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, 2019
or
☐
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
(State or other jurisdiction
of incorporation or organization)
46-4097730
(I.R.S. Employer
Identification No.)
7200 Wisconsin Ave, Suite 1000
Bethesda, MD
(Address of principal executive offices)
20814
(Zip code)
(301) 657-5560
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ☐
 
Accelerated filer  ☒
 
 
 
Non-accelerated filer  ☐
 
Smaller reporting company  ☐
 
 
Emerging growth company  ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Units
EVA
New York Stock Exchange
As of May 3, 2019 , 33,456,811 common units were outstanding.
 

Table of Contents

ENVIVA PARTNERS, LP
QUARTERLY REPORT ON FORM 10‑Q
TABLE OF CONTENTS
 
Page
 
 
 
 
 
 

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Table of Contents

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 plants or deep-water marine terminals;
•
the prices at which we are able to sell our products;
•
failure of the Partnership’s customers, vendors and shipping partners to pay or perform their contractual obligations to the Partnership;
•
our inability to successfully execute our project development and construction activities on time and within budget;
•
the creditworthiness of our contract counterparties;
•
the amount of low-cost wood fiber that we are able to procure and process, which could be adversely affected by, among other things, disruptions in supply or operating or financial difficulties suffered by our suppliers;
•
changes in the price and availability of natural gas, coal or other sources of energy;
•
changes in prevailing economic conditions;
•
our inability to complete acquisitions, including acquisitions from our sponsor and joint ventures, or to realize the anticipated benefits of such acquisitions;
•
inclement or hazardous environmental conditions, including extreme precipitation, temperatures and flooding;
•
fires, explosions or other accidents;
•
the timing and extent of our ability to recover the costs associated with the fire at the Chesapeake terminal and Hurricanes Florence and Michael through our insurance policies and other contractual rights;
•
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 generators;
•
changes in the regulatory treatment of biomass in core and emerging markets;
•
our inability to timely acquire or maintain necessary permits or rights for our production, transportation or terminaling operations as well as expenditures associated therewith;
•
changes in the price and availability of transportation;
•
changes in foreign currency exchange rates or interest rates, and the failure of our hedging arrangements to effectively reduce our exposure to the risks related thereto;
•
risks related to our indebtedness;
•
our failure to maintain effective quality control systems at our production plants and deep-water marine terminals, which could lead to the rejection of our products by our customers;
•
changes in the quality specifications for our products that are required by our customers;

1
Table of Contents

•
labor disputes;
•
our inability to hire, train or retain qualified personnel to manage and operate our business and newly acquired assets;
•
the effects of the anticipated exit of the United Kingdom from the European Union on our and our customers’ businesses; and
•
our inability to borrow funds and access capital markets.
Please read the risks described in our Annual Report on Form 10-K for the year ended December 31, 2018. 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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Table of Contents

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.
cost pass-through mechanism : a provision in commercial contracts that passes costs through to the purchaser.
dry-bulk: describes dry-bulk commodities that are shipped in large, unpackaged amounts.
metric ton : one metric ton, which is equivalent to 1,000 kilograms and 1.1023 short tons.
net calorific value : commonly used in the power industry as the means of expressing fuel energy.
off-take contract : an agreement concerning the purchase and sale of a certain volume of a given resource such as wood pellets.
ramp: increasing production for a period of time following the startup of a plant or completion of a project.
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.

3
Table of Contents

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
ENVIVA PARTNERS, LP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except number of units)
 
March 31,
2019
 
December 31,
2018
 
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
106,745

 
$
2,460

Accounts receivable
64,904

 
54,794

Insurance receivables
1,300

 
5,140

Related-party receivables
13,558

 
1,392

Inventories
27,999

 
31,490

Prepaid expenses and other current assets
2,391

 
2,235

Total current assets
216,897

 
97,511

 
 
 
 
Property, plant and equipment, net
560,372

 
557,028

Operating lease right-of-use assets, net
26,957

 
—

Goodwill
85,615

 
85,615

Other long-term assets
5,939

 
8,616

Total assets
$
895,780

 
$
748,770

 
 
 
 
Liabilities and Partners’ Capital
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
7,667

 
$
15,551

Related-party payables and accrued liabilities
17,294

 
28,225

Deferred consideration for Wilmington Drop-Down due to related-party
74,000

 
74,000

Accrued and other current liabilities
58,656

 
41,400

Current portion of interest payable
13,020

 
5,434

Current portion of long-term debt and finance lease obligations
2,762

 
2,722

Total current liabilities
173,399

 
167,332

Long-term debt and finance lease obligations
475,975

 
429,933

Long-term operating lease liabilities
27,730

 
—

Long-term interest payable
1,040

 
1,010

Other long-term liabilities
2,165

 
3,779

Total liabilities
680,309

 
602,054

Commitments and contingencies

 

 
 
 
 
Partners’ capital:
 
 
 
Limited partners:
 
 
 
Common unitholders—public (18,176,319 and 14,573,452 units issued and outstanding at March 31, 2019 and December 31, 2018, respectively)
290,845

 
207,612

Common unitholder—sponsor (11,905,138 units issued and outstanding at March 31, 2019 and December 31, 2018)
60,011

 
72,352

General partner (no outstanding units)
(135,680
)
 
(133,687
)
Accumulated other comprehensive income
295

 
439

Total partners’ capital
215,471

 
146,716

Total liabilities and partners’ capital
$
895,780

 
$
748,770

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per unit amounts)
(Unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
Product sales
$
156,599

 
$
122,322

Other revenue (1)
1,770

 
3,002

Net revenue
158,369

 
125,324

Cost of goods sold (1)
137,392

 
121,038

Depreciation and amortization
11,070

 
9,304

Total cost of goods sold
148,462

 
130,342

Gross margin
9,907

 
(5,018
)
General and administrative expenses (1)
9,837

 
6,804

Income (loss) from operations
70

 
(11,822
)
Other income (expense):
 
 
 
Interest expense
(9,633
)
 
(8,645
)
Other income, net
640

 
1,132

Total other expense, net
(8,993
)
 
(7,513
)
Net loss
$
(8,923
)
 
$
(19,335
)
Net loss per limited partner common unit:
 
 
 
Basic
$
(0.42
)
 
$
(0.78
)
Diluted
$
(0.42
)
 
$
(0.78
)
Net loss per limited partner subordinated unit:
 
 
 
Basic
$
—

 
$
(0.78
)
Diluted
$
—

 
$
(0.78
)
Weighted-average number of limited partner units outstanding:
 
 
 
Common—basic
26,759

 
14,438

Common—diluted
26,759

 
14,438

Subordinated—basic and diluted
—

 
11,905

 
 
 
 
(1)  See Note 12, Related-Party Transactions
 
 
 
See accompanying notes to condensed consolidated financial statements.

5

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
Net loss
$
(8,923
)
 
$
(19,335
)
Other comprehensive loss:
 
 
 
Net unrealized losses on cash flow hedges
(55
)
 
(1,328
)
Reclassification of net (gains) losses realized into net loss
(107
)
 
1

Total other comprehensive loss
(162
)
 
(1,327
)
Total comprehensive loss
$
(9,085
)
 
$
(20,662
)
See accompanying notes to condensed consolidated financial statements.

6

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Partners’ Capital
(In thousands)
(Unaudited)
 
General
Partner
Interest
 
Limited Partners’ Capital
Accumulated
Other
Comprehensive
Income
 
Total
Partners'
Capital
Common
Units—
Public
 
Common
Units—
Sponsor
 
Units
 
Amount
 
Units
 
Amount
 
Partners' capital, December 31, 2018
$
(133,687
)
 
14,573

 
$
207,612

 
11,905

 
$
72,352

 
$
439

 
$
146,716

Distributions to unitholders, distribution equivalent and incentive distribution rights
(1,671
)
 
—

 
(10,269
)
 
—

 
(7,619
)
 
—

 
(19,559
)
Issuance of units through Long-Term Incentive Plan
(2,129
)
 
94

 
659

 
—

 
—

 
—

 
(1,470
)
Issuance of common units, net
—

 
3,509

 
96,661

 
—

 
—

 
—

 
96,661

Non-cash Management Services Agreement expenses
136

 
—

 
2,072

 
—

 
—

 
—

 
2,208

Cumulative effect of accounting change - derivative instruments
—

 
—

 
(10
)
 
—

 
(8
)
 
18

 
—

Other comprehensive loss
—

 
—

 
—

 
—

 
—

 
(162
)
 
(162
)
Net income (loss)
1,671

 
—

 
(5,880
)
 
—

 
(4,714
)
 
—

 
(8,923
)
Partners' capital, March 31, 2019
$
(135,680
)
 
18,176

 
$
290,845

 
11,905

 
$
60,011

 
$
295

 
$
215,471

See accompanying notes to condensed consolidated financial statements.

7

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Partners’ Capital (Continued)
(In thousands)
(Unaudited)
 
General
Partner
Interest
 
Limited Partners’ Capital
 
Accumulated
Other
Comprehensive
Loss
 
Total
Partners'
Capital
Common
Units—
Public
 
Common
Units—
Sponsor
 
Subordinated
Units—
Sponsor
Units
 
Amount
 
Units
 
Amount
 
Units
 
Amount
Partners' capital, December 31, 2017
$
(128,569
)
 
13,073

 
$
224,027

 
1,347

 
$
16,050

 
11,905

 
$
101,901

 
$
(3,040
)
 
$
210,369

Distributions to unitholders, distribution equivalent and incentive distribution rights
(1,130
)
 
—

 
(8,833
)
 
—

 
(784
)
 
—

 
(7,381
)
 
—

 
(18,128
)
Issuance of units through Long-Term Incentive Plan
(2,129
)
 
99

 
(164
)
 
(82
)
 
(1,301
)
 
—

 
—

 
—

 
(3,594
)
Issuance of common units, net
—

 
8

 
241

 
—

 
—

 
—

 
—

 
—

 
241

Non-cash Management Services Agreement expenses
102

 
—

 
931

 
—

 
—

 
—

 
—

 
—

 
1,033

Other comprehensive loss
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1,327
)
 
(1,327
)
Net income (loss)
1,130

 
—

 
(10,233
)
 
—

 
(983
)
 
—

 
(9,249
)
 
—

 
(19,335
)
Partners' capital, March 31, 2018
$
(130,596
)
 
13,180

 
$
205,969

 
1,265

 
$
12,982

 
11,905

 
$
85,271

 
$
(4,367
)
 
$
169,259

See accompanying notes to condensed consolidated financial statements.

8

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net loss
$
(8,923
)
 
$
(19,335
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 
 
 
Depreciation and amortization
11,208

 
9,408

Amortization of debt issuance costs, debt premium and original issue discounts
295

 
272

Impairment of inventory
—

 
10,383

Loss on disposal of assets
—

 
1,130

Unit-based compensation
2,472

 
1,343

Fair value changes in derivatives
2,216

 
525

Unrealized gains (losses) on foreign currency transactions, net
92

 
(69
)
Change in operating assets and liabilities:
 
 
 
Accounts and insurance receivables
(6,359
)
 
31,232

Related-party receivables
(8,022
)
 
1,800

Prepaid expenses and other current and long-term assets
(72
)
 
(50
)
Inventories
3,366

 
(16,509
)
Derivatives
298

 
(601
)
Accounts payable, accrued liabilities and other current liabilities
(1,229
)
 
8,677

Related-party payables and accrued liabilities
(12,330
)
 
(6,501
)
Accrued interest
7,514

 
7,574

Operating lease liabilities
(893
)
 
—

Other long-term liabilities
98

 
37

Net cash (used in) provided by operating activities
(10,269
)
 
29,316

Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
(11,279
)
 
(1,999
)
Net cash used in investing activities
(11,279
)
 
(1,999
)
Cash flows from financing activities:
 
 
 
Proceeds from (repayments on) long-term debt and finance lease obligations, net
45,447

 
(1,172
)
Proceeds from common unit issuances (net in 2018)
100,000

 
241

Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder
(19,614
)
 
(17,847
)
Payment to General Partner to purchase affiliate common units for Long-Term Incentive Plan vesting
—

 
(2,341
)
Payment for withholding tax associated with Long-Term Incentive Plan vesting
—

 
(1,665
)
Net cash provided by (used in) financing activities
125,833

 
(22,784
)
Net increase in cash, cash equivalents and restricted cash
104,285

 
4,533

Cash, cash equivalents and restricted cash, beginning of period
2,460

 
524

Cash, cash equivalents and restricted cash, end of period
$
106,745

 
$
5,057


See accompanying notes to condensed consolidated financial statements.

9

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(Unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
Non-cash investing and financing activities:
 
 
 
The Partnership acquired property, plant and equipment in non-cash transactions as follows:
 
 
 
Property, plant and equipment acquired included in accounts payable and accrued liabilities
$
11,237

 
$
1,587

Property, plant and equipment acquired under finance lease obligations
626

 
674

Property, plant and equipment transferred from inventories
—

 
2

Property, plant and equipment capitalized interest
102

 
—

Distributions included in liabilities
873

 
1,352

Withholding tax payable associated with Long-Term Incentive Plan vesting
1,870

 
—

Common unit issuance costs in accrued liabilities
3,339

 
—

Depreciation capitalized to inventories
442

 
1,037

Supplemental cash flow information:
 
 
 
Interest paid
$
1,929

 
$
795

See accompanying notes to condensed consolidated financial statements.


10

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )


(1) Description of Business and Basis of Presentation
Description of Business
Enviva Partners, LP, together with its subsidiaries (“we,” “us,” “our” or the “Partnership”), supplies utility-grade wood pellets primarily to major power generators under long-term, take-or-pay off-take contracts. We procure wood fiber and process it into utility-grade wood pellets and load the finished wood pellets into railcars, trucks and barges for transportation to deep-water marine terminals, where they are received, stored and ultimately loaded onto oceangoing vessels for delivery to our principally European, and increasingly Japanese, customers under long-term, take-or-pay contracts.
As of March 31, 2019, we owned and operated six industrial-scale wood pellet production plants located in the Mid-Atlantic and Gulf Coast regions of the United States. In addition to the volumes from our plants, we also procure wood pellets from third parties and Enviva Pellets Greenwood, LLC (“Greenwood”), a wholly owned subsidiary of Enviva JV Development Company, LLC (the “Second JV”), a joint venture between Enviva Holdings, LP (together with its wholly owned subsidiaries Enviva MLP Holdco, LLC and Enviva Development Holdings, LLC, where applicable, the “sponsor”) and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates. Greenwood owns a wood pellet production plant in Greenwood, South Carolina (the “Greenwood plant”). Wood pellets are exported from our wholly owned dry-bulk, deep-water marine terminal in Chesapeake, Virginia (the “Chesapeake terminal”) and terminal assets in Wilmington, North Carolina (the “Wilmington terminal”), and from third-party deep-water marine terminals in Mobile, Alabama and Panama City, Florida, under a short-term and a long-term contract, respectively.
Basis of Presentation
The unaudited financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.
In the opinion of management, all adjustments and accruals necessary for a fair presentation have been included. All such adjustments and accruals are of a normal and recurring nature unless disclosed otherwise. All significant intercompany balances and transactions have been eliminated in consolidation. The results reported in the financial statements are not necessarily indicative of the results that may be reported for the entire year.
Certain amounts related to the change in the fair value of derivatives have been reclassified to product sales from other income for 2018 to conform to current period presentation. Certain amounts on our condensed consolidated statements of cash flows related to insurance recoveries have been reclassified to accounts and insurance receivables for 2018 to conform to current period presentation.
The unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2018 .
(2) Significant Accounting Policies
During interim periods, we follow the accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 except for our adoption on and as of January 1, 2019 of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) and ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in our unaudited financial statements and accompanying notes. Actual results could differ materially from those estimates.

11

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

Accounting Standards Adopted
Leases
ASU 2016-02 established a right-of-use (“ROU”) model that requires lessees to recognize a ROU asset and corresponding lease liability on the balance sheet for all leases with a term of longer than 12 months and classify leases as operating or finance. Operating lease expense is recorded in a single financial statement line item on a straight-line basis over the lease term. Amortization of the ROU asset is the calculated difference between straight-line lease expense and the accretion of interest on the lease liability each period.
We adopted ASU 2016-02 on and as of January 1, 2019 using the modified retrospective transition method, which we applied to all leases existing at the date of initial application of the ASU. We elected to use the effective date as the date of initial application, as opposed to the beginning of the earliest comparative period presented in the financial statements; consequently, financial information and disclosures are not presented under the new standard for periods prior to January 1, 2019. We elected the package of three practical expedients under the transition guidance within the new standard, which permitted us to reassess our prior conclusions under the previous guidance concerning lease identification, lease classification and initial direct leasing costs. We elected the practical expedient to not evaluate existing or expired land easements that were not accounted for as leases under previous guidance. We did not, however, elect the separate practical expedient pertaining to the use of hindsight in determining the lease term for existing leases. We have a significant contract containing both lease and nonlease components, which are accounted for separately. As this contract has fixed payments, the allocation of lease and nonlease components is based on relative standalone price.
The adoption of the new standard as of January 1, 2019 resulted in the recognition of operating lease ROU assets of $27.4 million , net of $2.1 million of deferred rent liabilities existing as of December 31, 2018, and operating lease liabilities of $29.5 million for operating leases related to real estate, machinery and equipment and other operating leases with terms of longer than 12 months. The amounts recognized as of January 1, 2019 were based on the present value of the remaining minimum rental payments under previous leasing standards for existing operating leases. The classification of a lease affects the pattern and classification of expense recognition in the income statement, which is unchanged from under the previous accounting method. The adoption of the new standard did not change our accounting for finance leases (which were described as “capital leases” under the previous standard) or impact our results of operations and cash flows. See Note 8, Leases .
Derivative Instruments
We adopted ASU 2017-12 on and as of January 1, 2019 using the modified retrospective method, which requires the recognition of the cumulative effect of the change on the opening balance of each affected component of equity in the statement of changes in partner’s capital as of the date of adoption of the new standard. Upon adoption of ASU 2017-12, we no longer measure and recognize ineffectiveness related to designated and qualifying cash flow hedges in earnings; as a result, any ineffectiveness is included in accumulated other comprehensive income. On January 1, 2019, we recorded a nominal cumulative effect adjustment to accumulated other comprehensive income and common units in partners’ capital. See Note 9, Derivatives .
Recently Issued Accounting Standards not yet Adopted
Currently, there are no recently issued accounting standards not yet adopted by us that we expect to be reasonably likely to materially impact the financial position, results of operations or cash flows of the Partnership.
(3) Revenue
Performance Obligations
As of March 31, 2019 , the aggregate amount of revenues from contracts with customers allocated to performance obligations that were unsatisfied or partially satisfied was approximately $7.9 billion . This amount excludes forward prices related to variable consideration including inflation and foreign currency and commodity prices. Also, this amount excludes the effects of related foreign currency derivative contracts as they do not represent contracts with customers. As of April 1, 2019 we expect to recognize approximately 7.0% of our remaining performance obligations as revenue during the remainder of 2019, an additional 11.0% in 2020 and the balance thereafter. Our off-take contracts expire at various times through 2040 and our terminal services contracts extend into 2026.

12

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

Variable Consideration
Variable consideration from off-take contracts arises from several pricing features outlined in our off-take contracts, pursuant to which such contract pricing may be adjusted in respect of particular shipments to reflect differences between certain contractual quality specifications of the wood pellets as measured both when the wood pellets are loaded onto ships and unloaded at the discharge port as well as certain other contractual adjustments.
Variable consideration from terminal services contracts, which was not material for the three months ended March 31, 2019 , arises from price increases based on agreed inflation indices and from above-minimum throughput quantities or services.
We allocate variable consideration under our off-take and terminal services contracts entirely to each performance obligation to which variable consideration relates. The estimate of variable consideration represents the amount that is not more likely than not to be reversed. For the three months ended March 31, 2019 , 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, 2019 and December 31, 2018 were $58.9 million and $51.3 million , respectively. We had $0.2 million and $0.3 million of deferred revenue as of March 31, 2019 and December 31, 2018 , respectively, for future performance obligations associated with off-take contracts.
(4) Significant Risks and Uncertainties Including Business and Credit Concentrations
Our business is significantly impacted by greenhouse gas emission and renewable energy legislation and regulations in the European Union as well as its member states and Japan. If the European Union, 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 sales are primarily to industrial customers located in the United Kingdom, Denmark and Belgium. Product sales to third-party customers that accounted for 10% or a greater share of consolidated product sales are as follows:
 
Three Months Ended
March 31,
 
2019
 
2018
Customer A
40
%
 
38
%
Customer B
11
%
 
7
%
Customer C
16
%
 
6
%
Customer D
25
%
 
34
%
(5) Inventory Impairment and Asset Disposal
On February 27, 2018, a fire occurred at the Chesapeake terminal, causing damage to equipment and approximately 43,000 MT of wood pellets (the “Chesapeake Incident”). The Chesapeake terminal returned to operations on June 28, 2018. During the three months ended March 31, 2018, we incurred $28.4 million in costs as a result of the Chesapeake Incident related to asset impairment, inventory write-off and disposal costs, emergency response costs, asset repair costs and business continuity costs, the latter of which represented incremental costs to commission temporary wood pellet storage and handling and ship loading operations at nearby locations to meet our contractual obligations to our customers. As of March 31, 2018, we had recovered $8.9 million related to the Chesapeake Incident, which included $1.1 million of lost profits. As of December 31, 2018, $3.8 million of probable insurance recoveries for the then-remaining costs not yet recovered were included in insurance receivables; we received the $3.8 million in probable insurance recoveries (plus $0.5 million recognized as other income) in February 2019.

