Enviva Partners, LP - FORM 8-K - EX-99.2

Attached files

file	filename
EX-99.1 - EX-99.1 - Enviva Partners, LP	a17-13114_1ex99d1.htm
EX-23.1 - EX-23.1 - Enviva Partners, LP	a17-13114_1ex23d1.htm
8-K - 8-K - Enviva Partners, LP	a17-13114_18k.htm

Exhibit 99.2

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except for number of units)

	March 31, 2017			December 31, 2016
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	11,913		$	466
Restricted cash	938			—
Accounts receivable, net of allowance for doubtful accounts of $24 as of March 31, 2017 and December 31, 2016	49,676			77,868
Related-party receivables	6,902			7,634
Inventories	30,780			29,764
Assets held for sale	3,390			3,044
Prepaid expenses and other current assets	2,431			1,939
Related-party prepaid expenses	148			—
Total current assets	106,178			120,715
Property, plant and equipment, net of accumulated depreciation of $88.8 million as of March 31, 2017 and $80.8 million as of December 31, 2016	511,907			516,418
Intangible assets, net of accumulated amortization of $9.2 million as of March 31, 2017 and $9.1 million as of December 31, 2016	1,287			1,371
Goodwill	85,615			85,615
Other long-term assets	2,508			2,049
Total assets	$	707,495		$	726,168
Liabilities and Partners’ Capital
Current liabilities:
Accounts payable	$	3,009		$	9,869
Related-party payables	7,893			11,118
Accrued and other current liabilities	38,936			38,432
Related-party accrued liabilities	—			382
Current portion of interest payable	10,805			4,414
Current portion of long-term debt and capital lease obligations	4,676			4,109
Total current liabilities	65,319			68,324
Long-term debt and capital lease obligations	340,402			346,686
Long-term interest payable	800			770
Other long-term liabilities	1,281			871
Total liabilities	407,802			416,651
Commitments and contingencies
Partners’ capital:
Limited partners:
Common unitholders—public (13,045,894 and 12,980,623 units issued and outstanding as of March 31, 2017 and December 31, 2016, respectively)	236,902			239,902
Common unitholder—sponsor (1,347,161 units issued and outstanding as of March 31, 2017 and December 31, 2016)	17,587			18,197
Subordinated unitholder—sponsor (11,905,138 units issued and outstanding as of March 31, 2017 and December 31, 2016)	115,488			120,872
General Partner (no outstanding units)	(67,393		)	(67,393		)
Accumulated other comprehensive (loss) income	(202		)	595
Total Enviva Partners, LP partners’ capital	302,382			312,173
Noncontrolling partners’ interests	(2,689		)	(2,656		)
Total partners’ capital	299,693			309,517
Total liabilities and partners’ capital	$	707,495		$	726,168

See accompanying notes to unaudited condensed consolidated financial statements.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(In thousands, except per unit amounts)

(Unaudited)

	Three Months Ended March 31,
	2017			2016 (Recast)
Product sales	$	119,047		$	103,445
Other revenue	3,076			3,807
Net revenue	122,123			107,252
Cost of goods sold, excluding depreciation and amortization	95,215			84,616
Depreciation and amortization	8,432			6,881
Total cost of goods sold	103,647			91,497
Gross margin	18,476			15,755
General and administrative expenses	8,325			6,950
Income from operations	10,151			8,805
Other income (expense):
Interest expense	(7,705		)	(3,182		)
Related-party interest expense	—			(209		)
Other income	56			132
Total other expense, net	(7,649		)	(3,259		)
Net income	2,502			5,546
Less net loss attributable to noncontrolling partners’ interests	33			993
Net income attributable to Enviva Partners, LP	$	2,535		$	6,539
Less: Pre-acquisition loss from operations of Enviva Pellets Sampson, LLC Drop-Down allocated to General Partner	$	—		$	(955	)
Enviva Partners, LP limited partners’ interest in net income	$	2,535		$	7,494
Net income per common unit:
Basic	$	0.08		$	0.30
Diluted	$	0.07		$	0.29
Net income per subordinated unit:
Basic	$	0.08		$	0.30
Diluted	$	0.08		$	0.29
Weighted-average number of limited partner units outstanding:
Common—basic	14,380			12,852
Common—diluted	15,228			13,337
Subordinated—basic and diluted	11,905			11,905

See accompanying notes to unaudited condensed consolidated financial statements.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2017			2016 (Recast)
Net income	$	2,502		$	5,546
Other comprehensive loss:
Net unrealized losses on cash flow hedges	(797		)	—
Total other comprehensive loss	(797		)	—
Total comprehensive income	1,705			5,546
Less:
Pre-acquisition loss from operations of Enviva Pellets Sampson, LLC Drop-Down allocated to General Partner	—			(955		)
Total comprehensive income subsequent to Sampson Drop-Down	1,705			6,501
Less:
Comprehensive loss attributable to noncontrolling partners’ interests	33			993
Comprehensive income attributable to Enviva Partners, LP limited partners	$	1,738		$	7,494

See accompanying notes to unaudited condensed consolidated financial statements.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Partners’ Capital

(In thousands)

(Unaudited)

						Limited Partners’ Capital												Accumulated
	Net Parent		General Partner			Common Units—Public				Common Units—Sponsor				Subordinated Units—Sponsor				Other Comprehensive			Non- controlling			Total Partners’
	Investment		Interest			Units	Interests			Units	Amount			Units	Amount			Income			Interests			Capital
Partners’ Capital, December 31, 2016	—		$	(67,393	)	12,981	$	239,902		1,347	$	18,197		11,905	$	120,872		$	595		$	(2,656	)	$	309,517
Distributions to unitholders, distribution equivalent and incentive distribution rights	—		(361		)	—	(7,507		)	—	(721		)	—	(6,369		)	—			—			(14,958		)
Issuance of units through Long-Term Incentive Plan	—		—			2	43			—	—			—	—			—			—			43
Issuance of common units, net	—		—			63	1,715			—	—			—	—			—			—			1,715
Unit-based compensation	—		—			—	1,671			—	—			—	—			—			—			1,671
Other comprehensive loss	—		—			—	—			—	—			—	—			(797		)	—			(797		)
Net income	—		361			—	1,078			—	111			—	985			—			(33		)	2,502
Partners’ Capital, March 31, 2017	$	—	$	(67,393	)	13,046	$	236,902		1,347	$	17,587		11,905	$	115,488		$	(202	)	$	(2,689	)	$	299,693

