ENVIVA INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-K)

0
The following discussion of our historical performance, financial condition and
future prospects should be read in conjunction with Part I, Item 1. "Business"
and the consolidated financial statements in Part II, Item 8. "Financial
Statements and Supplementary Data."

On December 31, 2021, Enviva Partners, LP (the "Partnership") converted from a
Delaware limited partnership to a Delaware corporation (the "Conversion") named
"Enviva Inc." References to "Enviva," the "Company," "we," "us," or "our" refer
to (i) Enviva Inc. and its subsidiaries for the periods following the Conversion
and (ii) Enviva Partners, LP and its subsidiaries for periods prior to the
Conversion, except where the context otherwise requires. References to common
units for periods prior to the Conversion refer to common units of Enviva
Partners, LP, and references to common stock for periods following the
Conversion refer to shares of common stock of Enviva Inc. As a result of the
Conversion, the primary financial impact to the consolidated financial
statements contained herein consisted of (i) reclassification of partnership
capital accounts to equity accounts reflective of a corporation and (ii) income
tax effects.

References to "our former sponsor" refer to Enviva Holdings, LP, and, where
applicable, its wholly owned subsidiaries Enviva MLP Holdco, LLC and Enviva
Development Holdings, LLC. References to "our former General Partner" refer to
Enviva Partners GP, LLC, a wholly owned subsidiary of Enviva Holdings, LP.
Please read Cautionary Statement Regarding Forward­Looking Statements on page 1
and Part 1, Item 1A. "Risk Factors" for information regarding certain risks
inherent in our business.

Company overview

We are a growth-oriented company originally formed as a Delaware limited
partnership in 2013 that converted to a Delaware corporation named "Enviva Inc."
We develop, construct, acquire, and own and operate, fully contracted wood
pellet production plants where we aggregate a natural resource, wood fiber, and
process it into dry, densified, uniform pellets that can be effectively stored
and transported around the world. We primarily sell our wood pellets through
long-term, take-or-pay off-take contracts with creditworthy customers in the
United Kingdom, the European Union, and Japan, who use our pellets to displace
coal and other fossil fuels to generate renewable power and heat as part of
their efforts to accelerate the energy transition from conventional energy
generation to renewable energy generation. Increasingly, our customers are also
using our pellets as renewable raw material inputs to decarbonize hard-to-abate
sectors like steel, cement, lime, chemicals, and aviation fuels. Collectively,
the wood pellets we produce are viewed by our customers as a critical component
of their efforts to reduce life-cycle greenhouse gas emissions in their core
energy generation or industrial manufacturing processes, and mitigate the impact
of climate change.

We own and operate ten plants (collectively, "our plants") with a combined
production capacity of approximately 6.2 million metric tons ("MT") of wood
pellets per year ("MTPY") in Virginia, North Carolina, South Carolina, Georgia,
Florida and Mississippi, the production of which is fully contracted, with many
of our contracts extending well into the 2040s. We export our wood pellets to
global markets through our deep-water marine terminal at the Port of Chesapeake,
Virginia, terminal assets at the Port of Wilmington, North Carolina, the Port of
Pascagoula, Mississippi, and from third-party deep-water marine terminals in
Savannah, Georgia, Mobile, Alabama, and Panama City, Florida. All of our
facilities are located in geographic regions with low input costs and favorable
transportation logistics. Owning these cost-advantaged assets in a rapidly
expanding industry provides us with a platform to generate stable and growing
cash flows. Our plants are sited in robust fiber baskets providing stable
pricing for the low-grade fiber used to produce wood pellets. Our raw materials
are byproducts of traditional timber harvesting, principally low-value wood
materials, such as trees generally not suited for sawmilling or other
manufactured forest products, and tree tops and limbs, understory, brush, and
slash that are generated in a harvest.

Our sales strategy is to fully contract the wood pellet production from our
plants under long-term, take-or-pay off-take contracts with a diversified and
creditworthy customer base. Our long-term off-take contracts typically provide
for fixed-price deliveries that often include provisions that escalate the price
over time and provide for other margin protection. During 2021, production
capacity from our wood pellet production plants, together with wood pellets
sourced from third parties, was approximately equal to the contracted volumes
under our existing long-term, take-or-pay off-take contracts. Our long-term,
take-or-pay off-take contracts provide for a product sales backlog of $21.2
billion and have a total weighted-average remaining term of 14.5 years from
February 1, 2022.

Our largest customers use our wood pellets as a substitute fuel for coal in
dedicated biomass or co-fired coal power plants. Wood pellets serve as a
suitable "drop-in" alternative to coal because of their comparable heat content,
density, and form. Due to the uninterruptible nature of our customers' fuel
consumption, our customers require a reliable supply of wood pellets that meet
stringent product specifications. We have built our operations and assets to
deliver and certify the highest levels of product

                                       25

————————————————– ——————————

Contents

quality and our proven track record of reliable deliveries enables us to charge
premium prices for this certainty. In addition to our customers' focus on the
reliability of supply, they are concerned about the combustion efficiency of the
wood pellets and their safe handling. Because combustion efficiency is a
function of energy density, particle size distribution, ash/inert content, and
moisture, our customers require that we supply wood pellets meeting minimum
criteria for a variety of specifications and, in some cases, provide incentives
for exceeding our contract specifications.

presentation basis

On October 14, 2021, the Partnership entered into and closed on an Agreement and
Plan of Merger (the "Merger Agreement"), by and among the Partnership, Enviva
Holdings, LP ("Holdings"), Enviva Partners Merger Sub, LLC ("Merger Sub"), and
the limited partners of Holdings (the "Holdings Limited Partners") set forth in
the Merger Agreement. Pursuant to the terms of the Merger Agreement, (a) the
Company acquired our former sponsor and our former General Partner and (b) the
incentive distribution rights held by our former sponsor were cancelled and
eliminated (collectively, the "Simplification Transaction"). In connection with
the Simplification Transaction, the Company acquired certain assets under
development, as well as off-take contracts in varying stages of negotiation. The
consolidated financial statements have been retroactively recast to reflect the
Simplification Transaction as if the Simplification Transaction occurred on
March 18, 2010, the date on which Holdings was originally organized, instead of
October 14, 2021, the closing date of the Simplification Transaction.

We own all of the Class B units of Enviva Wilmington Holdings, LLC (the "Hamlet
JV"). The Hamlet JV owns a wood pellet production plant in Hamlet, North
Carolina (the "Hamlet plant"). We are the managing member of the Hamlet JV,
which is a consolidated subsidiary partially owned by a third party. For more
information regarding our rights and obligations with respect to the Hamlet JV,
see Note 17, Equity-Hamlet JV.

RECENT DEVELOPMENTS

Simplified operation

In October 2021, we closed the Simplification Transaction and acquired all of
the ownership interests in our former sponsor and eliminated all outstanding
incentive distribution rights in exchange for 16.0 million common units, which
were distributed to the owners of our former sponsor.

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

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

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

In connection with the Simplification Transaction, our existing management
services fee waivers (the "MSA Fee Waivers") and other support agreements with
our former sponsor were consolidated, fixed, and novated to certain owners of
our former sponsor. Under the consolidated support agreement, we are entitled to
receive quarterly payments (the "Support Payments") in an aggregate amount of up
to $55.5 million with respect to periods from the fourth quarter of 2021 through
the first quarter of 2024.

