gpp-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission File Number 001-37469

GREEN PLAINS PARTNERS LP

(Exact name of registrant as specified in its charter)


Delaware			47-3822258
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1811 Aksarben Drive, Omaha, NE 68106			(402) 884-8700
(Address of principal executive offices, including zip code)			(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Units, Representing Limited Partner Interests

GPP

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

x Yes o No

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


Large Accelerated Filer o			Accelerated Filer x
Non-Accelerated Filer ¨
Smaller Reporting Company o			Emerging Growth Company ¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

The registrant had 23,264,833 common units outstanding as of July 28, 2023.

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TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION
Commonly Used Defined Terms		3
Item 1.	Financial Statements	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures.		34

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Commonly Used Defined Terms

The abbreviations, acronyms and industry terminology used in this quarterly report are defined as follows:


Green Plains Partners LP, Subsidiaries, and Partners:
Green Plains Operating Company			Green Plains Operating Company LLC
Green Plains Partners; the partnership			Green Plains Partners LP and its subsidiaries
NLR			NLR Energy Logistics LLC
Green Plains Inc. and Subsidiaries:
Green Plains; the parent or sponsor			Green Plains Inc. and its subsidiaries
Green Plains Holdings, the general partner			Green Plains Holdings LLC
Green Plains Trade			Green Plains Trade Group LLC
Other Defined Terms:
2022 annual report			The partnership’s annual report on Form 10-K for the year ended December 31, 2022, filed February 10, 2023
ATJ			Alcohol-to-Jet
ARO			Asset retirement obligation
ASC			Accounting Standards Codification
Bgy			Billion gallons per year
BlackRock			Funds and accounts managed by BlackRock
CI			Carbon intensity
Conflicts committee			The partnership’s committee responsible for reviewing situations involving certain transactions with affiliates or other potential conflicts of interest
D.C.			District of Columbia
DOE			Department of Energy
E10			Gasoline blended with up to 10% ethanol by volume
E15			Gasoline blended with up to 15% ethanol by volume
EBITDA			Earnings before interest, taxes, depreciation and amortization
EIA			U.S. Energy Information Administration
EPA			U.S. Environmental Protection Agency
EV			Electric Vehicle
Exchange Act			Securities Exchange Act of 1934, as amended
FASB			Financial Accounting Standards Board
FFV			Flexible-fuel vehicle
GAAP			U.S. Generally Accepted Accounting Principles
LIBOR			London Interbank Offered Rate
LTIP			Green Plains Partners LP 2015 Long-Term Incentive Plan
Mmg			Million gallons
MSC™			Maximized Stillage Coproducts produced using process technology developed by Fluid Quip Technologies LLC
MTBE			Methyl tertiary-butyl ether
Partnership agreement			First Amended and Restated Agreement of Limited Partnership of Green Plains Partners LP, dated as of July 1, 2015, between Green Plains Holdings LLC and Green Plains Inc.
RFS			Renewable Fuels Standard
RIN			Renewable identification number
RVO			Renewable volume obligation
SAF			Sustainable Aviation Fuel
SEC			Securities and Exchange Commission
SOFR			Secured Overnight Financing Rate
SRE			Small refinery exemption
U.S.			United States
USDA			U.S. Department of Agriculture

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

GREEN PLAINS PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(in thousands, except unit amounts)


	June 30, 2023		December 31, 2022
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	15,550	$	20,166
Accounts receivable	1,044		255
Accounts receivable from affiliates	14,156		12,742
Prepaid expenses and other	1,520		1,410
Total current assets	32,270		34,573

Property and equipment, net of accumulated depreciation and amortization of $37,961 and $36,323, respectively	25,984		26,137
Operating lease right-of-use assets	55,189		47,002
Goodwill	10,598		10,598
Investment in equity method investee	3,100		2,680
Other assets	378		432
Total assets	$	127,519	$	121,422

LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	3,554	$	3,086
Accounts payable to affiliates	489		1,139
Accrued and other liabilities	6,022		4,849
Asset retirement obligations	1,476		1,861
Operating lease current liabilities	17,226		14,734
Total current liabilities	28,767		25,669

Long-term debt	57,101		58,559
Asset retirement obligations	3,534		2,862
Operating lease long-term liabilities	39,583		33,582
Total liabilities	128,985		120,672

Commitments and contingencies (Note 8)

Partners' equity (deficit)
Common unitholders - public (11,660,274 units issued and outstanding)	133,993		135,025
Common unitholders - Green Plains (11,586,548 units issued and outstanding)	(135,434)		(134,296)
General partner interests	(25)		21
Total partners' equity (deficit)	(1,466)		750
Total liabilities and partners' equity (deficit)	$	127,519	$	121,422

See accompanying notes to the consolidated financial statements.

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GREEN PLAINS PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per unit amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues
Affiliate	$	19,460	$	18,742	$	39,116	$	36,837
Non-affiliate	1,063		912		2,182		1,917
Total revenues	20,523		19,654		41,298		38,754
Operating expenses
Operations and maintenance (excluding depreciation and amortization reflected below)	7,070		6,160		14,323		11,725
General and administrative	1,625		925		2,855		2,110
Depreciation and amortization	828		823		1,644		1,721
Total operating expenses	9,523		7,908		18,822		15,556
Operating income	11,000		11,746		22,476		23,198
Interest income	238		—		363		—
Interest expense	(1,910)		(1,384)		(3,807)		(2,623)
Income before income taxes and income from equity method investee	9,328		10,362		19,032		20,575
Income tax expense	(293)		(39)		(194)		(77)
Income from equity method investee	311		196		420		371
Net income	$	9,346	$	10,519	$	19,258	$	20,869

Net income attributable to partners' ownership interests
General partner	$	188	$	210	$	386	$	417
Limited partners - common unitholders	9,158		10,309		18,872		20,452

Earnings per limited partner unit (basic and diluted)
Common units	$	0.39	$	0.44	$	0.81	$	0.88

Weighted average limited partner units outstanding (basic and diluted)
Common units	23,227		23,208		23,227		23,208

See accompanying notes to the consolidated financial statements.

