Enviva Partners, LP (Form: 10-Q, Received: 08/08/2019 06:07:20)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended June 30, 2019



☐	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)

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units	EVA	New York Stock Exchange

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

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

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



Large accelerated filer ☐		Accelerated filer ☒

Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☒

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

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

As of July 31, 2019 , 33,456,811 common units were outstanding.

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ENVIVA PARTNERS, LP

QUARTERLY REPORT ON FORM 10‑Q

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		Page
CAUTIONARY STATEMENT REGARDING FORWARD‑LOOKING STATEMENTS		1
GLOSSARY OF TERMS		3
PART I—FINANCIAL INFORMATION		4
Item 1.	Financial Statements (unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Loss	6
	Condensed Consolidated Statements of Changes in Partners’ Capital	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51
PART II—OTHER INFORMATION		52
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 6.	Exhibits	53

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CAUTIONARY STATEMENT REGARDING FORWARD‑LOOKING STATEMENTS

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


•	the volume and quality of products that we are able to produce or source and sell, which could be adversely affected by, among other things, operating or technical difficulties at our 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;


•	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;


•	labor disputes;

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


•	the effects 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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GLOSSARY OF TERMS

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

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

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

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

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

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

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

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

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

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

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except number of units)



	June 30, 2019			December 31, 2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	5,005		$	2,460
Accounts receivable	61,818			54,794
Insurance receivables	2,258			5,140
Related-party receivables	5,687			1,392
Inventories	31,292			31,490
Prepaid expenses and other current assets	3,069			2,235
Total current assets	109,129			97,511

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

Operating lease right-of-use assets, net	33,877			—
Goodwill	85,615			85,615
Other long-term assets	6,858			8,616
Total assets	$	959,569		$	748,770

Liabilities and Partners’ Capital
Current liabilities:
Accounts payable	$	15,648		$	15,551
Related-party payables and accrued liabilities	29,473			28,225
Deferred consideration for drop-downs due to related party	40,000			74,000
Accrued and other current liabilities	52,788			41,400
Current portion of interest payable	5,512			5,434
Current portion of long-term debt and finance lease obligations	2,733			2,722
Total current liabilities	146,154			167,332
Long-term debt and finance lease obligations	523,348			429,933
Long-term operating lease liabilities	33,849			—
Long-term interest payable	1,070			1,010
Other long-term liabilities	1,991			3,779
Total liabilities	706,412			602,054
Commitments and contingencies

Partners’ capital:
Limited partners:
Common unitholders—public (19,870,436 and 14,573,452 units issued and outstanding at June 30, 2019 and December 31, 2018, respectively)	323,883			207,612
Common unitholder—sponsor (13,586,375 and 11,905,138 units issued and outstanding at June 30, 2019 and December 31, 2018, respectively)	98,785			72,352
General partner (no outstanding units)	(121,422		)	(133,687		)
Accumulated other comprehensive income	103			439
Total Enviva Partners, LP partners' capital	301,349			146,716
Noncontrolling interest	(48,192		)	—
Total partners’ capital	253,157			146,716
Total liabilities and partners’ capital	$	959,569		$	748,770

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per unit amounts)

(Unaudited)



	Three Months Ended June 30,						Six Months ended June 30,
	2019			2018			2019			2018
Product sales	$	167,202		$	133,168		$	323,801		$	255,490
Other revenue ⁽¹⁾	877			2,428			2,647			5,430
Net revenue	168,079			135,596			326,448			260,920
Cost of goods sold ⁽¹⁾	140,476			105,967			277,868			227,005
Depreciation and amortization	11,096			9,818			22,166			19,122
Total cost of goods sold	151,572			115,785			300,034			246,127
Gross margin	16,507			19,811			26,414			14,793
General and administrative expenses	2,241			3,829			7,865			6,577
Related-party management services agreement fee	8,789			3,458			13,002			7,514
Total general and administrative expenses	11,030			7,287			20,867			14,091
Income from operations	5,477			12,524			5,547			702
Other income (expense):
Interest expense	(9,196		)	(9,047		)	(18,829		)	(17,692		)
Other (expense) income, net	(82		)	67			558			1,199
Total other expense, net	(9,278		)	(8,980		)	(18,271		)	(16,493		)
Net (loss) income	$	(3,801	)	$	3,544		$	(12,724	)	$	(15,791	)
Net (loss) income per limited partner common unit:
Basic and diluted	$	(0.20	)	$	0.08		$	(0.59	)	$	(0.70	)
Net (loss) income per limited partner subordinated unit:
Basic and diluted	$	—		$	0.08		$	—		$	(0.70	)
Weighted-average number of limited partner units outstanding:
Common—basic	33,400			18,597			30,098			16,518
Common—diluted	33,400			19,728			30,098			16,518
Subordinated—basic and diluted	—			7,804			—			9,855

⁽¹⁾ See Note 13, Related-Party Transactions

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

(Unaudited)



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

See accompanying notes to condensed consolidated financial statements.

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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			Non-controlling interest			Total Partners' Capital
				Common Units— Public				Common Units— Sponsor
				Units	Amount			Units	Amount
Partners' capital, December 31, 2018	$	(133,687	)	14,573	$	207,612		11,905	$	72,352		$	439		$	—		$	146,716
Distributions to unitholders, distribution equivalent and incentive distribution rights	(1,671		)	—	(10,269		)	—	(7,619		)	—			—			(19,559		)
Issuance of units through Long-Term Incentive Plan	(2,129		)	94	659			—	—			—			—			(1,470		)
Issuance of common units, net	—			3,509	96,661			—	—			—			—			96,661
Non-cash Management Services Agreement expenses	136			—	2,072			—	—			—			—			2,208
Cumulative effect of accounting change - derivative instruments	—			—	(10		)	—	(8		)	18			—			—
Other comprehensive loss	—			—	—			—	—			(162		)	—			(162		)
Net income (loss)	1,671			—	(5,880		)	—	(4,714		)	—			—			(8,923		)
Partners' capital, March 31, 2019	(135,680		)	18,176	290,845			11,905	60,011			295			—			215,471
Excess consideration over Enviva Wilmington Holdings, LLC net assets and initial recognition of its noncontrolling interest	1,283			—	—			—	—			—			(48,192		)	(46,909		)
Distributions to unitholders, distribution equivalent and incentive distribution rights	(2,271		)	—	(13,720		)	—	(8,763		)	—			—			(24,754		)
Issuance of units through Long-Term Incentive Plan	247			2	(287		)	—	—			—			—			(40		)
Issuance of common units, net	—			1,692	49,641			—	—			—			—			49,641
Issuance of units associated with the First JV Drop-Down	—			—	—			1,681	50,000			—			—			50,000
Non-cash Management Services Agreement expenses	11,226			—	1,013			—	—			—			—			12,239
Reimbursable charges under Make-Whole Agreement	1,502			—	—			—	—			—			—			1,502
Other comprehensive loss	—			—	—			—	—			(192		)	—			(192		)
Net income (loss)	2,271			—	(3,609		)	—	(2,463		)	—			—			(3,801		)
Partners' capital, June 30, 2019	$	(121,422	)	19,870	$	323,883		13,586	$	98,785		$	103		$	(48,192	)	$	253,157

See accompanying notes to condensed consolidated financial statements.

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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		)	—		(785		)	—		(7,381		)	—			(18,129		)
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		12,981			11,905		85,271			(4,367		)	169,258
Distributions to unitholders, distribution equivalent and incentive distribution rights	(1,264		)	—	(9,750		)	—		—			—		(7,441		)	—			(18,455		)
Issuance of units through Long-Term Incentive Plan	(3,435		)	122	723			—		—			—		—			—			(2,712		)
Sale of common units	—			1,265	13,335			(1,265	)	(13,335		)	—		—			—			—
Conversion of subordinated units to common units	—			—	—			11,905		78,504			(11,905	)	(78,504		)	—			—
Non-cash Management Services Agreement expenses	210			—	2,480			—		—			—		—			—			2,690
Other comprehensive income	—			—	—			—		—			—		—			4,301			4,301
Net income (loss)	1,264			—	1,252			—		354			—		674			—			3,544
Partners' capital, June 30, 2018	$	(133,821	)	14,567	$	214,009		11,905		$	78,504		—		$	—		$	(66	)	$	158,626

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



	Six Months ended June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(12,724	)	$	(15,791	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	22,456			19,439
MSA Fee Waivers	11,046			—
Amortization of debt issuance costs, debt premium and original issue discounts	595			548
Loss on disposal of assets	350			244
Unit-based compensation	3,485			3,823
Fair value changes in derivatives	(346		)	(2,923		)
Unrealized loss on foreign currency transactions, net	29			29
Change in operating assets and liabilities:
Accounts and insurance receivables	(4,167		)	33,806
Related-party receivables	(2,536		)	66
Prepaid expenses and other current and long-term assets	(340		)	(297		)
Inventories	(18		)	(12,021		)
Derivatives	563			(947		)
Accounts payable, accrued liabilities and other current liabilities	(7,079		)	8,436
Related-party payables and accrued liabilities	(356		)	(3,445		)
Accrued interest	(578		)	60
Operating lease liabilities	(2,472		)	—
Other long-term liabilities	(346		)	206
Net cash provided by operating activities	7,562			31,233
Cash flows from investing activities:
Purchases of property, plant and equipment	(49,892		)	(5,879		)
Payment in relation to the Enviva Wilmington Holdings, LLC Drop-Down	(74,700		)	—
Insurance proceeds from property loss	—			1,130
Net cash used in investing activities	(124,592		)	(4,749		)
Cash flows from financing activities:
Proceeds from long-term debt and finance lease obligations, net	92,248			27,016
Proceeds from common unit issuances, net	96,970			241
Payment of deferred consideration for Enviva Port of Wilmington, LLC Drop-Down	(24,300		)	—
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(43,473		)	(36,469		)
Payment to General Partner to purchase affiliate common units for Long-Term Incentive Plan vesting	—			(2,341		)
Payment for withholding tax associated with Long-Term Incentive Plan vesting	(1,870		)	(1,665		)
Net cash provided by (used in) financing activities	119,575			(13,218		)
Net increase in cash, cash equivalents and restricted cash	2,545			13,266
Cash, cash equivalents and restricted cash, beginning of period	2,460			524
Cash, cash equivalents and restricted cash, end of period	$	5,005		$	13,790

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Continued)

(In thousands)

(Unaudited)



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

See accompanying notes to condensed consolidated financial statements.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

(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 June 30, 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 and are commissioning a seventh plant in Hamlet, North Carolina (the “Hamlet plant”). 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 limited liability company owned by Enviva Holdings, LP (together with its wholly owned subsidiaries Enviva MLP Holdco, LLC and Enviva Development Holdings, LLC, where applicable, 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.

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 .

