUR	€	24,503	€	12,968	Foreign exchange forward contracts in EUR	€	12,700	€	12,250
Interest rate swaps	Interest rate swaps	$	70,000	$	70,000	Interest rate swaps	$	35,000	$	70,000

~~(8)~~(10) 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 7,9, 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.

The carrying amount and estimated fair value of long-term debt, including the current portion, were as follows as of:


	September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2026 Notes	$	747,269	$	779,063	$	746,875	$	796,875
Seller Note	36,095		38,343		37,571		40,405
Other long-term debt	346,500		346,500		122,000		122,000
Total long-term debt	$	1,129,864	$	1,163,906	$	906,446	$	959,280

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

~~The carrying amount and estimated fair value of long-term debt as of March 31, 2021 and December 31, 2020 was as follows:~~

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

~~(9)~~(11) Intangibles

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

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)


	September 30, 2021						December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Favorable customer contracts	$	700	$	(185)	$	515	$	6,200	$	(5,566)	$	634
Assembled workforce	1,856		(1,607)		249		1,856		(1,249)		607
Unfavorable customer contract	(600)		159		(441)		(600)		57		(543)
Unfavorable shipping contract	(6,300)		1,357		(4,943)		(6,300)		485		(5,815)
Total intangible liabilities, net	$	(4,344)	$	(276)	$	(4,620)	$	1,156	$	(6,273)	$	(5,117)

~~(10)~~(12) Long-Term Debt and Finance Lease Obligations

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


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
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
2026 Notes, net of unamortized discount, premium and debt issuance costs of $2.7 million and $3.1 million as of September 30, 2021 and December 31, 2020, respectively						2026 Notes, net of unamortized discount, premium and debt issuance costs of $2.7 million and $3.1 million as of September 30, 2021 and December 31, 2020, respectively	$	747,269	$	746,875
Senior secured revolving credit facility	Senior secured revolving credit facility	166,000		120,000		Senior secured revolving credit facility	344,500		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		35,421		37,571
Seller Note, net of unamortized discount of $1.4 million and $2.4 million as of September 30, 2021 and December 31, 2020, respectively						Seller Note, net of unamortized discount of $1.4 million and $2.4 million as of September 30, 2021 and December 31, 2020, respectively	36,095		37,571
Other loans	Other loans	2,000		2,000		Other loans	2,000		2,000
Finance leases	Finance leases	17,368		19,603		Finance leases	16,748		19,603
Total long-term debt and finance lease obligations	Total long-term debt and finance lease obligations	967,793		926,049		Total long-term debt and finance lease obligations	1,146,612		926,049
Less current portion of long-term debt and finance lease obligations	Less current portion of long-term debt and finance lease obligations	(12,446)		(13,328)		Less current portion of long-term debt and finance lease obligations	(11,906)		(13,328)
Long-term debt and finance lease obligations, excluding current installments	Long-term debt and finance lease obligations, excluding current installments	$	955,347	$	912,721	Long-term debt and finance lease obligations, excluding current installments	$	1,134,706	$	912,721

2026 Notes

As of ~~March 31,~~September 30, 2021 and December 31, 2020, we were in compliance with 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

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

As of ~~March 31,~~September 30, 2021 and December 31, 2020, we were in compliance with the covenants and restrictions associated with, and no events of default existed under, our senior secured revolving credit facility. Our obligations under the senior secured

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

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

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

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

At ~~March 31,~~September 30, 2021 and December 31, 2020, we had a $0.4 million and $0.3 million, respectively, letter of credit outstanding under our senior secured revolving credit ~~facility~~facility.

Table of ~~$0.3 million.~~Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES

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

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

(13) Related-Party Transactions

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


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Other revenue	Other revenue	$	0	$	606	Other revenue	$	—	$	—	$	—	$	1,264
Cost of goods sold	Cost of goods sold	30,442		33,617		Cost of goods sold	11,704		25,361		66,290		101,357
General and administrative expenses	General and administrative expenses	8,770		7,689		General and administrative expenses	10,134		6,196		28,150		20,832

Management Services Agreements

~~Enviva Partners, LP and the Hamlet JV~~We are ~~each parties~~party to ~~separate~~ management services agreements (“~~MSA” or “MSAs”~~MSAs”) with Enviva Management Company, ~~LLC, a Delaware limited liability company and wholly owned subsidiary of our sponsor (together with its affiliates that~~which 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, LP reimburses Enviva Management Company for all direct or indirect internal or third-party expenses it incurs in connection with the provision of such services.

~~Under the Hamlet JV’s MSA (the “Hamlet JV MSA”), the~~The Hamlet JV pays an annual management fee to Enviva Management ~~Company; to~~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~~Expensed MSA fees in excess of the ~~Hamlet Drop-Down, Enviva Management Company~~annual management fee, which were waived and recorded as increases to partners’ capital, were $0.6 million and $2.1 million during the ~~Hamlet JV’s obligation to pay approximately $2.7~~three and nine months ended September 30, 2021, respectively, and $0.2 million ~~of management fees payable to Enviva Management Company from~~and $1.5 million during the ~~date thereof until July 1,~~three and nine months ended September 30, 2020, ~~(the “Hamlet JV MSA Fee Waiver”).~~respectively.

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


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Finished goods inventory	Finished goods inventory	$	3,301	$	907	Finished goods inventory	$	2,216	$	907
Related-party payables	Related-party payables	8,419		8,650		Related-party payables	5,336		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,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Cost of goods sold	Cost of goods sold	$	24,301	$	13,260	Cost of goods sold	$	20,319	$	22,952	$	64,784	$	53,465
General and administrative expenses	General and administrative expenses	8,770		7,689		General and administrative expenses	10,134		6,196		28,150		20,832

~~During~~Common Control Drop-Downs

Lucedale-Pascagoula Drop-Down

The following agreements were entered into on the ~~three months ended March 31, 2021~~date of the Lucedale-Pascagoula Drop-Down:

•A make-whole agreement with our sponsor, pursuant to which:

–our sponsor agreed to guarantee certain cash flows for construction cost overruns and ~~2020, $0.7 million of~~production shortfalls and guarantee a minimum throughput volume at the Pascagoula terminal; and

–we agreed to reimburse our sponsor for an amount calculated based on excess wood pellet production volume.

•An MSA fee waiver agreement with Enviva Management Company to provide cash flow support to us during the ramp period prior to commercial operations, pursuant to which management services and other fees ~~expensed under the Hamlet JV MSA~~that otherwise would have been owed by us to Enviva Management Company were ~~waived and recorded as an increase to partners’ capital.~~waived.

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Notes to Condensed Consolidated Financial Statements (Continued)

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

•An interim services agreement (“ISA”) with Enviva Lucedale Operator, LLC (“Lucedale Operator”), a wholly owned subsidiary of our sponsor, pursuant to which Lucedale Operator, as an independent contractor, agreed to manage, operate, maintain and repair the Lucedale plant and provide other services to us from the date through and including the day before the anniversary on which Lucedale has commenced commercial operations in exchange for a fixed fee per MT of wood pellets produced by the Lucedale plant during such period and delivered at place to the Pascagoula terminal. Our sponsor guarantees all obligations of Lucedale Operator under the ISA. Pursuant to the ISA, Lucedale Operator agreed to:

–pay all operating and maintenance expenses at the Lucedale plant;

~~Drop-Down Agreements~~–cover all reimbursable general and administrative expenses associated with the Lucedale plant; and

–pay other costs and expenses incurred by the Lucedale plant to produce and sell wood pellets delivered to the Pascagoula terminal from the Lucedale plant.

Greenwood Drop-Down

OnThe following agreements were entered into on the date of the Greenwood Drop-Down:

•~~We entered into an~~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 (the “Greenwood Make-Whole Agreement”).~~million.

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

~~Pursuant to the Third EVA MSA Fee Waiver, during the three months ended March~~December 31, ~~2021, $8.0 million was recorded as an increase to partners’ capital consisting of expenses waived under the agreement.~~2021.

Hamlet Drop-Down

OnThe following agreements were entered into on the date of the Hamlet Drop-Down:

•~~We entered into an~~A make-whole 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)~~ which:

–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)~~ exceptions;

–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~~2020; and ~~(4)~~

–our sponsor agreed to retain liability for certain claims payable, if any, by the Hamlet ~~JV (the “Hamlet Make-Whole Agreement”).~~JV.

•~~We entered into an~~An MSA fee waiver agreement with Enviva Management Company to ~~waive~~provide cash flow support to us, pursuant to which:

–Enviva Management Company waived our obligation to pay an aggregate of approximately $13.0 million inof MSA fees payable ~~under our MSA with Enviva Management Company (the “EVA MSA”) with respect to the period~~ from the date of the Hamlet Drop-Down through June 30, 2020;

–Enviva Management Company waived the ~~second quarter~~Hamlet JV’s obligation to pay approximately $2.7 million of ~~2020 (the “First EVA~~ MSA ~~Fee Waiver”).~~fees payable from the date of the Hamlet Drop-Down until July 1, 2020.