C-Corporation Conversion

The Partnership converted from a Delaware limited partnership to a Delaware
corporation effective December 31, 2021; consequently, results for periods prior
to December 31, 2021 reflect Enviva as a limited partnership, not a corporation.
The primary financial impacts of the Conversion to the consolidated financial
statements were (i) reclassification of partnership capital accounts to equity
accounts reflective of a corporation and (ii) income tax effects. On the date of
the Conversion, each

                                       26

————————————————– ——————————

Contents

common unit representing a limited partner interest in the Partnership issued
and outstanding immediately prior to the Conversion was exchanged for one share
of common stock of the Company, par value $0.001 per share.

Issuance of common units and common shares

In June 2021, we issued 4,925,000 common units at a price of $45.50 per common
unit for total net proceeds of $214.5 million, after deducting $9.5 million of
issuance costs. The net proceeds partially financed the drop-down of the
production plant under construction in Lucedale, Mississippi and the terminal at
the Port of Pascagoula, Mississippi,from our former sponsor and partially
financed our development activities to expand our wood pellet production plants
in Sampson, North Carolina, Hamlet, North Carolina, and Cottondale, Florida
(collectively the "Multi-Plant Expansions").

In January 2022, we issued 4,945,000 common shares at a price of $70.00 per
common share for total net proceeds of $334.0 million, after deducting $12.2
million of issuance costs. We intend to use the net proceeds of $334.0 million
to fund a portion of our capital expenditures related to ongoing development
projects. We initially used the net proceeds to repay borrowings under our
senior secured revolving credit facility.

Fundraising activities

In April 2021, we amended our senior secured revolving credit facility to
increase the revolving credit commitments from $350.0 million to $525.0 million,
extend the maturity from October 2023 to April 2026, increase the letter of
credit commitment from $50.0 million to $80.0 million, and reduce the cost of
borrowing by 25 basis points. In December 2021, we amended our senior secured
revolving credit facility to increase the revolving credit commitments from
$525.0 million to $570.0 million and to permit the issuance of commercial
letters of credit.

Expansion and capacity development activities

We have completed our expansion project at our Northampton, North Carolina wood pellet production plant and commission the recently expanded capacity of our Southampton, Virginia plant. We expect each plant to reach its expanded production capacity of approximately 750,000 and 760,000 MTPY, respectively, in 2022.

We are commissioning the increased capacity of our Greenwood plant and expect production capacity to increase to 600,000 MTPY in 2022.

Commitment to achieve carbon neutral operations

Consistent with our mission to displace coal, grow more trees, and fight climate
change, we recently announced our commitment to become "net-zero" in greenhouse
gas ("GHG") emissions from our operations by 2030. The product we manufacture
helps reduce the lifecycle GHG emissions of our customers, but we believe we
must also do our part within our operations to mitigate the impacts of climate
change. We expect to accomplish neutrality with respect to our Scope 1 emissions
(i.e., direct emissions from our manufacturing) by improving energy efficiency
and adopting lower-carbon processes, as well as through investment in carbon
offsets. We also plan to neutralize our Scope 2 emissions (i.e., indirect
emissions from energy we purchase) by using 100% renewable energy by 2030
through the purchase of renewable electricity and/or onsite generation where
practicable. Moreover, we will seek to proactively engage with our suppliers,
transportation partners, and other stakeholders to drive innovative improvements
in our supply chain to reduce our Scope 3 emissions (i.e., indirect emissions in
our value chain). We intend to report our Scopes 1, 2, and 3 emissions annually
and fully meet the requirements of CDP (formerly known as the Carbon Disclosure
Project) by 2022. Although it is difficult to project the incremental cost to
our operations in 2030, we do not expect any material impact to our financial
performance as a result of our efforts to achieve "net-zero" in GHG emissions
from our operations. For more information, refer to the risk factor titled
"Increasing attention to ESG matters, including our net-zero goals and our
failure to successfully achieve them, could adversely affect our business."

Novel coronavirus outbreak

The outbreak of a novel strain of coronavirus ("COVID-19") has significantly
adversely impacted global markets and continues to present global public health
and economic challenges. In the third quarter of 2021, our contractors and
supply chain partners experienced labor-related, and other challenges associated
with COVID-19 that had a temporal, but more pronounced than anticipated, impact
on our operations and project execution schedule. In the fourth quarter of 2021,
the prevalence of the Omicron variant of COVID-19 and increased rates of
infection across areas in which we operate affected the availability of healthy
workers from time to time at our facilities, and we experienced increased rates
of absence in our hourly workforce as our workers who contracted COVID-19
quarantined at home. These absences contributed to reduced facility availability
and in some cases, reduced aggregate production levels. We believe that these
challenges were short-term in nature, and based on the actions we have taken and
the plans we have in place, we believe these issues are beginning to be behind
us.

                                       27

————————————————– ——————————

Contents

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

We specifically designed our operations and logistics systems with flexibility
and redundancies so they are capable of effectively responding to unforeseen
events. We operate a portfolio of ten wood pellet production plants
geographically dispersed across the Southeast United States. Our wood pellet
production capacity is committed under long-term, take-or-pay off-take contracts
with fixed pricing and fixed volumes that are not impacted by the market prices
of crude oil, natural gas, power or heat. We export our product from a portfolio
of six bulk terminals and transport it to our customers under long-term,
fixed-price shipping contracts with multiple shipping partners. Our shipping
operations have not been affected by COVID-19.

Factors affecting the comparability of our financial results

way cross

On July 31, 2020, we acquired all of the limited liability interests in Georgia
Biomass Holding LLC, a Georgia limited liability company and the indirect owner
of a wood pellet production plant located in Waycross, Georgia (the "Waycross
plant,") for total consideration of $164.0 million in cash, after accounting for
certain adjustments (the "Georgia Biomass Acquisition"). The Georgia Biomass
Acquisition was recorded as a business combination and accounted for using the
acquisition method. Assets acquired and liabilities assumed were recognized at
fair value on the acquisition date of July 31, 2020, and the difference between
the fair value of consideration transferred, which excludes acquisition-related
costs, and the fair values of the identified net assets acquired, was recognized
as goodwill. For more information regarding the Georgia Biomass Acquisition, see
Item 8. Financial Statements and Supplemental Data, Note 1, Description of
Business and Basis of Presentation-Georgia Biomass Holding LLC and Note 4,
Acquisition.

Tickets 2026

During December 2019we issued $600.0 million principal of 6.5% senior unsecured bonds January 15, 2026 (the “2026 Bonds”). We received gross proceeds of approximately $601.8 million offers and net proceeds of approximately $595.8 million after deduction of commissions and costs.

In July 2020, we issued an additional $150.0 million in aggregate principal
amount of our 6.5% the 2026 Notes at an offering price of 103.75% of the
principal amount, which implied an effective yield to maturity of approximately
5.7%. We received net proceeds of approximately $153.6 million from the offering
after deducting discounts and commissions and offering costs.