13

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

(6) Inventories
Inventories consisted of the following at:
 
March 31,
2019
 
December 31,
2018
Raw materials and work-in-process
$
5,594

 
$
4,936

Consumable tooling
17,750

 
17,561

Finished goods
4,655

 
8,993

Total inventories
$
27,999

 
$
31,490

(7) Property, Plant and Equipment
Property, plant and equipment consisted of the following at:
 
March 31,
2019
 
December 31,
2018
Land
$
13,492

 
$
13,492

Land improvements
44,990

 
44,990

Buildings
196,574

 
196,574

Machinery and equipment
436,630

 
434,776

Vehicles
635

 
635

Furniture and office equipment
6,148

 
6,148

Leasehold improvements
987

 
987

Property, plant and equipment - in service
699,456

 
697,602

Less accumulated depreciation
(165,929
)
 
(154,967
)
Property, plant and equipment - in service, net
533,527

 
542,635

Construction in progress
26,845

 
14,393

Total property, plant and equipment, net
$
560,372

 
$
557,028

Total depreciation expense was $11.2 million and $9.3 million for the three months ended March 31, 2019 and 2018 , respectively. Total interest capitalized related to construction in progress was $0.1 million for the three months ended March 31, 2019. We did no t capitalize interest related to construction in progress during the three months ended March 31, 2018.
(8) Leases
We have operating and finance leases related to real estate, machinery, equipment and other assets where we are the lessee. Leases with an initial term of 12 months or less are not recorded on the balance sheet but are recognized as lease expense on a straight-line basis over the applicable lease terms. Amortization of the ROU asset is calculated as the difference between straight-line lease expense and the accretion of interest on the lease liability each period. In addition to fixed lease payments, we have contracts that incur variable lease expense related to usage (e.g. throughput fees, maintenance and repair and machine hours), which are expensed as incurred. Our leases have remaining terms of one to 28 years , some of which include options to extend the leases for up to 5 years . Our leases are generally noncancellable. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
A discount rate is applied to our leases for balance sheet measurement. As rates are not explicitly defined in the operating and finance lease agreements, we use our incremental borrowing rate for purposes of measuring the ROU assets and lease liabilities for recognized leases. This is a secured interest rate which takes into account our credit rating, the term of our leases, as well as the economic environment in which we operate. Each lease uses a secured interest rate with a term commensurate to the identified lease term.

14

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

Operating leases are included in operating lease right-of-use assets, accrued and other current liabilities and long-term operating lease liabilities on our condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, current portion of long-term debt and finance lease obligations and long-term debt and finance lease obligations on our condensed consolidated balance sheets. Changes in right-of-use assets and operating lease liabilities are included net in change in operating lease liabilities on the condensed consolidated statement of cash flows.
Operating lease ROU assets and liabilities and finance leases were as follows at:
 
 
March 31,
2019
Operating leases:
 
 
Operating lease ROU assets, gross
 
$
29,490

Accumulated amortization
 
(2,533
)
Operating lease ROU assets, net
 
$
26,957

 
 
 
Long-term operating lease liabilities
 
$
27,730

Current portion of operating lease liabilities
 
1,393

Total operating lease liabilities
 
$
29,123

 
 
 
Finance leases:
 
 
Property, plant and equipment, gross
 
$
8,461

Accumulated depreciation
 
(3,734
)
Property plant and equipment, net
 
$
4,727

 
 
 
Current portion of long-term finance lease obligations
 
$
2,754

Long-term finance lease obligations
 
1,963

Total finance lease liabilities
 
$
4,717

Operating and finance lease costs were as follows:
Lease Cost
 
Classification
 
Three Months Ended
March 31, 2019
Operating lease cost:
 
 
 
 
Fixed lease cost
 
Cost of goods sold
 
$
1,034

Variable lease cost
 
Cost of goods sold
 
6

Short-term lease costs
 
Cost of goods sold
 
—

 
 
 
 
 
Finance lease cost:
 
 
 
 
Amortization of leased assets
 
Depreciation and amortization
 
719

Variable lease cost
 
Cost of goods sold
 
4

Interest on lease liabilities
 
Interest expense
 
52

 
 
Total lease cost
 
$
1,815


15

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

Operating and finance lease cash flow information was as follows:
 
 
Three Months
Ended
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash flows from operating leases
 
$
893

Operating cash flows from financing leases
 
52

Financing cash flows from financing leases
 
551

 
 
 
Assets obtained in exchange for lease obligations:
 
 
Operating leases
 
$
—

Financing leases
 
626

The future minimum lease payments and the aggregate maturities of operating and finance lease liabilities are as follows as of March 31, 2019:
Years Ending December 31,
 
Operating Leases
 
Finance Leases
 
Total
Remainder of 2019
 
$
2,689

 
$
2,374

 
$
5,063

2020
 
3,224

 
1,861

 
5,085

2021
 
2,939

 
605

 
3,544

2022
 
2,729

 
46

 
2,775

2023
 
2,678

 
43

 
2,721

Thereafter
 
59,320

 
4

 
59,324

Total lease payments
 
73,579

 
4,933

 
78,512

Less: imputed interest
 
(44,456
)
 
(216
)
 
(44,672
)
Total present value of lease liabilities
 
$
29,123

 
$
4,717

 
$
33,840

The future minimum lease payments as of December 31, 2018 for operating and finance lease liabilities were $73.8 million and $4.8 million , respectively.
The weighted-average remaining lease terms and discount rates for our operating and finance leases were weighted using the undiscounted future minimum lease payments and are as follows at:
 
 
March 31, 2019
Weighted average remaining lease term (years):
 
 
Operating leases
 
27

Finance leases
 
2

 
 
 
Weighted average discount rate:
 
 
Operating leases
 
8
%
Finance leases
 
5
%
(9) Derivative Instruments
We use derivative instruments to partially offset our business exposure to foreign currency exchange and interest rate risk. We may enter into foreign currency forward and option contracts to offset some of the foreign currency exchange risk on our expected future cash flows and interest rate swaps to offset some of the interest rate risk on our expected future cash flows from certain borrowings. Our derivative instruments expose us to credit risk to the extent that our hedge counterparties may be unable to meet

16

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

the terms of the applicable derivative instrument. We seek to mitigate such risks by limiting our counterparties to major financial institutions. In addition, we monitor the potential risk of loss with any one counterparty resulting from credit risk. Management does not expect material losses as a result of defaults by counterparties. We use derivative instruments to manage cash flow and not for speculative or trading purposes.
Cash Flow Hedges
For qualifying cash flow hedges, the effective and ineffective portion of the gain or loss on the change in fair value is initially reported as a component of accumulated other comprehensive income in partners’ capital and subsequently reclassified into earnings when the hedged exposure affects earnings. Prior to January 1, 2019 and the adoption of ASU 2017-12 (see Note 2, Significant Accounting Policies ), the ineffective portion of the gain or loss, if any, was reported in earnings in the current period. We considered our cash flow hedges to be highly effective at inception. Changes in fair value for derivative instruments not designated as hedging instruments are recognized in earnings.
Foreign Currency Exchange Risk
We are primarily exposed to fluctuations in foreign currency exchange rates related to off-take contracts that require future deliveries of wood pellets to be settled in British Pound Sterling (“GBP”) and Euro (“EUR”). We have entered and may continue to enter into foreign currency forward contracts, purchased option contracts or other instruments to partially manage this risk and, prior to August 2018, had designated certain of these instruments as cash flow hedges.
Interest Rate Risk
We are exposed to fluctuations in interest rates on borrowings under our senior secured revolving credit facility. We have entered into a pay-fixed, receive-variable interest rate swap that expires in April 2020 to hedge the interest rate risk associated with our variable rate borrowings under our senior secured revolving credit facility. The interest rate swap is designated and qualifies as a cash flow hedge.
The fair value of derivative instruments as of March 31, 2019 and December 31, 2018 were as follows:
 
 
 
 
Asset (Liability)
 
 
Balance Sheet Classification
 
March 31, 2019
 
December 31, 2018
Designated as hedging instruments:
 
 
 
 
 
 
Interest rate swap
 
 
 
 
 
 
 
 
Other current assets
 
$
328

 
$
508

 
 
Other long-term assets
 
99

 
118

Total derivatives designated as hedging instruments
 
 
 
$
427

 
$
626

 
 
 
 
 
 
 
Not designated as hedging instruments:
 
 
 
 
 
 
Foreign currency exchange forward contracts:
 
 
 
 
 
 
 
 
Prepaid and other current assets
 
$
1,012

 
$
794

 
 
Other long-term assets
 
800

 
1,810

 
 
Accrued and other current liabilities
 
(388
)
 
(68
)
 
 
Other long-term liabilities
 
(415
)
 
(179
)
 
 
 
 
 
 
 
Foreign currency purchased option contracts:
 
 
 
 
 
 
 
 
Prepaid and other current assets
 
49

 
22

 
 
Other long-term assets
 
2,189

 
3,348

Total derivatives not designated as hedging instruments
 
 
 
$
3,247

 
$
5,727


17

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

Net losses related to the change in fair market value of derivative instruments not designated as hedging instruments were $2.0 million and $0.8 million during the three months ended March 31, 2019 and 2018, respectively, and are included in product sales. Realized gains related to derivatives settled during the period were $0.1 million and $0.3 million during the three months ended March 31, 2019 and 2018, respectively, and are included in product sales.
As a result of our adoption of ASU 2017-12 on January 1, 2019 (see Note 2, Significant Accounting Policies ), an insignificant amount of a cumulative effect of the accounting change was recognized to accumulated other comprehensive income to reflect that change of recognizing ineffectiveness related to designated and qualifying cash flow hedges in other comprehensive loss rather than net loss.
The effects of instruments that were designated as cash flow hedges and the related changes in accumulated other comprehensive loss and the gains and losses recognized in earnings for the three months ended March 31, 2019 were as follows:
 
Amount of Loss in Other
Comprehensive
Loss on
Derivative
 
Location of
Gain
Reclassified from
Accumulated Other
Comprehensive
Loss
 
Amount of
Gain 
Reclassified from
Accumulated Other
Comprehensive
Loss
into Earnings
Interest rate swap
(55
)
 
Interest expense
 
107

The effects of instruments that were designated as cash flow hedges and the related changes in accumulated other comprehensive loss and the gains and losses recognized in earnings for the three months ended March 31, 2018 were as follows:
 
Amount of (Loss) Gain
in Other
Comprehensive
Income on
Derivative
(Effective Portion)
 
Location of
Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive
Income
(Effective Portion)
 
Amount of
Loss
Reclassified from
Accumulated Other
Comprehensive
Income
into Income
(Effective Portion)
 
Location of (Loss) Gain
Recognized in
Income on Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness Testing)
 
Amount of Gain
(Loss) Recognized in
Earnings on Derivative
(Ineffective Portion
and Amount
Excluded from
Effectiveness Testing)
Foreign currency exchange forward contracts
$
(1,325
)
 
Product sales
 
$
—

 
Product sales
 
$
(1
)
Foreign currency exchange purchased option contracts
(323
)
 
Product sales
 
—

 
Product sales
 
—

Interest rate swap
320

 
Interest expense
 
(1
)
 
Interest expense
 
1

We enter into master netting arrangements, which are designed to permit net settlement of derivative transactions among the respective counterparties. If we had settled all transactions with our respective counterparties at March 31, 2019 , we would have received a net settlement termination payment of $3.7 million , which differs insignificantly from the recorded fair value of the derivatives. We present our derivative assets and liabilities at their gross fair values.
The notional amounts of outstanding derivative instruments associated with outstanding or unsettled derivative instruments were as follows:
 
March 31,
2019
 
December 31,
2018
Foreign exchange forward contracts in GBP
£
39,435

 
£
42,170

Foreign exchange purchased option contracts in GBP
£
39,365

 
£
39,365

Foreign exchange forward contracts in EUR
€
7,000

 
€
14,300

Foreign exchange purchased option contracts in EUR
€
1,675

 
€
1,675

Interest rate swap
$
38,460

 
$
39,829


18

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

(10) Fair Value Measurements
The amounts reported in the unaudited condensed consolidated balance sheets as cash and cash equivalents, accounts receivable, insurance receivables, related-party receivables, prepaid expenses and other current assets, accounts payable, related-party payables and accrued liabilities, and accrued and other current liabilities approximate fair value because of the short-term nature of these instruments.
Derivative instruments and long-term debt and finance lease obligations, including the current portion, are classified as Level 2 instruments. The fair value of our senior notes (see Note 11, Long-Term Debt and Finance Lease Obligations – Senior Notes Due 2021 ) was determined based on observable market prices in a less active market and was categorized as Level 2 in the fair value hierarchy. The fair value of other long-term debt and finance lease obligations classified as Level 2 was determined based on the usage of market prices not quoted on active markets and other observable market data. The fair value of long-term debt and finance lease obligations are based upon rates currently available for debt and finance lease obligations with similar terms and remaining maturities. The carrying amount of derivative instruments approximates fair value.
The carrying amount and estimated fair value of long-term debt and finance lease obligations as of March 31, 2019 and December 31, 2018 were as follows:
 
March 31, 2019
 
December 31, 2018
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Senior notes
$
353,008

 
$
368,095

 
$
352,843

 
$
359,943

Other long-term debt and finance lease obligations
125,729

 
125,730

 
79,812

 
79,812

Total long-term debt and finance lease obligations
$
478,737

 
$
493,825

 
$
432,655

 
$
439,755

(11) Long-Term Debt and Finance Lease Obligations
Long-term debt and finance lease obligations at carrying value are composed of the following:
 
March 31,
2019
 
December 31,
2018
Senior notes, net of unamortized discount, premium and debt issuance of $2.0 million as of March 31, 2019 and $2.2 million as of December 31, 2018
$
353,008

 
$
352,843

Senior secured revolving credit facility
119,000

 
73,000

Other loans
2,012

 
2,015

Finance leases
4,717

 
4,797

Total long-term debt and finance lease obligations
478,737

 
432,655

Less current portion of long-term debt and finance lease obligations
(2,762
)
 
(2,722
)
Long-term debt and finance lease obligations, excluding current installments
$
475,975

 
$
429,933

Senior Notes Due 2021
As of March 31, 2019 and December 31, 2018 , we were in compliance with all covenants and restrictions associated with, and no events of default existed under, our 8.5% senior unsecured notes due 2021. Our obligations under the senior notes are guaranteed by certain of our subsidiaries.
Senior Secured Revolving Credit Facility
As of March 31, 2019 and December 31, 2018 , we were in compliance with all covenants and restrictions associated with, and no events of default existed under, our senior secured revolving credit facility. Our obligations under the senior secured revolving credit facility are guaranteed by certain of our subsidiaries and secured by liens on substantially all of our assets.

19

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

(12) Related-Party Transactions
Related-party transaction amounts included on the unaudited condensed consolidated statements of operations were as follows:
 
Three Months Ended March 31,
 
2019
 
2018
Other revenue
$
592

 
$
1,232

Cost of goods sold
19,998

 
15,139

General and administrative expenses
4,213

 
3,964

Management Services Agreement
Pursuant to a management services agreement (the “MSA”) with Enviva Management Company, LLC (“Enviva Management”), a wholly owned subsidiary of the sponsor, Enviva Management provides us with operations, general administrative, management and other services (the “Services”). We are required to reimburse Enviva Management for the amount of all direct or indirect internal or third-party expenses incurred by Enviva Management in connection with the provision of the Services. The MSA fee charged by Enviva Holdings, LP to us includes rent related amounts for non-cancelable operating leases for office space in Maryland and North Carolina held by Enviva Holdings, LP.
During the three months ended March 31, 2019 , $13.6 million related to the MSA was included in cost of goods sold and $4.2 million was included in general and administrative expenses. As of March 31, 2019 , $0.9 million incurred under the MSA was included in finished goods inventory.
During the three months ended March 31, 2018 , $8.7 million related to the MSA was included in cost of goods sold and $4.0 million was included in general and administrative expenses.
As of March 31, 2019 and December 31, 2018 , we had $9.0 million and $19.0 million , respectively, included in related-party payables primarily related to the MSA.
Common Control Transactions
In October 2017, we acquired from Enviva Wilmington Holdings, LLC (the “First JV”), a joint venture between our sponsor and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates, all of the issued and outstanding limited liability company interests in Enviva Port of Wilmington, LLC (“Wilmington”), which owns the Wilmington terminal assets (the “Wilmington Drop-Down”), for total consideration of $130.0 million , subject to certain conditions. The Wilmington Drop-Down included the Wilmington terminal assets and a long-term terminal services agreement with our sponsor (the “Holdings TSA”) to handle throughput volumes sourced from Greenwood. The purchase price included $74.0 million of deferred consideration, which is reflected on the condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018 . We paid in full the $74.0 million in deferred consideration for the Wilmington Drop-Down to the First JV on April 1, 2019. See Note 17, Subsequent Events .
In March 2019, Wilmington entered into a long-term terminal services agreement (the “Wilmington Hamlet TSA”) with the First JV and Enviva Pellets Hamlet, LLC (“Hamlet”) to receive, store and load wood pellets from the First JV’s production plant under construction in Hamlet, North Carolina (the “Hamlet plant”) following notice of the anticipated first delivery of wood pellets to the Wilmington terminal from the Hamlet plant. The Wilmington Hamlet TSA provides for deficiency payments to Wilmington if minimum throughput requirements are not met.
Related-Party Indemnification
We acquired Enviva Pellets Sampson, LLC (“Sampson”) from the First JV in December 2016 (the “Sampson Drop-Down”). Sampson owns a wood pellet production plant in Sampson County, North Carolina (the “Sampson plant”). In connection with the Sampson Drop-Down and the Wilmington Drop-Down, the First JV agreed to indemnify us, our affiliates and our respective officers, directors, managers, counsel, agents and representatives from all costs and losses arising from certain vendor liabilities and claims related to the construction of the Sampson plant and the Wilmington terminal that were included in the net assets

20

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

acquired. As of March 31, 2019 and December 31, 2018 , the related-party receivable associated with such amounts was $4.5 million and $0.3 million , respectively.
Greenwood Contract
In February 2018, we entered into a contract with Greenwood to purchase wood pellets produced by the Greenwood plant through March 2022. We have a take-or-pay obligation with respect to 550,000 metric tons per year (“MTPY”) of wood pellets from July 2019 through March 2022.
During the three months ended March 31, 2019 , we purchased $10.5 million of wood pellets and recorded a cost of cover deficiency fee from Greenwood of approximately $2.9 million from Greenwood as Greenwood was unable to satisfy certain commitments. Of the net $7.6 million , $7.5 million is included in cost of goods sold and $0.1 million is included in finished goods inventory as of March 31, 2019 . During the three months ended March 31, 2018 , we purchased $3.7 million of wood pellets from Greenwood, of which $3.1 million is included in cost of goods sold.
As of March 31, 2019 , $4.3 million is included in related-party payables related to our wood pellet purchases from Greenwood and $3.6 million is included in related-party receivables related to Greenwood’s cost of cover deficiency fee. As of December 31, 2018, $7.9 million is included in related-party payables related to our wood pellet purchases from Greenwood.
Holdings TSA
Pursuant to the Holdings TSA, our sponsor agreed to deliver a minimum of 125,000 MT of wood pellets per quarter for receipt, storage, handling and loading services by the Wilmington terminal and pay a fixed fee on a per-ton basis for such terminal services. The Holdings TSA remains in effect until September 1, 2026. We did no t record any terminal services revenue from our sponsor during the three months ended March 31, 2019 . During the three months ended March 31, 2018 , we recorded $0.8 million as terminal services revenue from our sponsor, which is included in other revenue.
In February 2018, our sponsor amended and assigned the Holdings TSA to Greenwood. Deficiency payments are due to Wilmington if quarterly minimum throughput requirements are not met. During the three months ended March 31, 2019 and 2018, we recorded $0.6 million and $0.4 million , respectively, of deficiency fees from Greenwood, which is included in other revenue.
Biomass Option Agreement – Enviva Holdings, LP
Enviva, LP purchased $1.7 million of wood pellets from our sponsor during the three months ended March 31, 2018 pursuant to a biomass option agreement. The wood pellet purchase amounts are included in cost of goods sold. The biomass option agreement terminated in accordance with its terms in March 2018.
EVA-MGT Contracts
In January 2016, we entered into a contract (the “EVA‑MGT Contract”) with the First JV to supply 375,000 MTPY of wood pellets to MGT Teesside Limited’s Tees Renewable Energy Plant (the “Tees REP”), which is under development. As amended, the EVA-MGT Contract commences in 2019, ramps to full supply in 2021 and continues through 2034. The EVA-MGT Contract is denominated in U.S. Dollars for commissioning volumes in 2019 and in GBP thereafter.
We entered into a second supply agreement with the First JV in connection with the Sampson Drop-Down to supply an additional 95,000 MTPY of the contracted volume to the Tees REP. The contract, which is denominated in GBP, commences in 2020 and continues through 2034.
Enviva FiberCo, LLC
We purchase raw materials from Enviva FiberCo, LLC (“FiberCo”), a wholly owned subsidiary of our sponsor. During the three months ended March 31, 2019 , we purchased raw materials of $1.9 million from FiberCo. Offsetting the raw material purchases during the three months ended March 31, 2019, we recognized $2.9 million of cost of cover deficiency fees from FiberCo under a wood supply master agreement as FiberCo was unable to satisfy certain commitments, which is included in related-party receivables as of March 31, 2019. During the three months ended March 31, 2018 we purchased raw materials of $1.7 million from FiberCo. No cost of cover deficiency fees were recognized during the three months ended March 31, 2018.