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

–pay all operating and maintenance expenses at the Hamlet ~~plant, (2)~~ plant;

–cover all reimbursable general and administrative expenses associated with the Hamlet ~~plant~~plant; and ~~(3)~~

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

–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 guaranteed all obligations of Hamlet Operator under the ISA.~~

~~The Hamlet Make-Whole Agreement, First EVA~~ MSA ~~Fee Waiver~~fees waived are expensed and ISA expired pursuant to their terms on June 30, 2020. For the three months ended March 31, 2020, $2.5 million of fees expensed under the Hamlet JV MSA and waived under the First EVA MSA Fee Waiver were recordedoffset as ~~an increase~~increases to partners’ capital. ~~For the three months ended March 31, 2020,~~Make-whole amounts associated with production shortfalls are recorded as a reduction to cost of goods sold ~~included $10.6 million net of a~~and offset to related-party receivables, while amounts associated with excess wood pellet production are recorded as increases to cost of ~~cover deficiency fee from our sponsor pursuant~~goods sold and offset to ~~the Hamlet Make-Whole Agreement~~related-party payables. Make-whole agreement amounts associated with construction in progress are recorded to construction in progress and offset as increases to partners’ capital. ISA amounts are recorded to cost of goods sold and offset as a ~~result of~~related-party payable to Lucedale Operator or 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 sold. As of March 31, 2021 and December 31, 2020, related-party receivables included $0.4 million and $12.3 million related to the ISA.Operator. Related-party amounts associated with agreements entered into on common control acquisition dates were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,
	Statement of Operations	2021		2020		2021		2020
MSA Fee Waiver Agreements	Cost of goods sold and general and administrative expenses	$	15,200	$	9,000	$	28,200	$	12,500
ISAs	Cost of goods sold	—		—		—		27,857
Make-Whole Agreements	Cost of goods sold	(601)		—		(601)		(2,642)

Greenwood Contract

We were party to a contract with Greenwood to purchase wood pellets produced by the Greenwood plant through March 2022 (the “Greenwood Contract”). The Greenwood Contract was terminated on the date of the Greenwood Drop-Down. During

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

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

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

the ~~three~~nine months ended ~~March 31,~~September 30, 2020, we purchased ~~$9.9~~$18.8 million of wood pellets from Greenwood and recorded a cost of cover deficiency fee of approximately ~~$0.4~~$0.3 million ~~as Greenwood was unable to satisfy certain commitments. As of March 31,~~from Greenwood. During the nine months ended September 30, 2020, ~~of the~~a net purchased amount of ~~$9.5~~$18.1 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.~~sold.

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 were not met. During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, we recorded ~~$0.6~~$1.3 million of deficiency fees from Greenwood, which ~~was~~were included in other revenue. We did not record deficiency fees from Greenwood during the three months ended September 30, 2020.

Shipping Subcharter Agreement and MSA Fee Waiver

During the third quarter of 2021, we entered into an agreement with our sponsor pursuant to which we agreed to make shipments of wood pellets during 2022 and 2023. As consideration, we received $4.7 million of MSA fee waivers during the three and nine months ended September 30, 2021.

Enviva FiberCo, LLC

We purchase a portion of our raw materials from Enviva FiberCo, LLC (“FiberCo”), a wholly owned subsidiary of our sponsor, including through a wood supply agreement ~~that provided for~~effective July 1, 2021, whereby FiberCo committed to secure incremental stumpage inventory meeting acceptable specification requirements, above inventory levels held as of June 30, 2021, to supply certain of our plants. For all wood fiber delivered pursuant to the agreement, we agreed to pay a $5 per green short ton (”GST”) premium to market pricing. FiberCo agreed to pay deficiency fees of $10 per GST to us in the event that FiberCo did not satisfy certain volume ~~commitments. Purchased raw~~commitments between July 31 through December 31, 2021. Raw materials purchased, including stumpage, net of cost of cover deficiency fees are included in cost of goods sold. ~~Raw~~

Cost of cover deficiency fees received net of raw materials purchased during the three months ended ~~March 31,~~September 30, 2021 were ~~$6.0~~$2.1 million. ~~NaN~~Raw materials purchased, net of cost of cover deficiency fees ~~were recognized~~ during the ~~three~~nine months ended ~~March 31, 2021. During the~~September 30, 2021, were $7.9 million. Raw materials purchased during three and nine months ended ~~March 31,~~September 30, 2020 ~~included in cost of goods sold was $1.4~~were $2.4 million ~~of raw materials purchased.~~and $4.6 million. As of ~~March 31,~~September 30, 2021, related-party ~~payables of $0.8~~receivables, net included $5.3 million ~~is included in related-party payables related to raw materials purchased~~due from FiberCo. AtAs of December 31, 2020, related-party payables, net included $0.3 million ~~related~~due to FiberCo for raw materials ~~purchased~~purchased.

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Notes to Condensed Consolidated Financial Statements (Continued)

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

In addition, effective from ~~FiberCo.~~

~~Hamlet JV Revolver~~

~~As of March 31,~~July 1, 2021 ~~and~~through 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 with FiberCo to ~~sublease~~set per-unit prices, based on FiberCo’s forecasts as of June 2021, for certain ~~railcars~~types of wood fiber purchased by us. If we paid more or less than such set per-unit prices, then we would receive from ~~Enviva Pellets Lucedale, LLC, a wholly owned subsidiary of our sponsor. The sublease agreements terminate no later than August 30, 2021. During~~or pay to, as applicable, FiberCo the difference multiplied by the volume purchased. For the three and nine months ended ~~March 31,~~September 30, 2021, actual per-unit costs exceeded the set per-unit prices set forth in the agreement; consequently, we recorded a receivable from FiberCo of $7.1 million as of September 30, 2021 and reduced cost of goods sold ~~includes expense related to~~for the ~~railcar subleases~~three and ~~railcar deliveries~~nine months ended September 30, 2021 by $5.9 million and inventory as of ~~$0.1~~September 30, 2021 by $1.2 million. ~~At March 31, 2021, we had $0.1 million included in related-party payables.~~

~~(12)~~(14) Income Taxes

~~As of March 31,~~Through September 30, 2021, the only periods subject to examination for U.S. federal and state income tax returns are ~~2017~~2018 through ~~2019.~~2020. 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 included a $0.1 million income tax benefit for the three and nine months ended ~~March 31, 2021~~September 30, 2021. The three and nine months ended September 30, 2020 included an ~~insignificant~~ income tax ~~benefit. For the three months ended March 31, 2020, 0 provision for income tax was recorded~~benefit of $0.3 million in the condensed consolidated financial statements.

~~(13)~~(15) Partners’ Capital

Issuance of Common Units

In June 2021, we issued 4,925,000 common units at a price of $45.50 per common unit for total net proceeds of $214.5 million, after deducting $9.5 million of issuance costs.

Allocations of Net Income (Loss)

~~Our~~As of September 30, 2021, our partnership agreement ~~contains~~contained provisions for the allocation of net income and loss to our unitholders and Enviva Partners GP, LLC (the “General Partner”), a wholly owned subsidiary of our sponsor. For purposes of maintaining partner capital accounts, the partnership agreement ~~specifies~~specified 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~~were made after giving effect, if any, to priority income allocations in an amount equal to incentive cash distributions, which ~~are~~were allocated 100% to the holder of our incentive distribution rights (“IDRs”). As of October 14, 2021, the IDRs were eliminated, see Note 18, Subsequent Event.

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

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~~ENVIVA PARTNERS, LP AND SUBSIDIARIES~~

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

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

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,~~September 30, 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~~As of September 30, 2021, our sponsor ~~currently holds~~held 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. As of October 14, 2021, the IDRs were eliminated, see Note 18, Subsequent Event.

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,~~

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Notes to Condensed Consolidated Financial Statements (Continued)

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

Quarter Ended Declaration
Date Record
Date Payment
Date Distribution
Per Unit Total Cash
Distribution Total Payment to holder of Incentive Distribution Rights
March 31, 2020 April 29, 2020 May 15, 2020 May 29, 2020 $ 0.6800 $ 22.9 $ 3.5
June 30, 2020 August 5, 2020 August 14, 2020 August 28, 2020 $ 0.7650 $ 30.4 $ 7.5
September 30, 2020 October 30, 2020 November 13, 2020 November 27, 2020 $ 0.7750 $ 30.8 $ 7.9
December 31, 2020 January 29, 2021 February 15, 2021 February 26, 2021 $ 0.7800 $ 31.2 $ 8.1
March 31, 2021 April 28, 2021 May 14, 2021 May 28, 2021 $ 0.7850 $ 31.4 $ 8.3

Quarter Ended

Declaration Date

Record Date

Payment Date

Distribution Per Unit

September 30, 2020

October 30, 2020

November 13, 2020

November 27, 2020

0.7750

December 31, 2020

January 29, 2021

February 15, 2021

February 26, 2021

0.7800

March 31, 2021

April 28, 2021

May 14, 2021

May 28, 2021

0.7850

June 30, 2021

July 27, 2021

August 13, 2021

August 27, 2021

0.8150

September 30, 2021

November 3, 2021

November 15, 2021

November 26, 2021

0.8400

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. As of October 14, 2021, the IDRs were eliminated, see Note 18, Subsequent Event.