Enviva Wilmington Holdings, LLC

In April 2019, we acquired from the sponsor all of the issued and outstanding Class B Units in Enviva Wilmington Holdings, LLC (the “First JV”), a limited liability company owned by the sponsor and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates (collectively, the “Hancock Member”). As of April 2, 2019, we began to consolidate the First JV because the Class B Units represented a controlling interest in the First JV so we accounted for the First JV as a consolidated subsidiary, not as a joint venture. The First JV owns the Hamlet plant and a firm, 15 -year take-or-pay off-take contract with nearly 1.0 million metric tons per year (“MTPY”) of wood pellets, following a ramp period.

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


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

•

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

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

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

•

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

•

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


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

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

The $165.0 million purchase price for the JV 1.0 Drop-Down consisted of (1) a cash payment of $24.7 million , net of a purchase price adjustment of $0.3 million , (2) the issuance of 1,681,237 unregistered common units at a value of $29.74 , or $50.0 million of common units, (3) $50.0 million in cash paid on June 28, 2019, (4) $40.0 million in cash to be paid on January 2, 2020 and (5) the elimination of $3.7 million of net related-party receivables and payables included in the net assets on the date of acquisition. As the holder of the Class B Units, Enviva, LP became a member of the First JV (the “Enviva Member”) on the acquisition date. During the three and six month ended June 30, 2019, we incurred and expensed $0.5 million and $1.2 million , respectively, in acquisition costs to acquire the First JV which were recognized as general and administrative expenses.

As the Enviva Member, we are the managing member of the First JV. We included all accounts of the First JV in our consolidated results as of April 2, 2019 as the Class B Units represent a controlling interest in the First JV. The JV 1.0 Drop-Down was an asset acquisition of entities under common control and accounted for on the carryover basis of accounting. Pursuant to the First JV MSA, Enviva Management provides services to the First JV, including those necessary or incidental to the operation and management of the First JV’s business. The Enviva Member is responsible for managing the activities of the First JV, including the development, construction and operation of the Hamlet plant.

(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

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

Accounting Standards Adopted

Leases

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

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

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

Derivative Instruments

We adopted ASU 2017-12 on and as of January 1, 2019 using the modified retrospective method, which requires the recognition of the cumulative effect of the change on the opening balance of each affected component of equity in the statement of changes in partner’s capital as of the date of adoption of the new standard. Upon adoption of ASU 2017-12, we no longer measure and recognize ineffectiveness related to designated and qualifying cash flow hedges in earnings; as a result, any ineffectiveness is included in accumulated other comprehensive income. On January 1, 2019, we recorded a nominal cumulative effect adjustment to accumulated other comprehensive income and common units in partners’ capital. See Note 10, 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) Transactions Between Entities Under Common Control

The JV 1.0 Drop-Down was an asset acquisition of entities under common control and accounted for on the carryover basis of accounting. Accordingly, the consolidated financial statements for the period beginning April 2, 2019 reflect the acquisition.

The purchase price for the JV 1.0 Drop-Down consisted of $165.0 million , which included an initial cash payment of $24.7 million , net of purchase price adjustment of $0.3 million , and the issuance of 1,681,237 unregistered common units at a value of $29.74 , or $50.0 million of common units, $50.0 million in cash, paid on June 28, 2019, and $40.0 million in cash, which will be paid on January 2, 2020 as the third and final payment.

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

The changes in net assets at carryover basis on April 2, 2019 included $121.6 million net assets of the First JV, net of the elimination of $3.7 million of net related-party receivables and payables. The following table outlines the changes in consolidated net assets resulting from the JV 1.0 Drop-Down on April 2, 2019.



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

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

(4) Revenue

Performance Obligations

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

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 and six months ended June 30, 2019 and 2018, arises from price increases based on agreed inflation indices and from above-minimum throughput quantities or services.

We allocate variable consideration under our off-take and terminal services contracts entirely to each performance obligation to which variable consideration relates. The estimate of variable consideration represents the amount that is not more likely than not to be reversed. For the three and six months ended June 30, 2019 , we recognized $0.3 million and $0.4 million . respectively, of revenue related to performance obligations satisfied in previous periods. For the three and six months ended June 30, 2018, we recognized an insignificant amount of revenue related to performance obligations in previous periods.

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

Contract Balances

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

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

Our business is significantly impacted by greenhouse gas emission and renewable energy legislation and regulations in the 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 June 30,				Six Months ended June 30, 2019
	2019		2018		2019		2018
Customer A	60	%	69	%	50	%	54	%
Customer B	9	%	12	%	10	%	10	%
Customer C	23	%	15	%	20	%	11	%
Customer D	—	%	—	%	12	%	16	%

(6) Inventory Impairment and Asset Disposal

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

(7) Inventories

Inventories consisted of the following as of:



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

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

(8) Property, Plant and Equipment

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



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

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

(9) 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.

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.

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

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



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

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

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

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

Operating and finance lease costs were as follows:



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

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

Operating and finance lease cash flow information was as follows:



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

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

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



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

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

The weighted-average remaining lease terms and discount rates for our operating and finance leases were weighted using the undiscounted future minimum lease payments and are as follows as of June 30, 2019:



Weighted average remaining lease term (years):
Operating leases	24
Finance leases	2
Weighted average discount rate:
Operating leases	8	%
Finance leases	5	%

(10) 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 the terms of the applicable derivative instrument. We seek to mitigate such risks by limiting our counterparties to major financial

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

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

Cash Flow Hedges

For qualifying cash flow hedges, the effective and ineffective portion of the gain or loss on the change in fair value is initially reported as a component of accumulated other comprehensive income in partners’ capital and subsequently reclassified into earnings when the hedged exposure affects earnings. Prior to January 1, 2019 and the adoption of ASU 2017-12 (see Note 2, Significant Accounting Policies ), the ineffective portion of the gain or loss, if any, was reported in earnings in the current period. We considered our cash flow hedges to be highly effective at inception. Changes in fair value for derivative instruments not designated as hedging 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 June 30, 2019 and December 31, 2018 were as follows:



		Asset (Liability)
	Balance Sheet Classification	June 30, 2019			December 31, 2018
Designated as hedging instruments:
Interest rate swap
	Other current assets	$	202		$	508
	Other long-term assets	—			118
Total derivatives designated as hedging instruments		$	202		$	626

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

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

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

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

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



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



	Amount of 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	$	(161	)	Other income (expense)	$	193



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



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

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

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

received a net settlement termination payment of $5.8 million , which differs insignificantly from the recorded fair value of the derivatives. We present our derivative assets and liabilities at their gross fair values.

The notional amounts of outstanding derivative instruments associated with outstanding or unsettled derivative instruments as of June 30, 2019 and December 31, 2018 were as follows:



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

(11) 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 12, Long-Term Debt and Finance Lease Obligations – Senior Notes Due 2021 ) was determined based on observable market prices in a less active market and was categorized as Level 2 in the fair value hierarchy. The fair value of other long-term debt and finance lease obligations classified as Level 2 was determined based on the usage of market prices not quoted on active markets and other observable market data. The fair value of long-term debt and finance lease obligations are based upon rates currently available for debt and finance lease obligations with similar terms and remaining maturities. The carrying amount of derivative instruments approximates fair value.

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



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

(12) Long-Term Debt and Finance Lease Obligations

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



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

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

Senior Notes Due 2021

As of June 30, 2019 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 June 30, 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 due October 2023. Our obligations under the senior secured revolving credit facility are guaranteed by certain of our subsidiaries and secured by liens on substantially all of our assets. The senior secured revolving credit facility is not guaranteed by the First JV or secured by liens on its assets.

(13) Related-Party Transactions

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



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Other revenue	$	235	$	1,072	$	827	$	2,304
Cost of goods sold	34,623		20,912		54,621		36,051
General and administrative expenses	8,789		3,458		13,002		7,514

Management Services Agreements

Pursuant to the MSAs, Enviva Management provides us with operations, general administrative, management and other services. We are required to reimburse Enviva Management for the amount of all direct or indirect internal or third-party expenses incurred by Enviva Management in connection with the provision of such services. The MSAs include rent-related amounts for non-cancelable operating leases for office space in Maryland and North Carolina held by the sponsor. Under the First JV MSA, to the extent allocated costs exceed the annual management fee, the additional costs are recorded with an increase to partners’ capital.

During the three and six months ended June 30, 2019 , $20.1 million and $33.7 million , respectively, related to the MSAs was included in cost of goods sold and $8.8 million and $13.0 million , respectively, was included in general and administrative expenses. As of June 30, 2019 , $0.7 million incurred under the MSAs was included in finished goods inventory.

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

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

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

EVA MSA Fee Waiver

Under the EVA MSA, during the three and six months ended June 30, 2019, $4.7 million of EVA MSA fees expensed were waived and recorded as an increase to partners’ capital. During the three and six months ended June 30, 2018, no EVA MSA fees were waived.

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

Second EVA MSA Fee Waiver

In June 2019, we entered into an additional agreement with Enviva Management where we received a $5.0 million waiver of EVA MSA fees through September 30, 2019, as consideration for an assignment of two shipping contracts to our sponsor to rebalance our and our sponsor’s respective shipping obligations under existing off-take contracts. During the three and six months ended June 30, 2019, $2.7 million of EVA MSA fees expensed were waived and recorded as an increase to partners’ capital. During the three and six months ended June 30, 2018, no EVA MSA fees were waived.

First JV MSA Fee Waiver

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

Make-Whole Agreement

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

Wilmington Drop-Down - Deferred Consideration

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

Greenwood Contract

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

During the three and six months ended June 30, 2019 , we purchased $13.7 million and $24.2 million , respectively, of wood pellets and recorded a cost of cover deficiency fee from Greenwood of approximately $0.3 million and $3.3 million , respectively, from Greenwood as Greenwood was unable to satisfy certain commitments. Of the net $13.4 million and $20.9 million , respectively, $13.7 million and $24.1 million , respectively, is included in cost of goods sold and $0.1 million is included in finished goods inventory as of June 30, 2019 . During the three and six months ended June 30, 2018 , we purchased $5.2 million and $8.3 million , respectively, of wood pellets from Greenwood, which is included in cost of goods sold.

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

Holdings TSA

The Wilmington Drop-Down included a long-term terminal services agreement with our sponsor (the “Holdings TSA”). Pursuant to the Holdings TSA, our sponsor agreed to deliver a minimum of 125,000 MT of wood pellets per quarter for receipt, storage, handling and loading services by the Wilmington terminal and pay a fixed fee on a per-ton basis for such terminal services. The Holdings TSA remains in effect until September 1, 2026. We did no t record any terminal services revenue from our

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

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

In February 2018, our sponsor amended and assigned the Holdings TSA to Greenwood. Deficiency payments are due to Wilmington if quarterly minimum throughput requirements are not met. During the three and six months ended June 30, 2019 and 2018 , we recorded $0.2 million and $0.8 million , respectively, and $1.1 million and $1.5 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 the sponsor during the six months ended June 30, 2018 pursuant to a biomass option agreement. The wood pellet purchase amounts are included in cost of goods sold. The biomass option agreement terminated in accordance with its terms in March 2018.