21

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

Long-Term Incentive Plan Vesting
As of March 31, 2019 , we had $1.9 million included in related-party payables related to withholding tax amounts due to Enviva Management associated with the vesting of time-based phantom units under the Enviva Partners, LP Long-Term Incentive Plan (“LTIP”).
(13) Partners’ Capital
Common Units - Issuance
During March 2019, we issued 3,508,778 common units in a registered direct offering for net proceeds of approximately $97.0 million , net of $3.0 million of issuance costs which was included in accrued and other current liabilities.
Incentive Distribution Rights
Incentive distribution rights (“IDRs”) represent the right to receive increasing percentages (from 15.0% to 50.0% ) of quarterly distributions from operating surplus after distributions in amounts exceeding specified target distribution levels have been achieved by the Partnership. Our general partner (“General Partner”) currently holds the IDRs, but may transfer these rights at any time.
At-the-Market Offering Program
Pursuant to an equity distribution agreement dated August 8, 2016, we may offer and sell common units from time to time through a group of managers, subject to the terms and conditions set forth in such agreement, of up to an aggregate sales amount of $100.0 million (the “ATM Program”).
During the three months ended March 31, 2019 , we did no t sell common units under the ATM Program. During the three months ended March 31, 2018 , we sold 8,408 common units under the ATM Program for net proceeds of $0.2 million , net of an insignificant amount of commissions. Net proceeds from sales under the ATM Program were used for general partnership purposes.
(14) Equity-Based Awards
The following table summarizes information regarding phantom unit awards (the “Affiliate Grants”) under the LTIP to employees of Enviva Management who provide services to the Partnership:
 
Time-Based
Phantom Units
 
Performance-Based
Phantom Units
 
Total Affiliate Grant
Phantom Units
 
Units
 
Weighted-
Average
Grant Date
Fair Value
(per unit)(1)
 
Units
 
Weighted-
Average
Grant Date
Fair Value
(per unit)(1)
 
Units
 
Weighted-
Average
Grant Date
Fair Value
(per unit)(1)
Nonvested December 31, 2018
723,940

 
$
25.91

 
239,512

 
$
27.65

 
963,452

 
$
26.34

Granted
334,884

 
$
30.16

 
206,409

 
$
30.16

 
541,293

 
$
30.16

Forfeitures
(2,881
)
 
$
26.43

 
—

 
$
—

 
(2,881
)
 
$
26.43

Vested
(141,794
)
 
$
18.19

 
—

 
$
—

 
(141,794
)
 
$
18.19

Nonvested March 31, 2019
914,149

 
$
28.66

 
445,921

 
$
28.81

 
1,360,070

 
$
28.71

______________________________________________________________
(1)
Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.
As of March 31, 2019 , $1.9 million is included in related-party payables to Enviva Management to satisfy tax-withholding requirements associated with 141,794 time-based phantom awards that vested under the LTIP during the three months ended March 31, 2019 . During the three months ended March 31, 2018, we paid $2.3 million to the General Partner, which acquired common units from a wholly owned subsidiary of our sponsor for delivery to the recipients under the LTIP. We also paid $1.7

22

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

million during the three months ended March 31, 2018 to Enviva Management to satisfy the tax-withholding requirements associated with such common units under the MSA.
The following table summarizes information regarding phantom unit awards to certain non-employee directors of the General Partner (the “Director Grants”) under the LTIP:
 
Time-Based 
Phantom Units
 
Units
 
Weighted-
Average
Grant Date
Fair Value
(per unit)(1)
Nonvested December 31, 2018
13,964

 
$
28.65

Granted
13,444

 
$
30.16

Vested
(13,964
)
 
$
28.65

Nonvested March 31, 2019
13,444

 
$
30.16

In February 2019, Director Grants valued at $0.4 million were granted and vest on the first anniversary of the grant date. In February 2019, the Director Grants that were nonvested at December 31, 2018 vested, and common units were issued in respect of such vested Director Grants.
Distribution Equivalent Rights
Unpaid distribution equivalent rights (“DERs”) amounts related to the performance-based Affiliate Grants at March 31, 2019 were $1.0 million , of which $0.5 million are included in accrued liabilities and $0.5 million are included in other long-term liabilities on the condensed consolidated balance sheets. Unpaid DER amounts related to the performance-based Affiliate Grants at December 31, 2018 were $0.7 million , of which $0.4 million are included in accrued liabilities and $0.3 million are included in other long-term liabilities.
Paid DER distributions related to the time-based Affiliate Grants were $0.9 million for the three months ended March 31, 2019 . Paid DER distributions related to the time-based Affiliate Grants were $0.5 million for the three months ended March 31, 2018 . At March 31, 2019 and December 31, 2018, $0.6 million and $0.9 million , respectively, of DER distributions were included in related-party accrued liabilities.
(15) Income Taxes
Our operations are organized as limited partnerships and entities that are disregarded entities for federal and state income tax purposes. As a result, we are not subject to U.S. federal and most state income taxes. The unitholders of the Partnership are liable for these income taxes on their share of our taxable income. Some states impose franchise and capital taxes on the Partnership. Such taxes are not material to the condensed consolidated financial statements and have been included in other income (expense) as incurred.
As of March 31, 2019 , the only periods subject to examination for federal and state income tax returns are 2015 through 2018 . We believe our income tax filing positions, including our status as a pass-through entity, would be sustained on audit and do not anticipate any adjustments that would result in a material change to our unaudited condensed consolidated balance sheet. Therefore, no reserves for uncertain tax positions or interest and penalties have been recorded. For the three months ended March 31, 2019 and 2018 , no provision for federal or state income taxes has been recorded in the condensed consolidated financial statements.
(16) Net Income (Loss) per Limited Partner Unit
Net income (loss) per unit applicable to limited partners is computed by dividing limited partners’ interest in net income (loss), after deducting any incentive distributions, by the weighted-average number of outstanding common units. Our net income (loss) is allocated to the limited partners in accordance with their respective ownership percentages, after giving effect to priority

23

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

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.
On May 30, 2018, the requirements under our partnership agreement for the conversion of all of our subordinated units into common units were satisfied and the subordination period for such subordinated units ended. As a result, all of our 11,905,138 outstanding subordinated units converted into common units on a one -for-one basis. The conversion did not impact the amount of the cash distribution paid or the total number of our outstanding units representing limited partner interests. Our net income (loss) was allocated to the General Partner and the limited partners, including the holders of the subordinated units and IDR holders, in accordance with our partnership agreement.
In addition to the common units, we have also identified the IDRs and phantom units as participating securities and use the two-class method when calculating the net income (loss) per unit applicable to limited partners, which is based on the weighted-average number of common units and subordinated units outstanding during the period. Diluted net income per unit includes the effects of potentially dilutive time-based and performance-based phantom units on our common units. Basic and diluted earnings per unit previously applicable to subordinated limited partner units were the same because there are no potentially dilutive subordinated units outstanding.
The following computation of net income (loss) per limited partner unit is as follows for the three months ended March 31, 2019 and 2018 :
 
Three Months Ended March 31, 2019
 
Common
Units
 
General
Partner
Weighted-average common units outstanding—basic
26,759

 
—

Effect of nonvested phantom units
—

 
—

Weighted-average common units outstanding—diluted
26,759

 
—

 
Three Months Ended March 31, 2019
 
Common
Units
 
General
Partner
 
Total
Distributions declared
$
21,580

 
$
2,270

 
$
23,850

Earnings less than distributions
(32,773
)
 
—

 
(32,773
)
Net (loss) income attributable to partners
$
(11,193
)
 
$
2,270

 
$
(8,923
)
Weighted-average units outstanding—basic
26,759

 
 
 
 
Weighted-average units outstanding—diluted
26,759

 
 
 
 
Net loss per limited partner unit—basic
$
(0.42
)
 
 
 
 
Net loss per limited partner unit—diluted
$
(0.42
)
 
 
 
 
 
Three Months Ended March 31, 2018
 
Common
Units
 
Subordinated
Units
 
General
Partner
Weighted-average common units outstanding—basic
14,438

 
11,905

 
—

Effect of nonvested phantom units
—

 
—

 
—

Weighted-average common units outstanding—diluted
14,438

 
11,905

 
—


24

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

 
Three Months Ended March 31, 2018
 
Common
Units
 
Subordinated
Units
 
General
Partner
 
Total
Distributions declared
$
9,066

 
$
7,441

 
$
1,264

 
$
17,771

Earnings less than distributions
(20,380
)
 
(16,726
)
 
—

 
(37,106
)
Net (loss) income attributable to partners
$
(11,314
)
 
$
(9,285
)
 
$
1,264

 
$
(19,335
)
Weighted-average units outstanding—basic
14,438

 
11,905

 
 
 
 
Weighted-average units outstanding—diluted
14,438

 
11,905

 
 
 
 
Net loss per limited partner unit—basic
$
(0.78
)
 
$
(0.78
)
 
 
 
 
Net loss per limited partner unit—diluted
$
(0.78
)
 
$
(0.78
)
 
 
 
 
Cash Distributions to Unitholders
Distributions that have been paid or declared related to the reporting period are considered in the determination of earnings per unit. The following table details the cash distribution paid or declared (in millions, except per-unit amounts):
Quarter Ended
 
Declaration
Date
 
Record
Date
 
Payment
Date
 
Distribution 
Per Unit
 
Total Cash
Distribution
 
Total
Payment to
General
Partner for
Incentive
Distribution
Rights
March 31, 2018
 
May 3, 2018
 
May 15, 2018
 
May 29, 2018
 
$
0.6250

 
$
16.5

 
$
1.3

June 30, 2018
 
August 1, 2018
 
August 15, 2018
 
August 29, 2018
 
$
0.6300

 
$
16.7

 
$
1.4

September 30, 2018
 
October 31, 2018
 
November 15, 2018
 
November 29, 2018
 
$
0.6350

 
$
16.8

 
$
1.5

December 31, 2018
 
January 29, 2019
 
February 15, 2019
 
February 28, 2019
 
$
0.6400

 
$
17.0

 
$
1.7

March 31, 2019
 
May 2, 2019
 
May 15, 2019
 
May 29, 2019
 
$
0.6450

 
$
21.6

 
$
2.3

Distributions to be made in future periods based on the current period calculation of cash available for distribution are allocated to each class of equity that will receive the distribution. Any unpaid cumulative distributions are allocated to the appropriate class of equity.
We determine the amount of cash available for distribution for each quarter in accordance with our partnership agreement. The amount to be distributed to common unitholders and IDR holders is based on the distribution waterfall set forth in our partnership agreement. Net earnings for the quarter are allocated to each class of partnership interest based on the distributions to be made. On May 30, 2018, the subordination period ended in accordance with our partnership agreement and the subordinated units were converted into common units on a one -for-one basis (see Note 16, Net Income (Loss) per Limited Partner Unit ).

25

ENVIVA PARTNERS, LP AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except number of units, per unit amounts and unless otherwise noted)
(Unaudited )

(17) Subsequent Events
On April 1, 2019, we paid $74.0 million to the First JV in deferred consideration for the Wilmington Drop-Down (the “Second Payment”). The Second Payment consisted of (i) approximately $24.0 million in cash, of which approximately $23.0 million was distributed to John Hancock Life Insurance Company (U.S.A.) and approximately $1.0 million was retained by the First JV, and (ii) the issuance of 1,691,627 common units, or approximately $50.0 million in common units, which were distributed to John Hancock Life Insurance Company (U.S.A.), in connection with which we entered into a registration rights agreement covering the resale of such common units.
On April 2, 2019, we acquired all of the issued and outstanding Class B Units of the First JV from our sponsor and our sponsor assigned to us our sponsor’s position as lender under an amended and restated credit agreement dated June 30, 2018 between the First JV and our sponsor for total consideration of $165.0 million , subject to certain adjustments (the “Hamlet Transaction”). Such consideration is comprised of (i) the issuance of 1,681,237 common units, or approximately $50.0 million in common units, and approximately $25.0 million in cash, paid on April 2, 2019, (ii)  $50.0 million in cash to be paid upon commencement of commercial operations of the Hamlet plant, expected in the second quarter of 2019 (“COD”), and (iii)  $40.0 million in cash to be paid upon the later of COD and January 2, 2020. The First JV owns the Hamlet plant and a firm, 15 -year take-or-pay off-take contract, which adds incremental sales volumes of approximately 500,000 MTPY to our product sales backlog.
(18) Supplemental Guarantor Information
The Partnership and its wholly owned finance subsidiary, Enviva Partners Finance Corp., are the co-issuers of our senior notes on a joint and several basis. The Partnership has no material independent assets or operations. The senior notes are guaranteed on a senior unsecured basis by certain of the Partnership’s direct and indirect wholly owned subsidiaries (excluding Enviva Partners Finance Corp. and certain recently formed immaterial subsidiaries) and will be guaranteed by the Partnership’s future restricted subsidiaries that guarantee certain of its other indebtedness (collectively, the “Subsidiary Guarantors”). The guarantees are full and unconditional and joint and several. Each of the Subsidiary Guarantors is directly or indirectly 100% owned by the Partnership. Enviva Partners Finance Corp. is a finance subsidiary formed for the purpose of being the co-issuer of the Senior Notes. Other than certain restrictions arising under the senior secured revolving credit facility and the indenture governing the senior notes (see Note 11, Long-Term Debt and Finance Lease Obligations), there are no significant restrictions on the ability of any restricted subsidiary to (i) pay dividends or make any other distributions to the Partnership or any of its restricted subsidiaries or (ii) make loans or advances to the Partnership or any of its restricted subsidiaries.


26

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Enviva Partners, LP, together with its subsidiaries (“we,” “us,” “our” or the “Partnership”), is a Delaware limited partnership formed on November 12, 2013. Our sponsor is Enviva Holdings, LP (and, where applicable, its wholly owned subsidiaries Enviva MLP Holdco, LLC and Enviva Development Holdings, LLC) and references to our General Partner refer to Enviva Partners GP, LLC, a wholly owned subsidiary of Enviva Holdings, LP. References to “Enviva Management” refer to Enviva Management Company, LLC, a wholly owned subsidiary of Enviva Holdings, LP, and references to “our employees” refer to the employees of Enviva Management. References to the “First JV” and the “Second JV” refer to Enviva Wilmington Holdings, LLC and Enviva JV Development Company, LLC, respectively, which are joint ventures between our sponsor and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates.
The following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis (“MD&A”) in Part II-Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the U.S. Securities and Exchange Commission (the “SEC”). Our 2018 Form 10-K contains a discussion of other matters not included herein, such as disclosures regarding critical accounting policies and estimates and contractual obligations. You should also read the following discussion and analysis together with the risk factors set forth in the 2018 Form 10-K and the factors described under “Cautionary Statement Regarding Forward-Looking Information” and Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q for information regarding certain risks inherent in our business.
Basis of Presentation
The following discussion about matters affecting the financial condition and results of operations of the Partnership should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in this report and the audited consolidated financial statements and related notes that are included in the 2018 Form 10-K. Among other things, those financial statements and the related notes include more detailed information regarding the basis of presentation for the following information.
Business Overview
We are the world’s largest supplier by production capacity of utility-grade wood pellets to major power generators. As of March 31, 2019, we owned and operated six industrial-scale production plants in the Southeastern United States that have a combined wood pellet production capacity of 2.9 million metric tons per year (“MTPY”). On April 2, 2019, we acquired our sponsor’s interest in the First JV (the “Hamlet Transaction”), which owns a wood pellet production plant under construction in Hamlet, North Carolina (the “Hamlet plant”). The Hamlet plant is expected to achieve commercial operations (“COD”) in June 2019 and to reach its nameplate production capacity of approximately 600,000 MTPY in 2021. We also own dry-bulk, deep-water marine terminal assets at the Port of Chesapeake (the “Chesapeake terminal”) and the Port of Wilmington, North Carolina (the “Wilmington 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 that should enable us to increase our per-unit cash distributions over time, which is our primary business objective.
Our strategy is to fully contract the wood pellet production from our plants under long-term, take-or-pay off-take contracts. During 2019, production capacity from our plants and wood pellets sourced from a production plant in Greenwood, South Carolina (the “Greenwood plant”) owned by the Second JV and from third parties are 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 sales of 2.9 million metric tons (“MT”) of wood pellets in 2019 and have a total weighted-average remaining term of 10.5 years from April 2, 2019. We intend to continue expanding our business by taking advantage of the growing demand for our product that is driven by conversion of coal-fired power generation and combined heat and power plants to co-fired or dedicated biomass-fired plants and construction of newly dedicated biomass-fired plants, principally in Europe and increasingly in Japan.
Recent Developments
Mid-Atlantic Expansions
During 2019, we expect to increase the aggregate wood pellet production capacity of our plants in Northampton, North Carolina and Southampton, Virginia (the “Mid-Atlantic Expansions”) by approximately 400,000 MTPY in the aggregate, subject to receiving the necessary permits. We expect to invest a total of approximately $130.0 million in additional wood pellet production assets and emissions control equipment for the expansions and to complete expansion activities in the first half of 2020 with startup shortly thereafter. Capital expenditures on the Mid-Atlantic Expansions through March 31, 2019 were approximately $7.1 million.

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Table of Contents

Hamlet Transaction
On April 2, 2019, the Partnership closed the Hamlet Transaction and acquired all of the issued and outstanding Class B Units of the First JV from our sponsor and our sponsor assigned to the Partnership its position as lender under an amended and restated credit agreement dated June 30, 2018 between the First JV and our sponsor for total consideration of $165.0 million , subject to certain adjustments. The Hamlet Transaction includes the Hamlet plant and a firm, 15-year take-or-pay off-take contract (the “MGT contract”) to supply MGT Power Ltd.’s Teesside Renewable Energy Plant (the “Tees REP”) with nearly one million MTPY of wood pellets, following a ramp period. The MGT contract commences in 2019, ramps to full supply volumes in 2021 and continues through 2034. The Partnership already had off-take contracts with the First JV to supply 470,000 MTPY of the volumes to be supplied to the Tees Rep prior to the Hamlet Transaction; as a result, the Partnership will only have 500,000 MTPY in incremental sales volumes as a result thereof.
The Partnership made an initial payment of $75.0 million to our sponsor consisting of 1,681,237 common units at a price of $29.74 per unit (which was the undiscounted 20-day volume-weighted average price as of March 20, 2019), or approximately $50.0 million of common units, and $25.0 million in cash on April 2, 2019. Upon COD, the Partnership expects to make a second payment in the amount of $50.0 million in cash. The third and final payment of $40.0 million in cash is expected to be made on January 2, 2020.
As the Partnership completed the Hamlet Transaction before the Hamlet plant achieved COD and the MGT contract reached full contracted volumes, our sponsor and the Partnership entered into a make-whole agreement (the “Make-Whole Agreement”) pursuant to which, among other things, our sponsor agreed to (i) guarantee certain cash flows from the Hamlet plant until June 30, 2020 and (ii) reimburse construction cost overruns in excess of budgeted capital expenditures for the Hamlet plant, subject to certain limited exceptions. In addition, our sponsor entered into agreements with (a) the First JV, pursuant to which our sponsor waives certain management services and other fees that otherwise would be owed by the First JV until the later of July 1, 2019 and COD and (b) the Partnership, pursuant to which our sponsor waives certain management services and other fees that otherwise would be owed by the Partnership until June 30, 2020.
Wilmington Terminal Second Payment
The Partnership made an initial payment of $56.0 million to the First JV as partial payment of the $130.0 million purchase price for the Wilmington terminal in October 2017 (the “Wilmington Acquisition”).
On April 1, 2019, the Partnership made the second and final payment of $74.0 million in deferred consideration for the Wilmington Acquisition consisting of 1,691,627 common units at a price of $29.38 per common unit (which was the 20-day volume-weighted average price as of the closing of the Wilmington Acquisition), or approximately $50.0 million in common units, subject to certain adjustments, and approximately $24.0 million in cash (the “Second Payment”).
Financing Activities
In addition to the approximately $100.0 million in common units issued as partial consideration for the Hamlet Transaction and the Second Payment, the Partnership issued an aggregate of 3,508,778 common units to investors in exchange for proceeds of $100.0 million in a registered direct offering (the “RDO”) pursuant to an effective registration statement on file with the SEC at a purchase price of $28.50 per unit, representing a 4.2 percent discount to the 20-day volume-weighted average price as of March 20, 2019.
We used proceeds from the RDO, along with borrowings under the Partnership’s existing $350.0 million senior secured revolving credit facility and the common units issued as consideration for the Hamlet Transaction and the Second Payment, to partially finance (i) the $165.0 million purchase price for the Hamlet Transaction, (ii) the $74.0 million in deferred consideration for the Wilmington Acquisition, and will use proceeds to partially finance (iii) the $24.0 million in capital expenditures, net of payments under the Make-Whole Agreement, expected to be required to complete construction of the Hamlet plant and (iv) the approximately $130.0 million expected to be required for the Mid-Atlantic Expansions.
Contracted Backlog
As of April 2, 2019 and including the impact of the MGT contract acquired in the Hamlet Transaction, we had approximately $9.9 billion of product sales backlog for firm contracted product sales to our long-term off-take customers and have a total weighted-average remaining term of 10.5 years, compared to approximately $5.9 billion and a total weighted-average remaining term of 8.9 years as of April 1, 2018. Backlog represents the revenue to be recognized under existing contracts assuming deliveries occur as specified in the contracts. Contracted future product sales denominated in foreign currencies, excluding revenue hedged with foreign currency forward contracts, are included in U.S. Dollars at April 1, 2019

28
Table of Contents

forward rates. The contracted backlog includes forward prices including inflation, foreign currency and commodity prices. The amount also includes the effects of related foreign currency derivative contracts.
Our expected future product sales revenue under our contracted backlog as of April 2, 2019 is as follows (in millions):
Period from April 3, 2019 to December 31, 2019
$
494