~~(14)~~(16) Equity-Based Awards

Long-Term Incentive Plan

Affiliate Grants

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


		Time-Based Phantom Units			Performance-Based Phantom Units			Total Affiliate Grant Phantom Units				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, 2020	Nonvested December 31, 2020	1,061,885	$	33.52	648,514	$	34.07	1,710,399	$	33.73	Nonvested December 31, 2020	1,061,885	$	33.52	648,514	$	34.07	1,710,399	$	33.73
Granted	Granted	287,769	$	48.35	159,313	$	48.35	447,082	$	48.35	Granted	305,438	$	48.55	164,928	$	48.51	470,366	$	48.54
Forfeitures	Forfeitures	(22,543)	$	40.46	(6,913)	$	41.41	(29,456)	$	40.68	Forfeitures	(97,775)	$	39.32	(40,874)	$	38.46	(138,649)	$	39.07
Vested	Vested	(158,165)	$	28.65	(129,592)	$	28.91	(287,757)	$	28.77	Vested	(276,366)	$	29.23	(129,592)	$	28.91	(405,958)	$	29.12
Nonvested March 31, 2021		1,168,946	$	37.69	671,322	$	38.38	1,840,268	$	37.94
Nonvested September 30, 2021											Nonvested September 30, 2021	993,182	$	38.76	642,976	$	38.54	1,636,158	$	38.68

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

The unrecognized estimated unit-based compensation cost relating to outstanding Affiliate Grants as of September 30, 2021 was $15.1 million, which will be recognized over the remaining vesting period.

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Notes to Condensed Consolidated Financial Statements (Continued)

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

~~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 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, 2020	Nonvested December 31, 2020	14,987	$	38.37	Nonvested December 31, 2020	14,987	$	38.37
Granted	Granted	11,895	$	48.35	Granted	14,234	$	48.48
Vested	Vested	(12,112)	$	37.99	Vested	(14,987)	$	38.37
Nonvested March 31, 2021		14,770	$	46.72
Nonvested September 30, 2021					Nonvested September 30, 2021	14,234	$	48.48

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

In January 2021 and April 2021, Director Grants valued at $0.6 million ~~were granted,~~and $0.1 million, respectively, and which vest on the first anniversary of the grant ~~date. In~~date in January ~~2021, the Director Grants that~~and April 2022, respectively, were ~~unvested at December 31, 2020 vested and common units were issued.~~

During the three months ended March 31, 2021, we recorded $0.2 million of unit-based compensation expense with respect to the Director Grants. The unrecognized estimated unit-based compensation cost relating to outstanding Director Grants at March 31, 2021 is $0.5 million and will be recognized over the remaining vesting period.granted.

~~(15)~~(17) Net Income (Loss) per Limited Partner Unit

Net income (loss) per unit applicable to limited partners is computed by dividing limited partners’ interest in net income (loss), after deducting any incentive distributions, by the weighted-average number of outstanding 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 iswas as ~~follows for the three months ended March 31,~~follows:


	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Common Units		Incentive Distribution Rights(1)		Total		Common Units		Incentive Distribution Rights(1)		Total
Distributions declared	$	37,815	$	11,834	$	49,649	$	105,929	$	30,864	$	136,793
Earnings less than distributions	(50,592)		—		(50,592)		(138,378)		—		(138,378)
Net (loss) income available to partners	$	(12,777)	$	11,834	$	(943)	$	(32,449)	$	30,864	$	(1,585)
Weighted-average units outstanding—basic and diluted	45,015						42,079

Net loss per limited partner unit—basic and diluted	$	(0.28)					$	(0.77)

(1)As of October 14, 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 —
Incentive Distribution Rights have been eliminated. See Note 18, Subsequent Event.

2025

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Notes to Condensed Consolidated Financial Statements (Continued)

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

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 March 31, 2020
Common
Units Incentive Distribution Rights Total
Distributions declared $ 22,856 $ 3,457 $ 26,313
Earnings less than distributions (19,503) — (19,503)
Net income available to partners $ 3,353 $ 3,457 $ 6,810
Weighted-average units outstanding—basic 33,551
Weighted-average units outstanding—diluted 35,436
Net income per limited partner unit—basic $ 0.10
Net income per limited partner unit—diluted $ 0.09


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

~~(16)~~(18) Subsequent ~~Events~~Event

~~Senior Secured Revolving Credit Facility~~On October 14, 2021, we acquired all of the ownership interests in our sponsor (the “GP Buy-in”) and eliminated all outstanding IDRs (the “Simplification” and, together with the GP Buy-in, the “Simplification Transaction”) in exchange for 16.0 million common units, which were distributed to the former owners of our former sponsor. We concurrently announced that we intend to convert our organizational structure from a master limited partnership to a corporation under the name of Enviva Inc. (the “Conversion”).

The former owners of our former sponsor have agreed to reinvest in our common units all dividends related to 9.0 million of the 16.0 million common units issued in connection with the Simplification Transaction for the dividends paid for the period beginning with the third quarter of 2021 through the fourth quarter of 2024. On the date of the Simplification Transaction, the non-management former owners of our former sponsor held 27.7 million common units.

As part of the Simplification Transaction, we acquired four existing take-or-pay off-take contracts with investment grade-rated counterparties, a fully contracted plant in Epes, Alabama currently under development and a prospective production plant in Bond, Mississippi. We also acquired a development pipeline that includes projects at 13 additional sites in various stages of development. As a result of the Simplification Transaction and the newly announced contracts, our total weighted-average remaining term of off-take contracts is approximately 14.5 years, with a total product sales backlog of over $21 billion.

In ~~April 2021,~~connection with the GP Buy-in, the existing MSA fee waivers and other former sponsor support agreements associated with our earlier acquisitions of the Greenwood and Lucedale plants and Pascagoula terminal were consolidated, fixed and novated to certain of the former owners of our former sponsor. As a result, under the consolidated support agreement, we ~~amended~~will receive quarterly payments in an aggregate amount of $55.5 million with respect to periods through the fourth quarter of 2023. Beyond these amounts, the related-party transactions that had occurred before the Simplification Transaction and that we have disclosed in these and our ~~senior secured revolving credit facility~~prior financial statements will not recur as all of those transactions were with our sponsor or one of its subsidiaries, all of whom we have now acquired.

The Conversion is expected to ~~increase~~take effect as of December 31, 2021. The Conversion requires the ~~revolving credit commitments from $350.0 million~~affirmative vote of a majority of our common unitholders. Upon the Conversion, common units of Enviva Partners, LP units will be exchanged for shares of Enviva Inc. on a one-for-one basis in a transaction structured to ~~$525.0 million,~~be non-taxable to ~~extend the maturity from October 2023~~our unitholders. Thereafter, Enviva Inc. will be taxed as a corporation and subject to ~~April 2026, to increase the letter of credit commitment from $50.0 million to $80.0 million0 and to reduce the cost of borrowing by 25 basis points.~~federal income taxes.

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

Unless otherwise stated or the context otherwise indicates, all references to “we,” “us,” “our,” the “Partnership” or similar expressions refer to Enviva Partners, LP, including its consolidated subsidiaries. References to “our sponsor” refer to Enviva Holdings, LP and, where applicable, its wholly owned subsidiaries Enviva MLP Holdco, LLC and Enviva Development Holdings, LLC. References to our “General Partner” refer to Enviva Partners GP, LLC, a wholly owned subsidiary of Enviva Holdings, LP. References to “Enviva Management Company” refer to Enviva Management Company, LLC, a wholly owned subsidiary of Enviva Holdings, LP, and its affiliates who provide services to the Partnership, and references to “our employees” refer to the employees of Enviva Management ~~Company and its affiliates who provide services to the Partnership.~~Company.

The following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis (“MD&A”) in Part II-Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the U.S. Securities and Exchange Commission (the “SEC”). Our 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 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 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

WeAs of September 30, 2021, 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. WeAs of September 30, 2021, we own ~~and operate nine~~ten plants (collectively, “our plants”) with a combined production capacity of approximately ~~5.3~~6.2 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. 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. We are currently constructing a deep-water marine terminal at the Port of Pascagoula, Mississippi (the “Pascagoula terminal”). 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 business strategy is to construct and develop fully ~~contract the~~contracted 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 2021, production capacity from our wood pellet production plants and wood pellets sourced from our affiliates and third parties were approximately equal to the contracted volumes under our existing long-term, take-or-pay off-take contracts. Our long-term, take-or-pay off-take contracts provide for a product sales backlog of $14.5 billion and have a total weighted-average remaining term of 12.8 years from April 1, 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 were included with our product sales backlog for firm and contingent contracted product sales, our product sales backlog would increase to $20.0 billion and the total weighted-average remaining term from April 1, 2021 would increase to 14.2 years.

Our customers primarily use our wood pellets as a substitute fuel for coal in dedicated biomass or co-fired coal power plants. Wood pellets serve as a suitable “drop-in” alternative to coal because of their comparable heat content, density and form. Due to the uninterruptible nature of our customers’ fuel consumption, our customers require a reliable supply of wood pellets that meet stringent product specifications. In addition to power, heat and combined heat and power segments, we expect that increased requirements from regulators and policymakers worldwide, as well as commitments from the private sector, will drive industrial manufacturers around the world to decarbonize greenhouse gas (“GHG”)-intensive industries like steel, chemicals, lime, cement and aviation fuels, further increasing and diversifying our future customer base and contributing to global demand for sustainable biomass.