Senior Secured Green Term Loan Facility

In February 2021, our former sponsor entered into a senior secured green term
loan facility (the "Green Term Loan") providing for $325.0 million principal
amount, maturing in February 2026. Interest was priced at LIBOR plus 5.50% with
a LIBOR floor of 1.00%. Our former sponsor received gross proceeds of $325.0
million and net proceeds of approximately $317.2 million after deducting
original issue discount, commissions, and expenses. Our former sponsor used the
net proceeds (1) to purchase the noncontrolling interest in Enviva JV
Development Company, LLC (the " Development JV"), (2) to repay the Riverstone
Loan (see Item 8. Financial Statements and Supplemental Data, Note 15,
Related-Party Transactions), (3) to fund capital expenditures and liquidity
reserve cash accounts, and (4) for general purposes.

In October 2021our former sponsor repaid the green term loan in full and recognized a $9.4 million loss related to the prepayment of the debt resulting from the cancellation of the unamortized debt issue costs and the initial issue discount.

How we generate revenue

Overview

We primarily earn revenue by supplying wood pellets to our customers under
off­take contracts, the majority of which are long-term in nature. Our off-take
contracts are considered "take-or-pay" because they include a firm obligation of
the customer to take a fixed quantity of product at a stated price and
provisions that require that we be compensated in the case of a

                                       28

————————————————– ——————————

Contents

customer's failure to accept all or a part of the contracted volumes or
termination of a contract by a customer. Each of our long-term off-take
contracts defines the annual volume of wood pellets that a customer is required
to purchase and we are required to sell, the fixed price per MT for product
satisfying a base net calorific value and other technical specifications. These
prices are fixed for the entire term, and are subject to adjustments which may
include annual inflation-based adjustments or price escalators, price
adjustments for product specifications, as well as, in some instances, price
adjustments due to changes in underlying indices. In addition to sales of our
product under these long-term off-take contracts, we routinely sell wood pellets
under shorter-term contracts, which range in volume and tenor and, in some
cases, may include only one specific shipment. Because each of our off-take
contracts is a bilaterally negotiated agreement, our revenue over the duration
of such contracts does not generally follow observable current market pricing
trends. Our performance obligations under these contracts include the delivery
of wood pellets, which are aggregated into MT. We account for each MT as a
single performance obligation. Our revenue from the sale of wood pellets we
produce is recognized upon satisfaction of the performance obligation when
control transfers to the customer at the time of loading wood pellets onto a
ship.

Depending on the specific off-take contract, shipping terms under our long-term
contracts are either Cost, Insurance and Freight ("CIF"), Cost and Freight
("CFR"), or Free On Board ("FOB"). Under a CIF contract, we procure and pay for
shipping costs, which include insurance and all other charges, up to the port of
destination for the customer. Under a CFR contract, we procure and pay for
shipping costs, which include insurance (excluding marine cargo insurance) and
all other charges, up to the port of destination for the customer. Shipping
under CIF and CFR contracts after control has passed to the customer is
considered a fulfillment activity rather than a performance obligation and
associated expenses are accrued and included in the price to the customer. Under
FOB contracts, the customer is directly responsible for shipping costs.

In some cases, we may purchase shipments of product from third-party suppliers
and resell them in back-to-back transactions ("purchase and sale transactions").
We typically are the principal in such transactions because we control the wood
pellets prior to transferring them to the customer and therefore recognize
related revenue on a gross basis.

Other income

Other revenue includes customer fees related to cancellations, postponements or expedited shipments and certain sales and marketing, planning, sustainability, consulting, shipping and risk management services (collectively, “commercial services”).

We recognize third-party terminal services revenue ratably over the contract
term. Terminal services are performance obligations that are satisfied over
time, as customers simultaneously receive and consume the benefits of the
terminal services we perform. The consideration is generally fixed for minimum
quantities and services beyond minimum quantities are generally billed on a
per-MT rate.

Contracted backlog

As of February 1, 2022, we had approximately $21.2 billion of product sales
backlog for firm and contingent contracted product sales to our long-term
off-take customers and have a total weighted-average remaining term of 14.5
years compared to approximately $19.9 billion and a total weighted-average
remaining term of 14.0 years as of February 1, 2021. Contracted backlog
represents the revenue to be recognized under existing contracts assuming
deliveries occur as specified in the contracts. Contracted future product sales
denominated in foreign currencies, excluding revenue hedged with foreign
currency forward contracts, are included in U.S. Dollars at February 1, 2022
forward rates. The contracted backlog includes forward prices, including
inflation, as well as foreign currency and commodity prices. The contracted
backlog also includes the effects of related foreign currency derivative
contracts. Please read Part II, Item 7A "Quantitative and Qualitative
Disclosures About Market Risk" and Item 8. "Financial Statements and
Supplementary Data-Note 10, Derivative Instruments, for more information
regarding our foreign currency forward contracts.

Our expected future product sales revenue within our order backlog as of
February 1, 2022 is as follows (in millions):

Period of February 1, 2022 for December 31, 2022 $1,257
End of the year December 31, 2023

                            1,437
Year ending December 31, 2024 and thereafter            18,478
Total product sales contracted backlog                $ 21,172



                                       29

————————————————– ——————————

Contents

Costs of running our business

Cost of Goods Sold

Cost of goods sold includes the costs to produce and deliver our wood pellets to
customers, reimbursable shipping-related costs associated with specific off-take
contracts with CIF or CFR shipping terms, and costs associated with purchase and
sale transactions. The primary expenses incurred to produce and deliver our wood
pellets consist of raw material, production, and distribution costs.

We have strategically located our plants in the Mid-Atlantic and Gulf Coast
regions of the United States, geographic areas in which wood fiber sources are
plentiful and readily available. We have short-term and long-term contracts to
manage the supply of raw materials into our plants. Delivered wood fiber costs
include stumpage as well as harvesting, transportation, and in some cases,
size-reduction services provided by our suppliers. The majority of our product
volumes are sold under off-take contracts that include cost pass-through
mechanisms to mitigate increases in raw material and distribution costs.

Production costs at our production plants consist of labor, energy, tooling,
repairs and maintenance, and plant overhead costs. Production costs also include
depreciation expense associated with the use of our plants and equipment and any
gain or loss on disposal of associated assets. Some of our off-take contracts
include price escalators that mitigate inflationary pressure on certain
components of our production costs. In addition to the wood pellets that we
produce at our owned and operated production plants, we selectively purchase
additional quantities of wood pellets from other wood pellet producers.

Distribution costs include all transportation costs from our plants to our port
locations, any storage or handling costs while the product remains at port, and
shipping costs related to the delivery of our product from our port locations to
our customers. Both the strategic location of our plants and our ownership or
control of our deep-water terminals have allowed for the efficient and
cost-effective transportation of our wood pellets. We seek to mitigate shipping
risk by entering into long-term, fixed-price shipping contracts with reputable
shippers matching the terms and volumes of our off-take contracts pursuant to
which we are responsible for arranging shipping. Certain of our off-take
contracts include pricing adjustments for volatility in fuel prices, which allow
us to pass the majority of the fuel price-risk associated with shipping through
to our customers.

Costs associated with buying and selling transactions are included in cost of goods sold.