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GREEN PLAINS PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities
Net income	$	19,258	$	20,869
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	1,644		1,721
Accretion	203		133
Amortization of debt issuance costs	58		66
Unit-based compensation	119		119
Income from equity method investee	(420)		(371)
Other	(359)		—
Changes in operating assets and liabilities
Accounts receivable	(789)		62
Accounts receivable from affiliates	(1,414)		(1,982)
Prepaid expenses and other assets	645		(371)
Accounts payable and accrued liabilities	(42)		671
Accounts payable to affiliates	(650)		(217)
Operating lease liabilities and right-of-use assets	306		494
Other	56		—
Net cash provided by operating activities	18,615		21,194

Cash flows from investing activities
Purchases of property and equipment	(129)		(305)
Net cash used in investing activities	(129)		(305)

Cash flows from financing activities
Payments of distributions	(21,586)		(20,976)
Principal payments on long-term debt	(1,500)		(1,031)
Payments of loan fees	(16)		—
Net cash used in financing activities	(23,102)		(22,007)

Net change in cash and cash equivalents	(4,616)		(1,118)
Cash and cash equivalents, beginning of period	20,166		17,645
Cash and cash equivalents, end of period	$	15,550	$	16,527

Supplemental disclosures of cash flow
Cash paid for income taxes	$	198	$	76
Cash paid for interest	$	3,766	$	2,549

See accompanying notes to the consolidated financial statements.

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GREEN PLAINS PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

References to “we,” “our,” “us” or “the partnership” in the consolidated financial statements and notes to the consolidated financial statements refer to Green Plains Partners LP and its subsidiaries.

Green Plains Holdings LLC, a wholly owned subsidiary of Green Plains Inc., serves as the general partner of the partnership. References to (i) “the general partner” and “Green Plains Holdings” refer to Green Plains Holdings LLC; (ii) “the parent,” “the sponsor” and “Green Plains” refer to Green Plains Inc.; and (iii) “Green Plains Trade” refers to Green Plains Trade Group LLC, a wholly owned subsidiary of Green Plains.

On May 3, 2023, the Board of Directors of the general partner received a non-binding, preliminary proposal ("the Proposal") from the parent to acquire all of the outstanding common units representing limited partner interests in the partnership not already owned by the parent and its affiliates pursuant to a stock-for-unit merger that would result in the partnership becoming a direct, wholly owned subsidiary of the parent. The conflicts committee of the Board of Directors of the general partner (the "Conflicts Committee") has been delegated the authority to evaluate and negotiate the possible terms of a proposed transaction. Any transaction involving the parent and the partnership is subject to the execution of a mutually satisfactory definitive agreement and approval of such definitive agreement and the transactions contemplated thereunder by the boards of directors of the parent and the general partner, the Conflicts Committee, as well as the majority of the partnership's unitholders. There can be no assurance that the parties will reach agreement on the terms of a transaction, that a definitive agreement will be executed or that a transaction will be approved or consummated.

Consolidated Financial Statements

The consolidated financial statements include the accounts of the partnership and its subsidiaries. All significant intercompany balances and transactions are eliminated on a consolidated basis for reporting purposes. Results for the interim periods presented are not necessarily indicative of the expected results for the entire year.

The accompanying unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X. Because they do not include all of the information and footnotes required by GAAP, the consolidated financial statements should be read in conjunction with the partnership’s 2022 annual report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 10, 2023.

The partnership accounts for its interest in joint ventures using the equity method of accounting, with its investment recorded at the acquisition cost plus the partnership’s share of equity in undistributed earnings and reduced by the partnership’s share of equity in undistributed losses and distributions received.

Use of Estimates in the Preparation of Consolidated Financial Statements

Preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reporting period. The partnership bases its estimates on historical experience and assumptions it believes are proper and reasonable under the circumstances. The partnership regularly evaluates the appropriateness of these estimates and assumptions. Actual results could differ from those estimates. Certain accounting policies, including, but not limited to, those related to leases, depreciation of property and equipment, asset retirement obligations, and impairment of long-lived assets and goodwill are impacted by judgments, assumptions and estimates used to prepare the consolidated financial statements.

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Description of Business

The partnership provides fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage terminals, transportation assets and other related assets and businesses. The partnership is its parent’s primary downstream logistics provider to support the parent’s approximately 1.0 bgy ethanol marketing and distribution business since the partnership’s assets are the principal method of storing and delivering the ethanol the parent produces. The ethanol produced by the parent is fuel grade, made principally from starch extracted from corn, and is primarily used for blending with gasoline. Ethanol is an economical source of octane and oxygenates for blending into the fuel supply. The partnership does not take ownership of, or receive any payments based on the value of the ethanol or other fuels it handles; as a result, the partnership does not have any direct exposure to fluctuations in commodity prices. However, commodity prices can potentially impact the demand for the products that we handle.

Revenue Recognition

The partnership recognizes revenue when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs with the completion of services or the transfer of control of products to the customer or another specified third party. For contracts with customers in which a take-or-pay commitment exists, any minimum volume deficiency charges are recognized as revenue in the period incurred and are not allowed to be credited towards excess volumes in future periods.

The partnership generates a substantial portion of its revenues under fee-based commercial agreements with Green Plains Trade. Operating lease revenue related to minimum volume commitments is recognized on a straight-line basis over the term of the lease. Under the terms of the storage and throughput agreement with Green Plains Trade, to the extent shortfalls associated with minimum volume commitments in the previous four quarters continue to exist, volumes in excess of the minimum volume commitment are applied to those shortfalls. Remaining excess volumes generating operating lease revenue are recognized as incurred.