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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

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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

Simplification Transaction

On October 14, 2021, we acquired all of the ownership interests in our sponsor (the “GP Buy-in”) and eliminated all outstanding IDRs (the “Simplification” and, together with the GP Buy-in, the “Simplification Transaction”) in exchange for 16.0 million common units, which were distributed to the former owners of our sponsor. We concurrently announced that we intend to convert our organizational structure from a master limited partnership to a corporation under the name of Enviva Inc. (the “Conversion”).

The former owners of our sponsor have agreed to reinvest in our common units all dividends related to 9.0 million of the 16.0 million common units issued in connection with the Simplification Transaction during the period beginning with the third quarter of 2021 through the fourth quarter of 2024. On the date of the Simplification Transaction, the non-management former owners of our sponsor held 27.7 million common units.

As a result of the Simplification Transaction, we now perform the business activities previously performed by our sponsor, including corporate, commercial, sales and marketing, communications, public affairs, sustainability, development and construction. We plan to construct fully contracted wood pellet production plants and deep-water marine terminals using our “build and copy” model as a part of our organic growth initiatives. We expect the cost to construct such assets to be lower than our historical cost of acquiring them from our former sponsor in drop-down acquisitions.

In addition, we acquired four existing take-or-pay off-take contracts with investment grade-rated counterparties, a fully contracted plant in Epes, Alabama currently under development (the “Epes plant”) and a prospective production plant in Bond, Mississippi. The off-take contracts acquired have an aggregate revenue backlog of $4.4 billion, have a weighted-average term of approximately 19 years, with an associated base volume of 21 million metric tons of wood pellets. The Epes plant is designed and permitted to produce more than 1 million MTPY of wood pellets. The Bond plant is being developed to produce between 750,000 and more than 1 million MTPY of wood pellets.

In connection with the Simplification Transaction, the existing MSA fee waivers and other Holdings support agreements associated with our earlier acquisitions of the Greenwood and Lucedale plants and Pascagoula terminal were consolidated, fixed and novated to certain of the former owners of our former sponsor. As a result, under the consolidated support agreement, we will receive quarterly payments in an aggregate amount of $55.5 million with respect to periods through the first quarter of 2024. Beyond these amounts, the related party transactions that had occurred before the Simplification Transaction and that we have disclosed in these and our prior financial statements will not recur as all of those transactions were with our sponsor or one of its subsidiaries, all of whom we have now acquired.

The Conversion is expected to take effect by December 31, 2021. The Conversion requires the affirmative vote of a majority of our common unitholders. Upon the Conversion, common units of Enviva Partners, LP units will be exchanged for shares of Enviva Inc. on a one-for-one basis in a transaction structured to be non-taxable to our unitholders. Enviva Inc. will be taxed as a corporation and subject to federal income taxes.

Product Sales Contracted Backlog

Our volumes under our firm and contingent long-term off-take contracts, including the contracts we signed in October 2021 and acquired as part of the Simplification Transaction, provide for a product sales backlog of over $21 billion and have a total weighted-average remaining term from October 1, 2021 of 14.5 years.

Lucedale-Pascagoula Drop-Down

On July 1, 2021, we acquired from our former sponsor the Lucedale plant, the Pascagoula terminal, three long-term, take-or-pay off-take contracts with creditworthy Japanese counterparties (the “Associated Off-Take Contracts”), and three fixed-rate shipping contracts, which we refer to collectively as the “Lucedale-Pascagoula Drop-Down.” The purchase price for the Lucedale-Pascagoula Drop-Down was $259.5 million, after accounting for certain adjustments, and was paid in cash. We expect to invest approximately $85.0 million in remaining construction capital expenditures in the Lucedale plant and Pascagoula terminal, representing a total investment of approximately $345.0 million in the Lucedale-Pascagoula Drop-Down.

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

The Lucedale plant, which has a nameplate production capacity of approximately 750,000 MTPY of wood pellets, is permitted to produce 1.1 million MTPY. Its production will be transported via rail service to the Pascagoula terminal. The Pascagoula terminal is expected to have total throughput capacity of 3.0 million MTPY when fully constructed, allowing for throughput from multiple plants.

The following agreements were entered into on the date of the Lucedale-Pascagoula Drop-Down:

•A make-whole agreement with our sponsor, pursuant to which:

–our sponsor agreed to guarantee certain cash flows for construction cost overruns and production shortfalls and guarantee a minimum throughput volume at the Pascagoula terminal; and

–we agreed to reimburse our sponsor for an amount calculated based on excess wood pellet production volumes.

•An MSA fee waiver agreement with Enviva Management Company to provide cash flow support to us during the ramp period prior to commercial operations, pursuant to which management services and other fees that otherwise would have been owed by us to Enviva Management Company were waived.

–pay all operating and maintenance expenses at the Lucedale plant;

–cover all reimbursable general and administrative expenses associated with the Lucedale plant; and

–pay other costs and expenses incurred by the Lucedale plant to produce and sell wood pellets delivered to the Pascagoula terminal from the Lucedale plant.

In connection with the Simplification Transaction, the existing MSA fee waivers and other support agreements, including the agreements associated with the acquisition of the Lucedale plant and Pascagoula terminal were consolidated, fixed and novated to certain of the former owners of our former sponsor.

Issuance of Common Units

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

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 the letter of credit commitment from $50.0 million to $80.0 million and reduce the cost of borrowing by 25 basis points.

Development Activities

We ~~are well underway with commissioning activities for~~have completed the ~~recently constructed~~recent expansion ~~projects at~~project of our Northampton, North Carolina wood pellet production plant and we are commissioning the recent expansion project of our Southampton, Virginia wood pellet production ~~plants~~plant (the “Mid-Atlantic

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Expansions”). We continue to expect each plant to reach its expanded nameplate production capacity of approximately 750,000 and 760,000 MTPY, respectively, by the end of 2021.

We ~~have commenced a series~~expect an aggregate investment 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 in the Multi-Plant Expansions 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.

~~Financing Activities~~

~~In April 2021, we amended our senior secured revolving credit facility~~We expect to ~~increase the revolving credit commitments from $350.0~~invest a total of $28.0 million to ~~$525.0 million,~~expand the Greenwood plant’s production capacity to ~~extend~~600,000 MTPY (the “Greenwood Expansion”). We expect to complete 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~~expansion, which is currently underway, by ~~25 basis points.~~year-end 2021.

Commitment to Achieve Carbon-Neutral Operations

Consistent with our mission to displace coal, grow more trees and fight climate change, we and our sponsor recently announced our commitment to become “net-zero” in greenhouse gas (“GHG”) emissions from our operations by 2030. The product we manufacture helps reduce the lifecycle GHG emissions of our customers, but we believe we must also do our part within our operations to mitigate the impacts of climate change. We expect to accomplish neutrality with respect to our Scope 1 emissions (i.e., direct emissions from our manufacturing) by improving energy efficiency and 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 renewable electricity and/or onsite generation where practicable. Moreover, we will seek to proactively engage with our 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 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 our efforts to 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. In the third quarter of 2021, our contractors and supply chain partners experienced labor-related and other challenges associated with COVID-19 that had a temporal, but more pronounced than anticipated, impact on our operations and project execution schedule. We believe that these challenges were short-term and isolated in nature and based on the actions we have taken and the plans we have in place, we believe these issues are beginning to be behind us. Although the full impact of COVID-19 isremains unknown, ~~and rapidly evolving,~~ to date, our operations have not been materially impacted by the outbreak.

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

We specifically designed our operations and logistics systems with flexibility and redundancies so they are capable of effectively responding to unforeseen events. We operate a portfolio of nine wood pellet production plants geographically dispersed across the Southeast United States. We export our product from a portfolio of 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.

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As of March 31, 2021, we had liquidity, which included cash on hand and availability under our $350.0 million revolving credit facility of $187.1 million. In April 2021, we increased our revolving credit facility to $525.0 million and 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. ~~Furthermore, most~~We export our product from a portfolio of ~~our current deliveries are~~five bulk terminals and transport it 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. As of March 31, 2021, each of our customers ~~was in compliance~~under long-term, fixed-price shipping contracts with ~~their agreements with us, including payment terms.~~multiple shipping partners. These operations currently are unaffected by COVID-19.

Factors Impacting Comparability of Our Financial Results

~~Georgia Biomass Acquisition~~Lucedale-Pascagoula

The Lucedale-Pascagoula Drop-Down was an asset acquisition of entities under common control and accounted for on the carryover basis of accounting. Accordingly, the consolidated financial statements for the period beginning July 1, 2021 reflect the acquisition. For more information regarding the Lucedale-Pascagoula Drop-Down, see Note 1, Description of Business and Basis of Presentation-Lucedale, Pascagoula Drop-Down, Note 3, Transactions Between Entities Under Common Control and Note 13, Related-Party Transactions-Lucedale-Pascagoula Drop-Down.