See accompanying notes to unaudited condensed consolidated financial statements.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2017			2016 (Recast)
Cash flows from operating activities:
Net income	$	2,502		$	5,546
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,436			6,893
Amortization of debt issuance costs and original issue discounts	381			446
General and administrative expenses incurred by Hancock JV prior to Enviva Pellets Sampson, LLC Drop-Down	—			661
Loss on disposals of property, plant and equipment	24			1
Unit-based compensation	1,714			681
Change in fair value of derivatives	(759		)	—
Change in operating assets and liabilities:
Accounts receivable, net	28,192			831
Related-party receivables	(920		)	(289		)
Restricted cash	(938		)	—
Prepaid expenses and other assets	(697		)	724
Related-party prepaid expenses	(148		)	—
Assets held for sale	(345		)	—
Inventories	(1,254		)	(3,941		)
Other long-term assets	21			(121		)
Accounts payable	(6,095		)	3,161
Related-party payables	(2,941		)	4,771
Accrued liabilities	2,312			427
Accrued interest	6,421			45
Deferred revenue	—			(216		)
Other current liabilities	22			(229		)
Net cash provided by operating activities	35,928			19,391
Cash flows from investing activities:
Purchases of property, plant and equipment	(5,656		)	(12,254		)
Net cash used in investing activities	(5,656		)	(12,254		)
Cash flows from financing activities:
Principal payments on debt and capital lease obligations	(17,153		)	(29,329		)
Principal payments on related-party debt	—			(89		)
Cash paid for related debt issuance costs	(209		)	—
Proceeds from debt issuance	10,000			28,500
Proceeds from common unit issuance under the At-the-Market Offering Program, net	1,715			—
Distributions to unitholders, distribution equivalent rights and incentive distribution rights holder	(14,829		)	(11,570		)
Contributions from Hancock JV prior to Enviva Pellets Sampson, LLC Drop-Down	—			11,861
Distributions to sponsor	—			(5,002		)
Contributions from sponsor related to Enviva Pellets Sampson, LLC Drop-Down	1,651			—
Net cash used in financing activities	(18,825		)	(5,629		)
Net increase in cash and cash equivalents	11,447			1,508
Cash and cash equivalents, beginning of period	466			2,128
Cash and cash equivalents, end of period	$	11,913		$	3,636

See accompanying notes to unaudited condensed consolidated financial statements.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Continued)

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2017		2016 (Recast)
Non-cash investing and financing activities:
Property, plant and equipment acquired included in accounts payable and accrued liabilities	$	9,547	$	18,988
Property, plant and equipment transferred from inventories	153		38
Depreciation capitalized to inventories	86		198
Non-cash capital contributions from Hancock JV prior to Enviva Pellets Sampson, LLC Drop-Down	—		81
Distributions included in liabilities	509		83
Capitalized insurance included in related-party payables	—		89
Capitalized labor included in related-party payables	—		244
Property, plant and equipment acquired under capital leases	1,124		—
Supplemental information:
Interest paid	$	853	$	2,897

See accompanying notes to unaudited condensed consolidated financial statements.

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 (the “Partnership”) is a publicly traded Delaware limited partnership formed on November 12, 2013, as a wholly owned subsidiary of Enviva Holdings, LP (together with its wholly owned subsidiary Enviva Development Holdings, LLC, where applicable, the “sponsor”). Through its interests in Enviva, LP and Enviva GP, LLC, the general partner of Enviva, LP, the Partnership supplies utility-grade wood pellets to major power generators under long-term, take-or-pay off-take contracts. The Partnership procures wood fiber and processes it into utility-grade wood pellets and loads the finished wood pellets into railcars, trucks and barges that are transported to deep-water marine terminals, where they are received, stored and ultimately loaded onto oceangoing vessels for transport to the Partnership’s principally Northern European customers.

The Partnership owns and operates six industrial-scale wood pellet production plants located in the Mid-Atlantic and Gulf Coast regions of the United States. Wood pellets are exported from a wholly owned deep-water marine terminal in Chesapeake, Virginia, from a deep-water marine terminal in Wilmington, North Carolina owned by a joint venture between the sponsor and certain affiliates of John Hancock Life Insurance Company (the “Hancock JV”), which is consolidated by the sponsor, and from third-party deep-water marine terminals in Mobile, Alabama and Panama City, Florida under long-term contracts.

Basis of Presentation

On December 14, 2016, under the terms of a contribution agreement by and among the Partnership and the Hancock JV, the Hancock JV sold to the Partnership all of the issued and outstanding limited liability company interests in Enviva Pellets Sampson, LLC (“Sampson”) for total consideration of $175.0 million. Sampson owns a wood pellet production plant in Sampson County, North Carolina (the “Sampson plant”). The acquisition (the “Sampson Drop-Down”) included the Sampson plant, an approximate ten-year 420,000 metric tons per year (“MTPY”) take-or-pay off-take contract with DONG Energy Thermal Power A/S, an approximate 15-year, 95,000 MTPY off-take contract with the Hancock JV and related third-party shipping contracts. The Sampson Drop-Down included the payment of $139.6 million in cash, net of a purchase price adjustment of $5.4 million, to the Hancock JV, the issuance of 1,098,415 unregistered common units representing limited partnership interests in the Partnership (the “common units”) at a value of $27.31 per unit, or $30.0 million of common units, to affiliates of John Hancock Life Insurance Company, and the elimination of $1.2 million of related-party receivables and payables, net, included in the net assets on the date of acquisition. The Partnership accounted for the Sampson Drop-Down as a combination of entities under common control at historical cost in a manner similar to a pooling of interests. Accordingly, the unaudited interim condensed consolidated financial statements for the three months ended March 31, 2016 were retrospectively recast to reflect the Sampson Drop-Down as if it had occurred on May 15, 2013, the date Sampson was originally organized (see Note 2, Transactions Between Entities Under Common Control).

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(1) Description of Business and Basis of Presentation (Continued)

for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements include all adjustments and accruals that are necessary for a fair presentation of the results of all interim periods presented herein and are of a normal recurring nature. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC.

During interim periods, the Partnership follows the accounting policies disclosed in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016.

Use of Estimates

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

Summary of Significant Accounting Policies

The accounting policies are set forth in the Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2016. There have been no changes to these policies during the three months ended March 31, 2017.

Recent and Pending Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles—Goodwill and Other. ASU No. 2017-04 simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the new standard, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance should be adopted for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1,

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(1) Description of Business and Basis of Presentation (Continued)

2017. The Partnership does not expect the adoption of ASU No. 2017-04 to have a material impact on its results of operations, financial position and cash flows.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, in an effort to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this standard provide a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the integrated set of assets and activities is not a business. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is allowed (1) for transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and (2) for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. Entities will be required to apply the guidance retrospectively when adopted. The Partnership is in the process of evaluating the impact of the adoption of ASU No. 2017-01 on its condensed consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230)—Restricted Cash: A Consensus of the FASB Emerging Issues Task Force, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The guidance addresses the presentation of changes in restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. This reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. Entities will also have to disclose the nature of their restricted cash and restricted cash equivalent balances. The new guidance is effective for public business entities for fiscal years and interim periods within those years beginning after December 15, 2017. Early adoption in an interim period is permitted, but any adjustments must be reflected as of the beginning of the fiscal year that includes such interim period. Entities will be required to apply the guidance retrospectively when adopted. The Partnership does not expect the adoption of the new standard to have a material effect on the presentation of changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in its statements of cash flows.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230)—Classification of Certain Cash Receipts and Cash Payments, which will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows with the objective of reducing the existing diversity in practice. The guidance addresses the classification of