Raw material, production, and distribution costs associated with delivering our
wood pellets to our owned and leased marine terminals and third-party wood
pellet purchase costs are capitalized as a component of inventory. Fixed
production overhead, including the related depreciation expense, is allocated to
inventory based on the normal capacity of the production plants. When the
inventory is sold, the depreciation allocated to it is reflected as depreciation
and amortization expense in our consolidated statements of operations, while the
other fixed production overhead allocated to inventory is reflected in cost of
goods sold, excluding depreciation and amortization. Distribution costs
associated with shipping our wood pellets to our customers are expensed as
incurred. Our inventory is recorded using the first-in, first-out method
("FIFO"). Given the nature of our inventory, the calculation of cost of goods
sold is based on estimates used in the valuation of the FIFO inventory and in
determining the specific composition of inventory that is sold to each customer.

Recoveries from customers for certain costs incurred at the discharge port under
our off-take contracts are not considered a part of the transaction price, and
therefore are excluded from product sales and included as an offset to cost of
goods sold.

How we evaluate our operations

Adjusted net profit (loss)

We define adjusted net income (loss) as net income (loss) excluding acquisition
and integration costs and other, early retirement of debt obligation, and
Support Payments, adjusting for the effect of Commercial Services, and excluding
interest expense associated with incremental borrowings related to a fire that
occurred in February 2018 at the Chesapeake terminal (the "Chesapeake Incident")
and Hurricanes Florence and Michael (the "Hurricane Events"). We believe that
adjusted net income (loss) 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 and adjusted gross margin per metric ton

We define adjusted gross margin as gross margin excluding loss on disposal of
assets, non-cash equity-based compensation and other expense, depreciation and
amortization, changes in unrealized derivative instruments related to hedged
items, acquisition and integration costs and other, and Support Payments, and
adjusting for the effect of Commercial Services. We define adjusted gross margin
per metric ton as adjusted gross margin per metric ton of wood pellets sold. We
believe adjusted gross margin and adjusted gross margin per metric ton are
meaningful measures because they compare our revenue-generating

                                       30

————————————————– ——————————

Contents

activities to our cost of goods sold for a view of profitability and performance
on a total-dollar and a per-metric ton basis. Adjusted gross margin and adjusted
gross margin per metric ton primarily will be affected by our ability to meet
targeted production volumes and to control direct and indirect costs associated
with procurement and delivery of wood fiber to our wood pellet production plants
and our production and distribution of wood pellets.

Adjusted EBITDA

We define adjusted EBITDA as net income (loss) excluding depreciation and
amortization, interest expense, income tax expense (benefit), early retirement
of debt obligation, non-cash equity-based compensation and other expense, loss
on disposal of assets, changes in unrealized derivative instruments related to
hedged items, acquisition and integration costs and other, and MSA Fee Waivers
and Support Payments, and adjusting for the effect of Commercial Services.
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 cash income tax
expenses, interest expense net of amortization of debt issuance costs, debt
premium, original issue discounts, interest expense associated with the
redemption of the $355.0 million of aggregate principal amount of 6.5% senior
unsecured notes due 2021 (the "2021 Notes"), the impact from incremental
borrowings related to the Chesapeake Incident and Hurricane Events, and
maintenance capital expenditures. We use distributable cash flow as a
performance metric to compare our cash-generating performance from period to
period and to compare the cash-generating performance for specific periods to
the cash distributions (if any) that are expected to be paid to our
shareholders. We do not rely on distributable cash flow as a liquidity measure.

Unrevised presentation 2021

Our 2021 results were calculated on a recast basis in accordance with accounting
principles generally accepted in the United States ("GAAP") to reflect the
consolidated performance of Enviva and our former sponsor as if Enviva had
bought the former sponsor at inception instead of October 14, 2021, the closing
date of the Simplification Transaction. In addition, we are also presenting
results for 2021, calculated on a non-GAAP basis that combines (i) the actual
performance of Enviva through October 14, 2021, the closing date of the
Simplification Transaction, on a non-recast basis, and (ii) our consolidated
performance, calculated on a recast basis in accordance with GAAP, inclusive of
the assets and operations acquired as part of the Simplification Transaction,
from the closing date through December 31, 2021 (the "Non-Recast Presentation").
We believe the non-recast presentation provides investors with relevant
information to evaluate our financial and operating performance because it
reflects Enviva's actual and historically reported performance on a stand-alone
basis through the closing date of the Simplification Transaction and performance
on a consolidated basis from the closing date until year-end.

The unrestated presentation does not reflect the restatement of our historical results required under GAAP as a result of the simplification transaction and therefore contains non-GAAP measures.

                                       31

————————————————– ——————————

Contents

Unless expressly stated otherwise, all results are presented on a restated basis.

The following table presents a reconciliation of net loss to adjusted EBITDA and
distributable cash flow for the year ended December 31, 2021, on a recast basis
and non-recast basis (in millions):

                                                                            Year Ended December 31, 2021
                                                                                                               Non-Recast
                                                         Recast Presentation           Adjustments            Presentation
                                                                                    (in millions)
Net loss                                                $       (145.3)              $      112.1          $         (33.2)
Add:
Depreciation and amortization                                     92.0                       (2.8)                    89.2
Interest expense                                                  56.5                      (11.2)                    45.3
Income tax (benefit) expense                                     (17.0)                      17.1                      0.1
Early retirement of debt obligation                                9.4                       (9.4)                       -
Non-cash equity-based compensation and other expense              55.9                      (32.4)                    23.5
Loss on disposal of assets                                        10.2                       (0.1)                    10.1
Changes in unrealized derivative instruments                      (2.7)                         -                     (2.7)
Acquisition and integration costs and other                       32.6                          -                     32.6
MSA Fee Waivers and Support Payments                              25.1                       36.1                     61.2
Adjusted EBITDA                                         $        116.7               $      109.4          $         226.1
Less:
Interest expense net of amortization of debt issuance
costs, debt premium, and original issue discount                  52.6                       (8.3)                    44.3
Maintenance capital expenditures                                  14.0                          -                     14.0
Distributable cash flow                                 $         50.1               $      117.7          $         167.8

Limitations of Non-GAAP Financial Measures

Adjusted net income (loss), adjusted gross margin, adjusted gross margin per
metric ton, adjusted EBITDA, and distributable cash flow, as well as our
Non-Recast Presentation, 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 income (loss), adjusted gross margin, adjusted gross margin per
metric ton, adjusted EBITDA, or distributable cash flow, or our Non-Recast
Presentation, in isolation or as substitutes for analysis of our results as
reported in accordance with GAAP.