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Waycross

On July 31, 2020, we acquired 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 $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 assets acquired, was recognized as goodwill. For more information regarding the Georgia Biomass Acquisition, see Note 1, Description of Business and Basis of Presentation-Georgia Biomass ~~Holding LLC.~~Acquisition.

Greenwood ~~Drop-Down~~

On July 1, 2020, we acquired from our sponsor all of the limited liability company interests in Enviva Pellets Greenwood Holdings II, LLC (“Greenwood Holdings II”), the indirect owner of Enviva Pellets Greenwood, LLC, which owns the Greenwood plant, for a purchase price of $129.7 million, after accounting for certain adjustments and 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 “Greenwood Drop-Down”). The Greenwood Drop-Down was an asset acquisition between entities under common control and accounted for on the carryover basis of accounting. Accordingly, the consolidated financial statements for the period beginning July 1, 2020 reflect the acquisition, see Note 1, Description of Business and Basis of Presentation-Basis of ~~Presentation-Enviva Pellets Greenwood.~~Presentation-Greenwood Drop-Down.

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

The Greenwood plant current production capacity is 500,000 MTPY of wood pellets and transports its production via rail service to our terminal assets at the Port of Wilmington, 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~~

OnThe following agreements were entered into on the date of the Greenwood ~~Drop-Down, we entered into a~~Drop-Down:

•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~~•An MSA fee waiver agreement with Enviva Management Company ~~pursuant to which (1) an aggregate of approximately $37.0 million in management services and other fees that otherwise would be owed by~~

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us under our management services agreement (“MSA”) with Enviva Management Company 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 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~~plant, pursuant to which an MSA fee waiver agreement with Enviva Management Company to provide cash flow support to us 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 $200.0 million. We used the net proceeds of $190.8 million to fund a portion of the consideration for eachplanned expansion of the Greenwood ~~Drop-Down and the Georgia Biomass Acquisition.~~

~~Tack-On Notes Issuance~~

~~On July 15, 2020, we issued~~plant, pursuant to which Enviva Management Company waived our obligation to pay an ~~additional $150.0~~aggregate of approximately $37.0 million in ~~aggregate principal amount of our 6.5% senior unsecured notes due January 15, 2026 (the “2026 Notes ”) at an offering price of 103.75% of~~management services and other fees payable for the ~~principal amount, which implied an effective yield to maturity of approximately 5.7%. We received net proceeds of approximately $153.6 million~~period from ~~the offering after deducting discounts and commissions and offering costs.~~July 1, 2020 through December 31, 2021.

How We Evaluate Our Operations

Adjusted Net Income

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

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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 as gross margin excluding 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 expenses, and acquisition and integration costs and other, adjusting for the effect of Commercial Services, and including MSA Fee Waivers. We define adjusted gross margin per metric ton as adjusted gross margin per metric ton of wood pellets sold. We believe adjusted gross margin and adjusted gross margin per metric ton are meaningful measures because they compare our revenue-generating activities to our operating costs for a view of profitability and performance on a total-dollar 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 our production and distribution of wood pellets.

Adjusted EBITDA

We define adjusted EBITDA as net income excluding depreciation and amortization, interest expense, income tax expense (benefit), early retirement of debt ~~obligation,~~obligations, non-cash unit compensation expense, loss on disposal of assets, changes in unrealized derivative instruments related to hedged items included in gross margin and other income and expense, and 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 expenses, and interest expense net of amortization of debt issuance costs, debt premium, original issue discounts, and the impact from incremental borrowings related to the Chesapeake Incident and Hurricane Events. We use distributable cash flow as a performance metric to compare our cash-generating performance from period to period and to compare the cash-generating

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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, 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, adjusted gross margin, adjusted gross margin per metric ton, adjusted EBITDA or distributable cash flow in isolation or as substitutes for analysis of our results as reported under GAAP.

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

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Results of Operations

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


		Three Months Ended March 31,				Change			Three Months Ended September 30,				Change
		2021		2020					2021		2020
		(in thousands)							(in thousands)
Product sales	Product sales	$	224,530	$	197,853	$	26,677	Product sales	$	229,698	$	216,187	$	13,511
Other revenue (1)	Other revenue (1)	16,514		6,624		9,890		Other revenue (1)	7,700		9,393		(1,693)
Net revenue	Net revenue	241,044		204,477		36,567		Net revenue	237,398		225,580		11,818
Cost of goods sold(1)	Cost of goods sold(1)	196,639		162,618		34,021		Cost of goods sold (1)	186,019		178,088		7,931
Loss on disposal of assets	Loss on disposal of assets	1,644		912		732		Loss on disposal of assets	3,907		1,684		2,223
Depreciation and amortization	Depreciation and amortization	20,452		13,640		6,812		Depreciation and amortization	21,463		20,237		1,226
Total cost of goods sold	Total cost of goods sold	218,735		177,170		41,565		Total cost of goods sold	211,389		200,009		11,380
Gross margin	Gross margin	22,309		27,307		(4,998)		Gross margin	26,009		25,571		438
General and administrative expenses	General and administrative expenses	2,500		1,763		737		General and administrative expenses	5,357		6,425		(1,068)
Related-party management services agreement fee	Related-party management services agreement fee	8,770		7,689		1,081		Related-party management services agreement fee	10,134		6,196		3,938
Total general and administrative expenses	Total general and administrative expenses	11,270		9,452		1,818		Total general and administrative expenses	15,491		12,621		2,870
Income from operations	Income from operations	11,039		17,855		(6,816)		Income from operations	10,518		12,950		(2,432)
Interest expense	Interest expense	(12,632)		(10,394)		(2,238)		Interest expense	(10,624)		(11,950)		1,326
Other income		111		172		(61)
Other (expense) income								Other (expense) income	(31)		136		(167)
Net (loss) income before income tax benefit	Net (loss) income before income tax benefit	(1,482)		7,633		(9,115)		Net (loss) income before income tax benefit	(137)		1,136		(1,273)
Income tax benefit	Income tax benefit	(17)		—		(17)		Income tax benefit	(66)		(275)		209
Net (loss) income	Net (loss) income	(1,465)		7,633		(9,098)		Net (loss) income	(71)		1,411		(1,482)
Less net income attributable to noncontrolling interest	Less net income attributable to noncontrolling interest	25		—		25		Less net income attributable to noncontrolling interest	27		—		27
Net (loss) income attributable to Enviva Partners, LP	Net (loss) income attributable to Enviva Partners, LP	$	(1,490)	$	7,633	$	(9,123)	Net (loss) income attributable to Enviva Partners, LP	$	(98)	$	1,411	$	(1,509)
(1) See Note 11, Related-Party Transactions
(1) See Note 13, Related-Party Transactions								(1) See Note 13, Related-Party Transactions

Net Revenue

Revenue related to product sales for wood pellets produced or procured by us increased to ~~$224.5~~$229.7 million for three months ended ~~March 31,~~September 30, 2021 from ~~$197.9~~$216.2 million for three months ended ~~March 31,~~September 30, 2020. The ~~$26.7~~$13.5 million, or ~~13%~~6%, increase was ~~primarily~~partially attributable to a ~~14%~~3% increase in product sales volumes and improved pricing based on contract ~~mix, offset~~mix. The increase in revenue and product sales volumes was temporarily dampened as a result of labor-related and other challenges associated with COVID-19 experienced by

~~Table~~ our contractors and supply chain partners that had a temporal, but more pronounce than anticipated, impact on our operations and project execution schedule during the three months ended September 30, 2021. The increase in product sales was also attributable to an increase of ~~Contents~~

~~approximately $9.1~~$5.6 million ~~less~~ in net unrealized and realized gains from the fair value of foreign currency derivative instruments for the three months ended ~~March 31,~~September 30, 2021 as compared to the three months ended ~~March 31,~~September 30, 2020.

Other revenue for the three months ended ~~March 31,~~September 30, 2021 and 2020 included ~~$16.1~~$7.2 million and $8.2 million, respectively, in payments to us for adjusting deliveries under our take-or-pay off-take contracts, which otherwise would have been included in product ~~sales. During the three months ended March 31, 2020, other revenue included $2.3 million from the Commercial Services. The $16.1 million~~sales and ~~$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

Total cost of goods sold increased to ~~$218.7~~$211.4 million for the three months ended ~~March 31,~~September 30, 2021 from ~~$177.2~~$200.0 million for the three months ended ~~March 31,~~September 30, 2020, ~~an increase~~primarily as a result of ~~$41.6 million, or 23%. The increase was primarily attributable to a 14% increase in~~higher finished product costs given increased product sales volumes and ~~an increase in depreciation and amortization expense, mainly associated with the acquisitions in July 2020,~~costs incurred during the ~~three months ended March 31, 2021 compared to the three months ended March 31, 2020.~~commissioning of expansion projects.

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Gross margin

Gross margin was ~~$22.3~~$26.0 million for the three months ended ~~March 31,~~September 30, 2021 as compared to ~~$27.3~~$25.6 million for the three months ended ~~March 31,~~September 30, 2020, ~~a decrease~~an increase of ~~$5.0~~$0.4 million, or ~~18%~~2%. 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 March 31, 2020.