Please refer to Note 2 - Revenue to the consolidated financial statements for further details.

Operations and Maintenance Expenses

The partnership’s operations and maintenance expenses consist primarily of lease expenses related to the transportation assets, labor expenses, outside contractor expenses, insurance premiums, repairs and maintenance expenses, and utility costs. These expenses also include fees for certain management, maintenance and operational services to support the storage and terminal facilities, trucks, and leased railcar fleet allocated by Green Plains under the operational services and secondment agreement.

Concentrations of Credit Risk

In the normal course of business, the partnership is exposed to credit risk resulting from the possibility a loss may occur due to failure of another party to perform according to the terms of their contract. The partnership provides fuel storage and transportation services for various parties with a significant portion of its revenues earned from Green Plains Trade. The partnership continually monitors its credit risk exposure and concentrations. Please refer to Note 2 – Revenue and Note 9 – Related Party Transactions to the consolidated financial statements for additional information.

Impairment of Long-Lived Assets and Goodwill

The partnership reviews its long-lived assets, currently consisting primarily of property and equipment and operating lease right-of-use assets, for impairment when events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. No triggering events were identified for the periods reported.

The partnership’s goodwill currently is comprised of amounts recognized by the partnership's predecessor related to terminal services assets. The partnership reviews goodwill at the reporting unit level for impairment at least annually, as of October 1, or more frequently when events or changes in circumstances indicate that impairment may have occurred.

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Leases

The partnership leases certain facilities, parcels of land, and railcars. These leases are accounted for as operating leases, with lease expense recognized on a straight-line basis over the lease term. The term of the lease may include options to extend or terminate the lease when it is reasonably certain that such options will be exercised. For leases with initial terms greater than 12 months, the partnership records operating lease right-of-use assets and corresponding operating lease liabilities. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. The partnership did not incur any material short-term lease expense for either the three and six months ended June 30, 2023 or June 30, 2022.

Operating lease right-of-use assets represent the right to control an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the partnership’s leases do not provide an implicit rate, the incremental borrowing rate is used based on information available at the commencement date to determine the present value of future payments.

The partnership utilizes a portfolio approach for lease classification, which allows for an entity to group together leases with similar characteristics, provided that its application does not create a material difference when compared to accounting for the leases at a contract level. For the partnership’s railcar leases, the partnership combines the railcars within each contract rider and accounts for each contract rider as an individual lease.

From a lessee perspective, the partnership combines both the lease and non-lease components and accounts for them as one lease. Certain of the partnership’s railcar agreements provide for maintenance costs to be the responsibility of the partnership as incurred or charged by the lessor. This maintenance cost is a non-lease component that the partnership combines with the monthly rental payment and accounts for the total cost as operating lease expense. In addition, the partnership has a land lease that contains a non-lease component for the handling and unloading services the landlord provides. The partnership combines the cost of services with the land lease cost and accounts for the total as operating lease expense.

The partnership records operating lease revenue as part of its operating lease agreements for storage and throughput services, rail transportation services, and certain terminal services. In addition, the partnership may sublease certain of its railcars to third parties on a short-term basis. These subleases are classified as operating leases, with the associated sublease revenue recognized on a straight-line basis over the sublease lease term.

From a lessor perspective, the partnership combines, by class of underlying asset, both the lease and non-lease components and accounts for them as one lease. The storage and throughput agreement consists of lease costs paid by Green Plains Trade for the rental of the terminal facilities as well as non-lease costs for the throughput services provided by the partnership. For this agreement, the partnership combines the facility rental revenue and the service revenue and accounts for the total as leasing revenue. The railcar transportation services agreement consists of lease costs paid by Green Plains Trade for the use of the partnership’s railcar assets as well as non-lease costs for logistical operations management and other services. For this agreement, the partnership combines the railcar rental revenue and the service revenue and accounts for the total as leasing revenue.

Please refer to Note 8 – Commitments and Contingencies to the consolidated financial statements for further details on operating lease expense and revenue. Please refer to Note 2 - Revenue to the consolidated financial statements for further details on the operating lease agreements in which the partnership is a lessor.

Asset Retirement Obligations

The partnership records an ARO for the fair value of the estimated costs to retire a tangible long-lived asset in the period incurred if it can be reasonably estimated, which is subsequently adjusted for accretion expense. Corresponding asset retirement costs are capitalized as a long-lived asset and depreciated on a straight-line basis over the asset’s remaining useful life. The expected present value technique used to calculate the fair value of the AROs includes assumptions about costs, settlement dates, interest accretion, and inflation. Changes in assumptions, such as the amount or timing of estimated cash flows, could increase or decrease the AROs. The partnership’s AROs are based on legal obligations to perform remedial activity related to land, machinery and equipment when certain operating leases expire.

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Segment Reporting

The partnership accounts for segment reporting in accordance with ASC 280, Segment Reporting, which establishes standards for entities reporting information about the operating segments and geographic areas in which they operate. Management evaluated how its chief operating decision maker has organized the partnership for purposes of making operating decisions and assessing performance, and concluded it has one reportable segment.

2. REVENUE

Revenue by Source

The following table disaggregates our revenue by major source (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues
Service revenues
Terminal services	$	2,173	$	2,036	$	4,250	$	4,120
Trucking and other	416		929		1,241		1,735
Total service revenues	2,589		2,965		5,491		5,855
Leasing revenues (1)
Storage and throughput services	11,565		11,570		23,129		23,128
Railcar transportation services	6,369		5,119		12,678		9,771
Total leasing revenues	17,934		16,689		35,807		32,899
Total revenues	$	20,523	$	19,654	$	41,298	$	38,754

(1) Leasing revenues do not represent revenues recognized from contracts with customers under ASC 606, Revenue from Contracts with Customers, and are accounted for under ASC 842, Leases.