Enviva FiberCo, LLC

We purchase raw materials from Enviva FiberCo, LLC (“FiberCo”), a wholly owned subsidiary of our sponsor. During the three and six months ended June 30, 2019 , we purchased raw materials of $1.7 million and $3.6 million , respectively, from FiberCo. No cost of cover deficiency fees were recognized during the three months ended June 30, 2019 . Offsetting the raw material purchases during the six months ended June 30, 2019 , we recognized $2.9 million of cost of cover deficiency fees from FiberCo under a wood supply master agreement as FiberCo was unable to satisfy certain commitments, which is included in related-party receivables as of June 30, 2019 . During the three and six months ended June 30, 2018 we purchased raw materials of $1.8 million and $3.5 million , respectively, from FiberCo. No cost of cover deficiency fees were recognized during the three months ended June 30, 2018 .

JV 1.0 Drop-Down

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

Long-Term Incentive Plan Vesting

As of June 30, 2019 , we had an insignificant amount 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”).

(14) 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.

On April 1, 2019, as deferred consideration for the Wilmington Drop-Down, we issued 1,691,627 common units, or $49.7 million in common units, to the First JV, which common units were distributed to the Hancock Member. On April 2, 2019, in connection with the JV 1.0 Drop-Down, we issued 1,681,237 common units, or $50.0 million in common units, to the sponsor.

Allocations of Net Income

The Partnership’s partnership agreement contains provisions for the allocation of net income and loss to the unitholders of the Partnership and the General Partner. For purposes of maintaining partner capital accounts, the partnership agreement specifies that items of income and loss shall be allocated among the partners of the Partnership in accordance with their respective percentage ownership interest. Such allocations are made after giving effect, if any, to priority income allocations in an amount equal to incentive cash distributions, which are allocated 100% to the General Partner.

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

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 and six months ended June 30, 2019 , we did no t sell common units under the ATM Program. During the three months ended June 30, 2018 , we did not sell common units under the ATM Program. During the six months ended June 30, 2018 , we sold 8,408 common units under the ATM Program for net proceeds of $0.2 million , net of an insignificant amount of commissions. Net proceeds from sales under the ATM Program were used for general partnership purposes.

First JV

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

Class A Units - Noncontrolling Interests

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

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

Class B Units - Controlling Interests

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

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

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

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

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

Distribution Rights

Distributions to the Hancock Member, and to the Enviva member, are made in the reasonable discretion of the Enviva Member and are governed by the waterfall provisions of the First JV LLCA, which provides that distributions, after repayment of the First JV Revolver borrowings, are to be made as follows:


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


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

Prior to the JV 1.0 Drop-Down, at the discretion of the Enviva Member, the Hancock Member had received all of its capital contributions and substantially all of its preference amount. Given that and the historical net losses of the First JV having been previously allocated to the Enviva Member and the Hancock Member in proportion to their unreturned capital contributions, the balance of the First JV members’ capital attributable had become negative as of the JV 1.0 Drop-Down. Additionally, given that and the extent to which the Enviva Member has yet to receive repayment of its revolver borrowings, capital contributions and preference amount as of June 30, 2019, none of the net loss of the First JV has been allocated to the Hancock Member subsequent to the date of the JV 1.0 Drop-Down. Thus, no change has been recognized to the negative noncontrolling interest balance that we acquired.

(15) 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	372,007		$	30.39	214,437		$	30.25	586,444		$	30.34
Forfeitures	(35,459	)	$	27.55	(7,607	)	$	29.57	(43,066	)	$	27.91
Vested	(145,506	)	$	18.30	—		$	—	(145,506	)	$	18.30
Nonvested June 30, 2019	914,982		$	28.88	446,342		$	28.86	1,361,324		$	28.87

______________________________________________________________


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

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

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

The following table summarizes information regarding phantom unit awards to certain non-employee directors of the General Partner (the “Director Grants”) under the LTIP:



	Time-Based Phantom Units
	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 June 30, 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

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

Unpaid distribution equivalent rights (“DERs”) amounts related to the performance-based Affiliate Grants at June 30, 2019 were $1.3 million , of which $0.5 million are included in accrued liabilities and $0.8 million are included in other long-term liabilities on the condensed consolidated balance sheets. Unpaid DER amounts related to the performance-based Affiliate Grants at December 31, 2018 were $0.7 million , of which $0.4 million are included in accrued liabilities and $0.3 million are included in other long-term liabilities.

(16) Income Taxes

Our operations are organized as limited partnerships and entities that are disregarded entities for federal and state income tax purposes. As a result, we are not subject to U.S. federal and most state income taxes. The unitholders of the Partnership are liable for these income taxes on their share of our taxable income. Some states impose franchise and capital taxes on the Partnership. Such taxes are not material to the condensed consolidated financial statements and have been included in other income (expense) as incurred.

As of June 30, 2019 , 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 and six months ended June 30, 2019 and 2018 , no provision for federal or state income taxes has been recorded in the condensed consolidated financial statements.

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

Net income (loss) per unit applicable to limited partners is computed by dividing limited partners’ interest in net income (loss), after deducting any incentive distributions, by the weighted-average number of outstanding common units. Our net income (loss) is allocated to the limited partners in accordance with their respective ownership percentages, after giving effect to priority income allocations for incentive distributions, if any, to the holder of the IDRs, which are declared and paid following the close of each quarter. Earnings in excess of distributions are allocated to the limited partners based on their respective ownership interests.

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income (loss) allocations used in the calculation of earnings per unit.

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

In addition to the common units, we have also identified the IDRs and phantom units as participating securities and use 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 and six months ended June 30, 2019 and 2018 :



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



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



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

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )



	Six Months Ended June 30, 2019
	Common Units			General Partner		Total
Distributions declared	$	43,661		$	5,043	$	48,704
Earnings less than distributions	(61,428		)	—		(61,428		)
Net (loss) income attributable to partners	$	(17,767	)	$	5,043	$	(12,724	)
Weighted-average units outstanding—basic and diluted	30,098
Net loss per limited partner unit—basic and diluted	$	(0.59	)



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



	Three Months Ended June 30, 2018
	Common Units			Subordinated Units			General Partner		Total
Distributions declared	$	11,750		$	4,931		$	1,400	$	18,081
Earnings less than distributions	(10,240		)	(4,297		)	—		(14,537		)
Net income attributable to partners	$	1,510		$	634		$	1,400	$	3,544
Weighted-average units outstanding—basic	18,597			7,804
Weighted-average units outstanding—diluted	19,728			7,804
Net income per limited partner unit—basic	$	0.08		$	0.08
Net income per limited partner unit—diluted	$	0.08		$	0.08



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



	Six Months Ended June 30, 2018
	Common Units			Subordinated Units			General Partner		Total
Distributions declared	$	20,788		$	12,403		$	2,664	$	35,855
Earnings less than distributions	(32,347		)	(19,299		)	—		(51,646		)
Net (loss) income attributable to partners	$	(11,559	)	$	(6,896	)	$	2,664	$	(15,791	)
Weighted-average units outstanding—basic and diluted	16,518			9,855
Net loss per limited partner unit—basic and diluted	$	(0.70	)	$	(0.70	)

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )

Cash Distributions to Unitholders

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



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

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

We determine the amount of cash available for distribution for each quarter in accordance with our partnership agreement. The amount to be distributed to common unitholders and IDR holders is based on the distribution waterfall set forth in our partnership agreement. Net earnings for the quarter are allocated to each class of partnership interest based on the distributions to be made. On May 30, 2018, the subordination period ended in accordance with our partnership agreement and the subordinated units were converted into common units on a one -for-one basis.

(18) Supplemental Guarantor Information

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

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Notes to Condensed Consolidated Financial Statements

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

(Unaudited )



Condensed Consolidated Balance Sheet
June 30, 2019

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

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

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

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

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )



Condensed Consolidated Balance Sheet
December 31, 2018

	Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	2,396	$	64		$	—		$	2,460
Accounts receivable	54,792		2			—			54,794
Insurance receivables	5,140		—			—			5,140
Related-party receivables	6,453		4,944			(10,005		)	1,392
Inventories	31,490		—			—			31,490
Prepaid expenses and other current assets	2,235		—			—			2,235
Total current assets	102,506		5,010			(10,005		)	97,511

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

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

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

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )



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

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



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

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

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )



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

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



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

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

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )



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

	Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	1,693		$	(5,314	)	$	(180	)	$	(3,801	)
Other comprehensive loss:
Net unrealized losses on cash flow hedges	(106		)	—			—			(106		)
Reclassification of net gains realized into net income (loss)	(86		)	—			—			(86		)
Total other comprehensive loss	(192		)	—			—			(192		)
Total comprehensive income (loss)	$	1,501		$	(5,314	)	$	(180	)	$	(3,993	)



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

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

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )



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

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



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

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

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )



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

	Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net loss	$	(7,224	)	$	(5,320	)	$	(180	)	$	(12,724	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	22,426			30			—			22,456
MSA Fee Waivers	7,400			3,646			—			11,046
Amortization of debt issuance costs, debt premium and original issue discounts	595			—			—			595
Loss on disposal of assets	350			—			—			350
Unit-based compensation	2,936			549			—			3,485
Fair value changes in derivatives	(346		)	—			—			(346		)
Unrealized loss on foreign currency transactions, net	29			—			—			29
Change in operating assets and liabilities:
Accounts and insurance receivables	(4,163		)	(4		)	—			(4,167		)
Related-party receivables	(17,529		)	(2,012		)	17,005			(2,536		)
Prepaid expenses and other current and long-term assets	(139		)	(201		)	—			(340		)
Inventories	287			(305		)	—			(18		)
Derivatives	563			—			—			563
Accounts payable, accrued liabilities and other current liabilities	(2,449		)	(4,630		)	—			(7,079		)
Related-party payables and accrued liabilities	14,045			2,604			(17,005		)	(356		)
Accrued interest	(1,650		)	1,072			—			(578		)
Operating lease liabilities	(1,690		)	(782		)	—			(2,472		)
Other long-term liabilities	196			(542		)	—			(346		)
Net cash provided by (used in) operating activities	13,637			(5,895		)	(180		)	7,562
Cash flows from investing activities:
Purchases of property, plant and equipment	(30,823		)	(19,069		)	—			(49,892		)
Payment in relation to the Enviva Wilmington Holdings, LLC Drop-Down	(74,700		)	—			—			(74,700		)
Net cash used in investing activities	(105,523		)	(19,069		)	—			(124,592		)
Cash flows from financing activities:
Proceeds from long-term debt and finance lease obligations, net	92,248			—			—			92,248
Proceeds from common unit issuances	96,970			—			—			96,970
First JV Revolver	(22,850		)	22,850			—			—
Payment of deferred consideration for Enviva Port of Wilmington, LLC Drop-Down	(24,300		)	—			—			(24,300		)
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(43,473		)	—			—			(43,473		)
Payment for withholding tax associated with Long-Term Incentive Plan vesting	(1,870		)	—			—			(1,870		)
Net cash provided by financing activities	96,725			22,850			—			119,575
Net increase (decrease) in cash, cash equivalents and restricted cash	4,839			(2,114		)	(180		)	2,545
Cash, cash equivalents and restricted cash, beginning of period	(1,030		)	3,490			—			2,460
Cash, cash equivalents and restricted cash, end of period	$	3,809		$	1,376		$	(180	)	$	5,005