Year ending December 31, 2020
928

Year ending December 31, 2021 and thereafter
8,445

Total product sales contracted backlog
$
9,867

Assuming all volumes under the firm off-take contracts held by our sponsor and its joint ventures were included with our product sales backlog for firm contracted product sales, the total weighted-average remaining term as of April 2, 2019 would increase to 12.2 years and the product sales backlog would increase to $14.4 billion as follows (in millions):
Period from April 3, 2019 to December 31, 2019
$
494

Year ending December 31, 2020
928

Year ending December 31, 2021 and thereafter
13,004

Total product sales contracted backlog
$
14,426

Factors Impacting Comparability of Our Financial Results
Inventory Impairment and Asset Disposal
On February 27, 2018, a fire occurred at the Chesapeake terminal, causing damage to equipment and approximately 43,000 MT of wood pellets (the “Chesapeake Incident”). The Chesapeake terminal returned to operations on June 28, 2018. During the three months ended March 31, 2018, we incurred $28.4 million in costs as a result of the Chesapeake Incident related to asset impairment, inventory write-off and disposal costs, emergency response costs, asset repair costs and business continuity costs, the latter of which represented incremental costs to commission temporary wood pellet storage and handling and ship loading operations at nearby locations to meet our contractual obligations to our customers. As of March 31, 2018, we had recovered $8.9 million related to the Chesapeake Incident, which included $1.1 million of lost profits. As of December 31, 2018, $3.8 million of probable insurance recoveries for the then-remaining costs not yet recovered were included in insurance receivables; we received the $3.8 million in probable insurance recoveries (plus $0.5 million recognized as other income) in February 2019.
In addition, we incurred other losses and costs associated with the Chesapeake Incident during and since the three months ended March 31, 2018 and are pursuing outstanding claims of approximately $25.0 million related to such amounts. Consequently, our results of operations and cash flows, as well as our financial measures not presented in accordance with accounting principles generally accepted in the United States (“GAAP”), or non-GAAP financial measures, may not be comparable to those for reported periods before or after the three months ended March 31, 2018.
How We Evaluate Our Operations
Adjusted Net (Loss) Income
We define adjusted net (loss) income as net (loss) income excluding certain expenses incurred related to the Chesapeake Incident and Hurricanes Florence and Michael (collectively, “Hurricane Events”), consisting of emergency response expenses, expenses related to the disposal of inventory, and asset disposal and repair costs, offset by insurance recoveries received, and interest expense associated with incremental borrowings related to the Chesapeake Incident. We believe that adjusted net income enhances investors’ ability to compare the past financial performance of our underlying operations with our current performance separate from certain items of gain or loss that we characterize as unrepresentative of our ongoing operations.
Adjusted Gross Margin per Metric Ton
We use adjusted gross margin per metric ton to measure our financial performance. We define adjusted gross margin as gross margin excluding asset disposals, depreciation and amortization, changes in unrealized derivative instruments related to hedged items included in gross margin, and certain items of income or loss that we characterize as unrepresentative of our ongoing operations, including certain expenses incurred related to the Chesapeake Incident and Hurricane Events, consisting of emergency response expenses, expenses related to the disposal of inventory, and asset disposal and repair costs, offset by insurance recoveries received. We believe adjusted gross margin per metric ton is a meaningful measure because it compares

29
Table of Contents

our revenue-generating activities to our operating costs for a view of profitability and performance on a per metric ton basis. Adjusted gross margin per metric ton will primarily be affected by our ability to meet targeted production volumes and to control direct and indirect costs associated with procurement and delivery of wood fiber to our production plants and the production and distribution of wood pellets.
Adjusted EBITDA
We define adjusted EBITDA as net income or loss excluding depreciation and amortization, interest expense, income tax expense, early retirement of debt obligations, non-cash unit compensation expense, asset impairments and disposals, changes in unrealized derivative instruments related to hedged items included in gross margin and other income and expense, and certain items of income or loss that we characterize as unrepresentative of our ongoing operations, including certain expenses incurred related to the Chesapeake Incident and Hurricane Events, consisting of emergency response expenses, expenses related to the disposal of inventory, and asset disposal and repair costs, offset by insurance recoveries received. 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 and interest expense net of amortization of debt issuance costs, debt premium, original issue discounts and the impact from incremental borrowings related to the Chesapeake Incident and Hurricane Events. We use distributable cash flow as a performance metric to compare the cash‑generating performance of the Partnership from period to period and to compare the cash‑generating performance for specific periods to the cash distributions (if any) that are expected to be paid to our unitholders. We do not rely on distributable cash flow as a liquidity measure.
Limitations of Non-GAAP Financial Measures
Adjusted net (loss) income, adjusted gross margin per metric ton, adjusted EBITDA and distributable cash flow are not financial measures presented in accordance with 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 (loss) income, adjusted gross margin per metric ton, adjusted EBITDA, or distributable cash flow in isolation or as substitutes for analysis of our results as reported under GAAP.
Our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

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Table of Contents

Results of Operations
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
 
Three Months Ended
March 31,
 
Change
 
Chesapeake Incident and Hurricane Events
 
Net Change
 
2019
 
2018
 
 
 
 
(in thousands)
 
 
 
 
Product sales
$
156,599

 
$
122,322

 
$
34,277

 
$
—

 
$
34,277

Other revenue (1)
1,770

 
3,002

 
(1,232
)
 
—

 
(1,232
)
Net revenue
158,369

 
125,324

 
33,045

 
—

 
33,045

Cost of goods sold, excluding depreciation and
   amortization (1)
137,392

 
121,038

 
16,354

 
(16,231
)
 
32,585

Depreciation and amortization
11,070

 
9,304

 
1,766

 
—

 
1,766

Total cost of goods sold
148,462

 
130,342

 
18,120

 
(16,231
)
 
34,351

Gross margin
9,907

 
(5,018
)
 
14,925

 
16,231

 
(1,306
)
General and administrative expenses  (1)
9,837

 
6,804

 
3,033

 
391

 
2,642

Income (loss) from operations
70

 
(11,822
)
 
11,892

 
15,840

 
(3,948
)
Interest expense
(9,633
)
 
(8,645
)
 
(988
)
 
(490
)
 
(498
)
Other income
640

 
1,132

 
(492
)
 
—

 
(492
)
Net loss
$
(8,923
)
 
$
(19,335
)
 
$
10,412

 
$
15,350

 
$
(4,938
)
  (1)  See Note 12, Related-Party Transactions
 
 
 
 
 
 
 
 
 
Product sales
Revenue related to product sales for wood pellets produced or procured by us increased to $156.6 million for the three months ended March 31, 2019 from $122.3 million for the three months ended March 31, 2018 . The $34.3 million , or 28% , increase was primarily attributable to a 30% increase in sales volumes during the three months ended March 31, 2019 as compared to the three months ended March 31, 2018 . The increase in product sales volumes was partially offset by a decrease in pricing during the three months ended March 31, 2019 due primarily to customer contract mix.
Other revenue
Other revenue decreased by $1.2 million during the three months ended March 31, 2019 as compared to the three months ended March 31, 2018 . The decrease is attributable to a $0.8 million decrease primarily related to a reduction in fees received from customers requesting scheduling accommodations and to a $0.4 million reduction in terminal services revenue.
Cost of goods sold
Cost of goods sold increased to $148.5 million for the three months ended March 31, 2019 from $130.3 million for the three months ended March 31, 2018 . The $18.1 million , or 14% , increase was primarily attributable to a 30% increase in sales volumes during the three months ended March 31, 2019 as compared to the three months ended March 31, 2018 . This is partially offset by a decrease in costs of $20.2 million related to the Chesapeake Incident that occurred during the first quarter of 2018.

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Table of Contents

Gross margin
Gross margin increased to $9.9 million for the three months ended March 31, 2019 from $(5.0) million for the three months ended March 31, 2018 . Gross margin was primarily impacted by the following factors during the three months ended March 31, 2019 as compared to the three months ended March 31, 2018 :
•
A $16.2 million increase in gross margin related to the Chesapeake Incident (see Note 5, Inventory Impairment and Asset Disposal ).
•
An increase in sales volumes increased gross margin by $6.8 million. We sold 843,000 MT during the three months ended March 31, 2019 , or approximately 195,000 MT more than the three months ended March 31, 2018 . The gross margin was lower during the three months ended March 31, 2019 due to seasonal factors that were more significant and that were longer lasting than during the three months ended March 31, 2018.
Offsetting the above were:
•
Costs in connection with the potential acquisition, discussed below under the heading “Adjusted gross margin per metric ton” decreased gross margin by $4.2 million .
•
Unrealized changes in fair value of foreign currency derivative instruments (see Note 9, Derivative Instruments ) decreased gross margin by $1.2 million .
•
An increase in depreciation expense decreased gross margin by $1.8 million .
Adjusted gross margin per metric ton
 
Three Months Ended
March 31,
 
 
 
2019
 
2018
 
Change
 
(in thousands except per metric ton)
Reconciliation of gross margin to adjusted gross margin per metric ton:
 
 
 
 
 
Gross margin
$
9,907

 
$
(5,018
)
 
$
14,925

Depreciation and amortization
11,070

 
9,304

 
1,766

Chesapeake Incident and Hurricane Events
359

 
16,590

 
(16,231
)
Changes in unrealized derivative instruments
2,010

 
769

 
1,241

Acquisition costs
4,243

 
—

 
4,243

Adjusted gross margin
$
27,589

 
$
21,645

 
$
5,944

Metric tons sold
843

 
648

 
195

Adjusted gross margin per metric ton
$
32.73

 
$
33.40

 
$
(0.67
)
We earned adjusted gross margin of $27.6 million , or $32.73 per MT, for the three months ended March 31, 2019 . Adjusted gross margin was $21.6 million , or $33.40 per MT, for the three months ended March 31, 2018 . The factors impacting the change in adjusted gross margin include those described above under the heading “Gross margin” as well as $4.2 million of incremental costs, which are unrepresentative of our ongoing operations, in connection with our evaluation of a third-party wood pellet production plant we previously had considered, and were considering, purchasing (the “Potential Target”). When we commenced our review, the Potential Target had recently returned to operations following an extended shutdown during a bankruptcy proceeding with the intent of demonstrating favorable operations prior to proceeding to an auction sale process; however, the Potential Target had not yet established a logistics chain through a viable export terminal, given that the terminal through which the plant historically had exported was not operational at the time and was not reasonably certain to become operational in the future. Accordingly, as part of our diligence of the Potential Target, we developed an alternative logistics chain to bring the Potential Target’s wood pellets to market and began purchasing the production of the Potential Target for a trial period. The incremental costs associated with the establishment and evaluation of this new logistics chain primarily consist of barge, freight, trucking, storage, and shiploading services. We have completed our evaluation of the alternative logistics chain and, therefore, do not expect to incur additional costs of this nature in the future.

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Table of Contents

General and administrative expenses
General and administrative expenses were $9.8 million for the three months ended March 31, 2019 and $6.8 million for the three months ended March 31, 2018 .
During the three months ended March 31, 2019 , general and administrative expenses included allocated expenses of $4.2 million that were incurred under the MSA, $2.1 million of direct expenses, $2.4 million of non-cash unit compensation expense associated with unit-based awards under the Enviva Partners, LP Long-Term Incentive Plan (the “LTIP”), $0.7 million of transaction expenses related to the Hamlet Transaction and $0.4 million of legal fees related to the Chesapeake Incident.
During the three months ended March 31, 2018 , general and administrative expenses included allocated expenses of $4.0 million that were incurred under the MSA, $1.3 million of direct expenses, $1.3 million of non-cash unit compensation associated with unit-based awards under the LTIP and $0.2 million of other costs.
Interest expense
We incurred $9.6 million of interest expense during the three months ended March 31, 2019 and $8.6 million of interest expense during the three months ended March 31, 2018 . The increase in interest expense was primarily attributable to an increase in our revolving borrowings under our senior secured revolving credit facility.
Adjusted net loss
 
Three Months Ended
March 31,
 
 
 
2019
 
2018
 
Change
 
(in thousands)
Reconciliation of net loss to adjusted net loss:
 
 
 
 
 
Net loss
$
(8,923
)
 
$
(19,335
)
 
$
10,412

Chesapeake Incident and Hurricane Events
289

 
16,590

 
(16,301
)
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events
490

 
—

 
490

Adjusted net loss
$
(8,144
)
 
$
(2,745
)
 
$
(5,399
)
We generated adjusted net loss of $8.1 million for the three months ended March 31, 2019 compared to adjusted net loss of $2.7 million for the three months ended March 31, 2018 . The $5.4 million increase in adjusted net loss was attributable to the $15.8 million decrease in adjustments related to the Chesapeake Incident and Hurricane Events, offset by the $10.4 million decrease in net loss.
Adjusted EBITDA
 
Three Months Ended
March 31,
 
 
 
2019
 
2018
 
Change
 
(in thousands)
Reconciliation of net loss to adjusted EBITDA:
 
 
 
 
 
Net loss
$
(8,923
)
 
$
(19,335
)
 
$
10,412

Add:
 
 
 
 
  

Depreciation and amortization
11,208

 
9,408

 
1,800

Interest expense
9,633

 
8,645

 
988

Non-cash unit compensation expense
2,472

 
1,343

 
1,129

Chesapeake Incident and Hurricane Events
289

 
16,590

 
(16,301
)
Changes in the fair value of derivative instruments
2,010

 
769

 
1,241

Acquisition costs
4,927

 
153

 
4,774

Adjusted EBITDA
$
21,616

 
$
17,573

 
$
4,043

We generated adjusted EBITDA of $21.6 million for the three months ended March 31, 2019 compared to adjusted EBITDA of $17.6 million for the three months ended March 31, 2018 . The $4.0 million increase was primarily attributable to the factors described above under the heading “Gross margin,” including the $16.6 million of expenses incurred, net of

33
Table of Contents

insurance recoveries of $8.9 million, in connection with the Chesapeake Incident during the three months ended March 31, 2018 as well as the $4.2 million in acquisition costs described above under the heading “Adjusted gross margin per metric ton” and an additional $0.7 million in costs, primarily in legal fees related to the Hamlet Transaction.
Distributable Cash Flow
The following is a reconciliation of adjusted EBITDA to distributable cash flow:
 
Three Months Ended
March 31,
 
 
 
2019
 
2018
 
Change
 
(in thousands)
Adjusted EBITDA
$
21,616

 
$
17,573

 
$
4,043

Less:
 
 
 
 
  

Interest expense, net of amortization of debt issuance costs, debt premium, original issue discount and impact from incremental borrowings related to Chesapeake Incident and Hurricane Events
8,848

 
8,373

 
475

Maintenance capital expenditures
928

 
388

 
540

Distributable cash flow attributable to Enviva Partners, LP
11,840

 
8,812

 
3,028

Less: Distributable cash flow attributable to incentive distribution rights
2,270

 
1,264

 
1,006

Distributable cash flow attributable to Enviva Partners, LP limited partners
$
9,570

 
$
7,548

 
$
2,022


Liquidity and Capital Resources
Our primary sources of liquidity include cash and cash equivalent balances, cash generated from operations, borrowings under our revolving credit commitments and, from time to time, debt and equity offerings. Our primary liquidity requirements are to fund working capital, service our debt, maintain cash reserves, finance plant acquisitions and plant expansion projects, finance maintenance capital expenditures and pay distributions. We believe cash on hand, cash generated from our operations and the availability of our revolving credit commitments will be sufficient to meet our primary liquidity requirements. However, future capital expenditures 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.
Cash Distributions
To the extent we have sufficient cash from our operations after establishment of cash reserves and payment of fees and expenses, our minimum quarterly distribution is $0.4125 per common unit per quarter, which equates to approximately $13.8 million per quarter, or approximately $55.2 million per year, based on the number of common units outstanding as of May 3, 2019.
Capital Requirements
We operate in a capital-intensive industry, which requires significant investments to maintain and upgrade existing capital assets. Our capital requirements have consisted, and we anticipate will continue to consist, primarily of the following:
•
Maintenance capital expenditures, which are cash expenditures incurred to maintain our long-term operating income or operating capacity. These expenditures typically include certain system integrity, compliance and safety improvements; and
•
Growth capital expenditures, which are cash expenditures we expect will increase our operating income or operating capacity over the long term. Growth capital expenditures include acquisitions or construction of new capital assets or capital improvements such as additions to or improvements on our existing capital assets as well as projects intended to extend the useful life of assets.
The classification of capital expenditures as either maintenance or growth is made at the individual asset level during our budgeting process and as we approve, execute and monitor our capital spending.

34
Table of Contents

We expect to invest approximately $130.0 million in additional production assets and emissions control equipment for the Mid-Atlantic Expansions. We expect to complete construction in the first half of 2020, subject to receiving the necessary permits, with startup shortly thereafter.
Cash Flows
The following table sets forth a summary of our net cash flows from operating, investing and financing activities for the three months ended March 31, 2019 and 2018 , respectively:
 
Three months Ended
March 31,
 
2019
 
2018
 
(in thousands)
Net cash (used in) provided by operating activities
$
(10,269
)
 
$
29,316

Net cash used in investing activities
(11,279
)
 
(1,999
)
Net cash provided by (used in) financing activities
125,833

 
(22,784
)
Net increase in cash, cash equivalents and restricted cash
$
104,285

 
$
4,533

Cash Provided by Operating Activities
Net cash used in operating activities was $10.3 million for the three months ended March 31, 2019 compared to net cash provided by operating activities of $29.3 million for the three months ended March 31, 2018 . The decrease of $39.6 million was primarily attributable to the following:
•
A decrease of $5.4 million due to an increase in net loss, after excluding the impact of the Chesapeake Incident during the three months ended March 31, 2018 (see Note 5, Inventory Impairment and Asset Disposal ).
•
A decrease of $37.6 million due to an increase in accounts receivable, including the impact of $4.9 million of insurance receivables in connection with the Chesapeake Incident during the three months ended March 31, 2018 .
Cash Used in Investing Activities
Net cash used in investing activities was $11.3 million for the three months ended March 31, 2019 compared to $2.0 million for the three months ended March 31, 2018 . The $11.3 million of cash used for property, plant and equipment during the three months ended March 31, 2019 includes approximately $5.7 million of capital expenditures related to the Mid-Atlantic Expansions, $4.7 million related to projects intended to increase the operating income or operating capacity of our plants and $0.9 million of capital expenditures to maintain operations.
Cash Used in Financing Activities
Net cash provided by financing activities was $125.8 million for the three months ended March 31, 2019 compared to net cash used in financing activities of $22.8 million for the three months ended March 31, 2018 . The net cash provided by financing activities primarily consisted of approximately $100.0 million in issued common units and $46.0 million of borrowings under our senior secured revolving credit facility, net, during the three months ended March 31, 2019 . Net cash provided by financing activities was offset by $19.6 million of distributions paid to our unitholders.
Net cash used in financing activities for the three months ended March 31, 2018 primarily consisted of $17.8 million of distributions paid to our unitholders, $2.3 million paid to the general partner to purchase common units related to the vesting of LTIP awards and $1.7 million paid to Enviva Management to satisfy tax-withholding requirements associated with the vesting of phantom unit awards under the LTIP.
Off-Balance Sheet Arrangements
As of March 31, 2019 , we did not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in our unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. We provide expanded discussion of our significant

35
Table of Contents

accounting policies, estimates and judgments in our 2018 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, 2018 .
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to our exposure to market risk as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 other than as described below:
Foreign Currency Exchange Risk
We primarily are exposed to fluctuations in foreign currency exchange rates related to contracts pursuant to which deliveries of wood pellets will be settled in foreign currency. We have entered into forward contracts and purchased options to hedge a portion of our forecasted revenue for these customer contracts.
As of March 31, 2019 , we had notional amounts of 39.4 million GBP and 7.0 million EUR under foreign currency forward contracts and 39.4 million GBP and 1.7 million EUR under foreign currency purchased options that expire between 2019 and 2023.
We do not utilize foreign exchange contracts for speculative or trading purposes. The counterparties to our foreign exchange contracts are major financial institutions.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13(a)‑15(e) and 15(d)‑15(e) under the Securities Exchange Act of 1934, as amended) was carried out under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of our General Partner. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of our General Partner concluded that the design and operation of these disclosure controls and procedures were effective as of March 31, 2019 .
Changes in Internal Control Over Financial Reporting
During the quarter ended March 31, 2019 , there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

36
Table of Contents

PART II—OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changes with respect to the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.
Item 1A. Risk Factors
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, 2018, except for the following:
Our failure to successfully complete or integrate proposed acquisitions in the expected time frame, including the Hamlet Transaction, or to realize all or any part of the anticipated benefits of such acquisitions, may adversely affect our results of operations.
Our results of operations and financial condition may change significantly as a result of the Hamlet Transaction. Acquisitions involve numerous risks, including failure to complete the acquisition, difficulties in the assimilation of the assets and operations of the acquired businesses, inefficiencies and difficulties that arise because of unfamiliarity with new assets and the businesses associated with them and the diversion of management’s attention from other business concerns. Further, unexpected costs and challenges may arise whenever businesses with different operations are combined. The success of the Hamlet Transaction will depend, in part, on our ability to realize the anticipated benefits and synergies from combining the business of the First JV with that of the Partnership. If we are not able to achieve these objectives on a timely basis, the anticipated benefits of the Hamlet Transaction may not be realized fully or at all. There can be no assurance that the elimination of certain duplicative costs, as well as the realization of other efficiencies related to the integration of the First JV’s business into the Partnership, will be achieved or will offset the incremental transaction-related costs over time. Any of the difficulties described above could have an adverse effect on our results of operations, business and financial position and our ability to pay distributions to our unitholders.
Our acquisition of our sponsor’s interest in the First JV exposes us directly to project development risks.
As a result of the Hamlet Transaction and any additional investments we may make in the First JV or other project development opportunities, we will directly expose ourselves to project development risks including permitting challenges, failure to timely procure the requisite financing or equipment, construction, integration or operating difficulties or an inability to obtain off-take contracts commensurate with our production capacity on acceptable terms. Moreover, our project development activities, including in connection with the Hamlet Transaction, may be capital-intensive, and we may exceed our budgeted capital expenditures or be required to make additional unanticipated capital expenditures in connection therewith. No assurances can be given that we will be successful in any project development activities we undertake, whether in connection with the Hamlet Transaction or otherwise, which could have an adverse effect on our results of operations, business and financial position and our ability to pay distributions to our unitholders.
As a result of the Hamlet Transaction, we are engaged in a joint venture, and may in the future enter into additional joint ventures, which could restrict our operational and corporate flexibility. In addition, the First JV is subject to many of the same operational risks to which we are subject.
As a result of the Hamlet Transaction, we are engaged in a joint venture, which may restrict our operational and corporate flexibility. Because we do not control all of the decisions of the First JV, it may be difficult or impossible for us to cause the First JV to take certain actions that we desire to cause the First JV to take.  For example, we cannot unilaterally cause the First JV to (i) enter into, amend, modify or waive certain contracts with related parties or (ii) incur indebtedness in excess of $1 million or otherwise outside the ordinary course of business. Moreover, joint venture arrangements involve various risks and uncertainties, including the possibility that our joint venture partners may not satisfy their financial obligations to the joint venture.