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

                                       32

————————————————– ——————————

Contents

Operating results

Year ended December 31, 2021 Compared to the year ended December 31, 2020

                                                             Year Ended December 31,
                                                             2021                 2020
                                                           (Recast)             (Recast)             Change
                                                                           (in thousands)
Product sales                                          $     999,190          $  830,528          $ 168,662
Other revenue                                                 42,488              44,434             (1,946)
Net revenue                                                1,041,678             874,962            166,716
Cost of goods sold, excluding items below                    861,703             711,248            150,455
Loss on disposal of assets                                    10,153               8,715              1,438
Selling, general, administrative, and development
expenses(1)                                                  175,108             129,537             45,571
Depreciation and amortization                                 91,966              85,892              6,074
Total operating costs and expenses                         1,138,930             935,392            203,538
Loss from operations                                         (97,252)            (60,430)           (36,822)
Interest expense                                             (56,497)            (45,996)           (10,501)
Early retirement of debt obligation                           (9,377)                  -             (9,377)
Other income, net                                                880                 271                609
Net loss before income tax (benefit) expense                (162,246)           (106,155)           (56,091)
Income tax (benefit) expense                                 (16,975)                169            (17,144)
Net loss                                               $    (145,271)         $ (106,324)         $ (38,947)

(1)See Part II, Item 8., “Financial statements and additional data – Note 15, Transactions with related parties

Net revenue

Revenue related to product sales for wood pellets produced or procured by us
increased to $999.2 million in 2021 from $830.5 million in 2020. The $168.7
million, or 20%, increase was primarily attributable to a 16% increase in
product sales volumes for the year ended December 31, 2021 as compared to the
year ended December 31, 2020.

Other revenue for the years ended December 31, 2021 and 2020 included $37.3
million and $32.5 million, respectively, in payments to us for adjusting
deliveries under our take-or-pay off-take contracts, which otherwise would have
been included in product sales. Other revenue also included $4.1 million from
Commercial Services during the year ended December 31, 2020. The $37.3 million
and $36.6 million in other revenue was recognized under a breakage model based
on when the pellets would have been loaded.

Cost of Goods Sold

Cost of goods sold increased to $861.7 million for the year ended December 31,
2021 from $711.2 million for the year ended December 31, 2020, an increase of
$150.5 million, or 21%. The increase was primarily attributable to a 16%
increase in sales volumes.

                                       33

————————————————– ——————————

Contents

Adjusted gross margin and adjusted gross margin per metric ton

                                                                      Year Ended December 31,
                                                                      2021                       2020
                                                                    (Recast)                   (Recast)           Change
                                                                        (in thousands, except per metric ton)
Reconciliation of gross margin to adjusted gross margin
and adjusted gross margin per metric ton:
Gross margin(1)                                           $        83,362                    $  72,538          $ 10,824
Loss on disposal of assets                                         10,143                        8,653             1,490
Non-cash equity-based compensation and other expense                2,271                        2,714              (443)
Depreciation and amortization                                      86,471                       82,523             3,948
Changes in unrealized derivative instruments                       (2,673)                       4,328            (7,001)

Acquisition and integration costs and other                           397                        1,517            (1,120)
Support Payments                                                   25,100                            -            25,100
Commercial Services                                                     -                       (4,139)            4,139
Adjusted gross margin                                     $       205,071                    $ 168,134          $ 36,937
Metric tons sold                                                    5,033                        4,332               701
Adjusted gross margin per metric ton                      $         40.75                    $   38.81          $   1.94


(1)Gross margin is defined as net sales less cost of goods sold (including related amortization and depreciation and loss on disposal of assets).

We earned adjusted gross margin of $205.1 million, or $40.75 per MT, for the
year ended December 31, 2021 compared to $168.1 million, or $38.81 per MT, for
the year ended December 31, 2020. The increase in adjusted gross margin was
primarily due to a 16% increase in product sales volumes for the year ended
December 31, 2021 as compared to the year ended December 31, 2020 and the
Support Payments.

Selling, general, administrative and development expenses

Selling, general, administrative, and development expenses were $175.1 million
for the year ended December 31, 2021 and $129.5 million for the year ended
December 31, 2020. The $45.6 million increase in total selling, general,
administrative, and development expenses is primarily associated with the
increases in acquisition and integration costs of $24.9 million primarily
associated with the Simplification Transaction and Conversion and the drop-down
of the production plant under construction in Lucedale, Mississippi and terminal
at the Port of Pascagoula, Mississippi from our former sponsor as well as
non-cash equity-based compensation and other expense of $16.8 million associated
with the Simplification Transaction.

Depreciation and amortization

Depreciation and amortization expense increased to $92.0 million for the year
ended December 31, 2021 from $85.9 million for the year ended December 31, 2020,
an increase of $6.1 million or 7%, mainly due to the acquisition of the
production plant located in Waycross, Georgia in July 2020.

Interest expense

We incurred $56.5 million of interest expense during the year ended December 31,
2021 and $46.0 million during the year ended December 31, 2020. The increase in
interest expense from the prior year was primarily attributable to interest
expense associated with the Green Term Loan.

Prepayment of debt

In October 2021, our former sponsor repaid in full the Green Term Loan, which
had a principal balance of $318.4 million at the time, and recognized a $9.4
million loss in early retirement of debt resulting from the write-off of
unamortized debt issuance costs and original issue discount.

Income tax

We have registered $17.0 million of the tax benefit during the financial year ended
December 31, 2021 and $0.2 million income tax expense during the year ended
December 31, 2020. The increase in the tax benefit of $17.2 million was mainly due to the Conversion.

                                       34

————————————————– ——————————

  Table of Contents

Adjusted net loss
                                                                Year Ended December 31,
                                                                2021                 2020
                                                              (Recast)             (Recast)             Change
                                                                              (in thousands)
Reconciliation of net loss to adjusted net loss:
Net loss                                                  $    (145,271)         $ (106,324)         $ (38,947)
Acquisition and integration costs and other                      32,608               7,678             24,930
Early retirement of debt obligation                               9,377                   -              9,377
Support Payments                                                 25,100                   -             25,100
Commercial Services                                                   -              (4,139)             4,139

Interest expense from additional borrowing related to the Chesapeake incident and hurricanes

                              -               2,211             (2,211)
Adjusted net loss                                         $     (78,186)    

($100,574) $22,388

Adjusted EBITDA

                                                                     Year 

Ended the 31st of December,

                                                                     2021                 2020
                                                                   (Recast)             (Recast)             Change
                                                                                   (in thousands)
Reconciliation of net loss to adjusted EBITDA:
Net loss                                                       $    (145,271)         $ (106,324)         $ (38,947)
Add:
Depreciation and amortization                                         91,966              85,892              6,074
Interest expense                                                      56,497              45,996             10,501
Income tax (benefit) expense                                         (16,975)                169            (17,144)
Early retirement of debt obligation                                    9,377                   -              9,377
Non-cash equity-based compensation and other expense                  55,924              39,528             16,396
Loss on disposal of assets                                            10,153               8,715              1,438
Changes in unrealized derivative instruments                          (2,673)              4,328             (7,001)

Acquisition and integration costs and other                           32,608               7,678             24,930
Support Payments                                                      25,100                   -             25,100
Commercial Services                                                        -              (4,139)             4,139
Adjusted EBITDA                                                $     116,706          $   81,843          $  34,863


We generated adjusted EBITDA of $116.7 million for the year ended December 31,
2021 compared to $81.8 million for the year ended December 31, 2020. The $34.9
million increase was primarily attributable to the factors described above under
the heading "Adjusted gross margin and adjusted gross margin per metric ton."