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ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

(Unaudited )



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

	Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net loss	$	(15,677	)	$	(114	)	$	—		$	(15,791	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	19,439			—			—			19,439
Amortization of debt issuance costs, debt premium and original issue discounts	548			—			—			548
Loss on disposal of assets	244			—			—			244
Unit-based compensation	3,823			—			—			3,823
Fair value changes in derivatives	(2,923		)	—			—			(2,923		)
Unrealized loss on foreign currency transactions, net	29						—			29
Change in operating assets and liabilities:
Accounts and insurance receivables	33,806			—			—			33,806
Related-party receivables	(4,052		)	(2,899		)	7,017			66
Prepaid expenses and other current and long-term assets	(297		)	—			—			(297		)
Inventories	(12,021		)	—			—			(12,021		)
Derivatives	(947		)	—			—			(947		)
Accounts payable, accrued liabilities and other current liabilities	8,435			1			—			8,436
Related-party payables and accrued liabilities	(546		)	4,118			(7,017		)	(3,445		)
Accrued interest	60			—			—			60
Other long-term liabilities	206			—			—			206
Net cash provided by operating activities	30,127			1,106			—			31,233
Cash flows from investing activities:
Purchases of property, plant and equipment	(5,879		)	—			—			(5,879		)
Insurance proceeds from property loss	1,130			—			—			1,130
Net cash used in investing activities	(4,749		)	—			—			(4,749		)
Cash flows from financing activities:
Proceeds from long-term debt and finance lease obligations, net	27,016			—			—			27,016
Proceeds from common unit issuances	241			—			—			241
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(36,469		)	—			—			(36,469		)
Payment to General Partner to purchase affiliate common units for Long-Term Incentive Plan vesting	(2,341		)	—			—			(2,341		)
Payment for withholding tax associated with Long-Term Incentive Plan vesting	(1,665		)	—			—			(1,665		)
Net cash used in financing activities	(13,218		)	—			—			(13,218		)
Net increase in cash, cash equivalents and restricted cash	12,160			1,106			—			13,266
Cash, cash equivalents and restricted cash, beginning of period	524			—			—			524
Cash, cash equivalents and restricted cash, end of period	$	12,684		$	1,106		$	—		$	13,790

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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” refer to Enviva Wilmington Holdings, LLC, which is a joint venture between our sponsor and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates. References to the “Second JV” refer to a joint venture between our sponsor and John Hancock Life Insurance Company (U.S.A.) and certain of its affiliates.

The following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis (“MD&A”) in Part II-Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018 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 aggregate a natural resource, wood fiber, and process it into a transportable form, wood pellets. We sell a significant majority of our wood pellets through long-term, take-or-pay off-take contracts with creditworthy customers in the United Kingdom and Europe. We own and operate seven plants with a combined production capacity of over 3.5 million metric tons (“MT”) of wood pellets per year in Virginia, North Carolina, Mississippi, and Florida. In addition, we export wood pellets through our marine terminals at the Port of Chesapeake, Virginia (the “Chesapeake terminal”) and the Port of Wilmington, North Carolina (the “Wilmington terminal”) and from third-party marine terminals in Mobile, Alabama and Panama City, Florida. In April 2019, we acquired our sponsor’s interest the First JV. The First JV owns the Hamlet plant and a firm, 15-year take-or-pay off-take contract to supply nearly 1.0 million metric tons per year (“MTPY”) of wood pellets, following a ramp period. The Hamlet plant is now operating, and we expect the plant to exit 2019 with a production run-rate of approximately 500,000 MTPY and to reach its nameplate production capacity of approximately 600,000 MTPY in 2021. All of our facilities are located in geographic regions with low input costs and favorable transportation logistics. Owning these cost-advantaged assets, the output from which is fully contracted, in a rapidly expanding industry provides us with a platform to generate stable and growing cash flows 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 MT of wood pellets in 2019 and have a total weighted-average remaining term of 10.4 years from July 1, 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

Hamlet Transaction

In April 2019, we acquired from the sponsor all of the issued and outstanding Class B Units of the First JV for total consideration of $165.0 million , subject to certain adjustments (the “Hamlet Transaction”). The First JV owns the Hamlet plant

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

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


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

•

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


•	The First JV entered into an agreement with Enviva Management to waive the obligation to pay an aggregate of approximately $2.7 million of management fees payable to Enviva Management under the First JV MSA with respect to the period from the date of acquisition until the later of July 1, 2019 and COD of the Hamlet plant (the “First JV MSA Fee Waiver”).

•


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

We refer to these transactions as the “JV 1.0 Drop-Down.”

The purchase price of $165.0 million for the JV 1.0 Drop-Down consisted of (1) a cash payment of $24.7 million, net of a purchase price adjustment of $0.3 million, (2) the issuance of 1,681,237 unregistered common units at a value of $29.74, or $50.0 million of common units, (3) $50.0 million in cash paid on June 28, 2019, (4) $40.0 million in cash to be paid on January 2, 2020 and (5) the elimination of $3.7 million of net related-party receivables and payables included in the net assets on the date of acquisition. As the holder of the Class B Units, Enviva, LP became a member of the First JV (the “Enviva Member”) on the acquisition date.

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”).

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 June 30, 2019 were approximately $44.5 million.

Financing Activities

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

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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 August 5, 2019 we had approximately $9.6 billion of product sales backlog for firm contracted product sales to our long-term off-take customers and have a total weighted-average remaining term of 10.4 years, compared to approximately $5.8 billion and a total weighted-average remaining term of 9.0 years as of July 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 August 5, 2019 forward rates. The contracted backlog includes forward prices including inflation, foreign currency and commodity prices. The amount also includes the effects of related foreign currency derivative contracts.

Our expected future product sales revenue under our contracted backlog as of August 5, 2019 is as follows (in millions):



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

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



Period from August 5, 2019 to December 31, 2019	$	298
Year ending December 31, 2020	913
Year ending December 31, 2021 and thereafter	16,685
Total product sales contracted backlog	$	17,896

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

In addition, we incurred other losses and costs associated with the Chesapeake Incident during and since the three and six months ended June 30, 2018 and are pursuing outstanding claims of approximately $25.0 million related to such amounts. Consequently, our results of 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 and six months ended June 30, 2018 .

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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 the Hurricane Events, consisting of emergency response expenses, expenses related to the disposal of inventory, and asset disposal and repair costs, offset by insurance recoveries received, certain non-cash waivers of fees for management services provided to us by our sponsor (collectively, “MSA Fee Waivers”), and interest expense associated with incremental borrowings related to the Chesapeake Incident. We believe that adjusted net (loss) income enhances investors’ ability to compare the past financial performance of our underlying operations with our current performance separate from certain items of gain or loss that we characterize as unrepresentative of our ongoing operations.

Adjusted Gross Margin per Metric Ton

We use 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, MSA Fee Waivers, 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 our revenue-generating activities to our operating costs for a view of profitability and performance on a per metric ton basis. Adjusted gross margin per metric ton will primarily be affected by our ability to meet targeted production volumes and to control direct and indirect costs associated with procurement and delivery of wood fiber to our production plants and the production and distribution of wood pellets.

Adjusted EBITDA

We define adjusted EBITDA as net income or loss excluding depreciation and amortization, interest expense, income tax expense, early retirement of debt obligations, MSA Fee Waivers and 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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Results of Operations

Three Months ended June 30, 2019 Compared to Three Months ended June 30, 2018



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

⁽¹⁾ See Note 13, Related-Party Transactions

Product sales

Revenue related to product sales for wood pellets produced or procured by us increased to $167.2 million for the three months ended June 30, 2019 from $133.2 million for the three months ended June 30, 2018 . The $34.0 million , or 26% , increase was primarily attributable to a 24% increase in sales volumes during the three months ended June 30, 2019 as compared to the three months ended June 30, 2018 .

Other revenue

Other revenue decreased by $1.6 million during the three months ended June 30, 2019 as compared to the three months ended June 30, 2018 . The decrease is primarily attributable to $1.2 million in fees received from a customer requesting scheduling accommodations during the three months ended June 30, 2018.

Cost of goods sold

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

Gross margin

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

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Adjusted gross margin per metric ton



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

We earned adjusted gross margin of $28.0 million , or $32.26 per MT, for the three months ended June 30, 2019 . Adjusted gross margin was $25.6 million , or $36.63 per MT, for the three months ended June 30, 2018 . The factors impacting the change in adjusted gross margin include those described above under the heading “Gross margin.” Additionally, adjusted gross margin increased during the three months ended June 30, 2019 compared to the three months ended June 30, 2018 due to the waiver of $2.7 million of management services fees by the sponsor as consideration for an assignment of two shipping contracts to our sponsor to rebalance our and our sponsor’s respective shipping obligations under existing off-take contracts.

General and administrative expenses

General and administrative expenses were $11.0 million for the three months ended June 30, 2019 and $7.3 million for the three months ended June 30, 2018 . The $3.7 million increase in general and administrative expenses is primarily attributable to the consolidation of the First JV following the JV 1.0 Drop-Down on April 2, 2019.

Interest expense

We incurred $9.2 million of interest expense during the three months ended June 30, 2019 and $9.0 million of interest expense during the three months ended June 30, 2018 . The increase in interest expense was primarily attributable to an increase in borrowings under our senior secured revolving credit facility.

Adjusted net income



	Three Months ended June 30,
	2019			2018			Change
	(in thousands)
Reconciliation of net (loss) income to adjusted net income:
Net (loss) income	$	(3,801	)	$	3,544		$	(7,345	)
Chesapeake Incident and Hurricane Events	(281		)	(804		)	523
MSA Fee Waivers	11,046			—			11,046
Adjusted net income	$	6,964		$	2,740		$	4,224

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

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Adjusted EBITDA



	Three Months ended June 30,
	2019			2018			Change
	(in thousands)
Reconciliation of net (loss) income to adjusted EBITDA:
Net (loss) income	$	(3,801	)	$	3,544		$	(7,345	)
Add:
Depreciation and amortization	11,248			10,031			1,217
Interest expense	9,196			9,047			149
Non-cash unit compensation expense	1,013			2,480			(1,467		)
Asset impairments and disposals	350			244			106
Chesapeake Incident and Hurricane Events	(281		)	(804		)	523
Changes in the fair value of derivative instruments	(2,334		)	(3,463		)	1,129
MSA Fee Waivers	11,046			—			11,046
Acquisition costs	525			(7		)	532
Adjusted EBITDA	$	26,962		$	21,072		$	5,890

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

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Distributable Cash Flow

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



	Three Months ended June 30,
	2019		2018		Change
	(in thousands)
Adjusted EBITDA	$	26,962	$	21,072	$	5,890
Less:
Interest expense, net of amortization of debt issuance costs, debt premium, original issue discount and impact from incremental borrowings related to Chesapeake Incident and Hurricane Events	8,897		8,772		125
Maintenance capital expenditures	836		1,226		(390		)
Distributable cash flow attributable to Enviva Partners, LP	17,229		11,074		6,155
Less: Distributable cash flow attributable to incentive distribution rights	2,773		1,400		1,373
Distributable cash flow attributable to Enviva Partners, LP limited partners	$	14,456	$	9,674	$	4,782

Results of Operations

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



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

Product sales

Revenue related to product sales for wood pellets produced or procured by us increased to $323.8 million for the six months ended June 30, 2019 from $255.5 million for the six months ended June 30, 2018 . The increase of $68.3 million , or 27% , was primarily attributable to a 27% increase in sales volumes during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 .