Adjusted gross margin and adjusted gross margin per metric ton


		Three Months Ended March 31,							Three Months Ended September 30,
		2021		2020		Change			2021		2020		Change
		(in thousands, except per metric ton)							(in thousands, except per metric ton)
Reconciliation of gross margin to adjusted gross margin and adjusted gross margin per metric ton:	Reconciliation of gross margin to adjusted gross margin and adjusted gross margin per metric ton:							Reconciliation of gross margin to adjusted gross margin and adjusted gross margin per metric ton:
Gross margin	Gross margin	$	22,309	$	27,307	$	(4,998)	Gross margin	$	26,009	$	25,571	$	438
Loss on disposal of assets	Loss on disposal of assets	1,644		912		732		Loss on disposal of assets	3,907		1,684		2,223
Non-cash unit compensation expense	Non-cash unit compensation expense	472		471		1		Non-cash unit compensation expense	471		471		—
Depreciation and amortization	Depreciation and amortization	20,452		13,640		6,812		Depreciation and amortization	21,463		20,237		1,226
Changes in unrealized derivative instruments	Changes in unrealized derivative instruments	1,160		(6,795)		7,955		Changes in unrealized derivative instruments	(4,365)		2,616		(6,981)
MSA Fee Waivers	MSA Fee Waivers	3,059		—		3,059		MSA Fee Waivers	8,886		5,465		3,421
Acquisition and integration costs and other								Acquisition and integration costs and other	325		751		(426)

Commercial Services		—		(2,257)		2,257
Adjusted gross margin	Adjusted gross margin	$	49,096	$	33,278	$	15,818	Adjusted gross margin	$	56,696	$	56,795	$	(99)
Metric tons sold	Metric tons sold	1,149		1,004		145		Metric tons sold	1,172		1,133		39
Adjusted gross margin per metric ton	Adjusted gross margin per metric ton	$	42.73	$	33.15	$	9.58	Adjusted gross margin per metric ton	$	48.38	$	50.13	$	(1.75)

We earned an adjusted gross margin of ~~$49.1~~$56.7 million, or ~~$42.73~~$48.38 per MT, for the three months ended ~~March 31,~~September 30, 2021 compared to ~~$33.3~~$56.8 million, or ~~$33.15~~$50.13 per MT, for the three months ended ~~March 31,~~September 30, 2020. The ~~increase~~decrease in adjusted gross margin per metric ton 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~~factors impacting net ~~income for Commercial Services only during the three months ended March 31, 2020.~~revenue as described above.

General and administrative expenses

Total general and administrative expenses were ~~$11.3~~$15.5 million for the three months ended ~~March 31,~~September 30, 2021 and ~~$9.5~~$12.6 million for the three months ended ~~March 31,~~September 30, 2020. The ~~$1.8~~$2.9 million increase in 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 to our increased size and activities resulting from acquisitions and associated costs, including costs associated with the ~~acquisitions in July~~Simplification Transaction, during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Interest expense

We incurred ~~$12.6~~$10.6 million of interest expense during the three months ended ~~March 31,~~September 30, 2021 and ~~$10.4~~$12.0 million during the three months ended ~~March 31,~~September 30, 2020. The decrease in interest expense from the prior year was primarily due to an increase in capitalized interest in connection with a higher number of capital projects during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

Income tax

We recorded $0.1 million and $0.3 million of income tax benefit during the three months ended September 30, 2021 and 2020, respectively, related to an entity acquired in the Georgia Biomass Acquisition.

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Adjusted net income


	Three Months Ended September 30,
	2021		2020		Change
	(in thousands)
Reconciliation of net (loss) income to adjusted net income:
Net (loss) income	$	(71)	$	1,411	$	(1,482)
Acquisition and integration costs and other	7,294		4,908		2,386
MSA Fee Waivers	21,125		9,206		11,919
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	—		554		(554)

Adjusted net income	$	28,348	$	16,079	$	12,269

We generated adjusted net income of $28.3 million for the three months ended September 30, 2021 compared to $16.1 million for the three months ended September 30, 2020. The increase in adjusted net income for the three months ended September 30, 2021 was primarily attributable to the increase in MSA Fee Waivers due to the acquisitions, partially offset by the decrease in net income primarily attributable to the reasons described above.

Adjusted EBITDA


	Three Months Ended September 30,
	2021		2020		Change
	(in thousands)
Reconciliation of net (loss) income to adjusted EBITDA:
Net (loss) income	$	(71)	$	1,411	$	(1,482)
Add:
Depreciation and amortization	22,014		20,555		1,459
Interest expense	10,624		11,950		(1,326)
Income tax benefit	(66)		(275)		209

Non-cash unit compensation expense	2,398		2,347		51
Loss on disposal of assets	3,907		1,684		2,223
Changes in unrealized derivative instruments	(4,365)		2,616		(6,981)
MSA Fee Waivers	21,125		9,206		11,919
Acquisition and integration costs and other	7,294		4,908		2,386

Adjusted EBITDA	$	62,860	$	54,402	$	8,458

We generated adjusted EBITDA of $62.9 million for the three months ended September 30, 2021 compared to $54.4 million for the three months ended September 30, 2020. The $8.5 million increase was primarily due to the Lucedale-Pascagoula Drop-Down.

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Distributable cash flow


	Three Months Ended September 30,
	2021		2020		Change
	(in thousands)
Reconciliation of adjusted EBITDA to distributable cash flow attributable to Enviva Partners, LP limited partners:
Adjusted EBITDA	$	62,860	$	54,402	$	8,458
Less:
Interest expense, net of amortization of debt issuance costs, debt premium, original issue discount, and impact from incremental borrowings related to Chesapeake Incident and Hurricane Events	10,027		10,738		(711)
Maintenance capital expenditures	3,339		1,499		1,840
Distributable cash flow attributable to Enviva Partners, LP	49,494		42,165		7,329
Less: Distributable cash flow attributable to incentive distribution rights(1)	—		7,869		(7,869)
Distributable cash flow attributable to Enviva Partners, LP limited partners	$	49,494	$	34,296	$	15,198

(1)As of October 14, 2021, incentive distribution rights were eliminated. See Note 18, Subsequent Event.

Results of Operations

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020


	Nine Months Ended September 30,				Change
	2021		2020
	(in thousands)
Product sales	$	725,470	$	569,691	$	155,779
Other revenue (1)	38,014		28,078		9,936
Net revenue	763,484		597,769		165,715
Cost of goods sold (1)	616,813		465,113		151,700
Loss on disposal of assets	7,255		3,236		4,019
Depreciation and amortization	63,784		48,863		14,921
Total cost of goods sold	687,852		517,212		170,640
Gross margin	75,632		80,557		(4,925)
General and administrative expenses	10,444		10,284		160
Related-party management services agreement fee	28,150		20,832		7,318
Total general and administrative expenses	38,594		31,116		7,478
Income from operations	37,038		49,441		(12,403)
Interest expense	(35,903)		(32,468)		(3,435)
Other (expense) income	(85)		267		(352)
Net income before income tax benefit	1,050		17,240		(16,190)
Income tax benefit	(59)		(275)		216
Net income	1,109		17,515		(16,406)
Less net income attributable to noncontrolling interest	109		—		109
Net income attributable to Enviva Partners, LP	$	1,000	$	17,515	$	(16,515)
(1) See Note 13, Related-Party Transactions

Net Revenue

Revenue related to product sales for wood pellets produced or procured by us increased to $725.5 million for the nine months ended September 30, 2021 from $569.7 million for nine months ended September 30, 2020. The $155.8 million, or

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27%, increase was primarily attributable to a 24% increase in product sales volumes and improved pricing based on contract mix. The increase in revenue and product sales volumes was temporarily dampened as a result of labor-related and other challenges associated with COVID-19 experienced by our contractors and supply chain partners that had a temporal, but more pronounced than anticipated, impact on our operations and project execution schedule during the nine months ended September 30, 2021. The increase in product sales was partially offset by an increase of approximately $4.5 million in net unrealized and realized losses from the fair value of foreign currency derivative instruments, for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

Other revenue for the nine months ended September 30, 2021 and 2020 included $35.6 million and $17.1 million, respectively, in payments to us for adjusting deliveries under our take-or-pay off-take contracts, which otherwise would have been included in product sales. Other revenue for the nine months ended September 30, 2020 also included $4.1 million from Commercial Services. During the nine months ended September 30, 2021 and 2020 the $35.6 million and $21.2 million in other revenue was recognized under a breakage model based on when the pellets otherwise would have been loaded.

Cost of goods sold

Total cost of goods sold increased to $687.9 million for the nine months ended September 30, 2021 from $517.2 million for the nine months ended September 30, 2020, primarily as a result of higher finished product costs given increased product sales volumes, costs incurred during the commissioning of expansion projects and an increase in depreciation and amortization expense associated with the Greenwood Drop-Down and the Georgia Biomass Acquisition in July 2020.

Gross margin

Gross margin was $75.6 million for the nine months ended September 30, 2021 as compared to $80.6 million for the nine months ended September 30, 2020, a decrease of $4.9 million, or 6%.