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(1) Description of Business and Basis of Presentation (Continued)

cash flows related to (1) debt prepayment or extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance, including bank-owned life insurance, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions and (8) separately identifiable cash flows and application of the predominance principle. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. An entity will first apply any relevant guidance. If there is no guidance that addresses those cash receipts and cash payments, an entity will determine each separately identifiable source or use and classify the receipt or payment based on the nature of the cash flow. If a receipt or payment has aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source of use. The new guidance is effective for public business entities for fiscal years and interim periods within those years beginning after December 15, 2017. The new guidance will require adoption on a retroactive basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Partnership does not expect the adoption of the new standard to have a material effect on how cash receipts and cash payments are presented and classified in its consolidated statements of cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases. Under the new pronouncement, an entity is required to recognize assets and liabilities arising from a lease for all leases with a maximum possible term of more than 12 months. A lessee is required to recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. For most leases of assets other than property (for example, equipment, aircraft, cars, trucks), a lessee would recognize a right-of-use asset and a lease liability, initially measured at the present value of lease payments and recognize the unwinding of the discount on the lease liability as interest separately from the amortization of the right-of-use asset. For most leases of property (that is, land and/or a building or part of a building), a lessee would recognize a right-of-use asset and a lease liability, initially measured at the present value of lease payments and recognize a single lease cost, combining the unwinding of the discount on the lease liability with the amortization of the right-of-use asset, on a straight-line basis. The new guidance is effective for public entities for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Upon adoption, a lessee and a lessor would recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Early adoption is permitted. While the Partnership is continuing to assess all potential qualitative and quantitative impacts of the standard, the Partnership currently expects the new standard to impact its accounting for equipment under operating leases.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The new standard provides new guidance on the recognition of revenue and states that an entity should recognize revenue when control of the goods or services transfers to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(1) Description of Business and Basis of Presentation (Continued)

services. The new standard also requires significantly expanded disclosure regarding qualitative and quantitative information about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Partnership will adopt the new standard effective January 1, 2018. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers—Principal versus Agent Considerations. The new standard clarifies the implementation guidance on principal versus agent considerations. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606), which provides narrow scope improvements and practical expedients related to ASU No. 2014-09. ASU No. 2014-09 permits the application retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASUs at the date of initial application. The Partnership continues to evaluate the quantitative impact of the adoption. The Partnership has completed its evaluation of its off-take contracts to identify material performance obligations. The Partnership’s evaluation considered ASU No. 2016-10, Identifying Performance Obligations and Licensing, issued by the FASB on April 14, 2016, which amends the guidance on identifying performance obligations and the implementation guidance on licensing. The guidance permits an entity to account for shipping and handling activities occurring after control has passed to the customer as a fulfillment activity rather than as a revenue element. Based on its consideration of ASU No. 2016-10, the Partnership has elected to account for shipping and handling activities as a fulfillment activity, consistent with its current policy. The Partnership continues to assess the timing of revenue recognition under the new guidance and whether certain transactions currently presented on a net basis, should be recognized as principal sales on a gross basis.

(2) Transactions Between Entities Under Common Control

Recast of Historical Financial Statements

The financial statements for the three months ended March 31, 2016 have been recast to reflect the Sampson Drop-Down as if it had occurred on May 15, 2013, the date Sampson was originally organized.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(2) Transactions Between Entities Under Common Control (Continued)

The following table presents the changes to previously reported amounts in the unaudited interim condensed consolidated balance sheet as of March 31, 2016 included in the Partnership’s quarterly report on Form 10-Q for the quarter ended March 31, 2016:

	Three Months Ended March 31, 2016
	As Reported		Enviva Pellets Sampson, LLC		Total (Recast)
Cash and cash equivalents	$	3,636	$	—	$	3,636
Property, plant and equipment, net of accumulated depreciation	401,214		99,424		500,638
Goodwill and intangibles	85,615		—		85,615
Other assets	77,237		638		77,875
Total assets	$	567,702	$	100,062	$	667,764
Accounts payable and accrued liabilities	$	36,156	$	19,766	$	55,922
Total long-term debt	207,160		—		207,160
Other liabilities	1,727		—		1,727
Total liabilities	245,043		19,766		264,809
Partners’ capital	322,659		80,296		402,955
Total liabilities and partners’ capital	$	567,702	$	100,062	$	667,764

The following table presents the changes to previously reported amounts in the unaudited interim condensed consolidated statements of income for the three months ended March 31, 2016 included in the Partnership’s quarterly report on Form 10-Q for the quarter ended March 31, 2016:

	Three Months Ended March 31, 2016
	As Reported		Enviva Pellets Sampson, LLC			Total (Recast)
Net revenue	$	107,252	$	—		$	107,252
Net income (loss)	7,479		(1,933		)	5,546
Less net loss attributable to noncontrolling partners’ interests	15		978			993
Net income attributable to Enviva Partners, LP	7,494		(955		)	6,539
Net loss attributable to general partner	—		(955		)	(955		)
Net income attributable to Enviva Partners, LP limited partners	7,494		—			7,494

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(2) Transactions Between Entities Under Common Control (Continued)

The following table presents the changes to previously reported amounts in the unaudited interim condensed consolidated statement of cash flows for the three months ended March 31, 2016 included in the Partnership’s quarterly report on Form 10-Q for the quarter ended March 31, 2016:

	Three Months Ended March 31, 2016
	As Reported			Enviva Pellets Sampson, LLC			Total (Recast)
Net cash provided by (used in) operating activities	$	20,804		$	(1,413	)	$	19,391
Net cash used in investing activities	(1,853		)	(10,401		)	(12,254		)
Net cash (used in) provided by financing activities	(17,490		)	11,861			(5,629		)
Net increase (decrease) in cash and cash equivalents	$	1,461		$	47		$	1,508

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

The Partnership’s business is significantly impacted by greenhouse gas emission and renewable energy legislation and regulations in the European Union (the “E.U.”) as well as its member states. If the E.U. or its member states significantly modify such legislation or regulations, then the Partnership’s ability to enter into new contracts as the current contracts expire may be materially affected.

The Partnership’s primary industrial customers are located in the United Kingdom, Denmark and Belgium. Three customers accounted for 97% of the Partnership’s product sales during the three months ended March 31, 2017 and two customers accounted for 91% of the Partnership’s product sales during the three months ended March 31, 2016. The following table shows product sales to third-party customers that accounted for 10% or a greater share of consolidated product sales for each of the three months ended:

	March 31, 2017		March 31, 2016 (Recast)
Customer A	62	%	76	%
Customer B	19	%	15	%
Customer C	—	%	—	%
Customer D	16	%	—	%

The Partnership’s cash and cash equivalents are placed in or with various financial institutions. The Partnership has not experienced any losses on such accounts and does not believe it has any significant risk in this area.

(4) Restricted Cash

As of March 31, 2017, cash of $0.9 million is restricted as to withdrawal and use pursuant to a security agreement. The unused portion of the restricted cash balance will be returned to the Partnership upon satisfaction of all obligations. There was no restricted cash as of December 31, 2016.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(5) Property, Plant and Equipment

Property, plant and equipment consisted of the following at:

	March 31, 2017			December 31, 2016
Land	$	13,492		$	13,492
Land improvements	42,207			42,148
Buildings	137,092			137,092
Machinery and equipment	384,317			382,740
Vehicles	568			513
Furniture and office equipment	5,134			5,113
	582,810			581,098
Less accumulated depreciation	(88,784		)	(80,768		)
	494,026			500,330
Construction in progress	17,881			16,088
Total property, plant and equipment, net	$	511,907		$	516,418

Total depreciation expense was $8.4 million and $6.1 million for the three months ended March 31, 2017 and 2016, respectively.

(6) Inventories

Inventories consisted of the following at:

	March 31, 2017		December 31, 2016
Raw materials and work-in-process	$	8,106	$	7,689
Consumable tooling	12,716		11,978
Finished goods	9,958		10,097
Total inventories	$	30,780	$	29,764

(7) Derivative Instruments

The Partnership uses derivative instruments to partially offset its business exposure to foreign currency exchange and interest rate risk. The Partnership may enter into foreign currency forward and option contracts to offset some of the foreign currency exchange risk on expected future cash flows on certain forecasted revenue and interest rate swaps to offset some of the interest rate risk on expected future cash flows on certain borrowings. The Partnership’s derivative instruments expose it to credit risk to the extent that hedge counterparties may be unable to meet the terms of the applicable derivative instrument. The Partnership seeks to mitigate such risks by limiting its counterparties to major financial institutions. In addition, the Partnership monitors 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

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(7) Derivative Instruments (Continued)

counterparties. The Partnership uses derivative instruments to manage cash flow and does not enter into derivative instruments for speculative or trading purposes.