Terminal Services Revenue

The partnership provides terminal services and logistics solutions to Green Plains Trade, and other customers, through its fuel terminal facilities under various terminal service agreements, some of which have minimum volume commitments. If Green Plains Trade, or other customers, fail to meet their minimum volume commitments during the applicable term, a deficiency payment equal to the deficient volume multiplied by the applicable fee is charged. Deficiency payments related to the partnership’s terminal services revenue may not be utilized as credits toward future volumes. At terminals where customers have shared use of terminal and tank storage assets, revenue is generated from contracts with customers and accounted for as service revenue. This service revenue is recognized at the point in time when product is withdrawn from tank storage.

At terminals where a customer is predominantly provided exclusive use of the terminal or tank storage assets, the partnership is considered a lessor as part of an operating lease agreement. Revenue is recognized over the term of the lease based on the minimum volume commitment or total actual throughput if in excess of the minimum volume commitment.

Trucking and Other Revenue

The partnership transports ethanol, natural gasoline, other refined fuels and feedstocks by truck from identified receipt points to various delivery points. Trucking revenue is recognized over time based on the percentage of total miles traveled, which is on average less than 100 miles.

Railcar Transportation Services Revenue

Under the rail transportation services agreement, Green Plains Trade is obligated to use the partnership to transport ethanol and other fuels from receipt points identified by Green Plains Trade to nominated delivery points. Green Plains Trade is required to pay the partnership fees for the minimum railcar volumetric capacity provided, regardless of utilization

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of that capacity. However, Green Plains Trade is not charged for railcar volumetric capacity that is not available for use due to inspections, upgrades or routine repairs and maintenance. Revenue associated with the rail transportation services fee is considered leasing revenue and is recognized over the term of the lease based on the actual average daily railcar volumetric capacity provided. The partnership may also charge Green Plains Trade a related services fee for logistical operations management of railcar volumetric capacity utilized by Green Plains Trade which is not provided by the partnership. Revenue associated with the related services fee is also considered leasing revenue and recognized over the term of the lease based on the average volumetric capacity for which services are provided.

Storage and Throughput Revenue

The partnership generates leasing revenue from its storage and throughput agreement with Green Plains Trade based on contractual rates charged for the handling, storage and throughput of ethanol. Under this agreement, Green Plains Trade is required to pay the partnership a fee for a minimum volume commitment regardless of the actual volume delivered. If Green Plains Trade fails to meet its minimum volume commitment during any quarter, the partnership charges Green Plains Trade a deficiency payment equal to the deficient volume multiplied by the applicable fee. The deficiency payment may be applied as a credit toward volumes delivered by Green Plains Trade in excess of the minimum volume commitment during the following four quarters, after which time any unused credits will expire. Revenue is recognized over the term of the lease based on the minimum volume commitment or total actual throughput if in excess of the minimum volume commitment.

Payment Terms

The partnership has standard payment terms, which vary depending on the nature of the services provided, with the majority of terms falling within 10 to 30 days after transfer of control or completion of services. Contracts generally do not include a significant financing component in instances where the timing of revenue recognition differs from the timing of invoicing.

Major Customers

Revenue from Green Plains Trade Group was $19.4 million and $39.1 million for the three and six months ended June 30, 2023, respectively, and $18.7 million and $36.8 million for the three and six months ended June 30, 2022, respectively, which exceeds 10% of the partnership’s total revenue.

Contract Liabilities

The partnership records unearned revenue when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of service and lease agreements. Unearned revenue from service agreements, which represents a contract liability, is recorded for fees that have been charged to the customer prior to the completion of performance obligations, and is generally recognized in the subsequent quarter.

The following table reflects the changes in our unearned revenue from service agreements, which is recorded in accrued and other liabilities on the consolidated balance sheets, for the three and six months ended June 30, 2023 (in thousands):


	Amount
Balance at January 1, 2023	$	153
Revenue recognized included in beginning balance	(153)
Net additions	124
Balance at March 31, 2023	124
Revenue recognized included in beginning balance	(124)
Net additions	234
Balance at June 30, 2023	$	234

The partnership expects to recognize all of the unearned revenue associated with service agreements from contracts with customers as of June 30, 2023, in the subsequent quarter when the product is withdrawn from tank storage.

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3. DEBT

Term Loan Facility

Green Plains Operating Company has a term loan to fund working capital, capital expenditures and other general partnership purposes. The term loan has a maturity date of July 20, 2026. Under the terms of the agreement, Green Plains Partners and its affiliates are allowed to repurchase outstanding notes from the lenders. Interest on the term loan is based on three-month SOFR plus 8.26%. Interest is payable on the 15th day of each March, June, September and December during the term. The term loan does not require any principal payments; however, the partnership has the option to prepay $1.5 million per quarter. Principal prepayments totaling $1.5 million were made during the three and six months ended June 30, 2023. The partnership repurchased $1.0 million of the outstanding notes during the six months ended June 30, 2022. The term loan had an outstanding balance of $57.5 million, $0.4 million of unamortized debt issuance costs, and an interest rate of 13.52% as of June 30, 2023. The partnership believes the carrying amount of its debt approximated fair value at both June 30, 2023 and December 31, 2022.