Other revenue

Other revenue decreased by $2.8 million during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 . The decrease is primarily attributable to $2.2 million in fees received from a customer requesting scheduling accommodations during the six months ended June 30, 2018.

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Cost of goods sold

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

Gross margin

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


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


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

Offsetting the above were:


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


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


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


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

Adjusted gross margin per metric ton



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

We earned adjusted gross margin of $55.6 million , or $32.49 per MT, for the six months ended June 30, 2019 . Adjusted gross margin was $47.3 million , or $35.08 per MT, for the six months ended June 30, 2018 . The factors impacting the change in adjusted gross margin include those described above under the heading “Gross margin,” offset by an increase of $3.0 million related to depreciation and amortization expense, a decrease of $15.7 million related to the Chesapeake Incident and Hurricane Events and an increase of $2.4 million related to changes in unrealized derivative instruments. Additionally, adjusted gross margin increased during the six months ended June 30, 2019 compared to the six months ended June 30, 2018 due to the waiver of $2.7 million of management services fees from our sponsor as consideration for an assignment of two shipping contracts to our sponsor to rebalance our and our sponsor’s respective shipping obligations under existing off-take contracts. In addition, the six months ended June 30, 2019 includes $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

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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.

General and administrative expenses

General and administrative expenses were $20.9 million for the six months ended June 30, 2019 and $14.1 million for the six months ended June 30, 2018 . The $6.8 million increase in general and administrative expenses is primarily attributable to $5.3 million resulting from the consolidation of the First JV following the JV 1.0 Drop-Down on April 2, 2019, $1.2 million of transaction expenses related to the Hamlet Transaction and $0.4 million of legal fees related to the Chesapeake Incident.

Interest expense

We incurred $18.8 million of interest expense during the six months ended June 30, 2019 and $17.7 million of interest expense during the six months ended June 30, 2018 . The increase in interest expense was primarily attributable to an increase in borrowings under our senior secured revolving credit facility.

Adjusted net loss



	Six Months Ended June 30,
	2019			2018			Change
	(in thousands)
Reconciliation of net loss to adjusted net loss:
Net loss	$	(12,724	)	$	(15,791	)	$	3,067
Chesapeake Incident and Hurricane Events	8			15,786			(15,778		)
MSA Fee Waivers	11,046			—			11,046
Interest expense from incremental borrowings related to Chesapeake Incident and Hurricane Events	490			—			490
Adjusted net loss	$	(1,180	)	$	(5	)	$	(1,175	)

We generated adjusted net loss of $1.2 million for the six months ended June 30, 2019 . The $1.2 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 MSA Fee Waivers of $11.0 million and a $3.1 million , decrease in net loss primarily attributable to the factors described above.

Adjusted EBITDA



	Six Months Ended June 30,
	2019			2018			Change
	(in thousands)
Reconciliation of net loss to adjusted EBITDA:
Net loss	$	(12,724	)	$	(15,791	)	$	3,067
Add:
Depreciation and amortization	22,456			19,439			3,017
Interest expense	18,829			17,692			1,137
Non-cash unit compensation expense	3,485			3,823			(338		)
Asset impairments and disposals	350			244			106
Chesapeake Incident and Hurricane Events	8			15,786			(15,778		)
Changes in the fair value of derivative instruments	(324		)	(2,694		)	2,370
MSA Fee Waivers	11,046			—			11,046
Acquisition costs	5,452			146			5,306
Adjusted EBITDA	$	48,578		$	38,645		$	9,933

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



	Six Months Ended June 30,
	2019		2018		Change
	(in thousands)
Adjusted EBITDA	$	48,578	$	38,645	$	9,933
Less:
Interest expense, net of amortization of debt issuance costs, debt premium, original issue discount and impact from incremental borrowings related to Chesapeake Incident and Hurricane Events	17,745		17,145		600
Maintenance capital expenditures	1,764		1,614		150
Distributable cash flow attributable to Enviva Partners, LP	29,069		19,886		9,183
Less: Distributable cash flow attributable to incentive distribution rights	5,043		2,664		2,379
Distributable cash flow attributable to Enviva Partners, LP limited partners	$	24,026	$	17,222	$	6,804

Liquidity and Capital Resources

Our primary sources of liquidity include cash and cash equivalent balances, cash generated from operations, borrowings under our revolving credit commitments and, from time to time, debt and equity offerings. Our primary liquidity requirements are to fund working capital, service our debt, maintain cash reserves, finance plant acquisitions and plant expansion projects, finance maintenance capital expenditures and pay distributions. We believe cash on hand, cash generated from our operations and the availability of our revolving credit commitments will be sufficient to meet our primary liquidity requirements. However, future capital expenditures 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 June 30, 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.

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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 six months ended June 30, 2019 and 2018 , respectively:



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

Cash Provided by Operating Activities

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

Cash Used in Investing Activities

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

Cash Used in Financing Activities

Net cash provided by financing activities was $119.6 million for the six months ended June 30, 2019 compared to net cash used in financing activities of $13.2 million for the six months ended June 30, 2018 . The net cash provided by financing activities primarily consisted of approximately $97.0 million in issued common units and $93.5 million of borrowings under our senior secured revolving credit facility, net, during the six months ended June 30, 2019 . Net cash provided by financing activities was offset by $43.5 million of distributions paid to our unitholders and by the payment of $24.3 million of deferred consideration for the Wilmington Drop-Down

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

Off-Balance Sheet Arrangements

As of June 30, 2019 , we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in our unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. We provide expanded discussion of our significant accounting policies, estimates and judgments in our 2018 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 .

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our exposure to market risk as disclosed in our Annual Report on Form 10-K for the year ended December 31, 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 June 30, 2019 , we had notional amounts of 35.9 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 June 30, 2019 .

Changes in Internal Control Over Financial Reporting

During the quarter ended June 30, 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.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material changes with respect to the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.

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 or our Quarterly Report on Form 10-Q for the three months ended March 31, 2019.

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Item 6. Exhibits

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

Exhibit Index



Exhibit Number			Description

2.1			Contribution Agreement by and among Enviva Development Holdings, LLC, Enviva Holdings, LP, and Enviva Partners, LP dated March 21, 2019 (Exhibit 2.1, Form 10-K filed March 25, 2019, File No. 001-037363).
3.1			Certificate of Limited Partnership of Enviva Partners, LP (Exhibit 3.1, Form S‑1 Registration Statement filed October 28, 2014, File No. 333‑199625)
3.2			First Amended and Restated Agreement of Limited Partnership of Enviva Partners, LP, dated May 4, 2015, by Enviva Partners GP, LLC (Exhibit 3.1, Form 8‑K filed May 4, 2015, File No. 001‑37363)
3.3			Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of Enviva Partners, LP, effective as of December 18, 2017, by Enviva Partners GP, LLC (Exhibit 3.1, Form 8-K filed December 21, 2017, File No. 001-37363)
4.1*			Registration Rights Agreement by and between Enviva Partners, LP and John Hancock Life Insurance Company (U.S.A.), dated April 1, 2019
10.1			Third Amendment to Credit Agreement (Exhibit 10.1, Form 8-K filed September 17, 2018, File No. 001-37363)
10.2			Form of Subscription Agreement (Exhibit 10.1, Form 8-K filed March 25, 2019, File No. 001-37363)
10.3			Management Services Agreement Fee Waiver by and among Enviva, LP, Enviva GP, LLC, Enviva Pellets Ahoskie, LLC, Enviva Pellets Amory, LLC, Enviva Pellets Northampton, LLC, Enviva Pellets Cottondale, LLC, Enviva Port of Chesapeake, LLC, Enviva Energy Services, LLC, Enviva Pellets Sampson, LLC, Enviva Pellets Southampton, LLC, Enviva Port of Panama City, LLC, Enviva Port of Wilmington, LLC and Enviva Management Company, LLC dated April 2, 2019 (Exhibit 10.3, Form 10-Q filed May 9, 2019, File No. 001-37363)
10.4			Second Amended and Restated Credit Agreement by and between Enviva Wilmington Holdings, LLC and Enviva, LP dated April 2, 2019 (Exhibit 10.4, Form 10-Q filed May 9, 2019, File No. 001-37363)
10.5			Make-Whole Agreement by and between Enviva Holdings, LP and Enviva, LP dated April 2, 2019 (Exhibit 10.5, Form 10-Q filed May 9, 2019, File No. 001-37363)
31.1*			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
31.2*			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
32.1**			Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002
101.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.

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SIGNATURE

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

Date: August 7, 2019



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)

Execution Version

REGISTRATION RIGHTS AGREEMENT

BY AND BETWEEN

ENVIVA PARTNERS, LP

AND

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

TABLE OF CONTENTS

ARTICLE I DEFINITIONS 1


Section 1.01	Definitions 1


Section 1.02	Registrable Securities 3

ARTICLE II REGISTRATION RIGHTS 3


Section 2.01	Registration; Effectiveness Deadline 3


Section 2.02	Piggyback Rights 4


Section 2.03	Delay Rights 5


Section 2.04	Underwritten Offerings 6


Section 2.05	Sale Procedures 7


Section 2.06	Cooperation by Holders 10


Section 2.07	Restrictions on Public Sale by Holders of Registrable Securities 10


Section 2.08	Expenses 10


Section 2.09	Indemnification 11


Section 2.10	Rule 144 Reporting 13


Section 2.11	Transfer or Assignment of Registration Rights 13


Section 2.12	Limitation on Subsequent Registration Rights 14

ARTICLE III MISCELLANEOUS 14


Section 3.01	Communications 14


Section 3.02	Successor and Assigns 15


Section 3.03	Assignment of Rights 15


Section 3.04	Recapitalization, Exchanges, Etc. Affecting the Units 15


Section 3.05	Aggregation of Registrable Securities 15


Section 3.06	Specific Performance 15


Section 3.07	Counterparts 16


Section 3.08	Headings 16


Section 3.09	Governing Law 16


Section 3.10	Severability of Provisions 16


Section 3.11	Entire Agreement 16


Section 3.12	Amendment 16


Section 3.13	No Presumption 16


Section 3.14	Obligations Limited to Parties to Agreement 16


Section 3.15	Interpretation 17

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made and entered into as of April 1, 2019, by and between Enviva Partners, LP, a Delaware limited partnership (the “ Partnership ”), and John Hancock Life Insurance Company (U.S.A.), a Michigan corporation (the “ Investor ”). Capitalized terms used but not defined in this Agreement shall have the meanings set forth in the Contribution Agreement (as defined below).