Cash Flow Hedges

Foreign Currency Exchange Risk

The Partnership is 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”). Deliveries under these off-take contracts are expected to begin in late 2017 and 2019. The Partnership has and may continue to enter into foreign currency forward contracts, purchased option contracts or other instruments to partially manage this risk and has designated and may continue to designate these instruments as cash flow hedges.

For these cash flow hedges, the effective 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. The ineffective portion of the gain or loss, if any, is reported in earnings in the current period. The Partnership considers its cash flow hedges to be highly effective at inception.

The Partnership’s outstanding cash flow hedges at March 31, 2017 expire on dates between 2017 and 2021.

Interest Rate Risk

The Partnership is exposed to fluctuations in interest rates on borrowings under its Senior Secured Credit Facilities. The Partnership entered into a pay-fixed, receive-variable interest rate swap in September 2016 to hedge the interest rate risk associated with its variable rate borrowings under its Senior Secured Credit Facilities. The Partnership elected to discontinue hedge accounting as of December 14, 2016 following the repayment of a portion of its outstanding indebtedness under its Senior Secured Credit Facilities, and subsequently re-designated the interest rate swap for the remaining portion of such outstanding indebtedness during the three months ended March 31, 2017. The Partnership’s interest rate swap expires concurrently with the maturity of the Senior Secured Credit Facilities in April 2020.

The counterparty to the Partnership’s interest rate swap is a major financial institution.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(7) Derivative Instruments (Continued)

The fair values of cash flow hedging instruments included in the unaudited interim condensed consolidated balance sheet as of March 31, 2017 were as follows:

	Balance Sheet Location	Asset Derivatives		Liability Derivatives
Derivatives designated as hedging instruments:
Forward contracts:
Foreign currency exchange forward contracts	Prepaid and other current assets	$	291	$	—
Foreign currency exchange forward contracts	Other long-term assets	321		—
Foreign currency exchange forward contracts	Other current liabilities	—		2
Foreign currency exchange forward contracts	Other long-term liabilities	—		363
Purchased options:
Foreign currency purchased option contracts	Prepaid and other current assets	20		—
Foreign currency purchased option contracts	Other long-term assets	1,049		—
Interest rate swap:
Interest rate swap	Other current assets	6		—
Interest rate swap	Other long-term assets	514		—
Total derivatives designated as hedging instruments		$	2,201	$	365
Derivatives not designated as hedging instruments:
Forward contracts	Prepaid and other current assets	$	5	$	—

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(7) Derivative Instruments (Continued)

The fair values of cash flow hedging instruments included in the condensed consolidated balance sheet as of December 31, 2016 were as follows:

	Balance Sheet Location	Asset Derivatives		Liability Derivatives
Derivatives designated as hedging instruments:
Forward contracts:
Foreign currency exchange forward contracts	Prepaid and other current assets	$	188	$	—
Foreign currency exchange forward contracts	Other long-term assets	632		—
Foreign currency exchange forward contracts	Other long-term liabilities	—		51
Purchased options:
Foreign currency purchased option contracts	Other long-term assets	626		—
Total derivatives designated as hedging instruments		$	1,446	$	51
Derivatives not designated as hedging instruments:
Interest rate swap	Other long-term assets	$	484	$	—

The effects of instruments designated as cash flow hedges, the related changes in accumulated other comprehensive income and the gains and losses in income for the three months ended March 31, 2017 were as follows:

	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 (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Foreign exchange contracts	$	230		Product sales	$	—		Product sales	$	(2	)
Foreign exchange contracts	19			Other revenue	—			Other revenue	—
Purchased options	(511		)	Product sales	—			Product sales	—
Interest rate swap	60			Other income (expense)	(57		)	Other income (expense)	11

The estimated net amount of existing gains and losses in accumulated other comprehensive income associated with derivative instruments expected to be transferred to the consolidated statements of income during the next twelve months is a gain of approximately $0.1 million, net.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(7) Derivative Instruments (Continued)

The notional amounts of outstanding derivative instruments designated as cash flow hedges associated with outstanding or unsettled derivative instruments as of March 31, 2017 were as follows:

Foreign exchange forward contracts	£	32,370
Foreign exchange purchased option contracts	£	18,610
Foreign exchange forward contracts	€	3,800
Interest rate swap	$	47,220

The notional amounts of outstanding derivative instruments designated as cash flow hedges associated with outstanding or unsettled derivative instruments as of December 31, 2016 were as follows:

Foreign exchange forward contracts		£	25,270
Foreign exchange purchased option contracts		£	8,160

The Partnership did not have derivative instruments designated as cash flow hedges during the three months ended March 31, 2016.

(8) Fair Value Measurements

The amounts reported in the unaudited interim condensed consolidated balance sheets as cash and cash equivalents, accounts receivable, related-party receivables, prepaid expenses and other current assets, accounts payable, related-party payables 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 capital lease obligations, including the current portion, are classified as Level 2 instruments due to the usage of market prices not quoted on active markets and other observable market data. The carrying amount of derivative instruments approximates fair value as of March 31, 2017 and December 31, 2016. The carrying amount and estimated fair value of long-term debt and capital lease obligations as of March 31, 2017 and December 31, 2016 were as follows:

	March 31, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt and capital lease obligations including current portion	$	345,078	$	363,412	$	350,795	$	363,545

The fair value of long-term debt and capital lease obligations is estimated based upon rates currently available for debt with similar terms and remaining maturities.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(9) Goodwill and Other Intangible Assets

Intangible Assets

Intangible assets consisted of the following at:

		March 31, 2017							December 31, 2016
	Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Favorable customer contracts	3 years	$	8,700	$	(7,468	)	$	1,232	$	8,700	$	(7,468	)	$	1,232
Wood pellet contract	6 years	1,750		(1,695		)	55		1,750		(1,611		)	139
Total intangible assets		$	10,450	$	(9,163	)	$	1,287	$	10,450	$	(9,079	)	$	1,371

Intangible assets include favorable customer contracts acquired in connection with the Partnership’s purchase of Green Circle Bio Energy, Inc. in January 2015. The Partnership also recorded payments made to acquire a six-year wood pellet contract with a European utility in 2010 as an intangible asset. These costs are recoverable through the future revenue streams generated from the associated contract and are closely related to the revenue from the customer contract. The Partnership amortizes the customer contract intangible assets as deliveries are completed during the respective contract terms. During the three months ended March 31, 2017 and 2016, $0.1 million and $0.8 million, respectively, were included in cost of goods sold in the accompanying unaudited interim condensed consolidated statements of income.