The partnership’s obligations under the term loan are secured by a first priority lien on (i) the equity interests of the partnership’s present and future subsidiaries, (ii) all of the partnership’s present and future personal property, such as investment property, general intangibles and contract rights, including rights under any agreements with Green Plains Trade, (iii) all proceeds and products of the equity interests of the partnership’s present and future subsidiaries and its personal property and (iv) substantially all of the partnership’s real property and material leases of real property. The terms impose affirmative and negative covenants, including restrictions on the partnership’s ability to incur additional debt, acquire and sell assets, create liens, invest capital, pay distributions and materially amend the partnership’s commercial agreements with Green Plains Trade. The term loan also requires the partnership to maintain a maximum consolidated leverage ratio and a minimum consolidated debt service coverage ratio, each of which is calculated on a pro forma basis with respect to acquisitions and divestitures occurring during the applicable period. As of the end of any fiscal quarter, the maximum consolidated leverage ratio is required to be no more than 2.50x and the minimum debt service coverage ratio is required to be no less than 1.10x. The consolidated leverage ratio is calculated by dividing total funded indebtedness by the sum of the four preceding fiscal quarters’ consolidated EBITDA. The consolidated debt service coverage ratio is calculated by taking the sum of the four preceding fiscal quarters’ consolidated EBITDA minus income taxes and consolidated capital expenditures for such period divided by the sum of the four preceding fiscal quarters’ consolidated interest charges plus consolidated scheduled funded debt payments for such period. Under the terms of the loan, the partnership has no restrictions on the amount of quarterly distribution payments, so long as (i) no default has occurred and is continuing, or would result from payment of the distribution, and (ii) the partnership and its subsidiaries are in compliance with its financial covenants and remain in compliance after payment of the distribution.

Covenant Compliance

The partnership, including all of its subsidiaries, was in compliance with its debt covenants as of June 30, 2023.

4. UNIT-BASED COMPENSATION

The LTIP is intended to promote the interests of the partnership, its general partner and affiliates by providing unit-based incentive compensation awards to employees, consultants and directors to encourage superior performance. The LTIP reserves 2,500,000 common limited partner units for issuance in the form of options, restricted units, phantom units, distribution equivalent rights, substitute awards, unit appreciation rights, unit awards, profit interest units or other unit-based awards. The partnership measures unit-based compensation grants at fair value on the grant date and records noncash compensation expense related to the awards on a straight-line basis over the requisite service period of one year.

The non-vested unit-based award activity for the six months ended June 30, 2023, is as follows:

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	Non-Vested Units	Weighted-Average Grant-Date Fair Value		Weighted-Average Remaining Vesting Term (in years)
Non-vested at December 31, 2022	19,707	$	12.18
Vested	(19,707)	12.18
Non-vested at June 30, 2023	—	$	—	0.0

Compensation costs related to the unit-based awards of $60 thousand and $119 thousand were recognized during both the three and six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, there were no unrecognized compensation costs from unit-based compensation awards.

5. PARTNERS’ EQUITY (DEFICIT)

Changes in partners’ equity (deficit) are as follows (in thousands):


	Limited Partners				General Partner		Total
	Common Units- Public		Common Units- Green Plains
Balance, December 31, 2022	$	135,025	$	(134,296)	$	21	$	750
Quarterly cash distributions to unitholders ($0.455 per unit)	(5,305)		(5,272)		(216)		(10,793)
Net income	4,873		4,841		198		9,912
Unit-based compensation	59		—		—		59
Balance, March 31, 2023	$	134,652	$	(134,727)	$	3	$	(72)
Quarterly cash distributions to unitholders ($0.455 per unit)	(5,305)		(5,272)		(216)		(10,793)
Net income	4,593		4,565		188		9,346
Unit-based compensation	53		—		—		53
Balance, June 30, 2023	$	133,993	$	(135,434)	$	(25)	$	(1,466)


	Limited Partners				General Partner		Total
	Common Units- Public		Common Units- Green Plains
Balance, December 31, 2021	$	135,666	$	(133,420)	$	57	$	2,303
Quarterly cash distributions to unitholders ($0.44 per unit)	(5,122)		(5,098)		(209)		(10,429)
Net income	5,083		5,060		207		10,350
Unit-based compensation	59		—		—		59
Balance, March 31, 2022	$	135,686	$	(133,458)	$	55	$	2,283
Quarterly cash distributions to unitholders ($0.445 per unit)	(5,180)		(5,156)		(211)		(10,547)
Net income	5,167		5,142		210		10,519
Unit-based compensation	60		—		—		60
Balance, June 30, 2022	$	135,733	$	(133,472)	$	54	$	2,315

There was no change in the number of common limited partner units outstanding during the six months ended June 30, 2023.

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Issuance of Additional Securities

The partnership agreement authorizes the partnership to issue unlimited additional partnership interests on the terms and conditions determined by the general partner without unitholder approval.

Cash Distribution Policy

Quarterly distributions are made from available cash within 45 days after the end of each calendar quarter, assuming the partnership has available cash. Available cash generally means all cash and cash equivalents on hand at the end of that quarter less cash reserves established by the general partner, including those for future capital expenditures, future acquisitions and anticipated future debt service requirements, plus all or any portion of the cash on hand resulting from working capital borrowings made subsequent to the end of that quarter.

The general partner also holds incentive distribution rights that entitle it to receive increasing percentages, up to 48%, of available cash distributed from operating surplus, as defined in the partnership agreement, in excess of $0.46 per unit per quarter. The maximum distribution of 48% does not include any distributions the general partner or its affiliates may receive on its general partner interest or common units.

On February 10, 2023, the partnership distributed $10.8 million to unitholders of record as of February 3, 2023, related to the quarterly cash distribution of $0.455 per unit that was declared on January 19, 2023, for the quarter ended December 31, 2022.

On May 12, 2023, the partnership distributed $10.8 million to unitholders of record as of May 5, 2023, related to the quarterly cash distribution of $0.455 per unit that was declared on April 20, 2023, for the quarter ended March 31, 2023.

On July 20, 2023, the board of directors of the general partner declared a quarterly cash distribution of $0.455 per unit, or approximately $10.8 million, for the quarter ended June 30, 2023. The distribution is payable on August 11, 2023, to unitholders of record at the close of business on August 4, 2023.