WHEREAS, on May 8, 2017, Enviva Wilmington Holdings, LLC, a Delaware limited liability company, and the Partnership entered into that certain Contribution Agreement (the “ Contribution Agreement ”);

WHEREAS, pursuant to the Contribution Agreement, this Agreement is made in connection with the transactions contemplated to occur on the Hamlet Payment Date given that the Hancock Threshold will be met at the Hamlet Payment Time, but was not met at the Closing; and

WHEREAS, the Partnership has agreed to provide the registration and other rights set forth in this Agreement for the benefit of the Investor as required by the Contribution Agreement.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, the parties hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.01 Definitions . The terms set forth below are used herein as so defined:

“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise .

“ Agreement ” has the meaning specified therefor in the introductory paragraph of this Agreement.

“ Commission ” means the U.S. Securities and Exchange Commission.

“ Common Units ” means common units representing limited partner interests in the Partnership.

“ Contribution Agreement ” has the meaning specified therefor in the recitals of this Agreement.

“ Effectiveness Period ” has the meaning specified therefor in Section 2.01 of this Agreement.

“ Fully-Diluted Basis ” means, at the date of determination, all issued and outstanding Common Units after giving effect to (a) the conversion of all outstanding equity interests of the Partnership that are convertible into Common Units (excluding incentive distribution rights), (b) the issuance of New Common Units to the Investor pursuant to Section 2.2 of the Contribution Agreement, and (c) any issuance of Common Units to finance, or for any other purpose in connection with, the Transaction.

“ General Partner ” means Enviva Partners GP, LLC, a Delaware limited liability company.

“ Holder ” means the record holder of any Registrable Securities.

“ Included Registrable Securities ” has the meaning specified therefor in Section 2.02(a) of this Agreement.

“ Investor ” has the meaning specified therefor in the introductory paragraph of this Agreement.

“ Losses ” has the meaning specified therefor in Section 2.09(a) of this Agreement.

“ Managing Underwriter ” means, with respect to any Underwritten Offering, the book-running lead manager of such Underwritten Offering.

“ Opt-Out Notice ” has the meaning specified therefor in Section 2.02(a) of this Agreement.

“ Parity Securities ” has the meaning specified therefor in Section 2.02(b) of this Agreement.

“ Partnership ” has the meaning specified therefor in the introductory paragraph of this Agreement.

“ Person ” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity .

“ Registrable Securities ” means the Common Units issued to the Investor or its Affiliates pursuant to the Contribution Agreement until such time as they cease to be Registrable Securities pursuant to Section 1.02 and includes any type of interest issued to the Holder as a result of Section 3.04 .

“ Registration Expenses ” has the meaning specified therefor in Section 2.08(b) of this Agreement.

“ Registration Statement ” has the meaning specified therefor in Section 2.01 of this Agreement.

“ Selling Expenses ” has the meaning specified therefor in Section 2.08(b) of this Agreement.

“ Selling Holder ” means a Holder who is selling Registrable Securities pursuant to the Registration Statement or any other registration statement.

“ Selling Holder Indemnified Persons ” has the meaning specified therefor in Section 2.09(a) of this Agreement.

“ Underwritten Offering ” means an offering (including an offering pursuant to a Registration Statement) in which Common Units are sold to an underwriter on a firm commitment basis for reoffering to the public or an offering that is an “overnight” or “bought deal” with one or more investment banks.

Section 1.02 Registrable Securities . Any Registrable Security will cease to be a Registrable Security upon the earliest of the following to occur: (a) when a registration statement covering such Registrable Security becomes or has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective registration statement; (b) when such Registrable Security has been disposed of pursuant to any section of Rule 144 (or any similar provision then in effect) under the Securities Act; (c) when such Registrable Security is held by the Partnership or one of its subsidiaries or Affiliates; (d) when such Registrable Security has been transferred in a transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such securities pursuant to Section 2.11 hereof, (e) when such Registrable Security becomes eligible for resale without restriction and without the need for current public information pursuant to any section of Rule 144, and (f) on April 1, 2024.

ARTICLE II
REGISTRATION RIGHTS

Section 2.01 Registration; Effectiveness Deadline .

The Partnership shall prepare and file a registration statement under the Securities Act to permit the public resale of Registrable Securities then outstanding from time to time as permitted by Rule 415 of the Securities Act with respect to all of the Registrable Securities (the “ Registration Statement ”). The Registration Statement filed pursuant to this Section 2.01 shall be on such appropriate registration form of the Commission as shall be selected by the Partnership so long as it permits the continuous offering of the Registrable Securities pursuant to Rule 415 of the Securities Act or such other rule as is then applicable at the then-prevailing market prices. The Partnership shall use its reasonable best efforts to cause the Registration Statement to become effective by September 27, 2019. Any Registration Statement shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Holders of any and all Registrable Securities covered by such Registration Statement. The Partnership shall use its reasonable best efforts to cause the Registration Statement (or a subsequent replacement shelf registration statement to the extent that the original shelf registration statement may no longer be used) filed pursuant to this Section 2.01 to remain effective and to be supplemented and amended to the extent necessary to ensure that it is available for the resale of all Registrable Securities by the Holders until all Registrable Securities covered by such Registration Statement have ceased to be Registrable Securities (the “ Effectiveness Period ”). The Registration Statement when effective (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus contained in such Registration Statement, in the light of the circumstances under which a statement is made). As soon as practicable following the date that the Registration Statement becomes effective, but in any event within two (2) Business Days of such date, the Partnership shall provide the Holders with written notice of the effectiveness of the Registration Statement.

Section 2.02 Piggyback Rights .

(a) Participation . If the Partnership proposes to file (i) a shelf registration statement other than the Registration Statement contemplated by Section 2.01 , (ii) a prospectus supplement to an effective shelf registration statement, other than the Registration Statement contemplated by Section 2.01 of this Agreement and Holders may be included without the filing of a post-effective amendment thereto, or (iii) a registration statement, other than a shelf registration statement, in each case, for the sale of Common Units in an Underwritten Offering for its own account and/or another Person, then as soon as practicable following the engagement of counsel by the Partnership to prepare the documents to be used in connection with an Underwritten Offering, the Partnership shall give notice (including, but not limited to, notification by electronic mail) of such proposed Underwritten Offering to each Holder (together with its Affiliates) holding Registrable Securities representing (x) at least five percent (5.0%) of the then-outstanding Common Units on a Fully Diluted Basis or (y) no less than all of the Registrable Securities held by the Investor as of the date of this Agreement, and such notice shall offer such Holders the opportunity to include in such Underwritten Offering such number of Registrable Securities (the “ Included Registrable Securities ”) as each such Holder may request in writing; provided, however , if the Partnership has

been advised by the Managing Underwriter the inclusion of Registrable Securities for sale for the benefit of the Holders will have an adverse effect on the price, timing or distribution of the Common Units in the Underwritten Offering, then (A) if no Registrable Securities can be included in the Underwritten Offering in the opinion of the Managing Underwriter, the Partnership shall not be required to offer such opportunity to the Holders or (B) if any Registrable Securities can be included in the Underwritten Offering in the opinion of the Managing Underwriter, then the amount of Registrable Securities to be offered for the accounts of Holders shall be determined based on the provisions of Section 2.02(b) . Any notice required to be provided in this Section 2.02(a) to Holders shall be provided on a Business Day pursuant to Section 3.01 hereof. Each such Holder shall then have two (2) Business Days (or one (1) Business Day in connection with any overnight or bought Underwritten Offering) after notice has been delivered to request in writing the inclusion of Registrable Securities in the Underwritten Offering. If no written request for inclusion from a Holder is received within the specified time, each such Holder shall have no further right to participate in such Underwritten Offering. If, at any time after giving written notice of its intention to undertake an Underwritten Offering and prior to the closing of such Underwritten Offering, the Partnership shall determine for any reason not to undertake or to delay such Underwritten Offering, the Partnership may, at its election, give written notice of such determination to the Selling Holders and, (x) in the case of a determination not to undertake such Underwritten Offering, shall be relieved of its obligation to sell any Included Registrable Securities in connection with such terminated Underwritten Offering, and (y) in the case of a determination to delay such Underwritten Offering, shall be permitted to delay offering any Included Registrable Securities for the same period as the delay in the Underwritten Offering. Any Selling Holder shall have the right to withdraw such Selling Holder’s request for inclusion of such Selling Holder’s Registrable Securities in such Underwritten Offering by giving written notice to the Partnership of such withdrawal at or prior to the time of pricing of such Underwritten Offering. Any Holder may deliver written notice (an “ Opt-Out Notice ”) to the Partnership requesting that such Holder not receive notice from the Partnership of any proposed Underwritten Offering; provided, however , such Holder may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from a Holder (unless subsequently revoked), the Partnership shall not be required to deliver any notice to such Holder pursuant to this Section 2.02(a) and such Holder shall no longer be entitled to participate in Underwritten Offerings by the Partnership pursuant to this Section 2.02(a) .

(b) Priority . If the Managing Underwriter or Underwriters of any proposed Underwritten Offering advises the Partnership the total amount of Registrable Securities the Selling Holders and any other Persons intend to include in such offering exceeds the number that can be sold in such offering without being likely to have an adverse effect on the price, timing or distribution of the Common Units offered or the market for the Common Units, then the Common Units to be included in such Underwritten Offering shall include the number of Registrable Securities such Managing Underwriter or Underwriters advises the Partnership can be sold without having such adverse effect, with such number to be allocated (i) first, to the Partnership and (ii) second, pro rata among the Selling Holders who have requested participation in such Underwritten Offering and any other holder of securities of the Partnership having rights of registration that are neither expressly senior nor subordinated to the Registrable Securities (the “ Parity Securities ”). The pro rata allocations for each Selling Holder who has requested participation in such Underwritten Offering shall be the product of (a) the aggregate number of Registrable Securities proposed to be sold in such

Underwritten Offering multiplied by (b) the fraction derived by dividing (x) the number of Registrable Securities owned on the Hamlet Payment Date by such Selling Holder by (y) the aggregate number of Registrable Securities owned on the Hamlet Payment Date by all Selling Holders plus the aggregate number of Parity Securities owned on the Hamlet Payment Date by all holders of Parity Securities that are participating in the Underwritten Offering.

Section 2.03 Delay Rights .