37
Table of Contents

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

 
 
2.1

 
3.1

 
3.2

 
3.3

 
10.1

 
10.2

 
10.3*

 
10.4*

 
10.5* ‡

 
31.1*

 
31.2*

 
32.1**

 
101.INS*

 
XBRL Instance Document
101.SCH*

 
XBRL Schema Document
101.CAL*

 
XBRL Calculation Linkbase Document
101.DEF*

 
XBRL Definition Linkbase Document
101.LAB*

 
XBRL Labels Linkbase Document
101.PRE*

 
XBRL Presentation Linkbase Document
______________________________________________________________
*     Filed herewith.
**   Furnished herewith.
‡ Portions of the Exhibit have been omitted.


38
Table of Contents

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 8, 2019
 
ENVIVA PARTNERS, LP
 
 
 
 
By:
Enviva Partners GP, LLC, its general partner
 
 
 
 
By:
 /s/ SHAI EVEN
 
 
Name:
Shai Even
 
 
Title:
Executive Vice President and Chief Financial Officer (Principal Financial Officer)

39
Execution Version

ENVIVA MANAGEMENT COMPANY, LLC

April 2, 2019
Enviva Partners, LP
7200 Wisconsin Avenue, Suite 1000
Bethesda, MD 20814
Attn: General Counsel
Facsimile No.: (240) 482-3774
email: william.schmidt@envivabiomass.com
    

Re: Waiver of Payment Amount
Ladies and Gentlemen:
Reference is made to the Management Services Agreement dated April 5, 2015 (the “ Agreement ”) by and among Enviva Partners, LP, a Delaware limited partnership, Enviva Partners GP, LLC, a Delaware limited liability company, Enviva, LP, a Delaware limited partnership, Enviva GP, LLC, a Delaware limited liability company, Enviva Pellets Ahoskie, LLC, a Delaware limited liability company, Enviva Pellets Amory, LLC, a Delaware limited liability company, Enviva Pellets Northampton, LLC, a Delaware limited liability company, Enviva Pellets Cottondale, LLC, a Delaware limited liability company, Enviva Port of Chesapeake, LLC, a Delaware limited liability company, Enviva Energy Services, LLC, a Delaware limited liability company, Enviva Pellets Sampson, LLC, a Delaware limited liability company, Enviva Pellets Southampton, LLC, a Delaware limited liability company, Enviva Port of Panama City, LLC, a Delaware limited liability company, Enviva Port of Wilmington, LLC, a Delaware limited liability company, and Enviva Management Company, LLC, a Delaware limited liability company (collectively, the “ Parties ”). Capitalized terms used and not defined herein shall have the meaning assigned thereto in the Agreement.
The Parties agree to waive the obligation of Enviva Partners GP, LLC to pay, or cause to be paid, a portion of the Payment Amount in the amount of $4,700,000.00 payable with respect to the calendar quarter beginning April 1, 2019.
The Parties agree to waive the obligation of Enviva Partners GP, LLC to pay, or cause to be paid, a portion of the Payment Amount in the amount of $3,500,000.00 payable with respect to the calendar quarter beginning July 1, 2019.
The Parties agree to waive the obligation of Enviva Partners GP, LLC to pay, or cause to be paid, a portion of the Payment Amount in the amount of $2,500,000.00 payable with respect to the calendar quarter beginning October 1, 2019.



The Parties agree to waive the obligation of Enviva Partners GP, LLC to pay, or cause to be paid, a portion of the Payment Amount in the amount of $2,000,000.00 payable with respect to the calendar quarter beginning January 1, 2020.
The Parties agree to waive the obligation of Enviva Partners GP, LLC to pay, or cause to be paid, a portion of the Payment Amount in the amount of $500,000.00 payable with respect to the calendar quarter beginning April 1, 2020.
For the avoidance of doubt, the waiver of Enviva Partners GP, LLC’s obligation to pay the applicable portion of the Payment Amount is not a deferral of such payment obligation and such amounts will never become due and payable.
[The remainder of this page was left blank intentionally; the signature page follows.]





This letter agreement shall be effective as of the date first written above.

Sincerely yours,

ENVIVA MANAGEMENT COMPANY, LLC

By: /s/ WILLIAM H. SCHMIDT, JR.
Name: William H. Schmidt, Jr.
Title:
Executive Vice President, Corporate
Development and General Counsel



ACKNOWLEDGED AND AGREED:

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


By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer


ENVIVA PARTNERS GP, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer


ENVIVA, LP
By: Enviva GP, LLC, as its sole general partner


By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief

Signature Page to Letter Agreement

Financial Officer
ENVIVA GP, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer


ENVIVA PELLETS AHOSKIE, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer


ENVIVA PELLETS AMORY, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer


ENVIVA PELLETS NORTHAMPTON, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer


ENVIVA PELLETS COTTONDALE, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer







ENVIVA PORT OF CHESAPEAKE, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer


ENVIVA ENERGY SERVICES, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer


ENVIVA PELLETS SAMPSON, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer


ENVIVA PELLETS SOUTHAMPTON, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer


ENVIVA PORT OF PANAMA CITY, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer








ENVIVA PORT OF WILMINGTON, LLC

By: /s/ SHAI EVEN
Name: Shai Even
Title:      Executive Vice President and Chief
Financial Officer







Execution Version


THE INDEBTEDNESS EVIDENCED BY THIS CREDIT AGREEMENT IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. FOR INFORMATION REGARDING THE ISSUE PRICE, THE TOTAL AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, AND THE YIELD TO MATURITY OF SUCH INDEBTEDNESS, PLEASE CONTACT THE TREASURER OF THE BORROWER AT THE ADDRESS SET FORTH IN THE NOTICE PROVISIONS HEREOF.



SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
April 2, 2019
between
ENVIVA WILMINGTON HOLDINGS, LLC,
as Borrower
and
ENVIVA, LP,
as Lender






TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS    1
1.1
DEFINED TERMS    1
1.2
TERMS GENERALLY    9
1.3
ACCOUNTING TERMS; GAAP    9
ARTICLE II THE CREDITS    9
2.1
LOANS    9
2.2
REQUESTS FOR REVOLVING LOANS    10
2.3
FUNDING OF REVOLVING LOANS    10
2.4
TERMINATION AND REDUCTION OF REVOLVING COMMITMENT    10
2.5
REPAYMENT OF LOANS    11
2.6
PREPAYMENT OF LOANS    11
2.7
INTEREST    12
2.8
PAYMENTS GENERALLY    13

i


ARTICLE III REPRESENTATIONS AND WARRANTIES    13
3.1
ORGANIZATION; POWERS    13
3.2
AUTHORIZATION; ENFORCEABILITY    13
3.3
GOVERNMENTAL APPROVALS; NO CONFLICTS    13
3.4
FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE    14
3.5
PROPERTIES.    14
3.6
LITIGATION    14
3.7
COMPLIANCE WITH LAWS AND AGREEMENTS    14
3.8
TAXES    14
ARTICLE IV CONDITIONS    15
4.1
EACH REVOLVING LOAN    15
ARTICLE V AFFIRMATIVE COVENANTS    15
5.1
FINANCIAL STATEMENTS AND OTHER INFORMATION    15
5.2
NOTICES OF MATERIAL EVENTS    16

ii


5.3
EXISTENCE; CONDUCT OF BUSINESS    16
5.4
PAYMENT AND PERFORMANCE OF OBLIGATIONS    16
5.5
MAINTENANCE OF PROPERTIES; INSURANCE    16
5.6
BOOKS AND RECORDS; INSPECTION RIGHTS    17
5.7
COMPLIANCE WITH LAWS    17
5.8
USE OF PROCEEDS    17
5.9
FURTHER ASSURANCES    17
ARTICLE VI NEGATIVE COVENANTS    17
6.1
DEBT    17
6.2
LIENS    18
6.3
FUNDAMENTAL CHANGES    19
6.4
INVESTMENTS, LOANS, ADVANCES AND GUARANTEES    19
6.5
SWAP AGREEMENTS    20
6.6
RESTRICTED PAYMENTS    20
6.7
TRANSACTIONS WITH AFFILIATES, ETC.    20

iii


6.8
SALES OF ASSETS    21
6.9
CERTAIN AMENDMENTS    22
6.10
CHANGE IN THE NATURE OF BUSINESS    22
6.11
LIMITATION ON RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS    22
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES    22
7.1
EVENTS OF DEFAULT    22
7.2
REMEDIES    24
ARTICLE VIII MISCELLANEOUS    24
8.1
NOTICES    24
8.2
WAIVERS; AMENDMENTS    25
8.3
EXPENSES; INDEMNITY; DAMAGE WAIVER    25
8.4
SUCCESSORS AND ASSIGNS; REGISTER    26
8.5
SURVIVAL    27
8.6
COUNTERPARTS; INTEGRATION; EFFECTIVENESS    27

iv


8.7
SEVERABILITY    27
8.8
RIGHT OF SETOFF    27
8.9
GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS    28
8.10
WAIVER OF JURY TRIAL    28
8.11
HEADINGS    29


v



EXHIBIT :

Exhibit A            Form of Borrowing Request



SCHEDULE :

Schedule 3.6         Litigation


vi


AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT (as amended, restated, supplemented, or otherwise modified from time to time, this “ Agreement ”), dated as of April 2, 2019, is between ENVIVA WILMINGTON HOLDINGS, LLC, a Delaware limited liability company (together with its successors and permitted assigns, the “ Borrower ”), and ENVIVA, LP, a Delaware limited partnership (together with its successors and assigns, the “ Lender ”).
W I T N E S S E T H
WHEREAS , Holdings (as defined herein) was a party, as the lender, under that certain Amended and Restated Credit Agreement, dated as of June 30, 2018 (the “ Existing Credit Agreement ”);
WHEREAS , in connection with the consummation of the transactions contemplated by that certain Contribution Agreement, dated as of March 21, 2019 (the “ Contribution Agreement ”), Holdings assigned its rights and obligations under the Existing Credit Agreement to Enviva Partners, LP, a Delaware limited partnership (“ Enviva Partners ”), and Enviva Partners assigned its rights and obligations under the Existing Credit Agreement to Lender;
WHEREAS , each of Holdings and Enviva Partners has been released from all rights and obligations under the Existing Credit Agreement; and
WHEREAS , the Borrower and the Lender desire to amend and restate the Existing Credit Agreement as set forth herein.
NOW, THEREFORE , in consideration of the mutual covenants and agreements herein contained and of the loans, extensions of credit, and commitments hereinafter referred to, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1      Defined Terms . As used in this Agreement (including the recitals above), the following terms have the meanings specified below:
“ Affiliate ” means, with respect to a specified Person, another Person that, directly or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified; provided the Lender and its Affiliates (other than the Borrower and its Subsidiaries), on the one hand, and the Borrower and its Subsidiaries, on the other hand, shall not be deemed Affiliates of each other.

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“ Agreement ” has the meaning set forth in the introductory paragraph of this Agreement.
“ Applicable Margin ” means 1.75%.
“ Asset Sale ” means (a) any Disposition (including by way of merger or consolidation and including any sale and leaseback transaction) of any property (including Equity Interests of any Subsidiary by the holder thereof) by the Borrower or any Subsidiary to any Person (other than, with respect to any Disposition by a Subsidiary, to the Borrower or any other Subsidiary) and (b) any issuance or sale by any Subsidiary of its Equity Interests to any Person (other than to the Borrower or any other Subsidiary).
“ Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.
“ Borrower ” has the meaning set forth in the introductory paragraph of this Agreement.
“ Borrower LLC Agreement ” means the Fourth Amended and Restated Limited Liability Company Agreement of the Borrower (including any schedules, exhibits, or attachments thereto), dated as of December 29, 2016, as amended, supplemented, or otherwise modified from time to time in accordance with its terms and conditions and the terms and conditions hereof.
“ Borrowing Request ” means a request by the Borrower for the funding of an increase in the outstanding principal amount of the Revolving Loan in accordance with Section 2.2 in a form substantially similar to the form attached as Exhibit A , or otherwise in a form reasonably approved by the Lender.
“ Business ” has the meaning set forth in the Borrower LLC Agreement.
“ Business Day ” means any day that is not a Saturday, Sunday, or other day on which commercial banks in New York, New York are authorized or required by Law to remain closed.
“ Capital Lease Obligations ” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as finance leases on a balance sheet of such Person under GAAP, and the amount of such obligations at any time will be the capitalized amount thereof at such time determined in accordance with GAAP.

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“ Cash Equivalents ” means:
(a)      direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;
(b)      investments in commercial paper, asset-backed securities, auction rate securities, or similar instruments, in each case maturing within twelve months from the date of acquisition thereof and having, at such date of acquisition, a credit rating of at least A-1 from S&P or P-1 from Moody’s; and
(c)      investments in certificates of deposit, banker’s acceptances, and time deposits, in each case maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000 and whose senior unsecured debt obligations are rated not less than A by S&P or A2 by Moody’s.
“ Casualty Event ” means, with respect to any property of any Person, any loss of title with respect to such property or any loss of or damage to or destruction of, or any condemnation or other taking (including by any Governmental Authority) of, such property for which such Person or any of its Subsidiaries receives insurance proceeds or proceeds of a condemnation award or other compensation in excess of $250,000, including any such taking of all or any part of any property of any Person or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any Law, or by reason of the temporary requisition of the use or occupancy of all or any part of any property of any Person or any part thereof by any Governmental Authority, civil, or military.
“ Change in Control ” means:
(a)    the Sponsors shall, collectively, cease to own, directly or indirectly, 100% of the outstanding Equity Interests of the Borrower and its Subsidiaries; or
(b)    anyone other than an Affiliate of the Lender becomes the Managing Member of the Borrower except as a result of the removal of the Lender or an Affiliate of the Lender as Managing Member pursuant to Section 4.4(b) of the Borrower LLC Agreement; or

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(c)    the sale, lease, transfer, conveyance, or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Borrower and its Subsidiaries (other than a Project Disposition involving the Hamlet Plant), taken as a whole, to any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act).
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract, or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.
“ Debt ” of any Person means, without duplication: (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes, or similar instruments; (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person; (d) all obligations of such Person in respect of the deferred purchase price of property or services that are due more than 90 days from the date of the invoice for such property or services or are more than 90 days past due other than those being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (e) all Debt of other entities secured by any Lien on property owned or acquired by such Person, whether or not the Debt secured thereby has been assumed by such Person; (f) all Guarantees by such Person of Debt of others; (g) Capital Lease Obligations of such Person; (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty; and (i) all obligations, contingent, or otherwise, of such Person in respect of bankers’ acceptances. The Debt of any Person includes the Debt of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is legally liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Debt provide such Person is not liable therefor. Notwithstanding the foregoing, and for the avoidance of doubt, offtake arrangements entered into by the Borrower or any of its Subsidiaries shall not constitute “Debt”.
“ Debtor Relief Laws ” means the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States of America or other applicable jurisdictions from time to time in effect.
“ Default ” means any event or condition that constitutes an Event of Default or that upon notice, lapse of time, or both would, unless cured or waived, become an Event of Default.

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“ Default Rate ” has the meaning set forth in Section 2.7(b) .
“ Dispose ” means, with respect to any property, to sell, lease, engage in a sale and leaseback with respect thereto, assign, convey, transfer, or otherwise dispose thereof (other than (i) the granting of a Permitted Lien, (ii) the occurrence of a Casualty Event, or (iii) the issuance of equity by the Borrower to a Sponsor). The term “ Disposition ” has a correlative meaning.
“ Dollars ” or “ $ ” refers to lawful money of the United States of America.
“ Effective Date ” means April 2, 2019.
“ Equity Interests ” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust, or other equity ownership interests in a Person, and any warrants, options, or other rights entitling the holder thereof to purchase or acquire any such equity interest.
“ Event of Default ” has the meaning set forth in Article VII .
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“ Final Payment Date ” means the date on which all Obligations (other than obligations for taxes, costs, indemnifications, and reimbursements in respect of which no claim or demand for payment has been made) have been paid and the Revolving Commitment has expired or been terminated.
“ GAAP ” means generally accepted accounting principles in the United States of America, as in effect from time to time.
“ Governmental Approval ” means: (a) any authorization, consent, approval, license, waiver, ruling, permit, tariff, rate, certification, exemption, filing, variance, claim, order, judgment, decree, sanction, or publication of, by, or with; (b) any notice to; (c) any declaration of or with; or (d) any registration by or with, or any other action by or on behalf of, any Governmental Authority.
“ Governmental Authority ” means the government of any nation, any political subdivision of any nation, whether state, provincial, territorial, or local, and any agency, authority, instrumentality, regulatory body, court, central bank, or other entity exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of or pertaining to government.

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“ Guarantee ” of or by any Person (the “ guarantor ”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Debt or other obligation of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities, or services for the purpose of assuring the owner of such Debt or other obligation of the payment thereof, (c) to maintain working capital, equity capital, or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt or other obligation, or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Debt or obligation, but the term Guarantee does not include endorsements for collection or deposit in the ordinary course of business.
“ Hamlet Plant ” means the industrial wood pellet biomass plant to be located in Hamlet, North Carolina, capable of producing as least 500,000 MT of industrial wood pellet biomass per year.
“ Highest Lawful Rate ” means the maximum rate of interest the Lender is permitted to contract for, charge, or receive under Law.
“ Holdings ” means Enviva Holdings, LP, a Delaware limited partnership.
“ Interest Payment Date ” means (a) the last day of each fiscal month of the Lender and (b) the Maturity Date.
“ Investment ” has the meaning set forth in Section 6.4 .
“ Law ” means (a) a statute, permit, ordinance, treaty, rule, or regulation of any Governmental Authority and (b) a court decision, judgment, order, decree, injunction, or ruling.
“ Lender ” has the meaning set forth in the introductory paragraph of this Agreement.
“ LIBOR Rate ” means the one-month US Dollar LIBOR rate as reported in The Wall Street Journal on the Effective Date and, thereafter, each Interest Payment Date (or if no such rate is reported on such date, on the most recently preceding date on which such rate was reported), or if The Wall Street Journal is not available, such other publication as shall be reasonably agreed between the Borrower and the Lender. Notwithstanding the foregoing, if the LIBOR Rate is less than zero, such rate will be deemed zero for purposes of this Agreement.