                                       35

————————————————– ——————————

Contents

Distributable cash

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

                                                                   Year Ended December 31,
                                                                   2021                   2020
                                                                 (Recast)               (Recast)           Change
                                                                                (in thousands)
Adjusted EBITDA                                            $     116,706               $ 81,843          $ 34,863
Less:

Interest expense, net of amortization of debt issuance costs, debt premium, initial issuance discount, and the impact of additional borrowing related to the Chesapeake incident and hurricanes

                                              52,574                 41,206            11,368
Maintenance capital expenditures                                  13,981                  7,952             6,029
Distributable cash flow attributable to Enviva                    50,151                 32,685            17,466

Less: distributable cash flow attributable to incentive distribution rights

                                               19,030                 26,917            (7,887)
Distributable cash flow attributable to Enviva             $      31,121               $  5,768          $ 25,353


The following is a reconciliation of non-recast net (loss) income to non-recast
adjusted EBITDA and non-recast adjusted EBITDA to non-recast distributable cash
flow:

                                                                Year Ended December 31,
                                                             2021                    2020
                                                                                 Non-Recast As
                                                          Non-Recast              Previously
                                                         Presentation              Reported               Change
                                                                              (in millions)
Net (loss) income                                      $        (33.2)         $         17.1          $   (50.3)
Add:
Depreciation and amortization                                    89.2                    77.5               11.7
Interest expense                                                 45.3                    44.9                0.4
Income tax expense                                                0.1                     0.1                  -
Non-cash equity-based compensation and other expense             23.5                    12.8               10.7
Loss on disposal of assets                                       10.1                     7.0                3.1
Changes in unrealized derivative instruments                     (2.7)                    4.3               (7.0)
Acquisition and integration costs and other                      32.6                     7.4               25.2
MSA Fee Waivers and Support Payments                             61.2                    23.4               37.8
Commercial Services                                                 -                    (4.1)               4.1
Adjusted EBITDA                                                 226.1                   190.3               35.8
Less:

Interest expense net of amortization of debt issue costs, debt premium and initial issue discount

                 44.3                    40.8                3.5
Maintenance capital expenditures                                 14.0                     8.0                6.0
Distributable cash flow                                $        167.8          $        141.6          $    26.2


Non-recast Adjusted EBITDA increased to $226.1 million for the year ended
December 31, 2021 from $190.3 million for the year ended December 31, 2020, an
increase of $35.8 million, or 19%. Non-recast distributable cash flow increased
to $167.8 million for the year ended December 31, 2021 from $141.6 million for
the year ended December 31, 2020, an increase of $26.2 million, or 19%.

                                       36

————————————————– ——————————

Contents

Year ended December 31, 2020 Compared to the year ended December 31, 2019

                                                             Year Ended December 31,
                                                             2020                 2019
                                                           (Recast)             (Recast)             Change
                                                                           (in thousands)
Product sales                                          $     830,528          $  674,251          $ 156,277
Other revenue                                                 44,434               9,317             35,117
Net revenue                                                  874,962             683,568            191,394
Cost of goods sold, excluding items below                    711,248             601,869            109,379
Loss on disposal of assets                                     8,715               3,558              5,157
Selling, general, administrative, and development
expenses(1)                                                  129,537              98,818             30,719
Depreciation and amortization                                 85,892              65,565             20,327
Total operating costs and expenses                           935,392             769,810            165,582
Loss from operations                                         (60,430)            (86,242)            25,812
Interest expense                                             (45,996)            (42,042)            (3,954)
Early retirement of debt obligation                                -              (9,042)             9,042
Other income, net                                                271                 410               (139)
Loss from operations before income tax expense
(benefit)                                                   (106,155)           (136,916)            30,761
Income tax expense (benefit)                                     169              (1,932)             2,101
Net loss                                               $    (106,324)         $ (134,984)         $  28,660

(1)See Part II, Heading 8. “Financial statements and additional data – Note 15, Transactions with related parties

Net revenue

Revenue related to product sales for wood pellets produced or procured by us
increased to $830.5 million in 2020 from $674.3 million in 2019. The $156.3
million, or 23%, increase was primarily attributable to a 22% increase in
product sales volumes for the year ended December 31, 2020 as compared to the
year ended December 31, 2019.

Other revenue for the year ended December 31, 2020 included $32.5 million in
payments to us, which otherwise would have been included in product sales, for
adjusting deliveries under our take-or-pay off-take contracts. Other revenue
also included $4.1 million from the Commercial Services during the year ended
December 31, 2020. The $32.5 million and $4.1 million in other revenue was
recognized under a breakage model based on when the pellets otherwise would have
been loaded.

Cost of goods sold

Cost of goods sold increased to $711.2 million for the year ended December 31,
2020 from $601.9 million for the year ended December 31, 2019, an increase of
$109.4 million, or 18%. The increase was primarily attributable to a 22%
increase in sales volumes during the year ended December 31, 2020 compared to
the year ended December 31, 2019.

                                       37

————————————————– ——————————

Contents

Adjusted gross margin and adjusted gross margin per metric ton

                                                                Year Ended December 31,
                                                                2020                     2019
                                                              (Recast)                 (Recast)            Change
                                                                   (in thousands, except per metric ton)
Reconciliation of gross margin to adjusted gross
margin and adjusted gross margin per metric ton:
Gross margin(1)                                        $        72,538               $  16,134             56,404
Loss on disposal of assets                                       8,653                   3,577              5,076
Non-cash equity-based compensation and other expense             2,714                       -              2,714
Depreciation and amortization                                   82,523                  61,988             20,535
Changes in unrealized derivative instruments                     4,328                   4,588               (260)

Acquisition and integration costs and other                      1,517                   4,299             (2,782)
Commercial Services                                             (4,139)                  4,139             (8,278)
Adjusted gross margin                                  $       168,134               $  94,725          $  73,409
Metric tons sold                                                 4,332                   3,564                768
Adjusted gross margin per metric ton                   $         38.81      

$26.58 $12.23

(1)Gross margin is defined as net sales less cost of goods sold (including related amortization and depreciation and loss on disposal of assets).

We earned adjusted gross margin of $168.1 million, or $38.81 per MT, for the
year ended December 31, 2020 compared to $94.7 million, or $26.58 per MT, for
the year ended December 31, 2019. The increase in adjusted gross margin was
primarily due to a 22% increase in product sales volumes for the year ended
December 31, 2020 as compared to the year ended December 31, 2019.

Adjusted gross margin for the year ended December 31, 2019 excludes $4.3 million
of incremental costs, which are unrepresentative of our ongoing operations, in
connection with our evaluation of a third-party wood pellet production plant we
considered purchasing (the "Potential Target"). When we commenced our review,
the Potential Target had recently returned to operations following an extended
shutdown during a bankruptcy proceeding with the intent of demonstrating
favorable operations prior to proceeding to an auction sale process; however,
the Potential Target had not yet established a logistics chain through a viable
export terminal, given that the terminal through which the plant historically
had exported was not operational at the time and was not reasonably certain to
become operational in the future. Accordingly, as part of our diligence of the
Potential Target, we developed an alternative logistics chain to bring the
Potential Target's wood pellets to market and began purchasing the production of
the Potential Target for a trial period. The incremental costs associated with
the establishment and evaluation of this new logistics chain primarily consist
of barge, freight, trucking, storage, and shiploading services. We have
completed our evaluation of the alternative logistics chain and, therefore, do
not expect to incur additional costs of this nature in the future.