Notwithstanding anything to the contrary contained herein, the Partnership may, upon written notice to any Selling Holder whose Registrable Securities are included in the Registration Statement or other registration statement contemplated by this Agreement, suspend such Selling Holder’s use of any prospectus that is a part of the Registration Statement or other registration statement (in which event the Selling Holder shall discontinue sales of the Registrable Securities pursuant to the Registration Statement or other registration statement contemplated by this Agreement but may settle any previously made sales of Registrable Securities) if (i) the Partnership is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and the Partnership reasonably determines in good faith the Partnership’s ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in the Registration Statement or other registration statement or (ii) the Partnership has experienced some other material non-public event the disclosure of which at such time, in the reasonable good faith judgment of the Partnership, would materially adversely affect the Partnership; provided, however , in no event shall the Selling Holders be suspended from selling Registrable Securities pursuant to the Registration Statement or other registration statement for a period that exceeds an aggregate of 60 days in any 180-day period or 105 days in any 365-day period, in each case, exclusive of days covered by any lock-up agreement executed by a Selling Holder in connection with any Underwritten Offering. Upon disclosure of such information or the termination of the condition described above, the Partnership shall provide prompt notice to the Selling Holders whose Registrable Securities are included in the Registration Statement, and shall promptly terminate any suspension of sales it has put into effect and shall take such other reasonable actions to permit registered sales of Registrable Securities as contemplated in this Agreement.

Section 2.04 Underwritten Offerings .

(a) General Procedures . In connection with any Underwritten Offering under this Agreement, the Partnership shall be entitled to select the Managing Underwriter or Underwriters. In connection with an Underwritten Offering contemplated by this Agreement in which a Selling Holder participates, each Selling Holder and the Partnership shall be obligated to enter into an underwriting agreement containing such representations, covenants, indemnities and other rights and obligations as are customary in underwriting agreements for firm commitment offerings of securities. No Selling Holder may participate in such Underwritten Offering unless such Selling Holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities, and other documents reasonably required under the terms of such underwriting agreement. Each Selling Holder may, at its option, require any or all of the representations and warranties by, and the other agreements on the part of, the Partnership to and for the benefit of such underwriters also be made to and for such

Selling Holder’s benefit and any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to its obligations. No Selling Holder shall be required to make any representations or warranties to or agreements with the Partnership or the underwriters other than representations, warranties or agreements regarding such Selling Holder, its authority to enter into such underwriting agreement and to sell, and its ownership of, the securities being registered on its behalf, its intended method of distribution and any other representation required by Law. If any Selling Holder disapproves of the terms of an Underwritten Offering, such Selling Holder may elect to withdraw therefrom by notice to the Partnership and the Managing Underwriter; provided, however , such withdrawal must be made up to and including the time of pricing of such Underwritten Offering. No such withdrawal or abandonment shall affect the Partnership’s obligation to pay Registration Expenses. The Partnership’s management may but shall not be required to participate in a roadshow or similar marketing effort in connection with any Underwritten Offering.

(b) No Demand Rights . Notwithstanding any other provision of this Agreement, no Holder shall be entitled to any “demand” rights or similar rights that would require the Partnership to effect an Underwritten Offering solely on behalf of the Holders.

Section 2.05 Sale Procedures . In connection with its obligations under this Article II , the Partnership will, as expeditiously as possible:

(a) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective for the Effectiveness Period and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by the Registration Statement;

(b) if a prospectus supplement will be used in connection with the marketing of an Underwritten Offering from the Registration Statement and the Managing Underwriter at any time shall notify the Partnership in writing that, in the sole judgment of such Managing Underwriter, inclusion of detailed information to be used in such prospectus supplement is of material importance to the success of the Underwritten Offering of such Registrable Securities, the Partnership shall use its commercially reasonable efforts to include such information in such prospectus supplement;

(c) furnish to each Selling Holder (i) as far in advance as reasonably practicable before filing the Registration Statement or any other registration statement contemplated by this Agreement or any supplement or amendment thereto, upon request, copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits and each document incorporated by reference therein to the extent then required by the rules and regulations of the Commission), and provide each such Selling Holder the opportunity to object to any information pertaining to such Selling Holder and its plan of distribution that is contained therein and make the corrections reasonably requested by such Selling Holder with respect to such information prior to filing the Registration Statement or such other registration statement or supplement or amendment thereto, and (ii) such number of copies of the Registration Statement or such other registration statement and the prospectus included therein and any supplements and amendments thereto as such Selling

Holder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities covered by such Registration Statement or other registration statement;

(d) if applicable, use its commercially reasonable efforts to register or qualify the Registrable Securities covered by the Registration Statement or any other registration statement contemplated by this Agreement under the securities or blue sky laws of such jurisdictions as the Selling Holders or, in the case of an Underwritten Offering, the Managing Underwriter, shall reasonably request; provided, however , the Partnership will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject;

(e) promptly notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered by any of them under the Securities Act, of (i) the filing of the Registration Statement or any other registration statement contemplated by this Agreement or any prospectus or prospectus supplement to be used in connection therewith, or any amendment or supplement thereto, and, with respect to such Registration Statement or any other registration statement or any post-effective amendment thereto, when the same has become effective; and (ii) the receipt of any written comments from the Commission with respect to any filing referred to in clause (i) and any written request by the Commission for amendments or supplements to the Registration Statement or any other registration statement or any prospectus or prospectus supplement thereto;

(f) immediately notify each Selling Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (i) the happening of any event as a result of which the prospectus or prospectus supplement contained in the Registration Statement or any other registration statement contemplated by this Agreement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectus contained therein, in the light of the circumstances under which a statement is made); (ii) the issuance or express threat of issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any other registration statement contemplated by this Agreement, or the initiation of any proceedings for that purpose; or (iii) the receipt by the Partnership of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice, the Partnership agrees to, as promptly as practicable, amend or supplement the prospectus or prospectus supplement or take other appropriate action so the prospectus or prospectus supplement does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and to take such other commercially reasonable action as is necessary to remove a stop order, suspension, threat thereof, or proceedings related thereto;

(g) upon request and subject to reasonable confidentiality obligations, furnish to each Selling Holder copies of any and all transmittal letters or other correspondence with the Commission or any other governmental agency or self-regulatory body or other body having jurisdiction

(including any domestic or foreign securities exchange) relating to such offering of Registrable Securities;

(h) in the case of an Underwritten Offering, furnish upon request, (i) an opinion of counsel for the Partnership dated the date of the closing under the underwriting agreement and (ii) a “cold comfort” letter, dated the pricing date of such Underwritten Offering, and a letter of like kind, dated the date of the closing under the underwriting agreement, in each case, signed by the independent public accountants who have certified the Partnership’s financial statements included or incorporated by reference into the applicable registration statement, and each of the opinion and the “cold comfort” letter shall be in customary form and covering substantially the same matters with respect to such registration statement (and the prospectus and any prospectus supplement included therein) as have been customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to the underwriters in Underwritten Offerings of securities by the Partnership and such other matters as such underwriters and Selling Holders may reasonably request;

(i) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder;

(j) make available to the appropriate representatives of the Managing Underwriter and Selling Holders access to such information and Partnership personnel as is reasonable and customary to enable such parties to establish a due diligence defense under the Securities Act; provided , however , the Partnership need not disclose any non-public information to any such representative unless and until such representative has entered into a reasonable confidentiality agreement with the Partnership;

(k) cause all such Registrable Securities registered pursuant to this Agreement to be listed on each securities exchange or nationally recognized quotation system on which similar securities issued by the Partnership are then listed;

(l) use its commercially reasonable efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Partnership to enable the Selling Holders to consummate the disposition of such Registrable Securities;

(m) provide a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement;

(n) enter into customary agreements and take such other actions as are reasonably requested by the Selling Holders or the underwriters, if any, in order to expedite or facilitate the disposition of such Registrable Securities; and

(o) if requested by a Selling Holder, (i) incorporate in a prospectus supplement or post-effective amendment such information as such Selling Holder reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including information with

respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering and (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment.

The Partnership will not name a Holder as an underwriter as defined in Section 2(a)(11) of the Securities Act in any Registration Statement without such Holder’s consent. If the staff of the Commission requires the Partnership to name any Holder as an underwriter as defined in Section 2(a)(11) of the Securities Act, and such Holder does not consent thereto, then such Holder’s Registrable Securities shall not be included on the Registration Statement and the Partnership shall have no further obligations hereunder with respect to Registrable Securities held by such Holder.

Each Selling Holder, upon receipt of notice from the Partnership of the happening of any event of the kind described in subsection (f) of this Section 2.05 , shall forthwith discontinue offers and sales of the Registrable Securities by means of a prospectus or prospectus supplement until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection (f ) of this Section 2.05 or until it is advised in writing by the Partnership that the use of the prospectus may be resumed and has received copies of any additional or supplemental filings incorporated by reference in the prospectus, and, if so directed by the Partnership, such Selling Holder will, or will request the Managing Underwriter or Underwriters, if any, to deliver to the Partnership (at the Partnership’s expense) all copies in their possession or control, other than permanent file copies then in such Selling Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

Section 2.06 Cooperation by Holders . The Partnership shall have no obligation to include Registrable Securities in the Registration Statement or in an Underwritten Offering pursuant to Section 2.02(a) of a Holder who has failed to timely furnish such information the Partnership determines, after consultation with its counsel, is reasonably required in order for the registration statement or prospectus supplement, as applicable, to comply with the Securities Act.

Section 2.07 Restrictions on Public Sale by Holders of Registrable Securities . Each Holder of Registrable Securities agrees to enter into a customary letter agreement with underwriters providing such Holder will not effect any public sale or distribution of Registrable Securities during the 90 calendar day period beginning on the date of a prospectus or prospectus supplement filed with the Commission with respect to the pricing of any Underwritten Offering, provided , however , (i) the duration of the foregoing restrictions shall be no longer than the duration of the shortest restriction generally imposed by the underwriters on the Partnership or the officers, directors or any other Affiliate of the Partnership on whom a restriction is imposed and (ii) the restrictions set forth in this Section 2.07 shall not apply to any Registrable Securities included in such Underwritten Offering by such Holder. In addition, this Section 2.07 shall not apply to any Holder that is not entitled to participate in such Underwritten Offering, whether because such Holder delivered an Opt-Out Notice prior to receiving notice of the Underwritten Offering or because such Holder holds Registrable Securities representing (x) less than five percent (5.0%) of the then-outstanding

Common Units on a Fully Diluted Basis and (y) less than all of the Registrable Securities held by the Investor as of the date of this Agreement.

Section 2.08 Expenses .

(a) Expenses . The Partnership will pay all Registration Expenses, including, in the case of an Underwritten Offering, whether or not any sale is made pursuant to such Underwritten Offering. Each Selling Holder shall pay its pro rata share of all Selling Expenses in connection with any sale of its Registrable Securities hereunder. In addition, except as otherwise provided in Section 2.09 hereof, the Partnership shall not be responsible for legal fees incurred by Holders in connection with the exercise of such Holders’ rights hereunder.