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“ Lien ” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge, or security interest in, on, or of such asset, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease, or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.
“ Loans ” means the collective reference to the Revolving Loan and the Term Loan.
“ Managing Member ” has the meaning set forth in the Borrower LLC Agreement.
“ Material Adverse Effect ” means a material adverse effect on (a) the business, assets, liabilities, operations, or financial condition of the Borrower and its Subsidiaries, taken as a whole, (b) any Project, (c) the ability of the Borrower to perform any of its obligations under this Agreement, or (d) the rights or remedies available to the Lender under this Agreement.
“ Material Debt ” means, at any time, Debt of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $1,000,000 at such time.
“ Maturity Date ” means the earliest of (i) June 30, 2022, (ii) the date of termination of the Revolving Commitment and (iii) the date on which both (A) the Project Disposition involving the Hamlet Plant shall have been consummated and (B) all Scheduled Disputes shall have been finally settled; provided (i) after the Lender has received a written request from the Borrower, the then-current Maturity Date may be extended by up to six months in the sole and absolute discretion of the Lender and (ii) following the exercise of the extension provided for in the immediately preceding clause (i), the then-current Maturity Date may be extended for an additional six-month period upon a written request from the Borrower, in each case in the sole and absolute discretion of the Lender.
“ Member ” has the meaning set forth in the Borrower LLC Agreement.
“ Moody’s ” means Moody’s Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency.
“ Net Cash Proceeds ” means cash proceeds received by the Borrower or any of its Subsidiaries with respect to any issuance of Debt, any Asset Sale, or any insurance or condemnation proceeds with respect to any Casualty Event (including cash proceeds subsequently received (as and when received by the Borrower or any of its Subsidiaries) in respect of noncash consideration initially received) net of (i) related expenses (including brokers’ fees or commissions, legal, accounting, and other professional and transactional fees, and taxes, including transfer and other taxes and the Borrower’s good faith estimate

7



of income taxes, paid or payable in connection therewith); (ii) amounts provided as a reserve, in accordance with GAAP, against any liabilities under any indemnification obligations associated therewith (but any such amounts that are released from such reserve will constitute Net Cash Proceeds at the time of release); (iii) with respect to Asset Sales, the Borrower’s good faith estimate of payments required to be made with respect to unassumed liabilities relating to the assets sold within 90 days of such Asset Sale (but any such cash proceeds that are not used to make payments in respect of such unassumed liabilities within 90 days of such Asset Sale will constitute Net Cash Proceeds); (iv) the principal amount, premium or penalty, if any, interest, and other amounts in respect of any Debt for borrowed money that is secured by a senior Lien on the asset sold in such Asset Sale and that is repaid with such proceeds (other than any such Debt assumed by the purchaser of such asset); and (v) other customary fees, commissions, costs, and other expenses incurred in connection therewith.
“ Obligations ” means, collectively, all principal of and interest on the Loans, fees, costs, indemnities, and other obligations, liabilities, and indebtedness arising out of or in connection with this Agreement, whether due by acceleration or otherwise, of the Borrower to the Lender, whether now existing or hereafter incurred, whether direct or indirect, absolute, or contingent, including interest accruing at any post-default rate and interest accruing after the commencement of any case, proceeding or other action relating to bankruptcy, insolvency, reorganization, or any similar proceeding of the Borrower whether or not a claim for post-petition interest is allowed in any such proceeding.
“ Permitted Liens ” means Liens permitted pursuant to Section 6.2 .
“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority, or other entity.
“ PIK Interest ” has the meaning set forth in Section 2.7(c) .
“ Project ” has the meaning set forth in the Borrower LLC Agreement.
“ Project Disposition ” means the occurrence of any of the following: (i) any Disposition by the Borrower or any of its Subsidiaries of any Equity Interests in any Subsidiary of the Borrower (other than to the Borrower or another Subsidiary of the Borrower); (ii) any issuance of Equity Interests by any Subsidiary of the Borrower (other than to the Borrower or another Subsidiary of the Borrower); or (iii) any Disposition by the Borrower or any of its Subsidiaries of any material portion of any Project (other than to the Borrower or another Subsidiary of the Borrower).

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“ Related Parties ” means, with respect to any specified Person, such Person’s Affiliates and the respective partners, directors, managers, officers, employees, agents, trustees, administrators, representatives, and advisors of such Person and such Person’s Affiliates.
“ Responsible Officer ” means (a) with respect to the Borrower, the chairman, vice chairman, chief executive officer, chief financial officer, chief operating officer, president, executive vice president, managing director, principal accounting officer, treasurer, controller, general counsel, secretary, or assistant secretary of the Managing Member or any other officer of the Managing Member designated by any two of the foregoing officers in a notice to the Lender and (b) with respect to any other Person, any of the principal executive officers, managing members, or general partners of such Person.
“ Restricted Payment ” means any dividend or other distribution (whether in cash, securities, or other property) with respect to any Equity Interests in the Borrower or any of its Subsidiaries, or any payment (whether in cash, securities, or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation, or termination of any such Equity Interests in the Borrower or any of its Subsidiaries or any option, warrant, or other right to acquire any such Equity Interests in the Borrower or any of its Subsidiaries.
“ Revolving Commitment ” means the commitment of the Lender to fund increases in the amount of the Revolving Loan at the request of the Borrower, as such commitment may be reduced from time to time pursuant to Section 2.4 . The initial amount of the Revolving Commitment on the Effective Date is $60,000,000.
“ Revolving Credit Exposure ” means, at any time, the outstanding principal amount of the Revolving Loan at such time.
“ Revolving Loan ” has the meaning set forth in Section 2.1(a) .
“ S&P ” means Standard & Poor’s Financial Services, LLC, a subsidiary of The McGraw-Hill Companies, Inc., and any successor thereto that is a nationally recognized rating agency.
“ Scheduled Disputes ” means the disputes described on Schedule 3.6 .
“ Sponsors ” means (a) the Lender and its Affiliates (other than the Borrower and its Subsidiaries) and (b) John Hancock Life Insurance Company (U.S.A.) and its Affiliates (other than the Borrower and its Subsidiaries).

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“ Subsidiary ” has the meaning set forth in the Borrower LLC Agreement. Unless otherwise specified, any reference in this Agreement to Subsidiaries shall be deemed a reference to direct or indirect Subsidiaries of the Borrower.
“ Swap Agreement ” means any agreement with respect to any swap, forward, future, or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial, or pricing indices or measures of economic, financial, or pricing risk or value or any similar transaction or any combination of these transactions, except no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees, or consultants of the Borrower or its Subsidiaries will be a Swap Agreement. For the avoidance of doubt, put options and floors shall not constitute a “Swap Agreement” for the purposes of this definition.
“ Term Loan ” has the meaning set forth in Section 2.1(b) .
1.2      Terms Generally . The definitions of terms in this Agreement apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun includes the corresponding masculine, feminine, and neuter forms. The words “include”, “includes”, and “including” will be deemed to be followed by the phrase “without limitation”. The word “will” will be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (a) any definition of or reference in this Agreement to any other agreement, instrument, or document will be construed as referring to such agreement, instrument, or document as from time to time amended, amended and restated, supplemented, or otherwise modified (subject to any restrictions on such amendments, amendments and restatements, supplements, or modifications set forth in this Agreement), (b) any reference in this Agreement to any Person will be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof”, and “hereunder”, and words of similar import, will be construed to refer to this Agreement in its entirety and not to any particular provision, (d) all references in this Agreement to Articles, Sections, Exhibits, and Schedules will be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any Law, unless otherwise specified, refers to such Law as amended, modified, or supplemented from time to time, and (f) the words “asset” and “property” will be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts, and contract rights.
1.3      Accounting Terms; GAAP . Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates

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and reports as to financial matters required to be furnished to the Lender hereunder shall reflect amounts in Dollars and shall be prepared in accordance with GAAP applied on a basis consistent with the financial statements delivered pursuant to Section 3.4(a) , except for changes in which the Borrower’s independent certified public accountants concur.
ARTICLE II     
THE CREDITS
2.1      Loans . Subject to the terms and conditions set forth in this Agreement, from time to time from the effective date of the Existing Credit Agreement to but excluding the Maturity Date the Lender agrees to make (a) a revolving loan (the “ Revolving Loan ”) to the Borrower in an aggregate principal amount that will not result in the Revolving Credit Exposure exceeding the Revolving Commitment, which Revolving Loan shall be evidenced by, and governed by, this Agreement and (b) a term loan (the “ Term Loan ”) to the Borrower in an aggregate principal amount sufficient to cover PIK Interest, which Term Loan shall be evidenced by, and governed by, this Agreement. Within the foregoing limits and subject to the terms and conditions set forth in this Agreement, the Borrower may borrow, repay, and re-borrow the Revolving Loan.
2.2      Requests for Additional Amounts under the Revolving Loan . To request additional amounts be funded as a portion of the Revolving Loan, the Borrower shall deliver to the Lender by hand delivery, telecopy, or electronic mail a duly completed and executed Borrowing Request not later than 5:00 p.m., New York, New York time (or such later time as approved by the Lender), on the date of the proposed funding of an increase in the Revolving Loan. Each such Borrowing Request will be irrevocable and must specify the following information:
(a)      the amount of the requested funding under the Revolving Loan;
(b)      the date of the proposed funding under the Revolving Loan, which must be a Business Day; and
(c)      the location and number of the Borrower’s account to which funds are to be disbursed.

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2.3      Funding of Additional Amounts under the Revolving Loan . The Lender shall fund additional amounts under the Revolving Loan on the proposed date thereof by wire transfer or book transfer of immediately available funds by 7:00 p.m., New York, New York time, to the account of the Borrower or its Subsidiary designated by it for such purpose in the Borrowing Request.
2.4      Termination and Reduction of Revolving Commitment .
(a)      Unless previously terminated, the Revolving Commitment will terminate on the Maturity Date.
(b)      The Borrower may at any time terminate, or from time to time reduce, without premium or penalty, the Revolving Commitment, except the Borrower shall not terminate or reduce the Revolving Commitment if, after giving effect to any concurrent prepayment of the Revolving Loan in accordance with Section 2.6 , the Revolving Credit Exposure would exceed the Revolving Commitment. Each partial reduction of the Revolving Commitment must be in an amount that is an integral multiple of $50,000 and not less than $100,000.
(c)      The Borrower shall notify the Lender of any election by the Borrower to terminate or reduce the Revolving Commitment under Section 2.4(b) or prepay the Loans under Section 2.6(a) at least five Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Each notice delivered by the Borrower pursuant to this Section 2.4(c) will be irrevocable.
(d)      [reserved.]
(e)      Any termination or reduction of the Revolving Commitment will be permanent and such Revolving Commitment will not be reinstated.
2.5      Repayment of Loans . The Borrower hereby unconditionally promises to pay to the Lender the unpaid principal amount of each Loan (together with all accrued but unpaid interest on the Loans and all other Obligations) on the Maturity Date.
2.6      Prepayment of Loans .
(a)      Subject to prior notice in accordance with Section 2.4(c) , the Borrower may at any time and from time to time prepay the Loans made to it in whole or in part, without premium or penalty, in an amount that is an integral multiple of $50,000 and not less than $100,000 (or, if less, the remaining outstanding principal amount thereof); provided the Borrower may prepay the Revolving Loan only if there are no amounts then outstanding under the Term Loan.

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(b)      If the Revolving Credit Exposure exceeds the Revolving Commitment, the Borrower shall, within three Business Days (or such later time as approved by the Lender in its sole discretion), repay or prepay the Revolving Loan in an amount sufficient to eliminate such excess.
(c)      On or before the date that is 180 days after the receipt by the Borrower or any of its Subsidiaries of any proceeds from any Asset Sale permitted by Section 6.8(d) or Casualty Event, the Borrower shall use 100% of the Net Cash Proceeds from the proceeds of such Asset Sale or Casualty Event that have not been reinvested (or, if committed to be reinvested, within 90 days after the end of such 180-day period) in assets useful in the Borrower and its Subsidiaries’ business on or before such date (x) first , to pay the Term Loan until no amounts remain outstanding thereon, (y) second , to prepay the Revolving Loan with a contemporaneous permanent reduction in the Revolving Commitment, and (z) third , to pay any other outstanding Obligations.
(d)      On the date the Borrower or any of its Subsidiaries receives any proceeds from any Asset Sale constituting a Project Disposition, the Borrower shall apply Net Cash Proceeds from such Asset Sale in an amount equal to an amount determined by the Lender in its sole and absolute discretion (but, in any case, not to exceed 100% of the Net Cash Proceeds from such Asset Sale) (x) first , to pay the Term Loan until no amounts remain outstanding thereon, (y) second , to prepay the Revolving Loan with a contemporaneous permanent reduction in the Revolving Commitment, and (z) third , to pay any other outstanding Obligations.
(e)      If the Borrower or any of its Subsidiaries receives Net Cash Proceeds from the issuance or incurrence of Debt for money borrowed (other than any cash proceeds from the issuance of Debt permitted by Section 6.1 ), the Borrower shall simultaneously with the receipt of such Net Cash Proceeds by the Borrower or any of its Subsidiaries use 100% of such Net Cash Proceeds (x) first , to pay the Term Loan until no amounts remain outstanding thereon, (y) second , to prepay the Revolving Loan with a contemporaneous permanent reduction in the Revolving Commitment, and (z) third , to pay any other outstanding Obligations.
(f)      The Borrower shall, on the last Business Day of each week, to the extent demanded by Lender, prepay Loans in an amount equal to all Excess Cash (as defined below). Excess Cash accepted by the Lender pursuant to this Section 2.6(f) shall be applied to the Loans as follows: (x) first , to pay the Term Loan until no amounts remain outstanding thereon, (y) second , to prepay the Revolving Loan but without a contemporaneous permanent reduction in the Revolving Commitment, and (z) third , to pay any other outstanding Obligations. For purposes of this Section 2.6(f) , “ Excess Cash ” means, at any time, the

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aggregate amount of cash, cash equivalents, certificates of deposit, and investments in money market funds, in each case, held or owned by (whether directly or indirectly), the Borrower or its Subsidiaries or which are otherwise assets of a nature that would be reflected as cash on the consolidated balance sheet of the Borrower excluding (i) any cash held to pay, in the ordinary course of business, amounts then due and owing to third parties and for which the Borrower or such Subsidiary (as the case may be) has issued checks or has initiated wires or ACH transfers in order to pay such amounts, (ii) cash to be used within two (2) Business Days to pay the purchase price for any acquisition of any assets or property, and (iii) any cash constituting deposits or advance payments held in escrow by a third party subject to customary provisions regarding the payment and refunding of such deposits or advance payments.
2.7      Interest .
(a)      The Loans will bear interest at the lower of (i) the LIBOR Rate plus the Applicable Margin and (ii) the Highest Lawful Rate.
(b)      Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default, the Loans will bear interest, after as well as before judgment, at an annual rate (the “ Default Rate ”) equal to the lower of (i) 2% plus the rate otherwise applicable to the Loans as provided in Section 2.7(a) and (ii) the Highest Lawful Rate.
(c)      Accrued interest on each Loan will be payable in arrears in cash on each Interest Payment Date and upon termination of the Revolving Commitment, except (i) interest accrued pursuant to Section 2.7(b) will be payable on demand and (ii) unless otherwise elected by the Borrower on each Interest Payment Date, in lieu of a cash interest payment, accrued interest pursuant to Section 2.7(a) shall be deemed to increase the outstanding principal amount of the Term Loan (any interest so deemed to increase the outstanding principal amount of the Term Loan is referred to as “ PIK Interest ”). For the avoidance of doubt, the Lender shall deem any interest not paid in cash in Dollars on an Interest Payment Date to be automatically deemed to increase the outstanding principal amount of the Term Loan on such Interest Payment Date without any further action on the part of either the Lender or the Borrower.
(d)      All interest payable under this Agreement will be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The Lender shall determine the applicable LIBOR Rate, and such determination will be conclusive absent manifest error.

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2.8      Payments Generally .
(a)      The Borrower shall make each payment required to be made by it under this Agreement prior to the time specified for such payment (or, if no such time is specified, prior to 7:00 p.m., New York, New York time), on the date when due, in immediately available funds (except as otherwise expressly provided herein), without set off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Lender, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments must be made to the Lender at the address on file pursuant to Section 8.1 . If any payment hereunder is due on a day that is not a Business Day, the date for payment will be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon will be payable for the period of such extension. All payments under this Agreement must be made in Dollars.
(b)      If at any time insufficient funds are received by and available to the Lender to pay fully all amounts of principal, interest, and fees (after giving effect to the provisions of Section 2.7(c) ) then due under this Agreement, such funds will be applied (i) first , towards payment of interest and fees then due and (ii) second , towards payment of principal then due or otherwise as directed by the Lender in its sole discretion.
ARTICLE III     
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
3.1      Organization; Powers . The Borrower and each of its Subsidiaries (a) is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or formation, (b) has all requisite power and authority to carry on its business as now conducted, and (c) is qualified to do business in, and is in good standing (if applicable in a jurisdiction) in, every jurisdiction where such qualification is required, except in each case where the failure to be so qualified, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
3.2      Authorization; Enforceability . The transactions contemplated by this Agreement are within the Borrower’s limited liability company powers, and have been duly authorized by all necessary corporate action. This Agreement constitutes the legal, valid, and binding obligations of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

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3.3      Governmental Approvals; No Conflicts . The transactions contemplated by this Agreement (a) do not require any Governmental Approval on the part of the Borrower or any of its Subsidiaries, except such as have been obtained or made and are in full force and effect, (b) will not violate (i) any Law applicable to the Borrower or any of its Subsidiaries, except any violation that could not reasonably be expected to have a Material Adverse Effect, (ii) the organizational documents of the Borrower or any of its Subsidiaries, or (iii) any order of any Governmental Authority applicable to the Borrower or any of its Subsidiaries, (c) will not violate or result in a default under any indenture, agreement, or other instrument binding upon the Borrower, any of its Subsidiaries, or any of their respective assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any Subsidiary, except any violation, default, or payment that could not reasonably be expected to have a Material Adverse Effect, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.
3.4      Financial Condition; No Material Adverse Change .
(a)      The Borrower has previously furnished to the Lender its unaudited consolidated balance sheet as of December 31, 2018, and the related statements of operations, equity, and cash flows for the three months then ended. Such financial statements present fairly, in all material respects, the financial position and results of operations, changes in equity, and cash flows of the Borrower and its Subsidiaries as of such date and for such period in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes.
(b)      Since December 31, 2018, no event has occurred that has had, or could reasonably be expected to have, a Material Adverse Effect.
3.5      Properties . The Borrower and each of its Subsidiaries has good and marketable title to, valid leasehold interests in, or easements, licenses, or other limited property interests in, all real and personal property necessary for the operation of the Business, subject to no Liens other than Permitted Liens.
3.6      Litigation . Other than the Scheduled Disputes, there are no actions, suits, investigations, or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened in writing against the Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect or (ii) that involve this Agreement or the transactions contemplated hereby.

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3.7      Compliance with Laws and Agreements . The Borrower and each of its Subsidiaries is in compliance with all Laws applicable to it or its property and all indentures, agreements, and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
3.8      Taxes . The Borrower and each of its Subsidiaries has timely filed or caused to be filed all tax returns and reports required to have been filed (after giving effect to any extension granted in the time for filing) and has paid or caused to be paid all taxes required to have been paid by it, except (i) taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary has set aside on its books adequate reserves or (ii) where the failure to file such tax returns or pay such taxes, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
ARTICLE IV     
CONDITIONS
4.1      Each Revolving Loan . The obligation of the Lender to fund increases in the outstanding principal amount of the Revolving Loan is subject to the satisfaction of the following conditions:
(a)      The Lender shall have received a Borrowing Request as required by Section 2.2 .
(b)      The representations and warranties of the Borrower set forth in this Agreement shall be true and correct in all material respects (or, as to any representations and warranties that are otherwise qualified as to materiality or Material Adverse Effect, as so qualified) on and as of the date of such funding of an increase in the outstanding principal amount of the Revolving Loan, except to the extent any such representation or warranty is stated to relate to an earlier date in which case such representation and warranty shall be true and correct in all material respects on and as of such earlier date.
(c)      No event shall have occurred since December 31, 2018, that has had, or could reasonably be expected to have, a Material Adverse Effect.
(d)      At the time of and immediately after giving effect to such funding of an increase in the outstanding principal amount of the Revolving Loan, no Default or Event of Default shall have occurred and be continuing.

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ARTICLE V     
AFFIRMATIVE COVENANTS
Until the Final Payment Date, the Borrower covenants and agrees with the Lender as follows:
5.1      Financial Statements and Other Information . The Borrower shall, if requested by the Lender, furnish to the Lender:
(a)      within 60 days following the end of each fiscal quarter, an unaudited quarterly income statement, balance sheet, statement of changes in Members’ capital, and statement of cash flow, prepared in accordance with GAAP (except as therein noted);
(b)      within 150 days after the end of each fiscal year an audited annual income statement, balance sheet, statement of changes in Members’ capital, and statement of cash flow, prepared in accordance with GAAP (except as therein noted); and
(c)      within a reasonable period following any request therefor, such other information regarding the operations, business affairs, and financial condition of the Borrower and its Subsidiaries, or compliance with the terms of this Agreement, as the Lender may reasonably request.
5.2      Notices of Material Events . The Borrower shall furnish to the Lender prompt written notice of the following:
(a)      the Borrower obtaining actual knowledge of the occurrence of any Default;
(b)      the receipt by the Borrower of service with respect to, or the Borrower otherwise obtaining actual knowledge of, the filing or commencement of any action, suit, or proceeding by or before any arbitrator or Governmental Authority against the Borrower or any of its Subsidiaries as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; and
(c)      the Borrower obtaining actual knowledge of any other development that has had, or could reasonably be expected to have, a Material Adverse Effect.
The Borrower shall deliver with each notice delivered under this Section 5.2 a statement of a Responsible Officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

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5.3      Existence; Conduct of Business . The Borrower shall, and shall cause each of its Subsidiaries to, (i) preserve, renew, and keep in full force and effect its legal existence and (ii) take all reasonable action to maintain the rights, licenses, permits, privileges, and franchises material to the conduct of its Business except, in the case of clause (ii) above, where the failure to do so could not reasonably be expected to have a Material Adverse Effect, but the foregoing will not prohibit any merger, consolidation, liquidation, or dissolution permitted under Section 6.3 or any Asset Sale permitted under Section 6.8 .
5.4      Payment and Performance of Obligations . The Borrower shall, and shall cause each of its Subsidiaries to, pay and perform its material obligations before the same become delinquent or in default, including tax liabilities, except where (a) (i) the validity or amount thereof is being contested in good faith by appropriate proceedings, and (ii) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, or (b) the failure to pay or perform pending such contest could not reasonably be expected to have a Material Adverse Effect.
5.5      Maintenance of Properties; Insurance . The Borrower shall, and shall cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition in accordance with industry practice, ordinary wear and tear excepted, except nothing in this Section 5.5 will prevent the Borrower or any of its Subsidiaries from discontinuing the operation or maintenance of any such properties if such discontinuance is, in the reasonable judgment of the Borrower, desirable in the conduct of its Business and not disadvantageous in any material respect to the Lender and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.
5.6      Books and Records; Inspection Rights . The Borrower shall, and shall cause each of its Subsidiaries to, keep proper books of record and account in accordance with GAAP, prudent accounting practice, and applicable Law. The Borrower shall, and shall cause each of its Subsidiaries to, permit any representatives designated by the Lender, upon reasonable prior notice and subject to applicable safety rules and regulations, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances, and condition with its officers and, so long as the Borrower has been given reasonable notice thereof and an opportunity to participate in such discussions, independent accountants, all at such reasonable times during the Borrower’s and each of its Subsidiaries’ normal business hours (and in a manner so as, to the extent practicable, not to interfere with the normal business operations of the Borrower and each of its Subsidiaries or jeopardize any applicable privileges) and as often as reasonably requested.