The total cash distributions declared for the three and six months ended June 30, 2023 and 2022, are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
General partner distributions	$	216	$	213	$	432	$	424

Limited partner common units - public	5,314		5,239		10,619		10,419
Limited partner common units - Green Plains	5,272		5,214		10,544		10,370
Total distributions to limited partners	10,586		10,453		21,163		20,789
Total distributions declared	$	10,802	$	10,666	$	21,595	$	21,213

6. EARNINGS PER UNIT

The partnership computes earnings per unit using the two-class method. Earnings per unit applicable to common units is calculated by dividing the respective limited partners’ interest in net income by the weighted average number of common units outstanding during the period, adjusted for the dilutive effect of any outstanding dilutive securities. Diluted earnings per limited partner unit was the same as basic earnings per limited partner unit as there were no potentially dilutive common units outstanding as of June 30, 2023.

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The following tables show the calculation of earnings per limited partner unit – basic and diluted (in thousands, except for per unit data):


	Three Months Ended June 30, 2023
	Limited Partner Common Units		General Partner		Total
Net income
Distributions declared	$	10,586	$	216	$	10,802
Earnings less than distributions	(1,428)		(28)		(1,456)
Total net income	$	9,158	$	188	$	9,346

Weighted-average units outstanding - basic and diluted	23,227

Earnings per limited partner unit - basic and diluted	$	0.39


	Six Months Ended June 30, 2023
	Limited Partner Common Units		General Partner		Total
Net income
Distributions declared	$	21,163	$	432	$	21,595
Earnings less than distributions	(2,291)		(46)		(2,337)
Total net income	$	18,872	$	386	$	19,258

Weighted-average units outstanding - basic and diluted	23,227

Earnings per limited partner unit - basic and diluted	$	0.81


	Three Months Ended June 30, 2022
	Limited Partner Common Units		General Partner		Total
Net income
Distributions declared	$	10,453	$	213	$	10,666
Earnings less than distributions	(144)		(3)		(147)
Total net income	$	10,309	$	210	$	10,519

Weighted-average units outstanding - basic and diluted	23,208

Earnings per limited partner unit - basic and diluted	$	0.44

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	Six Months Ended June 30, 2022
	Limited Partner Common Units		General Partner		Total
Net income
Distributions declared	$	20,789	$	424	$	21,213
Earnings less than distributions	(337)		(7)		(344)
Total net income	$	20,452	$	417	$	20,869

Weighted-average units outstanding - basic and diluted	23,208

Earnings per limited partner unit - basic and diluted	$	0.88

7. INCOME TAXES

The partnership is a limited partnership, which is not subject to federal income taxes. However, the partnership is subject to state income taxes in certain states. As a result, the financial statements reflect a provision or benefit for such income taxes. The general partner and the unitholders are responsible for paying federal and state income taxes on their share of the partnership’s taxable income. The partnership’s income tax balances did not have a material impact on the financial statements.

The partnership recognizes uncertainties in income taxes based upon the technical merits of the position, and measures the maximum benefit and degree of likelihood to determine the tax liability in the financial statements. The partnership does not have any material uncertain tax positions as of June 30, 2023.

8. COMMITMENTS AND CONTINGENCIES

Operating Lease Expense

The partnership leases certain facilities, parcels of land, and railcars with remaining terms ranging from less than one year to approximately 8.3 years, including renewal options reasonably certain to be exercised for the land and facility leases. Railcar agreement renewals are not considered reasonably certain to be exercised as they typically renew with different underlying terms.

The components of lease expense for the three and six months ended June 30, 2023 and 2022, are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Lease expense
Operating lease expense	$	4,855	$	3,676	$	9,714	$	7,169
Variable lease expense (benefit) (1)	(206)		187		(173)		162
Total lease expense	$	4,649	$	3,863	$	9,541	$	7,331

(1) Represents railcar lease abatements provided by the lessor when railcars are out of service during periods of maintenance or upgrade, offset by amounts incurred in excess of the minimum payments required for the handling and unloading of railcars for a certain lease.

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Supplemental cash flow information related to operating leases is as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,749	$	3,329	$	9,196	$	6,687

Right-of-use assets obtained in exchange for lease obligations
Operating leases	—		3,031		16,576		7,740

Supplemental balance sheet information related to operating leases is as follows:


	June 30, 2023		December 31, 2022
Weighted average remaining lease term	3.8 years		3.8 years

Weighted average discount rate	4.70	%	3.93	%

Aggregate minimum lease payments under the operating lease agreements for the remainder of 2023 and in future years are as follows (in thousands):


Year Ending December 31,	Amount
2023	$	10,088
2024	18,121
2025	15,508
2026	9,385
2027	6,790
Thereafter	2,384
Total	62,276
Less: Present value discount	(5,467)
Operating lease liabilities	$	56,809

Lease Revenue

The components of lease revenue for the three and six months ended June 30, 2023 and 2022, are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Lease revenue
Operating lease revenue	$	17,287	$	15,833	$	34,493	$	31,591
Variable lease revenue (1)	647		856		1,314		1,308
Total lease revenue	$	17,934	$	16,689	$	35,807	$	32,899

(1) Represents amounts charged to Green Plains Trade under the storage and throughput agreement in excess of the initial rate of $0.05 per gallon, amounts delivered by Green Plains Trade and other customers in excess of various minimum volume commitments, and the difference between the contracted railcar volumetric capacity and the actual amount provided to Green Plains Trade during the period.

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In accordance with the amended storage and throughput agreement, Green Plains Trade is obligated to deliver a minimum volume of 217.7 mmg per calendar quarter to the partnership’s storage facilities and pay $0.05312 per gallon on all volume it throughputs associated with the agreement.