Adjusted gross margin and adjusted gross margin per metric ton


	Nine Months Ended September 30,
	2021		2020		Change
	(in thousands, except per metric ton)
Reconciliation of gross margin to adjusted gross margin and adjusted gross margin per metric ton:
Gross margin	$	75,632	$	80,557	$	(4,925)
Loss on disposal of assets	7,255		3,236		4,019
Non-cash unit compensation expense	1,415		1,415		—
Depreciation and amortization	63,784		48,863		14,921
Changes in unrealized derivative instruments	(3,567)		(4,058)		491
MSA Fee Waivers	16,945		5,465		11,480
Acquisition and integration costs and other	397		751		(354)
Commercial Services	—		(4,139)		4,139
Adjusted gross margin	$	161,861	$	132,090	$	29,771
Metric tons sold	3,688		2,985		703
Adjusted gross margin per metric ton	$	43.89	$	44.25	$	(0.36)

We earned adjusted gross margin of $161.9 million, or $43.89 per MT, for the nine months ended September 30, 2021 compared to $132.1 million, or $44.25 per MT, for the nine months ended September 30, 2020. The increase in adjusted gross margin was primarily attributable to higher revenue as described above and higher MSA Fee Waivers due to the acquisitions, which were partially offset by higher cost of goods sold as described above.

General and administrative expenses

Total general and administrative expenses were $38.6 million for the nine months ended September 30, 2021 and $31.1 million for the nine months ended September 30, 2020. The $7.5 million increase in total general and administrative expenses is primarily due to our increased size and activities resulting from acquisitions, amounts associated with acquisition and integration costs, including costs associated with the Simplification Transaction, and non-cash unit-based compensation during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

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Interest expense

We incurred $35.9 million of interest expense during nine months ended September 30, 2021 and $32.5 million during the nine months ended September 30, 2020. The increase in interest expense from the prior year was primarily attributable to an increase in borrowings as a result of our acquisitions in July 2020 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

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Income tax

We recorded ~~an insignificant~~$0.1 million and $0.3 million of income tax benefit during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively, related to an entity acquired in the Georgia Biomass Acquisition.

Adjusted net income


		Three Months Ended March 31,							Nine Months Ended September 30,
		2021		2020		Change			2021		2020		Change
		(in thousands)							(in thousands)
Reconciliation of net (loss) income to adjusted net income:
Net (loss) income		$	(1,465)	$	7,633	$	(9,098)
Reconciliation of net income to adjusted net income:								Reconciliation of net income to adjusted net income:
Net income								Net income	$	1,109	$	17,515	$	(16,406)
Acquisition and integration costs and other	Acquisition and integration costs and other	134		—		134		Acquisition and integration costs and other	8,297		5,865		2,432
MSA Fee Waivers	MSA Fee Waivers	8,723		3,185		5,538		MSA Fee Waivers	36,150		13,963		22,187
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	—		570		(570)		Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	—		1,672		(1,672)
Commercial Services	Commercial Services	—		(2,257)		2,257		Commercial Services	—		(4,139)		4,139
Adjusted net income	Adjusted net income	$	7,392	$	9,131	$	(1,739)	Adjusted net income	$	45,556	$	34,876	$	10,680

We generated adjusted net income of ~~$7.4~~$45.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$9.1~~$34.9 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The ~~decrease~~increase in adjusted net income for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 was primarily attributable to the increase in MSA Fee Waivers due to the acquisitions, partially offset by the decrease in net income from the three months ended March 31, 2020, which was mainly driven by an increase in depreciation and amortization expense of $6.9 million, an $8.0 million decrease in gains on unrealized derivative instruments and offset by the $5.5 million increaseprimarily attributable to ~~MSA Fee Waivers compared to~~ the ~~three months ended March 31, 2020.~~reasons described above.

Adjusted EBITDA


		Three Months Ended March 31,							Nine Months Ended September 30,
		2021		2020		Change			2021		2020		Change
		(in thousands)							(in thousands)
Reconciliation of net (loss) income to adjusted EBITDA:
Net (loss) income		$	(1,465)	$	7,633	$	(9,098)
Reconciliation of net income to adjusted EBITDA:								Reconciliation of net income to adjusted EBITDA:
Net income								Net income	$	1,109	$	17,515	$	(16,406)
Add:	Add:							Add:
Depreciation and amortization	Depreciation and amortization	20,881		13,950		6,931		Depreciation and amortization	65,238		49,802		15,436
Interest expense	Interest expense	12,632		10,394		2,238		Interest expense	35,903		32,468		3,435
Income tax benefit								Income tax benefit	(59)		(275)		216

Non-cash unit compensation expense	Non-cash unit compensation expense	2,656		2,158		498		Non-cash unit compensation expense	7,756		6,603		1,153
Income tax benefit		(17)		—		(17)
Loss on disposal of assets	Loss on disposal of assets	1,644		912		732		Loss on disposal of assets	7,255		3,236		4,019
Changes in unrealized derivative instruments	Changes in unrealized derivative instruments	1,160		(6,795)		7,955		Changes in unrealized derivative instruments	(3,567)		(4,058)		491
MSA Fee Waivers	MSA Fee Waivers	8,723		3,185		5,538		MSA Fee Waivers	36,150		13,963		22,187
Acquisition and integration costs and other	Acquisition and integration costs and other	134		—		134		Acquisition and integration costs and other	8,297		5,865		2,432
Commercial Services	Commercial Services	—		(2,257)		2,257		Commercial Services	—		(4,139)		4,139
Adjusted EBITDA	Adjusted EBITDA	$	46,348	$	29,180	$	17,168	Adjusted EBITDA	$	158,082	$	120,980	$	37,102

We generated adjusted EBITDA of ~~$46.3~~$158.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$29.2~~$121.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The ~~$17.2~~$37.1 million increase was primarily attributable to the factors described above under the ~~heading~~headings “Adjusted gross margin and adjusted gross margin per metric ton” ~~as well as an increase of approximately $2.5 million in MSA Fee Waivers that impacted adjusted EBITDA for the three months ended March 31, 2021 compared~~and “General and administrative expenses” and to the ~~three months ended March 31, 2020.~~Lucedale-Pascagoula Drop-Down.

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Distributable cash flow

~~The following is a reconciliation~~


	Nine Months Ended September 30,
	2021		2020		Change
	(in thousands)
Reconciliation of adjusted EBITDA to distributable cash flow attributable to Enviva Partners, LP limited partners:
Adjusted EBITDA	$	158,082	$	120,980	$	37,102
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	34,042		29,325		4,717
Maintenance capital expenditures	11,183		4,944		6,239
Distributable cash flow attributable to Enviva Partners, LP	112,857		86,711		26,146
Less: Distributable cash flow attributable to incentive distribution rights(1)	19,030		18,798		232
Distributable cash flow attributable to Enviva Partners, LP limited partners	$	93,827	$	67,913	$	25,914

(1)Incentive distribution rights only include distributions for the first two quarters 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
2021. As of October 14, 2021, incentive distribution rights were eliminated. See Note 18, Subsequent Event.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity include cash and cash equivalent balances, cash generated from operations, borrowings under our revolving credit commitments and, from time to time, debt and equity offerings. Our primary liquidity requirements are to fund working capital, service our debt, ~~maintain cash reserves,~~ finance ~~plant acquisitions~~growth initiatives and ~~plant expansion projects, finance~~ maintenance capital expenditures and pay distributions. We believe cash on hand, cash generated from our operations and the availability of our revolving credit commitments will be sufficient to meet our primary liquidity requirements. However, future capital expenditures, such as expenditures made in relation to acquisitions of plants or terminals, plant ~~acquisitions~~development and/or plant expansion projects, and other cash requirements could be higher than we currently expect as a result of various factors. 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.

Our liquidity as of September 30, 2021, which included cash on hand and availability under our $525.0 million revolving credit facility, was $191.9 million.

Cash Distributions

~~To the extent we have sufficient cash from our operations after establishment of cash reserves and payment of fees and expenses, we~~We intend to pay cash distributions to holders of our common units ~~cash distributions~~ of ~~at least the minimum quarterly distribution of $0.4125~~$3.30 per common unit for 2021 and $3.62 per ~~quarter, which equates~~common unit for 2022.

The former owners of our former sponsor have agreed to ~~approximately $16.5 million per quarter, or approximately $66.0 million per year, based on the number of~~reinvest in our common units ~~outstanding as~~all dividends related to 9.0 million of ~~April 23, 2021.~~the 16.0 million common units issued in connection with the Simplification Transaction for the dividends paid for the period beginning with the third quarter of 2021 through the fourth quarter of 2024.

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. Our capital requirements primarily have consisted, and we anticipate will continue to consist, 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

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•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.

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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 a total of $28.0 million ~~to expand~~in the Greenwood ~~plant’s production capacity to 600,000 MTPY (the “Greenwood Expansion”),~~Expansion, of which we have paid ~~approximately $6.0~~$25.0 million through ~~March 31,~~September 30, 2021. We expect to complete the expansion, which is currently underway, by year-end 2021.

We expect to 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~~$28.0 million through ~~March 31,~~September 30, 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 baghouses at our existing plants where required for environmental compliance or as part of our environmental leadership strategy.