The estimated aggregate maturities of amortization expense for the next five years are as follows:

April 1, 2017 through December 31, 2017	$	979
Year ending December 31, 2018	308
Year ending December 31, 2019	—
Year ending December 31, 2020	—
Year ending December 31, 2021	—
Thereafter	—
Total	$	1,287

(10) Assets Held for Sale

The Partnership has a controlling interest in Enviva Pellets Wiggins, LLC (“Enviva Pellets Wiggins”), an entity that owns a wood pellet production plant in Stone County, Mississippi (the “Wiggins plant”). Enviva Pellets Wiggins is a joint venture controlled and consolidated by the Partnership. In December 2016, the Partnership, with the authorization of the Partnership’s board of directors, initiated a plan, and entered into a purchase and sale agreement, to sell the Wiggins plant. In December 2016, the Partnership reclassified the Enviva Pellets Wiggins assets to current assets held for sale and ceased depreciation. On January 20, 2017, the purchase and sale agreement terminated when the buyer failed to pay the purchase price. As of March 31, 2017, all operations at the Wiggins plant

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(10) Assets Held for Sale (Continued)

have ceased and the plant remains available for immediate sale. The Partnership remains in active negotiations with a buyer for the Enviva Pellets Wiggins assets.

(11) Long-Term Debt and Capital Lease Obligations

Long-term debt, at carrying value which approximates fair value, and capital lease obligations is composed of the following:

	March 31, 2017			December 31, 2016
Senior Notes, net of unamortized discount and debt issuance of $6.0 million as of March 31, 2017 and $6.2 million as of December 31, 2016	$	293,970		$	293,797
Senior Secured Credit Facilities, Tranche A-1 Advances, net of unamortized discount and debt issuance costs of $1.4 million as of March 31, 2017 and December 31, 2016	41,166			41,651
Senior Secured Credit Facilities, Tranche A-3 Advances, net of unamortized discount and debt issuance costs of $0.1 million as of March 31, 2017 and $0.2 December 31, 2016	4,564			4,489
Senior Secured Credit Facilities, revolving credit commitments, at a Eurodollar Rate of 7.0% at December 31, 2016	—			6,500
Other loans	2,758			2,759
Capital leases	2,620			1,599
Total long-term debt and capital lease obligations	345,078			350,795
Less current portion of long-term debt and capital lease obligations	(4,676		)	(4,109		)
Long-term debt and capital lease obligations, excluding current installments	$	340,402		$	346,686

Senior Notes Due 2021

On November 1, 2016, the Partnership and Enviva Finance Corp. (together with the Partnership, the “Issuers”), issued $300.0 million in aggregate principal amount of 8.5% senior unsecured notes due November 1, 2021 (the “Senior Notes”) to eligible purchasers in a private placement under Rule 144A and Regulation S of the Securities Act of 1933, as amended (the “Senior Notes Offering”). Interest payments will be due semi-annually in arrears on May 1 and November 1, commencing May 1, 2017. The Partnership recorded $6.4 million in issue discounts and costs associated with the issuance of the Senior Notes, which have been recorded as a deduction to long-term debt and capital lease obligations.

The Partnership used $139.6 million of the net proceeds from the Senior Notes, together with cash on hand, to pay a portion of the purchase price for the Sampson Drop-Down and $159.8 million to repay borrowings, including accrued interest, under the Senior Secured Credit Facilities.

In connection with the Senior Notes Offering, the Partnership entered into a registration rights agreement among the Issuers, the guarantors of the Senior Notes and JP Morgan Securities LLC, as representative of the several initial purchasers of each series of the Senior Notes. Pursuant to the

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(11) Long-Term Debt and Capital Lease Obligations (Continued)

registration rights agreement, the Issuers and the guarantors agreed to use commercially reasonable efforts to file a registration statement with the SEC to offer to exchange the Senior Notes for newly issued registered notes with terms substantially identical in all material respects to the Senior Notes (except that the registered notes will not be subject to restrictions on transfer) (the “Exchange Offer”), and cause the registration statement to become effective within 365 days of the closing date of the Senior Notes Offering. If the Exchange Offer is not completed on or before the 365th day following the Senior Notes Offering, the annual interest rate on the Senior Notes will increase by 0.25% per annum (with an additional 0.25% per annum increase for each subsequent 90-day period that such additional interest continues to accrue, up to a maximum total additional interest rate increase of 1.00% per annum).

At any time prior to November 1, 2018, the Issuers may redeem up to 35% of the aggregate principal amount of the Senior Notes (including additional notes) at a redemption price of 108.5% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, in an amount not greater than the net cash proceeds of one or more equity offerings by the Partnership, provided that:

· at least 65% of the aggregate principal amount of the notes issued under the indenture governing the Senior Notes (the “Indenture”) on November 1, 2016, remains outstanding immediately after the occurrence of such redemption (excluding notes held by the Partnership and its subsidiaries); and

· the redemption occurs within 120 days of the date of the closing of such equity offering(s).

On and after November 1, 2018, the Issuers may redeem all or a portion of the Senior Notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, on the Senior Notes redeemed to the applicable redemption date (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), if redeemed during the twelve-month period beginning November 1 on the years indicated below:

Year:	Percentages
2018	104.250	%
2019	102.125	%
2020 and thereafter	100.000	%

The Senior Notes contain certain covenants applicable to the Partnership including, but not limited to (1) restricted payments, (2) incurrence of indebtedness and issuance of preferred securities, (3) liens, (4) dividend and other payment restrictions affecting subsidiaries, (5) merger, consolidation or sale of assets, (6) transactions with affiliates, (7) designation of restricted and unrestricted subsidiaries, (8) additional subsidiary guarantees, (9) business activities and (10) reporting obligations.

As of March 31, 2017 and December 31, 2016, the Partnership was in compliance with all covenants and restrictions associated with, and no events of default existed under, the Indenture. The

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(11) Long-Term Debt and Capital Lease Obligations (Continued)

Partnership’s obligations under the Indenture are guaranteed by certain of the Partnership’s subsidiaries and secured by liens on substantially all of the Partnership’s assets.

Senior Secured Credit Facilities

On April 9, 2015, the Partnership entered into a credit agreement (the “Credit Agreement”) providing for $199.5 million aggregate principal amount of senior secured credit facilities (the “Original Credit Facilities”). The Original Credit Facilities consisted of (i) $99.5 million aggregate principal amount of Tranche A-1 advances, (ii) $75.0 million aggregate principal amount of Tranche A-2 advances and (iii) revolving credit commitments in an aggregate principal amount at any time outstanding, taken together with the face amount of letters of credit, not in excess of $25.0 million. The Partnership is also able to request loans under incremental facilities under the Credit Agreement on the terms and conditions and in the maximum aggregate principal amounts set forth therein, provided that lenders provide commitments to make loans under such incremental facilities.

On December 11, 2015, the Partnership entered into the First Incremental Term Loan Assumption Agreement (the “Assumption Agreement”) providing for $36.5 million of incremental borrowings (the “Incremental Term Advances” and, together with the Original Credit Facilities, the “Senior Secured Credit Facilities”) under the Credit Agreement. The Incremental Term Advances consisted of (i) $10.0 million aggregate principal amount of Tranche A-3 advances and (ii) $26.5 million aggregate principal amount of Tranche A-4 advances. Enviva FiberCo, LLC (“Enviva FiberCo”), an affiliate and a wholly owned subsidiary of the sponsor, became a lender pursuant to the Credit Agreement with a purchase of $15.0 million aggregate principal amount of the Tranche A-4 advances, net of a 1.0% lender fee. On June 30, 2016, Enviva FiberCo assigned all of its rights and obligations in its capacity as a lender to a third party. The Partnership recorded $0.2 million as interest expense related to this indebtedness during the three months ended March 31, 2016.

On October 17, 2016, the Partnership entered into a second amendment to the Credit Agreement (the “Second Amendment”) under the Partnership’s Senior Secured Credit Facilities. Following the consummation of the Sampson Drop-Down, the Second Amendment provided for an increase from $25.0 million to $100.0 million of the revolving credit commitments.