The remaining lease term for the storage and throughput agreement is 6.0 years with automatic one year renewal periods in which either party has the right to terminate the contract. Due to the unilateral right to termination during the renewal period, the lease contract would no longer contain enforceable rights or obligations. Therefore, the lease term does not include the successive one year renewal periods. Anticipated minimum operating lease revenue under this agreement assuming a consistent rate of $0.05312 per gallon for the remainder of 2023 and in future years, is as follows (in thousands):


Year Ending December 31,	Amount
2023	$	23,128
2024	46,257
2025	46,257
2026	46,257
2027	46,257
Thereafter	69,385
Total	$	277,541

In accordance with the amended rail transportation services agreement with Green Plains Trade, Green Plains Trade is required to pay the rail transportation services fee for railcar volumetric capacity provided by the partnership. The remaining lease term for this agreement is 6.0 years, with automatic one year renewal periods in which either party has the right to terminate the contract. Due to the unilateral right to termination during the renewal period, the lease contract would no longer contain enforceable rights or obligations. Therefore, the lease term does not include the successive one year renewal periods. Under the terms of the agreement, Green Plains Trade is not required to pay for volumetric capacity that is not available due to inspections, upgrades, or routine repairs and maintenance. As a result, the actual volumetric capacity billed may be reduced based on the amount of volumetric capacity available for use during any applicable period. Anticipated minimum operating lease revenue under this agreement for the remainder of 2023 and in future years is as follows (in thousands):


Year Ending December 31,	Amount
2023	$	12,953
2024	23,530
2025	20,096
2026	11,386
2027	8,526
Thereafter	1,073
Total	$	77,564

Legal

The partnership may be involved in litigation that arises during the ordinary course of business. Currently, the partnership is not a party to any material litigation.

9. RELATED PARTY TRANSACTIONS

The partnership engages in various related party transactions with Green Plains and subsidiaries of Green Plains. Green Plains provides a variety of shared services to the partnership, including general management, accounting and finance, payroll and human resources, information technology, legal, communications and treasury activities. These costs are proportionally allocated by Green Plains to its subsidiaries based on common financial metrics management believes are reasonable. The partnership recorded expenses related to these shared services of $0.9 million and $1.9 million, respectively, for the three and six months ended June 30, 2023. Of these shared service expenses, $0.5 million and $1.1 million were recorded in operations and maintenance expenses and $0.4 million and $0.8 million were recorded within

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general and administrative expenses, respectively, for the three and six months ended June 30, 2023. The partnership recorded expenses related to these shared services of $0.8 million and $1.7 million, respectively, for the three and six months ended June 30, 2022. Of these shared service expenses, $0.4 million and $1.0 million were recorded in operations and maintenance expenses and $0.4 million and $0.7 million were recorded within general and administrative expenses, respectively, for the three and six months ended June 30, 2022. In addition, the partnership reimburses Green Plains for wages and benefit costs of employees directly performing services on its behalf. Green Plains may also pay certain direct costs on behalf of the partnership, which are reimbursed by the partnership. The partnership believes the consolidated financial statements reflect all material costs of doing business related to its operations, including expenses incurred by other entities on its behalf.

Omnibus Agreement

The partnership has entered into an omnibus agreement, as amended, with Green Plains and its affiliates which, among other terms and conditions, addresses the partnership’s obligation to reimburse Green Plains for direct or allocated costs and expenses incurred by Green Plains for general and administrative services; the prohibition of Green Plains and its subsidiaries from owning, operating or investing in any business that owns or operates fuel terminals or fuel transportation assets; the partnership’s right of first offer to acquire assets if Green Plains decides to sell them; a nontransferable, nonexclusive, royalty-free license to use the Green Plains trademark and name; the allocation of taxes among the parent, the partnership and its affiliates and the parent’s preparation and filing of tax returns; and an indemnity by Green Plains for certain environmental and other liabilities.

If Green Plains or its affiliates cease to control the general partner, then either Green Plains or the partnership may terminate the omnibus agreement, provided that (i) the indemnification obligations of the parties survive according to their respective terms; and (ii) Green Plains’ obligation to reimburse the partnership for operational failures survives according to its terms.

Operating Services and Secondment Agreement

The general partner has entered into an operational services and secondment agreement, as amended, with Green Plains. Under the terms of the agreement, Green Plains seconds employees to the general partner to provide management, maintenance and operational functions for the partnership, including regulatory matters, health, environment, safety and security programs, operational services, emergency response, employee training, finance and administration, human resources, business operations and planning. The seconded personnel are under the direct management and supervision of the general partner who reimburses the parent for the cost of the seconded employees, including wages and benefits. If a seconded employee does not devote 100% of his or her time providing services to the general partner, the general partner reimburses the parent for a prorated portion of the employee’s overall wages and benefits based on the percentage of time the employee spent working for the general partner.

Under the operational services and secondment agreement, Green Plains will indemnify the partnership from any claims, losses or liabilities incurred by the partnership, including third-party claims, arising from their performance of the operational services secondment agreement; provided, however, that Green Plains will not be obligated to indemnify the partnership for any claims, losses or liabilities arising out of the partnership’s gross negligence, willful misconduct or bad faith with respect to any services provided under the operational services and secondment agreement.

Commercial Agreements

The partnership has various fee-based commercial agreements with Green Plains Trade, including:

•Storage and throughput agreement, expiring on June 30, 2029;

•Rail transportation services agreement, expiring on June 30, 2029;

•Terminal services agreement for the Birmingham, Alabama unit train terminal, expiring on December 31, 2023; and

•Terminal services agreement for the Collins, Mississippi terminal, expiring on December 31, 2023.

The storage and throughput and rail transportation services agreements have various automatic renewal terms if not cancelled by either party within specified timeframes.

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The storage and throughput agreement and terminal services agreements are supported by minimum volume commitments. The rail transportation services agreement is supported by minimum take-or-pay volumetric capacity commitments.

Under the storage and throughput agreement, as amended, Green Plains Trade is obligated to deliver a minimum volume of 217.7 mmg of product per calendar quarter to the partnership’s storage facilities and pay $0.05312 per gallon on all volume it throughputs associated with the agreement.