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

Under GAAP, we recognized $1.5 million of the $5.6 million payment as revenue
during the fourth quarter of 2019, under the breakage model of Accounting
Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers,
and recorded the remaining $4.1 million as deferred revenue as of December 31,
2019, which was recognized as revenue during the first six months of 2020 in
accordance with the original product sales schedule under the off-take contract.
For presentation of our non-GAAP measures, including the Non-Recast
Presentation, we included the $4.1 million in adjusted net income, adjusted
gross margin, adjusted gross margin per MT, and adjusted EBITDA for the year
ended December 31, 2019 as such amount relates to our performance of certain
Commercial Services, which we completed and for which we were compensated in
2019. The $4.1 million increased adjusted net income, adjusted gross margin per
MT, and adjusted EBITDA for the year ended December 31, 2019 and decreased such
measures by an equal amount during the first six months of 2020.

                                       38

————————————————– ——————————

Contents

Selling, general, administrative and development expenses

Selling, general, administrative and development expenses have been $129.5 million
for the year ended December 31, 2020 and $98.8 million for the year ended
December 31, 2019. the $30.7 million the increase in total selling, general, administrative and development expenses is primarily associated with an increase in non-cash stock-based compensation and other $28.9 million.

Depreciation and amortization

Depreciation and amortization expense increased to $85.9 million for the year
ended December 31, 2020 from $65.6 million for the year ended December 31, 2019,
an increase of $20.3 million or 31%, mainly due to the drop-down of the Hamlet
plant from our former sponsor and the acquisition of the production plant
located in Waycross, Georgia.

Interest expense

We incurred $46.0 million of interest expense during the year ended December 31,
2020 and $42.0 million during the year ended December 31, 2019. The increase in
interest expense from the prior year was primarily attributable to an increase
in borrowings as a result of our acquisition of the production plant located in
Waycross, Georgia in July 2020.

Prepayment of debt

In 2019, we redeemed all $355.0 million of aggregate principal amount of 2021
Notes and recognized a $9.0 million loss in early retirement of debt obligation
consisting of a $7.5 million debt redemption premium and $1.5 million for the
write-off of unamortized debt issuance costs, original issue discount and
premium. The amounts were amortized over the term of the 2021 Notes and were
expensed in December 2019 when we repaid $355.0 million of aggregate principal
amount of the 2021 Notes.

Income tax

We incurred $0.2 million of income tax expense during the year ended December
31, 2020 and incurred and income tax benefit of $1.9 million during the year
ended December 31, 2019. The decrease in the income tax benefit of $2.1 million
was primarily related to income taxes of a corporate subsidiary.

Adjusted net loss

                                                                Year Ended December 31,
                                                                2020                 2019
                                                              (Recast)             (Recast)            Change
                                                                              (in thousands)
Reconciliation of net loss to adjusted net loss:
Net loss                                                  $    (106,324)         $ (134,984)         $ 28,660
Acquisition and integration costs and other                       7,678               6,866               812

Early retirement of debt obligation                                   -               9,042            (9,042)
Commercial Services                                              (4,139)              4,139            (8,278)

Interest expense from additional borrowing related to the Chesapeake incident and hurricanes

                          2,211               1,705               506
Adjusted net loss                                         $    (100,574)         $ (113,232)         $ 12,658


                                       39

————————————————– ——————————

  Table of Contents

Adjusted EBITDA

                                                             Year Ended December 31,
                                                             2020                 2019
                                                           (Recast)             (Recast)             Change
                                                                           (in thousands)
Reconciliation of net loss to adjusted EBITDA:
Net loss                                               $    (106,324)         $ (134,984)         $  28,660
Add:
Depreciation and amortization                                 85,892              65,565             20,327
Interest expense                                              45,996              42,042              3,954
Income tax expense (benefit)                                     169              (1,954)             2,123
Early retirement of debt obligation                                -               9,042             (9,042)

Non-cash stock-based compensation and other charges 39,528

       10,631             28,897
Loss on disposal of assets                                     8,715               3,558              5,157
Changes in unrealized derivative instruments                   4,328               4,588               (260)

Acquisition and integration costs and other                    7,678               6,866                812
Commercial Services                                           (4,139)              4,139             (8,278)
Adjusted EBITDA                                        $      81,843          $    9,493          $  72,350


We generated adjusted EBITDA of $81.8 million for the year ended December 31,
2020 compared to $9.5 million for the year ended December 31, 2019. The $72.4
million increase was primarily attributable to the factors described above under
the heading "Adjusted gross margin and adjusted gross margin per metric ton."

Distributable cash

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

                                                                Year Ended December 31,
                                                                2020                   2019
                                                              (Recast)               (Recast)            Change
                                                                              (in thousands)
Reconciliation of adjusted EBITDA to distributable cash
flow attributable to Enviva
Adjusted EBITDA                                         $     81,843               $   9,493          $  72,350
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                      41,206                  37,193              4,013
Maintenance capital expenditures                               7,952                   6,922              1,030

Distributable cash flow attributable to Enviva $32,685

($34,622) $67,307

Cash and capital resources

Overview

Our primary sources of liquidity include cash and cash equivalent balances, cash
generated from operations, availability under our senior secured revolving
credit facility and, from time to time, debt and equity offerings. Our primary
liquidity needs are to fund working capital, service our debt, finance
greenfield construction projects, growth initiatives, and maintenance capital
expenditures, and pay dividends. We believe cash on hand, cash generated from
our operations and the availability of our senior secured revolving credit
facility will be sufficient to meet our primary liquidity requirements. However,
future capital expenditures, such as expenditures made in relation to
acquisitions of plants or terminals, plant development and/or plant expansion
projects, and other cash requirements could be higher than we currently expect
as a result of various factors. Additionally, our ability to generate sufficient
cash from our operating activities depends on our future performance, which is
subject to general economic, political, financial, competitive, and other
factors beyond our control.

                                       40

————————————————– ——————————

Contents

Our liquidity at December 31, 2021which included cash and availability under our $570.0 million senior secured revolving credit facility, was $116.6 million.

Cash Dividends

We intend to pay cash dividends to holders of our common stock of $3.62 per common share for 2022.

The former owners of our former sponsor have agreed to reinvest in our common
stock all dividends from 9.0 million of the 16.0 million common units issued in
connection with the Simplification Transaction for the dividends paid for the
period beginning with the third quarter of 2021 through the fourth quarter of
2024.

Capital Requirements

We operate in a capital-intensive industry, which requires significant
investments to develop and construct new production and terminal facilities, and
maintain and upgrade our existing facilities. Our capital requirements primarily
have consisted, and we anticipate will continue to consist, of the following:

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

•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 maintenance or growth is done at the individual asset level during our budgeting process and when we approve, execute and monitor our capital expenditures.