On December 14, 2016, proceeds from the Senior Notes were used to repay all outstanding indebtedness, including accrued interest, of $74.7 million for Tranche A-2 and $26.5 million for Tranche A-4, under the Senior Secured Credit Facilities, and to repay a portion of the outstanding indebtedness, including accrued interest, of $53.6 million for Tranche A-1 and $5.1 million for Tranche A-3 under the Senior Secured Credit Facilities. For the year ended December 31, 2016, the Partnership recorded a $4.4 million loss on early retirement of debt obligation related to the repayments.

The Senior Secured Credit Facilities mature in April 2020. Borrowings under the Senior Secured Credit Facilities bear interest, at the Partnership’s option, at either a base rate plus an applicable margin or at a Eurodollar rate (with a 1.00% floor for term loan borrowings) plus an applicable margin. Principal and interest are payable quarterly.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(11) Long-Term Debt and Capital Lease Obligations (Continued)

The Partnership had $4.0 million of letters of credit outstanding under the letters of credit facilities as of March 31, 2017 and December 31, 2016. The letters of credit were issued in connection with contracts between the Partnership and third parties, in the ordinary course of business.

The Partnership had $6.5 million outstanding under the revolving credit commitments as of December 31, 2016. The Partnership had no amount outstanding under the revolving credit commitments as of March 31, 2017.

As of March 31, 2017 and December 31, 2016, the Partnership was in compliance with all covenants and restrictions associated with, and no events of default existed under, the Credit Agreement. The Partnership’s obligations under the Credit Agreement are guaranteed by certain of the Partnership’s subsidiaries and secured by liens on substantially all its assets.

(12) Related-Party Transactions

Management Services Agreement

On April 9, 2015, the Partnership, Enviva Partners GP, LLC, its general partner (the “General Partner”), Enviva, LP, Enviva GP, LLC and certain subsidiaries of Enviva, LP (collectively, the “Service Recipients”) entered into a five-year Management Services Agreement (the “MSA”) with Enviva Management Company, LLC (the “Provider”), a wholly owned subsidiary of Enviva Holdings, LP, pursuant to which the Provider provides the Service Recipients with operations, general administrative, management and other services (the “Services”). Under the terms of the MSA, the Service Recipients are required to reimburse the Provider the amount of all direct or indirect internal or third-party expenses incurred, including without limitation: (i) the portion of the salary and benefits of the employees engaged in providing the Services reasonably allocable to the Service Recipients; (ii) the charges and expenses of any third party retained to provide any portion of the Services; (iii) office rent and expenses and other overhead costs incurred in connection with, or reasonably allocable to, providing the Services; (iv) amounts related to the payment of taxes related to the business of the Service Recipients; and (v) costs and expenses incurred in connection with the formation, capitalization, business or other activities of the Provider pursuant to the MSA.

Direct or indirect internal or third-party expenses incurred are either directly identifiable or allocated to the Partnership by the Provider. The Provider estimates the percentage of salary, benefits, third-party costs, office rent and expenses and any other overhead costs incurred by the Provider associated with the Services to be provided to the Partnership. Each month, the Provider allocates the actual costs accumulated in the financial accounting system using these estimates. The Provider also charges the Partnership for any directly identifiable costs such as goods or services provided at the Partnership’s request.

During the three months ended March 31, 2017, the Partnership incurred $14.2 million related to the MSA. Of this amount, $10.5 million is included in cost of goods sold and $2.6 million is included in general and administrative expenses on the unaudited interim condensed consolidated statements of income. At March 31, 2017, $1.1 million incurred under the MSA is included in finished goods inventory.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(12) Related-Party Transactions (Continued)

During the three months ended March 31, 2016, the Partnership incurred $12.8 million related to the MSA. Of this amount, $8.0 million is included in cost of goods sold and $4.1 million is included in general and administrative expenses on the unaudited interim condensed consolidated statements of income. At March 31, 2016, $0.7 million incurred under the MSA is included in finished goods inventory.

As of March 31, 2017 and December 31, 2016, the Partnership had $6.2 million and $10.6 million, respectively, included in related-party payables related to the MSA.

Common Control Transactions

On December 14, 2016, the Hancock JV contributed to Enviva, LP all of the issued and outstanding limited liability company interests in Sampson for total consideration of $175.0 million (see Note 1, Description of Business and Basis of Presentation).

Enviva FiberCo, LLC

The Partnership purchases raw materials from Enviva FiberCo. Raw material purchases during the three months ended March 31, 2017 and 2016 from Enviva FiberCo were $1.8 million and $0.9 million, respectively.

Related-Party Indemnification

In connection with the Sampson Drop-Down, the Hancock JV agreed to indemnify the Partnership, its affiliates, and its respective officers, directors, managers, counsel, agents and representatives from all costs and losses arising from certain vendor liabilities and claims related to the construction of the Sampson plant. At March 31, 2017 and December 31, 2016, accrued liabilities related to such indemnifiable costs and losses included $6.4 million related to work performed by certain vendors. The Partnership recorded a corresponding related-party receivable from the Hancock JV of $6.4 million for reimbursement of these amounts (see Note 1, Description of Business and Basis of Presentation).

Terminal Services Agreement

On December 14, 2016, Enviva, LP and Enviva Port of Wilmington, LLC (“Wilmington”), a wholly owned subsidiary of the Hancock JV, entered into a terminal services agreement pursuant to which wood pellets produced at the Sampson plant are transported by truck to the marine terminal in Wilmington, North Carolina (the “Wilmington terminal”), where they are received, stored and ultimately loaded onto oceangoing vessels for transport to the Partnership’s customers. During the three months ended March 31, 2017, terminal services of $0.7 million were expensed and are included in cost of goods sold on the unaudited interim consolidated statements of operations. No terminal services were provided by the Wilmington terminal to the Partnership during the three months ended March 31, 2016.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(12) Related-Party Transactions (Continued)

Biomass Purchase Agreement—Hancock JV

On April 9, 2015, Enviva, LP entered into a master biomass purchase and sale agreement (the “Biomass Purchase Agreement”) with the Hancock JV pursuant to which the Hancock JV sold to Enviva, LP, at a fixed price per metric ton, certain volumes of wood pellets per month. The Partnership sold the wood pellets purchased from the Hancock JV to customers under the Partnership’s existing off-take contracts. Such confirmation was terminated on December 11, 2015.

On September 26, 2016, Enviva, LP and Sampson entered into two confirmations under the Biomass Purchase Agreement pursuant to which Enviva, LP agreed to sell to Sampson 140,000 metric tons of wood pellets, and Sampson agreed to sell to Enviva, LP, 140,000 metric tons of wood pellets. The confirmation pursuant to which Enviva, LP agreed to sell wood pellets to Sampson under the Biomass Purchase Agreement was terminated in connection with the Sampson Drop-Down.

Biomass Option Agreement—Enviva Holdings, LP

On February 3, 2017, Enviva, LP entered into a master biomass purchase and sale agreement and a confirmation thereto, each with the sponsor (together, the “Option Contract”), pursuant to which Enviva, LP has the option to purchase certain volumes of wood pellets from the sponsor, from time to time at a price per metric ton determined by reference to a market index. During the three months ended March 31, 2017, pursuant to the Option Contract, Enviva, LP purchased $1.6 million of wood pellets from the sponsor, which, after delivery to the customer, is included in cost of goods sold in the Partnership’s unaudited interim condensed consolidated statements of income.