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5.7      Compliance with Laws . The Borrower shall, and shall cause each of its Subsidiaries to, comply with all Laws applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
5.8      Use of Proceeds . The Borrower shall use the proceeds of any funding of an increase in the outstanding principal amount of the Revolving Loan for the general corporate purposes of the Borrower and its Subsidiaries. The Borrower shall use the proceeds of any increase in the outstanding principal amount of the Term Loan only to pay PIK Interest.
5.9      Further Assurances . The Borrower shall, and shall cause each of the Subsidiaries to, promptly, upon the request of the Lender (a) correct any material defect or error that may be discovered in this Agreement or in the execution thereof and (b) do, execute, acknowledge, deliver, record, re-record, file, re-file, register, and re-register any and all such further acts, deeds, certificates, assurances, and other instruments the Lender may reasonably require from time to time in order to carry out more effectively the purposes of this Agreement.
ARTICLE VI     
NEGATIVE COVENANTS
Until the Final Payment Date, the Borrower covenants and agrees with the Lender as follows:
6.1      Debt . The Borrower shall not, and shall not permit any of its Subsidiaries to, create, incur, assume, or permit to exist any Debt, except:
(a)      the Obligations;
(b)      Debt existing on the Effective Date;
(c)      purchase money Debt (including Capital Lease Obligations) incurred to finance the acquisition, construction, or improvement of any equipment and other fixed or capital assets, and any Debt assumed in connection with the acquisition of any assets or secured by a Lien on any such assets prior to the acquisition thereof if the Liens securing such purchase money Debt attach only to the equipment or fixed or capital assets constructed or acquired with the proceeds thereof or such improvements made with the proceeds thereof;
(d)      Debt consisting of reimbursement obligations relating to performance bonds or surety or appeal bonds issued on behalf of or for the benefit of the Borrower or any of its Subsidiaries in the ordinary course of business, including any such bonds provided pursuant to legal or regulatory requirements;

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(e)      current payables in respect of bankers’ acceptances, overdraft facilities, automatic clearinghouse arrangements, employee credit card programs, corporate cards and purchasing cards, and other business cash management arrangements in the ordinary course of business;
(f)      Debt arising in connection with endorsement of checks, drafts, or similar instruments of payment for deposit in the ordinary course of business; and
(g)      other Debt in an aggregate principal amount not to exceed $1,000,000.
6.2      Liens . The Borrower shall not, and shall not permit any of its Subsidiaries to, create, incur, assume, or permit to exist any Lien on any asset now owned or hereafter acquired by it, except:
(a)      Liens in existence on the Effective Date;
(b)      Liens for taxes, assessments, or other governmental charges that are not delinquent or are being contested in good faith and by appropriate proceedings and with respect to which cash reserves have been maintained in accordance with GAAP in compliance with Section 5.4 ;
(c)      deposits or pledges to secure obligations under worker’s compensation, social security, or similar laws, or under unemployment insurance;
(d)      deposits or pledges to secure bids, tenders, contracts, leases, statutory obligations, performance bonds, surety and appeal bonds, and other obligations of like nature arising in the ordinary course of business;
(e)      judgment Liens in respect of judgments that do not constitute an Event of Default under Section 7.1(k) ;
(f)      Liens of mechanics, builders, materialmen, warehousemen, carriers, landlords, or other similar statutory or contractual Liens arising in the ordinary course of business with respect to obligations that are not overdue by more than 60 days or that are being contested in good faith and by appropriate proceedings and with respect to which appropriate reserves have been maintained in accordance with GAAP;
(g)      purchase money Liens (including conditional sale contracts and Liens securing Capital Lease Obligations) placed upon equipment or fixed or capital assets hereafter constructed, acquired or improved to secure all or a portion of the purchase price thereof, if (i) such Liens are created substantially simultaneously with the construction, acquisition, or improvement of such assets and (ii) such Liens do not encumber any property

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of the Company or any Subsidiary other than the equipment or fixed assets so acquired, constructed, or improved;
(h)      encumbrances on real property consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property, and defects, deficiencies, and irregularities in the title thereto that do not in the aggregate detract from or impair the value or intended use of the property or assets affected thereby to any material extent;
(i)      Liens arising by virtue of any statutory or common law provision or customary deposit account terms relating to banker’s liens, rights of set-off, or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution if (i) such deposit account is not a dedicated cash collateral account, (ii) is not subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board of Governors of the Federal Reserve System of the United States of America, and (iii) is not intended by the Borrower or any Subsidiary to provide collateral to the depository institution to secure any Debt; and
(j)      other Liens on property in respect of aggregate obligations not to exceed $1,000,000.
6.3      Fundamental Changes . The Borrower shall not, and shall not permit any of its Subsidiaries to, merge or consolidate with or into any other Person or liquidate or dissolve except:
(a)      the Borrower may merge with any Person so long as the Borrower is the surviving or continuing Person;
(b)      a Subsidiary may merge into the Borrower or any other Subsidiary or the Borrower; and
(c)      any Subsidiary may liquidate or dissolve if such liquidation or dissolution is not materially disadvantageous to the Lender and substantially all of such Subsidiary’s property, business, or assets shall be or have been conveyed, sold, assigned, or otherwise transferred to the Borrower or any other Subsidiary of the Borrower.
6.4      Investments, Loans, Advances and Guarantees . The Borrower shall not, and shall not permit any of its Subsidiaries to, purchase, hold, or acquire (including pursuant to any merger with any Person that was not a Subsidiary of the Borrower prior to such merger) any Equity Interests, evidences of indebtedness, or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist

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any loans or advances to, or Guarantee any Debt of any other Person (any of the foregoing, an “ Investment ”), except:
(a)      Investments by the Borrower and its Subsidiaries outstanding on the Effective Date;
(b)      Investments by the Borrower in any of its Subsidiaries and Investments by any Subsidiary of the Borrower in another Subsidiary of the Borrower;
(c)      Swap Agreements permitted under Section 6.5 ;
(d)      Cash Equivalents;
(e)      Guarantees of the obligations (other than Debt for borrowed money, unless such Debt is otherwise permitted under Section 6.1 ) of any Subsidiary of the Borrower;
(f)      Investments made using the proceeds of the issuance of Equity Interests of the Borrower or capital contributions to the Borrower; and
(g)      other Investments in an aggregate outstanding amount not to exceed (net of return on investment) $1,000,000.
6.5      Swap Agreements . The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into or permit to exist any Swap Agreement, except Swap Agreements entered into in the conduct of the Business consistent with prudent industry practices and not speculative in nature.
6.6      Restricted Payments . The Borrower shall not, and shall not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payments, except:
(a)      any Subsidiary of the Borrower may make Restricted Payments to the Borrower or any other Subsidiary of the Borrower;
(b)      the Borrower may declare and pay dividends with respect to its Equity Interests payable solely in additional Equity Interests; and
(c)      the Borrower may make dividends or distributions to holders of any Equity Interests of the Borrower from available cash generated from operations to the extent that, both immediately before and after giving pro forma effect thereto, no Default or Event of Default exists or will result therefrom.

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6.7      Transactions with Affiliates, Etc. The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, purchase, acquire, or lease any property from, or sell, transfer, or lease any property to, or otherwise enter into any transaction with, any Affiliate (other than the Borrower or any of its Subsidiaries), except: (i) transactions that are in the ordinary course of business, on an arm’s-length basis on terms and conditions no less favorable than terms and conditions that would have been obtainable from a Person other than an Affiliate; (ii) Restricted Payments permitted under Section 6.6 ; and (iii) the Borrower LLC Agreement and transactions expressly permitted by the Borrower LLC Agreement.
6.8      Sales of Assets . The Borrower shall not, and shall not permit any of its Subsidiaries to, Dispose of any property, real, personal, or mixed, whether now owned or hereafter acquired, except:
(a)      sales of inventory in the ordinary course of business and the granting of any option or other right to purchase, lease, or otherwise acquire inventory in the ordinary course of its business;
(b)      Dispositions of property (other than any material portion of a Project) that is: (1) being replaced, (2) no longer commercially viable to maintain, or (3) non-material, obsolete, surplus, or worn-out, in each case, whether now owned or hereafter acquired;
(c)      Dispositions of property by any Subsidiary to the Borrower or any other Subsidiary of the Borrower;
(d)      Asset Sales (other than any Project Disposition) and Casualty Events, the Net Cash Proceeds of which are (i) reinvested within 180 days of such Asset Sale or Casualty Event in assets useful in the Business (or, if committed to be reinvested, within 90 days after the end of such 180-day period), or (ii) otherwise applied to repay the Loans;
(e)      a Project Disposition (and all transactions in connection with such Project Disposition as contemplated by Exhibit G to the Borrower LLC Agreement) so long as the Net Cash Proceeds of each such Project Disposition are applied as required by Section 2.6(d) ;
(f)      the use, sale, exchange, or other Disposition of money or Cash Equivalents in a manner that is not prohibited by the terms of this Agreement;
(g)      the settlement or write-off of accounts receivable or sale of overdue accounts receivable for collection in the ordinary course of business;

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(h)      Dispositions constituting Restricted Payments permitted under Section 6.6 ;
(i)      the sale and lease-back of equipment; and
(j)      other Dispositions of personal property (other than any portion of a Project) the fair market value of which does not exceed $1,000,000 during any fiscal year.
6.9      Certain Amendments . The Borrower shall not, and shall not permit any of its Subsidiaries to, amend, modify, or waive any provision of its organizational documents unless (a) such amendment, modification, or waiver is required by Law or (b) such amendment, modification, or waiver could not reasonably be expected to materially adversely affect any material right or remedy of the Lender under this Agreement.
6.10      Change in the Nature of Business . The Borrower shall not, and shall not permit any of its Subsidiaries to, engage in any business other than the Business.
6.11      Limitation on Restrictions on Subsidiary Distributions . The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any of its Subsidiaries to make Restricted Payments in respect of any Equity Interests of such Subsidiary held by, or pay any Debt owed to, the Borrower or any other Subsidiary of the Borrower, except (i) restrictions and conditions imposed by applicable Law or by this Agreement, (ii) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, if such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iii) restrictions and conditions contained in the documentation evidencing any Debt or Liens permitted hereunder that are not materially more restrictive than the restrictions and conditions set forth in this Agreement, (iv) customary provisions in leases restricting the assignment thereof, and (v) customary provisions in joint venture agreements governing any Subsidiary that is not a wholly-owned Subsidiary.
ARTICLE VII     
EVENTS OF DEFAULT AND REMEDIES
7.1      Events of Default . Each of the following events constitutes an “ Event of Default ”:
(a)      the Borrower fails to pay any principal of any Loan when and as the same becomes due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

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(b)      the Borrower fails to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Section 7.1 ) payable under this Agreement, when and as the same becomes due and payable, and such failure continues unremedied for a period of three Business Days following written notice of such failure to the Borrower;
(c)      any representation or warranty made or deemed made to the Lender by or on behalf of the Borrower in this Agreement, or in any report, certificate, financial statement, or other document furnished pursuant to or in connection with this Agreement, proves to be incorrect in any material respect when made or deemed made;
(d)      the Borrower fails to observe or perform any covenant, condition, or agreement contained in Section 5.2(a) , Section 5.3(i) (with respect to existence of the Borrower), Section 5.8 , or Article VI ;
(e)      the Borrower fails to observe or perform any covenant, condition, or agreement contained in this Agreement (other than those specified in clauses (a) , (b) , or (d) of this Section 7.1 ) and such failure continues unremedied for a period of 30 days following written notice of such failure to the Borrower;
(f)      the Borrower or any of its Subsidiaries fails to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Debt, when and as the same becomes due and payable and such failure continues after any applicable notice or grace period;
(g)      any event or condition occurs that results in any Material Debt becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of such Material Debt or any trustee or agent on its or their behalf to cause such Material Debt to become due, or to require the prepayment, repurchase, redemption, or defeasance thereof, prior to its scheduled maturity, except this clause (g) will not apply to (i) secured Debt that becomes due as a result of the disposition of, or casualty or other loss with respect to, the property or assets securing such Debt and (ii) Swap Agreements that are terminated;
(h)      an involuntary proceeding is commenced or an involuntary petition is filed seeking (i) liquidation, reorganization, or other relief in respect of the Borrower or any of its Subsidiaries or its debts, or of a substantial part of its assets, under any Debtor Relief Law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator, or similar official for the Borrower or any of its Subsidiaries or for a substantial part of its assets, and, in any such case, such proceeding or petition continues

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undismissed for 90 days or an order or decree approving or ordering any of the foregoing is entered;
(i)      the Borrower or any of its Subsidiaries (i) voluntarily commences any proceeding or files any petition seeking liquidation, reorganization, or other relief under any Debtor Relief Law now or hereafter in effect, (ii) consents to the institution of, or fails to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Section 7.1 , (iii) applies for or consents to the appointment of a receiver, trustee, custodian, sequestrator, conservator, or similar official for the Borrower or any of its Subsidiaries or for a substantial part of its assets, (iv) files an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) makes a general assignment for the benefit of creditors, or (vi) takes any corporate action for the purpose of effecting any of the foregoing;
(j)      the Borrower or any of its Subsidiaries becomes unable, admits in writing its inability, or fails, generally to pay its debts as they become due;
(k)      one or more final non-appealable judgments for the payment of money in an aggregate amount in excess of $1,000,000 (net of insurance coverage) is rendered against the Borrower or any of its Subsidiaries or any combination thereof and the same remains undischarged for a period of 60 consecutive days during which execution is not effectively stayed, or any action is taken by a judgment creditor to attach or levy upon any assets of the Borrower or any of its Subsidiaries to enforce any such judgment and is not released, vacated, or fully bonded within 60 days after its attachment or levy; or
(l)      a Change in Control occurs.
7.2      Remedies . Upon the occurrence of any event described in clause (h) or clause (i) of Section 7.1 , the Revolving Commitment will automatically terminate, the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, will automatically become due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration, or other notice of any kind, all of which are hereby waived by the Borrower, in each case without further act of the Lender. Following the occurrence and during the continuance of any other Event of Default, the Lender may by notice to the Borrower, take the following actions, at the same or different times: (i) terminate the Revolving Commitment, and thereupon the Revolving Commitment will terminate immediately, (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter, and provided an Event of Default then exists, be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all

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fees and other obligations of the Borrower accrued hereunder, will become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration, or other notice of any kind, all of which are hereby waived by the Borrower, and (iii) exercise on behalf of itself all rights and remedies available to it under this Agreement or applicable Law or equity.
ARTICLE VIII     
MISCELLANEOUS
8.1      Notices .
(a)      Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein must be in writing and must be delivered by hand or overnight courier service, mailed by certified or registered mail, or sent by telecopy, as follows:
(i)      if to the Borrower, to it at 7200 Wisconsin Avenue, Suite 1000, Bethesda, Maryland 20814, Attention: General Counsel (Telecopy No.: (301) 657-5567; Telephone No.: (240) 482-3840); John Hancock Life Insurance Company (U.S.A.), c/o Verto Management, LLC, 200 Portland Street, Boston, Massachusetts 02114, Attn: Glenn M. Smith, Chief Executive Officer, email: gsmith@vertomgmt.com (Telephone No. (206) 366-5267), and to John Hancock Life Insurance Company (U.S.A.), Power and Infrastructure Team, 197 Clarendon Street, C-2, Boston, Massachusetts 02116, Attn: Matthew L. Fedors, Director, email: mfedors@jhancock.com (Telephone No. (617) 572-4491and email: powerteam@jhancock.com; and
(ii)      if to the Lender, to it at 7200 Wisconsin Avenue, Suite 1000, Bethesda, Maryland 20814, Attention: Chief Financial Officer (Telecopy No.: (301) 657-5567; Telephone No.: (240) 482 3787).
(b)      The Borrower or the Lender may change its address or telecopy number for notices and other communications hereunder by notice to the other party. All notices and other communications given to a party hereto in accordance with the provisions of this Agreement will be deemed to have been given on the date of receipt.
8.2      Waivers; Amendments .
(a)      No failure or delay by the Lender in exercising any right or power hereunder will operate as a waiver thereof, nor will any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or

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power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Lender hereunder are cumulative and are not exclusive of any rights or remedies it would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom will in any event be effective unless the same is permitted by clause (b) of this Section 8.2 , and then such waiver or consent will be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the funding of an increase in the outstanding principal amount of the Revolving Loan or the increase in the outstanding principal amount of the Term Loan as a result of PIK Interest will not be construed as a waiver of any Default, regardless of whether the Lender may have had notice or knowledge of such Default at the time.
(b)      This Agreement or any provision hereof may not be waived, amended, or modified, and no consent to any departure by the Borrower from any provision hereof or thereof shall be effective, except pursuant to an agreement or agreements in writing entered into by the Borrower and the Lender.
8.3      Expenses; Indemnity; Damage Waiver .
(a)      The Borrower shall pay (i) all reasonable and documented out of pocket expenses incurred by the Lender, including the reasonable and documented fees, charges, and disbursements of counsel to the Lender in connection with the preparation, negotiation, execution, delivery, and administration of this Agreement or any amendments, modifications, or waivers of the provisions hereof (whether or not the transactions contemplated by this Agreement are consummated) and (ii) all out-of-pocket expenses incurred by the Lender, including the fees, charges, and disbursements of counsel to the Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring, or negotiations in respect of such Loans.
(b)      The Borrower shall indemnify the Lender and each Related Party of the Lender (other than the Borrower and its Subsidiaries) (each such Person being called an “ Indemnitee ”) against any and all losses, claims, damages, and liabilities, including the reasonable and documented fees, charges, and disbursements of counsel for the Indemnitees (unless there is an actual or perceived conflict of interest in which case each such Person may retain its own counsel to the extent required to avoid such conflict) in defending any such claims, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of: (i) the execution or delivery of this Agreement, the performance by the parties hereto of their respective obligations under

29



this Agreement, or the consummation of the transactions contemplated by this Agreement; (ii) any Loan or the use of the proceeds therefrom; or (iii) any actual or threatened claim, litigation, investigation, or proceeding relating to any of the foregoing, whether based on contract, tort, or any other theory and regardless of whether any Indemnitee is a party thereto.
Notwithstanding the foregoing, such indemnity will not, as to any Indemnitee, be available to the extent such losses, claims, damages, liabilities, or related expenses are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the negligence or willful misconduct of such Indemnitee.
(c)      To the extent permitted by applicable Law, each party hereto shall not assert, and hereby waives, any claim against any other party hereto, on any theory of liability, for special, indirect, consequential, punitive or exemplary damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any Loan or the use of the proceeds thereof. No Indemnitee referred to in paragraph (b) above will be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the transactions contemplated thereby, except to the extent such damages are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the negligence or willful misconduct of such Indemnitee.
(d)      All amounts due under this Section 8.3 will be payable on demand.
(e)      Each party’s obligations under this Section 8.3 will survive the termination of this Agreement and payment of the Obligations.
8.4      Successors and Assigns; Register . The provisions of this Agreement are binding upon and will inure to the benefit of the parties to this Agreement and their respective permitted successors and assigns, except the Borrower may not assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the Lender, and the Lender may not assign or otherwise transfer any of its rights or obligations under this Agreement except to any current or future Affiliate of the Lender or by way of pledge or assignment of a security interest, and following any such assignment such assignee shall be solely liable for all obligations to fund any increase in the outstanding principal amount of the Revolving Loan in accordance with Article II hereunder. Any other attempted assignment or transfer by any party hereto will be null and void. Nothing in this Agreement, expressed or implied, will be construed to confer upon any Person (other than the parties to this Agreement, their respective successors and permitted assigns and, to the extent expressly

30



contemplated by this Agreement, the Related Parties of the Lender) any legal or equitable right, remedy, or claim under or by reason of this Agreement. The Lender shall record any assignment or transfer of rights by the Lender under this Agreement (including the name and address of such assignee or transferee, the principal amount of Loans and stated interest owing thereto) on a register maintained by the Lender, and no such assignment or transfer shall be effective unless so recorded. Such register shall be conclusive and the Borrower shall treat the Person set forth therein as the Lender for all purposes hereunder.
8.5      Survival . All covenants, agreements, representations, and warranties made by the Borrower in this Agreement and in the certificates or other instruments delivered in connection with or pursuant to this Agreement will be considered to have been relied upon by the Lender and will survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and will continue in full force and effect until the Final Payment Date. The provisions of Section 8.3 will survive and remain in full force and effect regardless of the consummation of the transactions contemplated by this Agreement, the repayment of the Loans, the expiration or termination of the Revolving Commitment or the termination of this Agreement, or any provision hereof.
8.6      Counterparts; Integration; Effectiveness . This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which constitutes an original, but all of which when taken together constitute a single contract. This Agreement constitutes the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement will become effective when it has been executed by the Lender and when the Lender has received counterparts hereof bearing the signature of the Borrower, and thereafter will be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by electronic communication will be effective as delivery of a manually executed counterpart of this Agreement.
8.7      Severability . Any provision of this Agreement held to be invalid, illegal, or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality, or unenforceability without affecting the validity, legality, and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction will not invalidate such provision in any other jurisdiction.