~~Our~~We expect to invest approximately $85.0 million in remaining construction capital expenditures in the Lucedale plant and the Pascagoula terminal during the remainder of 2021, of which we have paid $33.0 million through September 30, 2021.

We acquired the Epes plant, which is currently under development, in connection with the Simplification Transaction. We expect to make a final investment decision on the Epes plant during the next few months, with construction to commence thereafter.

We also expect to incur higher general and administrative expenses associated with the expanded business activities described above following the Simplification Transaction. During the fourth quarter of 2021, we expect to incur $15.0 million to $20.0 million for general and administrative expenses. For full-year 2022, we expect general and administrative expenses to be in the range from $37.0 million to $43.0 million. Actual amounts reported for general and administrative expenses may vary due to the level of capitalization of development activities associated with new plant construction and plant expansions. We expect general and administrative expenses related to the Simplification Transaction to decline over time as we benefit from synergies and execute streamlining initiatives, with a desire to reduce these expenses by approximately $5.0 million annually commencing in 2023.

Although we expect to transition to a self-funding growth model over time, our current financing strategy is to fund acquisitions ~~drop-downs~~ and ~~major expansion projects~~construction activities with 50% equity and 50% debt.

Cash Flows

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


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
		(in thousands)					(in thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	37,713	$	27,904	Net cash provided by operating activities	$	110,700	$	59,190
Net cash used in investing activities	Net cash used in investing activities	(37,142)		(29,460)		Net cash used in investing activities	(396,675)		(373,586)
Net cash used in financing activities		(7,187)		(2,186)
Net decrease in cash, cash equivalents and restricted cash		$	(6,616)	$	(3,742)
Net cash provided by financing activities						Net cash provided by financing activities	287,763		306,689
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	$	1,788	$	(7,707)

Cash Provided by Operating Activities

Net cash provided by operating activities was ~~$37.7~~$110.7 million and ~~$27.9~~$59.2 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively. The ~~$9.8~~$51.5 million increase in cash provided by operating activities during ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020 was primarily due to an increase of ~~$13.0~~$33.7 million in net income after considering non-cash adjustments to reconcile to net cash provided by operating activities, ~~offset by a decrease~~plus an increase of ~~$3.2~~$17.8 million due to changes in operating assets and ~~liabilities~~liabilities.

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Cash Used in Investing Activities

Net cash used in investing activities was ~~$37.1~~$396.7 million and ~~$29.5~~$373.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively. The ~~$7.7~~$23.1 million increase in cash used in investing activities during ~~three~~the nine months ended ~~March 31,~~September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020 was primarily due to increase in capital expenditures of $74.1 million primarily related to the Mid-Atlantic Expansions, the Greenwood Expansion, ~~and~~ the Multi-Plant Expansions, and construction of the Lucedale plant and the Pascagoula terminal, 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.~~2020, offset by a decrease in payments related to acquisitions (including drop-downs) of $47.3 million and by a decrease in other payments of $3.8 million.

Cash ~~Used in~~Provided by Financing Activities

Net cash ~~used in~~provided by financing activities was ~~$7.2~~$287.8 million and ~~$2.2~~$306.7 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively.

The ~~$5.0~~$18.9 million ~~increase~~decrease in net cash ~~used in~~provided by financing activities in during the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, iswas primarily attributable to an increase of $36.3 million in distributions to unitholders, distribution equivalent rights and incentive distribution rights holder, a decrease of ~~$27.1~~$36.1 million in ~~net~~ proceeds from debt ~~a $14.5~~and an increase of $12.4 million ~~increase~~ in payments ~~for cash distributions,~~on other long-term debt and ~~a $4.4 million increase in payments~~finance lease obligations and for withholding tax associated with ~~the~~Long-Term Incentive Plan vesting, ~~of phantom units under the LTIP,~~partially offset by $40.0 million in payments in relation to the Hamlet JV Drop-Down during the ~~three~~nine months ended ~~March 31, 2020.~~September 30, 2020 and by an increase of $23.7 million in net proceeds from common unit issuances.

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

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

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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 2020 Form 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, 2020.

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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, 2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13(a)~~‑15(e)~~-15(e) and 15(d)~~‑15(e)~~-15(e) under the Securities Exchange Act of 1934, as amended) was carried out under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of our General Partner. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of our General Partner concluded that the design and operation of these disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2021.

Changes in Internal Control Over Financial Reporting

~~Other than changes that have resulted or may result from acquisitions of entities under common control and business combinations,~~During the quarter ended September 30, 2021, 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.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

~~There~~Other than as set forth below, there have been no material changes with respect to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

We are exposed to construction and development risks related to our projects.

Historically, we acquired wood pellet production plants and marine export terminals that had either already commenced commercial operations or received financial support from our former sponsor to mitigate the risk associated with the construction and ramp of such assets. Following the Simplification Transaction, we will receive certain fixed payments from certain former owners of our former sponsor associated with its existing obligations related to prior drop-downs and other transactions; however, such payments may be insufficient to fully compensate us for cost overruns, production delays or other adverse developments. Furthermore, we remain exposed to the risks associated with our organic growth initiatives and will be fully exposed to the risks associated with any new development or construction activities.

We expect to experience an increase in capital expenditures and general and administrative expenses related to our development and construction activities, which may be substantial. We may face delays or unexpected developments in completing our current or future construction projects, including as a result of our failure to timely obtain the equipment, services or access to infrastructure necessary for the operation of our projects at budgeted costs, maintain all necessary rights to land access and use and obtain and maintain environmental and other permits or approvals. These circumstances could prevent our construction projects from commencing operations or meeting our original expectations concerning timing, operational performance, the capital expenditures necessary for their completion and the returns they will achieve. Moreover, design, development and construction activities associated with a project may occur over an extended period of time, but may generate little or no revenue or cash flow until the project is placed into commercial service. This mis-match in timing could reduce our available liquidity. Our inability to complete and transition our construction projects into financially successful operating projects on time and within budget or the failure of our projects to generate expected returns could have a material adverse impact our liquidity, results of operations, business and financial position, as well as our ability to pay distributions to our unitholders.

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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~~10-Q and is incorporated herein by reference.

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EXHIBIT INDEX


Exhibit Number						Exhibit
2.1						Contribution Agreement, dated June 3, 2021, by and among Enviva Development Holdings, LLC, Enviva, LP, and Enviva Holdings, LP (Exhibit 2.1, Form 8-K filed June 7, 2021, File No. 001-37363)
3.1						Certificate of Limited Partnership of Enviva Partners, LP (Exhibit 3.1, Form S‑1 Registration Statement filed October 28, 2014, File No. 333‑199625)
3.2						First Amended and Restated Agreement of Limited Partnership of Enviva Partners, LP, dated May 4, 2015, by Enviva Partners GP, LLC (Exhibit 3.1, Form 8‑K filed May 4, 2015, File No. 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)
3.4						Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Enviva Partners, LP, effective as of January 1, 2019 (Exhibit 3.4, Form 10-K filed February 27, 2020)
~~10.2~~10.1†						~~Second Amendment to~~Management Services Agreement Fee Waiver, dated July 1, 2021, by and among Enviva Partners, LP, ~~Long-Term Incentive Plan~~Enviva Partners GP, LLC and the other parties named therein (Exhibit 10.1, ~~form~~Form 8-K filed ~~January 29,~~July 1, 2021, File No. 001-37363)
10.2†						Make-Whole Agreement, dated July 1, 2021, by and between Enviva Holdings, LP and Enviva, LP. (Exhibit 10.2, Form 8-K filed July 1, 2021, File No. 001-37363)
31.1*						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
31.2*						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
32.1**						Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002
101						The following financial information from Enviva Partners, LP’s Annual Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 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 (Loss) Income, ~~(Loss),~~ (iv) the Condensed Consolidated Statements of Changes in Partners’ Capital, (v) the Condensed Consolidated Statements of Cash Flows and (vi) Notes to the Condensed Consolidated Financial Statements.
104						Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)

____________________________________________

* Filed herewith.

** Furnished herewith.

† Management Contract or Compensatory Plan or Arrangement

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Table of Contents

SIGNATURE

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



	ENVIVA PARTNERS, LP

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

Date: ~~April 28,~~November 3, 2021	By:	/s/ SHAI S. EVEN
		Shai S. Even
	Title:	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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Quarter Ended	Declaration Date	Record Date	Payment Date	Distribution Per Unit		Total Cash Distribution		Total Payment to holder of Incentive Distribution Rights
March 31, 2020	April 29, 2020	May 15, 2020	May 29, 2020	$	0.6800	$	22.9	$	3.5
June 30, 2020	August 5, 2020	August 14, 2020	August 28, 2020	$	0.7650	$	30.4	$	7.5
September 30, 2020	October 30, 2020	November 13, 2020	November 27, 2020	$	0.7750	$	30.8	$	7.9
December 31, 2020	January 29, 2021	February 15, 2021	February 26, 2021	$	0.7800	$	31.2	$	8.1
March 31, 2021	April 28, 2021	May 14, 2021	May 28, 2021	$	0.7850	$	31.4	$	8.3


	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	—