(b) Certain Definitions . “ Registration Expenses ” means all expenses incident to the Partnership’s performance under or compliance with this Agreement to effect the registration of Registrable Securities on the Registration Statement pursuant to Section 2.01 or an Underwritten Offering covered under this Agreement, and the disposition of such Registrable Securities, including, without limitation, all registration, filing, securities exchange listing and NYSE fees, all registration, filing, qualification and other fees and expenses of complying with securities or blue sky laws, fees of the Financial Industry Regulatory Authority, fees of transfer agents and registrars, all word processing, duplicating and printing expenses, the fees and disbursements of counsel and independent public accountants for the Partnership, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, and all expenses relating to the marketing of the sale of the Registrable Securities (including those relating to conducting a road show). “ Selling Expenses ” means all underwriting discounts, selling commissions and stock transfer taxes allocable to the sale of the Registrable Securities.

Section 2.09 Indemnification .

(a) By the Partnership . In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Partnership will indemnify and hold harmless each Selling Holder thereunder, its directors, officers, members, managers, employees, representatives and agents and each Person, if any, who controls such Selling Holder within the meaning of the Securities Act or the Exchange Act, and its directors, officers, members, managers, employees, representatives or agents (collectively, the “ Selling Holder Indemnified Persons ”), against any losses, claims, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses) (collectively, “ Losses ”), joint or several, to which such Selling Holder Indemnified Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or claims, actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact (in the case of any prospectus, in light of the circumstances under which such statement is made) contained in the Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus, prospectus supplement, free writing prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the circumstances under which they were made) not misleading, and will reimburse each such Selling

Holder Indemnified Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss or claims, actions or proceedings, as such expenses are incurred; provided, however , the Partnership will not be liable in any such case if and to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in reliance upon and in conformity with written information furnished by such Selling Holder Indemnified Person specifically for use in the Registration Statement or such other registration statement, or prospectus supplement, as applicable. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Selling Holder Indemnified Person, and shall survive the transfer of such securities by such Selling Holder.

(b) By Each Selling Holder . Each Selling Holder agrees severally and not jointly to indemnify and hold harmless the Partnership, the General Partner, and their respective directors, officers, members, managers, employees, representatives and agents and each Person, if any, who controls the Partnership within the meaning of the Securities Act or of the Exchange Act, and its directors, officers, members, managers, employees, representatives and agents, to the same extent as the foregoing indemnity from the Partnership to the Selling Holders, but only with respect to written information regarding such Selling Holder furnished by or on behalf of such Selling Holder expressly for inclusion in the Registration Statement or any other registration statement contemplated by this Agreement, any preliminary prospectus, prospectus supplement, free writing prospectus or final prospectus contained therein, or any amendment or supplement thereof; provided, however , the liability of each Selling Holder shall not be greater in amount than the dollar amount of the proceeds received by such Selling Holder (net of Selling Expenses) from the sale of the Registrable Securities giving rise to such indemnification.

(c) Notice . Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have to any indemnified party except to the extent that such omission materially prejudices the indemnifying party’s ability to defend such action. In any action brought against any indemnified party, it shall notify the indemnifying party of the commencement thereof. The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 2.09 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however , (i) if the indemnifying party has failed to assume the defense or employ counsel reasonably acceptable to the indemnified party or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have concluded there may be reasonable defenses available to the indemnified party different from or additional to those available to the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, then the indemnified party shall have the right to select a separate counsel and

to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. Notwithstanding any other provision of this Agreement, no indemnifying party shall settle any action brought against any indemnified party with respect to which such indemnified party is entitled to indemnification hereunder without the consent of the indemnified party, unless the settlement thereof imposes no liability or obligation on, and includes a complete and unconditional release from all liability of, the indemnified party.

(d) Contribution . If the indemnification provided for in this Section 2.09 is held by a court or government agency of competent jurisdiction to be unavailable to any indemnified party or is insufficient to hold such indemnified party harmless in respect of any Losses, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of such indemnified party on the other in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations; provided, however , in no event shall such Selling Holder be required to contribute an aggregate amount in excess of the dollar amount of proceeds received by such Selling Holder (net of Selling Expenses) from the sale of Registrable Securities giving rise to such indemnification. The relative fault of the indemnifying party on the one hand and the indemnified party on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree it would not be just and equitable if contributions pursuant to this paragraph were to be determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to herein. The amount paid by an indemnified party as a result of the Losses referred to in the first sentence of this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such indemnified party in connection with investigating or defending any Loss that is the subject of this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation.

(e) Other Indemnification . The provisions of this Section 2.09 shall be in addition to any other rights to indemnification or contribution an indemnified party may have pursuant to law, equity, contract or otherwise.

Section 2.10 Rule 144 Reporting . With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Securities to the public without registration, the Partnership agrees to use its commercially reasonable efforts to:

(a) make and keep adequate current public information regarding the Partnership available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after the date hereof;

(b) file with the Commission in a timely manner all reports and other documents required of the Partnership under the Securities Act and the Exchange Act at all times from and after the date hereof; and

(c) so long as a Holder owns any Registrable Securities, furnish, unless otherwise available via EDGAR, to such Holder forthwith upon request a copy of the most recent annual or quarterly report of the Partnership, and such other reports and documents so filed as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Holder to sell any such securities without registration.

Section 2.11 Transfer or Assignment of Registration Rights . The rights to cause the Partnership to register Registrable Securities granted to the Investor by the Partnership under this Article II may be transferred or assigned by the Investor to one or more transferees or assignees of Registrable Securities; provided, however, (a) unless the transferee or assignee is an Affiliate of, and after such transfer continues to be an Affiliate of, the Investor, the amount of Registrable Securities transferred or assigned to such transferee or assignee shall represent (i) at least five percent (5.0%) of the then-outstanding Common Units on a Fully-Diluted Basis or (ii) no less than all of the Registrable Securities held by the Investor as of the date of this Agreement, (b) the Partnership is given written notice prior to any said transfer or assignment, stating the name and address of each such transferee or assignee and identifying the securities with respect to which such registration rights are being transferred or assigned, and (c) each such transferee or assignee assumes in writing responsibility for its portion of the obligations of the Investor under this Agreement.

Section 2.12 Limitation on Subsequent Registration Rights . From and after the date hereof, the Partnership shall not, without the prior written consent of the Holders of a majority of the Registrable Securities, enter into any agreement with any current or future holder of any securities of the Partnership that would allow such current or future holder to require the Partnership to include securities in any registration statement filed by the Partnership on a basis other than pari passu with, or expressly subordinate to the rights of, the Holders of Registrable Securities hereunder.

ARTICLE III
MISCELLANEOUS

Section 3.01 Communications . All notices and other communications provided for or permitted hereunder shall be made in writing by facsimile, courier service or personal delivery:

(a) if to the Investor:

John Hancock Life Insurance Company (U.S.A.)
c/o Verto Management, LLC
200 Portland Street
Boston, MA 02114
Attn: Glenn M. Smith, Chief Executive Officer
email: gsmith@vertomgmt.com

with a copy, which shall not constitute notice, to:

John Hancock Life Insurance Company (U.S.A.)
Power and Infrastructure Team
197 Clarendon Street, C-2
Boston, MA 02116
Attn: Matthew L. Fedors, Director
email: mfedors@jhancock.com
with an email copy to: powerteam@jhancock.com

(b) if to a transferee of the Investor, to such Holder at the address provided pursuant to Section 2.11 above; and

Enviva Partners, LP
c/o Enviva Partners GP, LLC (as sole General Partner)

7200 Wisconsin Avenue, Suite 1000

Bethesda, MD 20814

Attention: Executive Vice President, Corporate Development and General Counsel

Facsimile: (240) 482-3774

Email: William.Schmidt@envivabiomass.com

with a copy to:

Vinson & Elkins L.L.P.

666 Fifth Avenue, 26 ^th Floor

New York, NY 10103

Attention: Caroline Blitzer Phillips
Facsimile: (917) 849-5317

Email: cphillips@velaw.com

All such notices and communications shall be deemed to have been received at the time delivered by hand, if personally delivered; when receipt acknowledged, if sent via facsimile; and when actually received, if sent by courier service or any other means.

Section 3.02 Successor and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties, including subsequent Holders of Registrable Securities to the extent permitted herein.

Section 3.03 Assignment of Rights . All or any portion of the rights and obligations of the Investor under this Agreement may be transferred or assigned by the Investor only in accordance with Section 2.11 hereof.

Section 3.04 Recapitalization, Exchanges, Etc. Affecting the Units . The provisions of this Agreement shall apply to the full extent set forth herein with respect to any and all units of the Partnership or any successor or assign of the Partnership (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for or in substitution of, the

Registrable Securities, and shall be appropriately adjusted for combinations, unit splits, recapitalizations, pro rata distributions of units and the like occurring after the date of this Agreement.

Section 3.05 Aggregation of Registrable Securities . All Registrable Securities held or acquired by Persons who are Affiliates of one another shall be aggregated together for the purpose of determining the availability of any rights and applicability of any obligations under this Agreement.

Section 3.06 Specific Performance . Damages in the event of breach of this Agreement by a party hereto may be difficult, if not impossible, to ascertain, and it is therefore agreed that each such Person, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each of the parties hereto hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude any such Person from pursuing any other rights and remedies at law or in equity that such Person may have.

Section 3.07 Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.

Section 3.08 Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

Section 3.09 Governing Law . THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK .

Section 3.10 Severability of Provisions . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction.

Section 3.11 Entire Agreement . This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the rights granted by the Partnership set forth herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

Section 3.12 Amendment . This Agreement may be amended only by means of a written amendment signed by the Partnership and the Holders of a majority of the then outstanding Registrable Securities; provided, however, no such amendment shall materially and adversely affect the rights of any Holder hereunder without the consent of such Holder.

Section 3.13 No Presumption . If any claim is made by a party relating to any conflict, omission or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular party or its counsel.

Section 3.14 Obligations Limited to Parties to Agreement . Each of the Parties hereto covenants, agrees and acknowledges that no Person other than the Investor (and its permitted transferees and assignees) and the Partnership shall have any obligation hereunder and that, notwithstanding that the Investor may be a corporation, partnership or limited liability company, no recourse under this Agreement or under any documents or instruments delivered in connection herewith or therewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of the Investor or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable Law, it being expressly agreed and acknowledged no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of the Investor or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder or Affiliate of any of the foregoing, as such, for any obligations of the Investor under this Agreement or any documents or instruments delivered in connection herewith or therewith or for any claim based on, in respect of or by reason of such obligation or its creation, except in each case for any transferee or assignee of the Investor hereunder.

Section 3.15 Interpretation . Article and Section references are to this Agreement, unless otherwise specified. All references to instruments, documents, contracts and agreements are references to such instruments, documents, contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified. The word “including” shall mean “including but not limited to.”

[Signature pages to follow]

IN WITNESS WHEREOF, the Parties hereto execute this Agreement, effective as of the date first above written.

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

Signature Page to Registration Rights Agreement

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

By: /s/ MATTHEW L. FEDORS

Name: Matthew L. Fedors

Title: Director

Signature Page to Registration Rights Agreement

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: August 7, 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: August 7, 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: August 7, 2019

	By:	/s/ JOHN KEPPLER
		Name:	John K. Keppler
		Title:	Chairman, President and Chief Executive Officer



Date: August 7, 2019

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