Related-Party Indebtedness

On December 11, 2015, Enviva FiberCo became a lender pursuant to the Credit Agreement with a purchase of $15.0 million aggregate principal amount of the Tranche A-4 term advances, net of a 1.0% lender fee. On June 30, 2016, Enviva FiberCo assigned all of its rights and obligations in its capacity as a lender to a third party. The Partnership recorded $0.2 million as related-party interest expense related to this indebtedness during the three months ended March 31, 2016.

Related-Party Notes Payable

On January 22, 2016, a noncontrolling interest holder in Enviva Pellets Wiggins became the holder of the $3.3 million Enviva Pellets Wiggins construction loan and working capital line. There were no changes to the terms of the loans. The loans were paid in full on the October 18, 2016 maturity date. Related-party interest expense associated with the related-party notes payable was insignificant during the three months ended March 31, 2016.

(13) Income Taxes

The Partnership’s U.S. operations are organized as limited partnerships and entities that are disregarded for federal and state income tax purposes. As a result, the Partnership is not subject to U.S. federal or most state income taxes. The partners and unitholders of the Partnership are liable for

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(13) Income Taxes (Continued)

these income taxes on their share of the Partnership’s taxable income. Some states impose franchise and capital taxes on the Partnership. Such taxes are not material to the consolidated financial statements and have been included in other income (expense) as incurred.

As of March 31, 2017, the periods subject to examination for federal and state income tax returns are 2013 through 2016. The Partnership believes its income tax filing positions, including its status as a pass-through entity, would be sustained on audit and does not anticipate any adjustments that would result in a material change to its consolidated balance sheet. Therefore, no reserves for uncertain tax positions, interest or penalties have been recorded. For the three months ended March 31, 2017 and 2016, no provision for federal or state income taxes has been recorded in the consolidated financial statements.

(14) Partners’ Capital

Allocations of Net Income

The First Amended and Restated Agreement of Limited Partnership of the Partnership (the “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. Normal allocations according to percentage interests are made after giving effect, if any, to priority income allocations in an amount equal to incentive cash distributions allocated 100% to the General Partner.

Incentive Distribution Rights

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

At-the-Market Offering Program

On August 8, 2016, the Partnership filed a prospectus supplement to the shelf registration filed with the SEC on June 24, 2016, for the registration of the continuous offering of up to $100.0 million of common units, in amounts, at prices and on terms to be determined by market conditions and other factors at the time of the offerings. In August 2016, the Partnership entered into an equity distribution agreement (the “Equity Distribution Agreement”) with certain managers pursuant to which the Partnership may offer and sell common units from time to time through or to one or more of the managers, subject to the terms and conditions set forth in the Equity Distribution Agreement, of up to an aggregate sales amount of $100.0 million (the “ATM Program”).

During the three months ended March 31, 2017, the Partnership sold 63,577 common units under the Equity Distribution Agreement for net proceeds of $1.7 million, net of an insignificant amount of

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(14) Partners’ Capital (Continued)

commissions. Net proceeds from sales under the ATM Program were used for general partnership purposes. No common units were sold under the Equity Distribution Agreement during the three months ended March 31, 2016.

Sampson Drop-Down

As partial consideration for the Sampson Drop-Down, the Partnership issued 1,098,415 unregistered common units at a price of $27.31 per unit, or $30.0 million of common units, to affiliates of John Hancock Life Insurance Company (see Note 2, Transactions Between Entities Under Common Control).

Cash Distributions to Unitholders

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

Quarter Ended	Declaration Date	Record Date	Payment Date	Distribution per Unit		Total Cash Distribution		Total Payment to General Partner for Incentive Distribution Rights
March 31, 2016	May 4, 2016	May 16, 2016	May 27, 2016	$	0.5100	$	12.6	$	0.2
June 30, 2016	August 3, 2016	August 15, 2016	August 29, 2016	$	0.5250	$	13.0	$	0.3
September 30, 2016	November 2, 2016	November 14, 2016	November 29, 2016	$	0.5300	$	13.3	$	0.3
December 31, 2016	February 1, 2017	February 15, 2017	February 28, 2017	$	0.5350	$	14.1	$	0.4
March 31, 2017	May 3, 2017	May 18, 2017	May 30, 2017	$	0.5550	$	14.6	$	0.5

For purposes of calculating the Partnership’s earnings per unit under the two-class method, common units are treated as participating preferred units, and the subordinated units are treated as the residual equity interest, or common equity. IDRs are treated as participating securities.

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

The Partnership determines the amount of cash available for distribution for each quarter in accordance with the Partnership Agreement. The amount to be distributed to common unitholders, subordinated unitholders and IDR holders is based on the distribution waterfall set forth in the Partnership Agreement. Net earnings for the quarter are allocated to each class of partnership interest based on the distributions to be made. Additionally, if, during the subordination period, the Partnership does not have enough cash available to make the required minimum distribution to the common unitholders, the Partnership will allocate net earnings to the common unitholders based on the amount of distributions in arrears. When actual cash distributions are made based on distributions in arrears, those cash distributions will not be allocated to the common unitholders, as such earnings were allocated in previous quarters.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(14) Partners’ Capital (Continued)

Accumulated Other Comprehensive Income

Comprehensive income consists of two components: net income and other comprehensive income. Other comprehensive income refers to revenue, expenses and gains and losses that under GAAP are included in comprehensive income but excluded from net income. The Partnership’s other comprehensive income consists of unrealized gains and losses related to derivative instruments accounted for as cash flow hedges. There was no other comprehensive income for the three months ended March 31, 2016.

The following table presents the changes in accumulated other comprehensive income for the three months ended March 31, 2017:

	Unrealized Losses on Derivative Instruments
Balance at December 31, 2016	$	595
Net unrealized losses	(740		)
Reclassification of net gains to net income	(57		)
Accumulated other comprehensive income	$	(202	)

Noncontrolling Interests—Enviva Pellets Wiggins, LLC

The Partnership has a controlling interest in Enviva Pellets Wiggins. The Partnership and the former owners of Enviva Pellets Wiggins each initially held 10.0 million voting Series B units in the joint venture. The Partnership committed to invest up to $10.0 million in expansion and other capital for the Wiggins plant in return for 10.0 million non-voting Series A units in the joint venture. Due to the capital requirements of Enviva Pellets Wiggins, its board of managers approved the investment by the Partnership of up to an additional $10.0 million in return for 10.0 million Series A units and 10.0 million Series B units. At March 31, 2017 and December 31, 2016, the Partnership held 20.0 million of the 30.0 million outstanding Series B units, respectively, which accounted for a 67% controlling interest in Enviva Pellets Wiggins.

A prior owner of Enviva Pellets Wiggins who is currently a holder of an interest in Series B units of Enviva Pellets Wiggins owns 0.5 million Series A units, which were acquired for a cash contribution of $0.5 million under an option granted as part of the formation of Enviva Pellets Wiggins. Board and voting control still resides with the Partnership.

In December 2016, the Partnership executed a purchase and sale agreement to sell substantially all of the assets of Enviva Pellets Wiggins for consideration of $2.7 million, with the closing of the transaction scheduled for January 20, 2017. On January 20, 2017, the purchase and sale agreement terminated when the buyer failed to pay the purchase price and the Partnership ceased operations at the Wiggins plant (See Note 10, Assets Held for Sale). The Partnership remains in active negotiations with a buyer for the assets of Enviva Pellets Wiggins.