We plan to invest $255.0 million to $275.0 million in capital expenditures in
2022. Of that amount, we expect to invest (i) $210.0 million to $220.0 million
primarily on the completion of the production plant under construction in
Lucedale Mississippi and the terminal at the Port of Pascagoula, Mississippi,
and the construction of the Epes plant, (ii) $30.0 million to $35.0 million
primarily on the Multi-Plant Expansions, and (iii) $15.0 million to $20.0
million on maintenance capital expenditures.

long-term debt

Tickets 2026

In 2019, we issued $600.0 million 2026 Tickets. We received gross proceeds of approximately $601.8 million offers and net proceeds of approximately $595.8 million after deduction of commissions and costs.

In July 2020, we issued an additional $150.0 million aggregate principal amount
of the 2026 Notes at an offering price of 103.75% of the principal amount (the
"Additional Notes"). We received net proceeds of approximately $153.6 million
from the Additional Notes offering after deducting discounts and commissions.

We may redeem all or a portion of the 2026 Notes at any time at the applicable
redemption price, plus accrued and unpaid interest, if any (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), and, in some
cases, plus a make-whole premium.

For more information on the 2026 Notes, see Section 8. Financial Statements and Supplementary Data, Note 14, Long-Term Debt and Finance Lease Obligations.

Senior Secured Revolving Credit Facility

In April 2021, we amended our senior secured revolving credit facility to
increase the revolving credit commitments from $350.0 million to $525.0 million,
to extend the maturity from October 2023 to April 2026, to increase the letter
of credit commitment from $50.0 million to $80.0 million, and to reduce the cost
of borrowing by 25 basis points. In December 2021, we amended our senior secured
revolving credit facility to increase the revolving credit commitments from
$525.0 million to $570.0 million and to permit the issuance of commercial
letters of credit.

Borrowings under the revolving credit facility bear interest, at our option, at
either a Eurodollar rate or at a base rate, in each case, plus an applicable
margin. The applicable margin will fluctuate between 1.50% per annum and 2.75%
per annum, in

                                       41

————————————————– ——————————

Contents

the case of Eurodollar rate borrowings, or between 0.50% per annum and 1.75% per
annum, in the case of base rate loans, in each case, based on our Total Leverage
Ratio (as defined in our credit agreement) at such time, with 25 basis point
increases or decreases for each 0.50 increase or decrease in our Total Leverage
Ratio from 2.75:1:00 to 4.75:1:00.

We are required to pay a commitment fee on the unused daily amount under revolving credit commitments at a rate of between 0.25% and 0.50% per annum.

The credit agreement contains certain covenants, restrictions, and events of
default. We are required to maintain (1) a maximum Total Leverage Ratio at or
below 5.00 to 1.00 (or 5.25 to 1.00 during a Material Transaction Period) and
(2) a minimum Interest Coverage Ratio (as defined in our credit agreement) of
not less than 2.25 to 1.00.

As of December 31, 2021, we were in compliance with all covenants and
restrictions associated with, and no events of default existed under, the credit
agreement governing our senior secured revolving credit facility. Our
obligations under the senior secured revolving credit facility are guaranteed by
certain of our subsidiaries and secured by liens on substantially all of our
assets; however, the senior secured revolving credit facility is not guaranteed
by the Hamlet JV or secured by liens on its assets. For additional information
on our senior secured revolving credit facility, see Item 8. Financial
Statements and Supplemental Data, Note 14, Long-Term Debt and Finance Lease
Obligations.

Note from seller

We are a party to, and a guarantor of, a promissory note (the "Seller Note")
with a remaining principal balance of $37.5 million. The Seller Note matures in
February 2023 and has an interest rate of 2.5% per annum. Principal and related
interest payments are due annually through February 2022 and quarterly
thereafter.

Cash flow

The following table sets forth a summary of our net cash flows from operating,
investing and financing activities for the years ended December 31, 2021 and
2020:

                                                                             Year Ended December 31,
                                                                             2021                    2020
                                                                                  (in thousands)
Net cash provided by operating activities                            $      33,390               $  14,399
Net cash used in investing activities                                     (332,322)               (383,969)
Net cash provided by financing activities                                  249,775                 406,521

Net increase (decrease) in cash, cash equivalents and restricted cash

                                                                 $     (49,157)              $  36,951


Cash flow from operating activities

Net cash provided by operating activities was $33.4 million and $14.4 million
for the years ended December 31, 2021 and 2020, respectively. The $19.0 million
increase in cash provided by operating activities during the year ended
December 31, 2021 compared to the year ended December 31, 2020 was primarily due
to an increase in cash from changes in working capital of $47.4 million
partially offset by a decrease in cash from net income (loss) adjusted for
non-cash items of $28.4 million.

Cash used in investing activities

Net cash used in investing activities was $332.3 million and $384.0 million for
the years ended December 31, 2021 and 2020, respectively. The $51.6 million
decrease in cash used in investing activities during the year ended December 31,
2021 compared to the year ended December 31, 2020 was primarily due to the
investment of $163.3 million in the acquisition of the production plant located
in Waycross, Georgia, last year offset by the increase in capital expenditures
of $111.3 million.

Cash provided by financing activities

Net cash provided by financing activities was $249.8 million and $406.5 million
for the years ended December 31, 2021 and 2020, respectively. The $156.7 million
decrease in net cash provided by financing activities in 2021, as compared to
2020, was primarily attributable to an increase in cash used to acquire a
non-controlling interest of $59.7 million, a reduction in cash from contributed
capital to common control entities acquired of $105.0 million, and an increase
in cash distribution of $44.8 million, partially offset by an increase in
proceeds from the issuance of common shares of $24.0 million and proceeds from
debt issuance net of repayment of debt of $19.3 million.

                                       42

————————————————– ——————————

Contents

Off-balance sheet arrangements

As of December 31, 2021, we did not have any off­balance sheet arrangements, as
defined in Item 303(a)(4)(ii) of Regulation S­K, such as the use of
unconsolidated subsidiaries, structured finance, special purpose entities or a
variable interest in unconsolidated entities.

Recently issued accounting pronouncements

See part II, point 8. “Financial statements and additional data – Note 2, “Significant accounting policies – Recently adopted accounting standards and recently issued accounting standards not yet adopted”, in the notes to our consolidated financial statements included in this annual report on Form 10-K for a description of recently issued and adopted accounting pronouncements.

Significant Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations
is based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these consolidated financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the dates
of the consolidated financial statements and the reported revenues and expenses
during the reporting periods. We evaluate these estimates and assumptions on an
ongoing basis and base our estimates on historical experience, current
conditions and various other assumptions that we believe to be reasonable under
the circumstances. The results of these estimates form the basis for making
judgments about the carrying values of assets and liabilities as well as
identifying and assessing the accounting treatment with respect to commitments
and contingencies. Our actual results may materially differ from these
estimates.

For accounting policies and estimates that we believe are critical to our
consolidated financial statements due to the degree of uncertainty regarding the
estimates or assumptions involved, please see the following disclosures within
the Notes to our Consolidated Financial Statements included in Part II, Item 8.
of this Annual Report on Form 10-K: Note 2, Significant Accounting Policies,
specifically about "Business Combinations", "Inventories", "Revenue
Recognition", "Cost of Goods Sold", and "Property, Plant and Equipment", and
Note 4, "Acquisition".

                                       43

————————————————– ——————————

Contents

© Edgar Online, source Previews

Share.

About Author

Comments are closed.