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8.8      Right of Setoff . If an Event of Default has occurred and is continuing, the Lender, at any time and from time to time, to the fullest extent permitted by applicable Law, may set off and apply any obligations at any time owing by the Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement, irrespective of whether or not the Lender has made any demand under this Agreement and although such obligations may be contingent or unmatured. The Lender shall notify the Borrower promptly after any such setoff and application, but the failure to give such notice will not affect the validity of such setoff and application.
8.9      Governing Law; Jurisdiction; Consent To Service Of Process .
(a)      This Agreement is governed by and will be construed in accordance with the laws of the State of New York, except for conflicts of laws rules that would require the application of the law of another jurisdiction.
(b)      Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the state courts of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action, litigation, or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment. All claims in respect of any such action, litigation, or proceeding may be heard and determined in such New York state or, to the extent permitted by Law, in such federal court. A final judgment in any such action, litigation, or proceeding will be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing in this Agreement will affect any right that any party hereto may otherwise have to bring any action or proceeding relating to this Agreement against any other party hereto or its properties in the courts of any jurisdiction.
(c)      Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable Law (i) any objection it may now or hereafter have to the laying of venue of any action, litigation, or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this section and (ii) the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(d)      Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.1 . Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by applicable Law.

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8.10      Waiver Of Jury Trial. Each party hereto hereby waives, to the fullest extent permitted by applicable Law, any right it may have to a trial by jury in any legal proceeding directly or indirectly arising out of or relating to this Agreement or the transactions contemplated hereby (whether based on contract, tort, or any other theory). Each party hereto (a) certifies that no representative, agent, or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section.
8.11      Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and will not affect the construction of, or be taken into consideration in interpreting, this Agreement.


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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
ENVIVA, LP
By:
Enviva GP, LLC, as its sole general partner
By: /s/ SHAI EVEN

Name: Shai Even
Title: Executive Vice President and Chief Financial Officer

ENVIVA WILMINGTON HOLDINGS, LLC
By:
Enviva, LP, as its managing member
By: Enviva, GP, LLC, as its sole general partner

By: /s/ WILLIAM H. SCHMIDT, JR    
Name: William H. Schmidt, Jr.
Title: Executive Vice President, Corporate Development and General Counsel




Signature Page to Credit Agreement

EXHIBIT A

Form of
BORROWING REQUEST
DATE:
[●]

Pursuant to Section 2.2 of the Second Amended and Restated Credit Agreement, dated as of April 2, 2019 (as amended, restated, or otherwise modified from time to time, the “ Credit Agreement ”), between Enviva, LP as lender, and Enviva Wilmington Holdings, LLC, as borrower (the “ Borrower ”), the Borrower irrevocably requests the following on [●]:
1.
funding of an increase in the outstanding principal amount of the Revolving Loan in an aggregate principal amount equal to $[●];
2.
to be disbursed to the Borrower’s account as follows:
[Location and number of account].
Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.

[ Signature Page Follows ]






The Borrower has duly executed and delivered this Borrowing Request as of the date first written above.
BORROWER:

ENVIVA WILMINGTON HOLDINGS, LLC , a Delaware limited liability company
By:
Enviva, LP, as its managing member
By: Enviva, GP, LLC, as its sole general partner

By: /s/ WILLIAM H. SCHMIDT, JR    
Name: William H. Schmidt, Jr.
Title: Executive Vice President, Corporate Development and General Counsel


Signature Page to Borrowing Request
SCHEDULE 3.6

Litigation
None.



Execution Version


MAKE-WHOLE AGREEMENT
This Make-Whole Agreement (this “ Agreement ”) is entered into by and between Enviva Holdings, LP, a Delaware limited partnership (with its successors and permitted assigns, hereinafter called “ Payor ”), and Enviva, LP, a Delaware limited partnership (with its successors and assigns, hereinafter called “ Payee ”). Payor and Payee are collectively referred to as the “ Parties ” and individually as a “ Party .”
WHEREAS , pursuant to that certain Contribution Agreement (the “ Contribution Agreement ”) dated as of March 21, 2019 by and among Enviva Partners, LP (“ MLP ”), Enviva Development Holdings, LLC (“ DevCo ”), and Payor, among other things, DevCo contributed to MLP the Class B Units in Enviva Wilmington Holdings, LLC (the “ Contributed Interests ”), the sole member of Enviva Pellets Hamlet, LLC (“ HAM ”);
WHEREAS , immediately following the contribution of the Contributed Interests to MLP, MLP contributed (i) 99.999% of the Contributed Interests to Payee, a wholly-owned subsidiary of MLP, and (ii) 0.001% of the Contributed Interests to Enviva GP, LLC, a Delaware limited liability company and the general partner of Payee (“ Enviva GP, LLC ”), and immediately upon receipt thereof, Enviva GP, LLC contributed 0.001% of the Contributed Interests to Payee; and
WHEREAS , as an inducement to Payee’s consummation of the transactions contemplated by the Contribution Agreement, among other things, Payor is willing to pay to Payee the Make-Whole Payments (as defined below) and other payment described herein on the terms and subject to the conditions set forth herein.
NOW THEREFORE , in consideration of the premises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Payor covenants and agrees as follows:
1. Definitions . The following terms used in this Agreement have the following meanings:
(a)      “ Actual Production ” means, with respect to a Quarter, the amount (in MT) of Biomass produced by the Hamlet Plant during such Quarter.
(b)      “ Base Price ” shall mean, with respect to any Shipment during a Quarter, the price per MT of Biomass set forth in Exhibit A for such Quarter.
(c)      “ Biomass ” means wood pellets that conform to the Specifications (as defined in the Master Biomass Purchase Agreement) and the Sustainability Criteria (as defined in the Master Biomass Purchase Agreement).
(d)      “ Business Day ” means any day other than a Saturday, a Sunday, or a day on which banks in New York City are authorized or required by law to be closed.
(e)      “ Closing Date ” has the meaning set forth in the Contribution Agreement.



(f)      “ Confirmation ” means that certain confirmation dated March 20, 2019 by and between EWH and Payee, entered into pursuant to the Master Biomass Purchase Agreement, as amended, supplemented or restated from time to time.
(g)      “ EWH ” means Enviva Wilmington Holdings, LLC, a Delaware limited liability company.
(h)      “ Excess Expenditures ” shall have the meaning set forth in Section 2 .
(i)      “ Excess Expenditures Statement ” shall have the meaning set forth in Section 2 .
(j)      “ Excess Production ” means, with respect to a Quarter, the amount, if any, by which Actual Production (excluding any amounts which Payee rejected in accordance with Section 10(a) of the Master Biomass Purchase Agreement for which replacement Biomass was not provided pursuant to Section 10(c) of the Master Biomass Purchase Agreement) exceeds Forecast Production.
(k)      “ Forecast Production ” means, with respect to a Quarter, the amount (in MT) of Biomass forecast to be produced by the Hamlet Plant as set forth in Exhibit B hereto.
(l)      “ Forecast Production Shortfall ” means, with respect to a Quarter, the amount, if any, by which Forecast Production exceeds Actual Production.
(m)      “ Force Majeure Event ” means any event or circumstance which prevents EWH from performing its obligations under the Confirmation, which event or circumstance was not anticipated or reasonably foreseeable by EWH as of the date of the Confirmation, which is not within the reasonable control, or the result of the negligence, of EWH, and which, by the exercise of due diligence, EWH is unable to overcome or avoid or cause to be avoided. A Force Majeure Event may include the following, to the extent that each satisfies the foregoing requirements: any act of God or the elements, earthquakes, floods, landslides, hurricanes, civil disturbances, sabotage, acts of public enemies, war, blockades, insurrections, riots, epidemics, fires or explosions. For the avoidance of doubt, a lack of funds, the availability of a more attractive market, changes in law or regulations or inefficiencies in operations shall not constitute a Force Majeure Event.
(n)      “ Hamlet Plant ” means the wood pellet production plant under construction in Hamlet, North Carolina .
(o)      “ Incentive Payment ” shall have the meaning set forth in Section 1(b) .
(p)      “ Make-Whole Payment ” shall have the meaning set forth in Section 1(a) .
(q)      “ Make-Whole Term ” shall have the meaning set forth in Section 1(a) .
(r)      “ Master Biomass Purchase Agreement ” means the Master Biomass Purchase and Sale Agreement, dated as of April 9, 2015, by and between Payee and EWH.
(s)      “ MT ” means metric tons.

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(t)      “ Operations Fee ” means the price per MT of Biomass set forth in Exhibit C .
(u)      “ Quarter ” means a calendar quarter; provided , however , the Quarter ended June 30, 2019 shall be deemed to begin on the date MLP acquired the Contributed Interests pursuant to the Contribution Agreement.
(v)      “ Quarterly Statement ” shall have the meaning set forth in Section 1(c) .
(w)      “ Regulatory Costs ” means costs and expenses incurred by EWH or HAM required to deal with any event, incident, condition, or situation which gives rise to, or could reasonably be expected to result in, a breach of or any liability or reporting obligation under any law, damage to any asset or property of EWH or HAM, the injury, illness, or death of any natural person, including the safeguarding of health, life, and property, obtaining required permits or licenses, or otherwise complying with applicable law.
(x)      “ Retained Matters ” has the meaning set forth in the Sampson Contribution Agreement.
(y)      “ Sampson Contribution Agreement ” means that certain Contribution Agreement by and between EWH and MLP dated November 1, 2016.
(z)      “ Shipment ” means a consignment of Biomass shipped on board truck(s) or rail car(s) and delivered by EWH to Payee pursuant to the Confirmation.
1. Make-Whole Payments and Incentive Payments .
(a)      If, with respect to any Quarter during the period beginning with (and including) the Quarter ended June 30, 2019 through and including the Quarter ended June 30, 2020 (the “ Make-Whole Term ”), there is a Forecast Production Shortfall as a result of (i) Payee’s rejection of all or any part of any one or more Shipments during such Quarter in accordance with Section 10(a) of the Master Biomass Purchase Agreement and replacement Biomass not having been provided pursuant to Section 10(c) of the Master Biomass Purchase Agreement, (ii) EWH’s failure to deliver in any one or more Shipments during such Quarter a quantity of Biomass equal to the Forecast Production for such Quarter, other than due to a Force Majeure Event or Payee’s failure to perform under the Master Biomass Purchase Agreement, or (iii) EWH’s failure to comply with its obligations pursuant to Section 5 of the Master Biomass Purchase Agreement (or any combination of the events described in such clauses (i), (ii) and (iii)), Payor shall pay Payee an amount per MT of such Forecast Production Shortfall equal to the positive difference, if any, between the Base Price for such Quarter and the Operations Fee (each Quarterly payment, a “ Make-Whole Payment ”).
(b)      If, with respect to any Quarter during the Make-Whole Term, there is Excess Production, Payee shall pay Payor an amount equal to $20 per MT for each MT of Excess Production (each Quarterly payment, an “ Incentive Payment ”) .
(c)      Not later than ten (10) Business Days after the end of each Quarter, Payor will provide Payee with a statement (each statement, a “ Quarterly Statement ”) setting forth the Actual Production and any Forecast Production Shortfall or Excess Production with respect to such Quarter, and the

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amount of the Make-Whole Payment or Incentive Payment due with respect to such Quarter, if any. If a Make-Whole Payment is due for such Quarter, Payor shall pay the amount of such Make-Whole Payment to Payee within five (5) Business Days after delivery of a Quarterly Statement to the account set forth in Exhibit D hereto (or such other account identified by Payee to Payor prior to delivery of a Quarterly Statement). Any Make-Whole Payments shall be reduced by the amount of any payments paid to Payee by EWH pursuant to Section 11(a) of the Master Biomass Purchase Agreement. If an Incentive Payment is due for such Quarter, Payee shall pay the amount of such Incentive Payment to Payor within five (5) Business Days after delivery of a Quarterly Statement to the account set forth in Exhibit E hereto (or such other account identified by Payor to Payee prior to delivery of a Quarterly Statement or as set forth in a Quarterly Statement).
(d)      Any Make-Whole Payment paid with respect to any Quarter is not required to be reimbursed to or recouped by Payor in any subsequent Quarter as a result of future production or otherwise. Any Incentive Payment paid with respect to a Quarter shall not be used to offset any Make-Whole Payment that may be due (or may have been paid) with respect to any Quarter.
(e)      Payor shall be entitled to offset in whole or in part any Make-Whole Payments owed to Payee pursuant to this Agreement against any unpaid Second Payment (as defined in the Contribution Agreement), Second Payment Fee (as defined in the Contribution Agreement), Third Payment (as defined in the Contribution Agreement), and/or Third Payment Fee (as defined in the Contribution Agreement) owed by Payee to Payor’s wholly-owned subsidiary, DevCo, pursuant to the Contribution Agreement.

2. Reimbursements . Payor hereby agrees to be responsible, and reimburse Payee, for the amount, if any, by which the aggregate costs incurred by EWH to complete construction of the Hamlet Plant (other than punch list items) and to commence the production and shipment of wood pellets to Payee’s marine export terminal located at the Port of Wilmington, North Carolina exceed an aggregate $157,500,000 (such excess costs, “ Excess Expenditures ”); provided , however , Excess Expenditures will not include any Regulatory Costs, clear and deliberate costs outside the original scope of the construction plan, or costs incurred to accelerate the current construction schedule contemplated in the Hamlet Plant spend forecast attached hereto as Exhibit F . Not later than ten (10) Business Days after the end of each month in which Excess Expenditures were incurred by EWH, Payee shall provide Payor with a written statement (the “ Excess Expenditures Statement ”) setting forth the amount of such Excess Expenditures. Payor shall pay the amount of such Excess Expenditures within five (5) Business Days after delivery of the Excess Expenditures Statement to the account set forth in Exhibit C hereto (or such other account identified by Payee to Payor prior to the delivery of the Excess Expenditure Statement or as set forth in the Excess Expenditure Statement).
3. Payments under the Sampson Contribution Agreement . If any amounts are paid by EWH after the Closing Date pursuant to Section 5.8 of the Sampson Contribution Agreement in respect of Retained Matters, Payee shall promptly notify Payor of the amount of such payments and provide reasonable documentation in support thereof and Payor shall pay an equal amount to Payee within ten (10) Business Days after payment of the amounts by EWH, by wire transfer of immediately available funds to the account designated by Payee.

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4. Payments . Payor or Payee, as applicable, shall make each payment under this Agreement in immediately available funds and in U.S. dollars.
5. Tax Treatment . The Parties intend that any payments made under Section 1 , Section 2 , and Section 3 of this Agreement will be characterized for U.S. federal income tax purposes as a purchase price adjustment to the consideration paid under the Contribution Agreement.
6. Successors and Assigns .
(a)      All of the terms of this Agreement will be binding upon, and inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.
(b)      Neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assignable by either Party without the prior written consent of the other Party; provided , however , Payee may assign its rights, interests, or obligations hereunder to a wholly-owned subsidiary of Payee without the prior written consent of Payor; provided , further , no such assignment by Payee shall relieve Payee of any of its obligations hereunder.
7. Amendments and Waivers . All amendments to this Agreement must be in writing and signed by the Parties. A Party may, only by an instrument in writing, waive compliance by the other Party with any term or provision of this Agreement. The waiver by any Party of a breach of any term or provision of this Agreement shall not be construed as a waiver of any subsequent breach. Except as otherwise expressly provided herein, no failure to exercise, delay in exercising, or single or partial exercise of any right, power, or remedy by a Party, and no course of dealing between the Parties, shall constitute a waiver of any such right, power, or remedy.
8. Notices . Unless otherwise provided herein, all notices, requests, consents, approvals, demands, and other communications to be given hereunder will be in writing and will be deemed given upon (%3) confirmed delivery by a reputable overnight carrier or when delivered by hand, addressed to the respective Parties listed below at the following addresses (or such other address for a Party hereto as will be specified by like notice); (%3) actual receipt; (%3) the expiration of four Business Days after the day when mailed by registered or certified mail (postage prepaid, return receipt requested), addressed to the respective Parties listed below at the following addresses (or such other address for a Party hereto as will be specified by like notice); (%3) delivery by facsimile, with receipt confirmed, to a Party, at the facsimile number set forth below (or at such other facsimile number as such Party shall designate by like notice), or (%3) delivery by electronic mail to a Party at the electronic mail address set forth below (or at such other address as such Party shall designate by like notice); provided , however , in the case of any notice delivered by electronic mail, the notifying Party shall send notice by facsimile, hand, courier, or overnight delivery service not later than the following Business Day:

5

If to Payor, addressed to:
Enviva Holdings, LP
7200 Wisconsin Avenue
Suite 1000
Bethesda, MD 20814
Attn: General Counsel
Facsimile No.: (240) 482-3774
Email: william.schmidt@envivabiomass.com

If to Payee, addressed to:
Enviva, LP
7200 Wisconsin Avenue
Suite 1000
Bethesda, MD 20814
Attn: General Counsel
Facsimile No.: (240) 482-3774
Email: william.schmidt@envivabiomass.com

9. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to the choice of law principles thereof.
10. Dispute Resolution; Waiver of Jury Trial .

6

(a)      Each of the Parties (%4) consents to submit itself to the exclusive personal jurisdiction and venue of any U.S. federal court located in the State of Delaware or any Delaware state court with respect to any suit relating to or arising out of this Agreement, (%4) agrees it will not attempt to defeat or deny such personal jurisdiction or venue by motion or otherwise, (%4) agrees it will not bring any such suit in any court other than a U.S. federal or state court sitting in the State of Delaware, (%4) irrevocably agrees any such suit (whether at law, in equity, in contract, in tort, or otherwise) shall be heard and determined exclusively in such U.S. federal or state court sitting in the State of Delaware, (%4) agrees to service of process in any such action in any manner prescribed by the laws of the State of Delaware, and (%4) agrees service of process upon such Party in any action or proceeding shall be effective if notice is given in accordance with Section 8 .
(b)      EACH PARTY ACKNOWLEDGES AND AGREES ANY SUCH CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUCH LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT.
11. Severability . In the event any of the provisions hereof are held to be invalid or unenforceable under applicable laws, the remaining provisions hereof will not be affected thereby. In such event, the Parties hereto agree and consent such provisions and this Agreement will be modified and reformed so as to effect the original intent of the Parties as closely as possible with respect to those provisions that were held to be invalid or unenforceable.
12. Rights of Third Parties . Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any person, other than the Parties, any right or remedies under or by reason of this Agreement.
13. Counterparts . This Agreement may be executed by facsimile or electronic mail exchange of .pdf signature pages and in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each Party hereto and delivered (including by facsimile or electronic mail exchange of .pdf signature pages) to the other Parties hereto.
14. Specific Performance . The Parties agree if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, irreparable damage would occur and money damages may not be a sufficient remedy. In addition to any other remedy at law or in equity, each of Payor and Payee shall be entitled to specific performance by the other Party of its obligations under this Agreement and immediate injunctive relief, without the necessity of proving the inadequacy of money damages as a remedy.
[The remainder of this page has been left blank intentionally.
The signature page follows.]


7



IN WITNESS WHEREOF, Payor has executed this Agreement this _____th of _______, 2019.

ENVIVA HOLDINGS, LP

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

By:
/s/ WILLIAM H. SCHMIDT, JR    
Name:
William H. Schmidt, Jr.
Title:
Executive Vice President, Corporate Development and General Counsel



ENVIVA, LP

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


By: /s/ SHAI EVEN    
Name: Shai Even
Title: Executive Vice President and Chief Financial
Officer

MAKE-WHOLE AGREEMENT
SIGNATURE PAGE


EXHIBIT A

Base Price


[Certain information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.]

EXHIBIT A



EXHIBIT B

Forecast Production

[Certain information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.]


EXHIBIT B


EXHIBIT C

Operations Fee

[Certain information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.]


EXHIBIT C


EXHIBIT D

Payee Account Information

[Certain information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.]









EXHIBIT D


EXHIBIT E

Payor Account Information


[Certain information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.]



EXHIBIT E


EXHIBIT F

Hamlet Plant Spend Forecast


[Certain information has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.]


EXHIBIT F


EXHIBIT 31.1
CERTIFICATION
I, John K. Keppler, certify that:
1.
I have reviewed this quarterly report on Form 10‑Q of Enviva Partners, LP (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 8, 2019
 
 
 
 
 
 
 
 
 
 
By:
 /s/ JOHN K. KEPPLER
 
 
 
Name:
John K. Keppler
 
 
 
Title:
Chairman, President and Chief Executive
Officer
 





EXHIBIT 31.2
CERTIFICATION
I, Shai Even, certify that:
1.
I have reviewed this quarterly report on Form 10‑Q of Enviva Partners, LP (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 8, 2019
 
 
 
 
 
 
 
 
 
 
By:
 /s/ SHAI EVEN
 
 
 
Name:
Shai Even
 
 
 
Title:
Executive Vice President and Chief Financial
Officer
 




EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of Enviva Partners, LP (the “Partnership”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), John K. Keppler, Chairman, President and Chief Executive Officer of Enviva Partners GP, LLC, the general partner of the Partnership, and Shai Even, Executive Vice President and Chief Financial Officer of Enviva Partners GP, LLC, the general partner of the Partnership, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that, to his knowledge:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
Date: May 8, 2019
 
 
 
 
 
 
 
 
 
 
By:
 /s/ JOHN K. KEPPLER
 
 
 
Name:
John K. Keppler
 
 
 
Title:
Chairman, President and Chief Executive
Officer
 
Date: May 8, 2019
 
 
 
 
 
 
 
 
 
 
By:
/s/ SHAI EVEN
 
 
 
Name:
Shai Even
 
 
 
Title:
Executive Vice President and Chief Financial
Officer