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(14) Partners’ Capital (Continued)

Noncontrolling Interests—Hancock JV

Sampson was a wholly owned subsidiary of the Hancock JV prior to the consummation of the Sampson Drop-Down. The Partnership’s financial statements have been recast to include the financial results of Sampson as if the consummation of the Sampson Drop-Down had occurred on May 15, 2013, the date Sampson was originally organized. The Partnership’s financial statements include the Hancock JV’s noncontrolling interest for the periods prior to the consummation of the Sampson Drop-Down. The Partnership’s unaudited interim condensed consolidated statements of income for the three months ended March 31, 2016 includes net losses of $1.0 million attributable to the noncontrolling interests in Sampson.

(15) Equity-Based Awards

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

	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, 2016	346,153	$	19.32	235,355	$	19.46	581,508	$	19.37
Granted	266,662	$	25.25	104,024	$	25.25	370,686	$	25.25
Forfeitures	—	$	—	—	$	—	—	$	—
Vested	—	$	—	—	$	—	—	$	—
Nonvested March 31, 2017	612,815	$	21.90	339,379	$	21.23	952,194	$	21.66

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

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(15) Equity-Based Awards (Continued)

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

	Phantom Units			Performance-Based Phantom Units			Total Director Grants 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, 2016	17,724	$	22.57	—	$	—	17,724	$	22.57
Granted	15,840	$	25.25	—	$	—	15,840	$	25.25
Forfeitures	—	$	—	—	$	—	—	$	—
Vested	—	$	—	—	$	—	—	$	—
Nonvested March 31, 2017	33,564	$	23.83	—	$	—	33,564	$	23.83

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

On February 3, 2017, Director Grants valued at $0.4 million were granted and vest on the first anniversary of the grant date, February 3, 2018. On May 4, 2017, the Director Grants that were nonvested at December 31, 2016 vested and common units were issued.

The distribution equivalent rights (“DERs”) associated with the Director Grants and the Affiliate Grants entitle the recipients to receive payments equal to any distributions made by the Partnership to the holders of common units within 60 days following the record date for such distributions. The DERs associated with the performance-based Affiliate Grants will remain outstanding and unpaid from the grant date until the earlier of the settlement or forfeiture of the related phantom units. Distributions related to DERs for the three months ended March 31, 2016 were not significant.

(16) Net Income per Limited Partner Unit

Net income per unit applicable to limited partners (including subordinated unitholders) is computed by dividing limited partners’ interest in net income, after deducting any incentive distributions, by the weighted-average number of outstanding common and subordinated units. The Partnership’s net income 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, pursuant to the Partnership Agreement, which are declared and paid following the close of each quarter. Earnings in excess of distributions are allocated to the limited partners based on their respective ownership interests. Payments made to the Partnership’s unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of earnings per unit.

In addition to the common and subordinated units, the Partnership has also identified the IDRs and phantom units as participating securities and uses the two-class method when calculating the net

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(16) Net Income per Limited Partner Unit (Continued)

income 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 the Partnership’s common units. Basic and diluted earnings per unit applicable to subordinated limited partners are the same because there are no potentially dilutive subordinated units outstanding.

The following provides a reconciliation of net income and the assumed allocation of net income under the two-class method for purposes of computing net income per unit for the three months ended March 31, 2017 and 2016:

	Three Months ended March 31, 2017
	Common Units	Subordinated Units	General Partner
	(in thousands)
Weighted-average common units outstanding—basic	14,380	11,905	—
Effect of nonvested phantom units	848	—	—
Weighted-average common units outstanding—diluted	15,228	11,905	—

	Three Months Ended March 31, 2017
	Common Units			Subordinated Units			General Partner		Total
	(in thousands, except per unit amounts)
Distributions declared	$	7,999		$	6,607		$	537	$	15,143
Earnings less than distributions	(6,905		)	(5,703		)	—		(12,608		)
Net income attributable to partners	$	1,094		$	904		$	537	$	2,535
Weighted-average units outstanding—basic	14,380			11,905
Weighted-average units outstanding—diluted	15,228			11,905
Net income per limited partner unit—basic	$	0.08		$	0.08
Net income per limited partner unit—diluted	$	0.07		$	0.08

	Three Months ended March 31, 2016
	Common Units	Subordinated Units	General Partner
	(in thousands)
Weighted-average common units outstanding—basic	12,852	11,905	—
Effect of nonvested phantom units	485	—	—
Weighted-average common units outstanding—diluted	13,337	11,905	—

ENVIVA PARTNERS, LP AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Continued)

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

(Unaudited)

(16) Net Income per Limited Partner Unit (Continued)

	Three Months Ended March 31, 2016
	Common Units			Subordinated Units			General Partner		Total
	(in thousands, except per unit amounts)
Distributions declared	$	6,503		$	6,072		$	156	$	12,731
Earnings less than distributions	(2,694		)	(2,543		)	—		(5,237		)
Net income attributable to partners	$	3,809		$	3,529		$	156	$	7,494
Weighted-average units outstanding—basic	12,852			11,905
Weighted-average units outstanding—diluted	13,337			11,905
Net income per limited partner unit—basic	$	0.30		$	0.30
Net income per limited partner unit—diluted	$	0.29		$	0.29

(17) Subsequent Event

Enviva Port of Wilmington, LLC Acquisition

The Partnership has agreed to purchase Wilmington from the Hancock JV for total consideration of $130.0 million. The acquisition of Wilmington (the “Wilmington Drop-Down”) is expected to close on or about October 2, 2017 with an initial payment of $56.0 million and is subject to customary closing conditions. Wilmington owns the Wilmington terminal, a fully operational deep-water marine terminal in Wilmington, North Carolina. Wilmington is party to long-term terminal services agreements to receive, store and load wood pellets from the Sampson plant and wood pellets for the sponsor produced by a third party production plant. In addition, Wilmington has entered into a long-term terminal services agreement with the Hancock JV to receive, store and load wood pellets from the planned production plant in Hamlet, North Carolina (the “Hamlet plant”), expected to be completed by the sponsor in late 2018. Upon first deliveries to the Wilmington terminal from the Hamlet plant, the Partnership will make another payment of $74.0 million, subject to certain conditions.

(18) Supplemental Guarantor Information

The Partnership and its wholly owned finance fsubsidiary, Enviva Finance Corp., are the co-issuers of the Senior Notes on a joint and several basis. The Partnership has no independent assets or operations. The Senior Notes are guaranteed on a senior unsecured basis by the Partnership’s direct and indirect wholly-owned subsidiaries, other than Enviva Finance Corp., Enviva Pellets Wiggins and Enviva Preferred Holdings, LLC. The guarantees are full and unconditional and joint and several. Each of the subsidiary guarantors is 100% owned by the Partnership. Enviva Pellets Wiggins is a non-guarantor subsidiary that permanently ceased operations in January of 2017 and the plant assets of Enviva Pellets Wiggins are currently classified as held for sale. Enviva Preferred Holdings, LLC is a minor non-Guarantor subsidiary as of March 31, 2017. Other than certain restrictions arising under the Credit Agreement and the Indenture (see Note 11, Long-Term Debt and Capital Lease Obligations), there are no significant restrictions on the ability of any restricted subsidiary to (a) pay dividends or make any other distributions on its capital stock to the Partnership or any of its restricted subsidiaries or (b) make loans or advances to the Partnership or any of its restricted subsidiaries.

Enviva Partners, LP - FORM 8-K - EX-99.2 - June 16, 2017

Attached files

Enviva Partners, LP Reports