If Green Plains Trade fails to meet its minimum volume commitment during any quarter, Green Plains Trade will pay the partnership a deficiency payment equal to the deficient volume multiplied by the applicable fee. The deficiency payment may be applied as a credit toward payments due on future volumes delivered by Green Plains Trade in excess of the minimum volume commitment during the following four quarters, after which time this option will expire.

For the three months ended June 30, 2023, the partnership charged Green Plains Trade $1.2 million related to the minimum volume commitment deficiency for the quarter, resulting in a credit to be applied against excess volumes in future periods. The cumulative balance of minimum volume deficiency credits available to Green Plains Trade is $1.7 million as of June 30, 2023. These credits expire, if unused, as follows:

• $0.5 million, expiring on March 31, 2024; and

• $1.2 million, expiring on June 30, 2024.

The above credits have been recognized as revenue by the partnership in the period in which the deficiency occurred, and as such, future volumes throughput by Green Plains Trade in excess of the quarterly minimum volume commitment, up to the amount of these credits, will not be recognized in revenue in future periods.

Under the rail transportation services agreement, Green Plains Trade is obligated to use the partnership to transport ethanol and other fuels from receipt points identified by Green Plains Trade to nominated delivery points. The average daily railcar volumetric capacity provided by the partnership was 70.7 mmg and 71.7 mmg, respectively, and the associated average monthly fee was approximately $0.0301 and $0.0296 per gallon, respectively, during the three and six months ended June 30, 2023. The average daily railcar volumetric capacity provided by the partnership was 74.5 mmg and 72.1 mmg, respectively, and the associated monthly fee was approximately $0.0229 and $0.0228 per gallon, respectively, during the three and six months ended June 30, 2022. The partnership’s leased railcar fleet consisted of approximately 2,360 and 2,530 railcars as of June 30, 2023 and 2022, respectively.

Green Plains Trade is also obligated to use the partnership for logistical operations management and other services related to average daily railcar volumetric capacity provided by Green Plains Trade, which was approximately 0.7 mmg during the three and six months ended June 30, 2023 and 2022. Green Plains Trade is obligated to pay a monthly fee of approximately $0.0013 per gallon for these services. In addition, Green Plains Trade reimburses the partnership for costs related to: (1) railcar switching and unloading fees; (2) increased costs related to changes in law or governmental regulation related to the specification, operation or maintenance of railcars; (3) demurrage charges, except when the charges are due to the partnership’s gross negligence or willful misconduct; and (4) fees related to rail transportation services under transportation contracts with third-party common carriers. As needed, Green Plains Trade contracts with the partnership for additional railcar volumetric capacity during the normal course of business at comparable margins.

Under the existing Birmingham terminal services agreement, effective through December 31, 2023, Green Plains Trade is obligated to throughput a minimum volume commitment of approximately 8.3 mmg per month and pay associated throughput fees, as well as fees for ancillary services.

The partnership recorded revenues from Green Plains Trade under the storage and throughput agreement and rail transportation services agreement of $17.9 million and $35.8 million for the three and six months ended June 30, 2023, respectively, and $16.7 million and $32.9 million for the three and six months ended June 30, 2022, respectively. In addition, the partnership recorded revenues from Green Plains Trade and other Green Plains subsidiaries related to trucking and terminal services of $1.5 million and $3.3 million for the three and six months ended June 30, 2023, respectively, and $2.0 million and $3.9 million for the three and six months ended June 30, 2022, respectively.

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Cash Distributions

The partnership distributed $5.5 million and $11.0 million to Green Plains related to the quarterly cash distribution paid for the three and six months ended June 30, 2023, respectively, and $5.4 million and $10.7 million for the three and six months ended June 30, 2022, respectively.

10. EQUITY METHOD INVESTMENT

NLR Energy Logistics LLC

The partnership and Delek Renewables LLC have a 50/50 joint venture, NLR Energy Logistics LLC, which operates a unit train terminal in the Little Rock, Arkansas area with capacity to unload 110-car unit trains and provide approximately 100,000 barrels of storage. As of June 30, 2023, the partnership’s investment balance in the joint venture was $3.1 million.

The partnership does not consolidate any part of the assets or liabilities or operating results of its equity method investee. The partnership’s share of net income or loss in the investee increases or decreases, as applicable, the carrying value of the investment. With respect to NLR, the partnership determined that this entity does not represent a variable interest entity and consolidation is not required. In addition, although the partnership has the ability to exercise significant influence over the joint venture through board representation and voting rights, all significant decisions require the consent of the other investor without regard to economic interest.

11. SUBSEQUENT EVENTS

On July 25, 2023, Green Plains entered into an asset purchase agreement to sell its ethanol plant located in Atkinson, Nebraska. Correspondingly, the partnership entered into an asset purchase agreement to sell its storage assets located adjacent to the Atkinson plant to Green Plains, along with the transfer of associated railcar operating leases. The transaction is anticipated to close within 30 days in conjunction with the completion of the Green Plains Atkinson LLC ethanol asset sale, subject to customary closing conditions. The terms of this transaction were approved by both the board of directors of the general partner and the board of directors’ conflicts committee, which consists entirely of independent directors.

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

The following discussion and analysis provides information we believe is relevant to understand our consolidated financial condition and results of operations. This discussion should be read in conjunction with our unaudited consolidated financial statements and accompanying notes contained in this report together with our 2022 annual report. The results of operations for the three and six months ended June 30, 2023, are not necessarily indicative of the results we expect for the full year.

Cautionary Information Regarding Forward-Looking Statements

Forward-looking statements are made in accordance with safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations that involve a number of risks and uncertainties and do not relate strictly to historical or current facts, but rather to plans and objectives for future operations. These statements may be identified by words such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “outlook,” “plan,” “predict,” “may,” “could,” “should,” “will” and similar expressions, as well as statements regarding future operating or financial performance or guidance, business strategy, environment, key trends and benefits of actual or planned acquisitions.

Factors that could cause actual results to differ from those expressed or implied in the forward-looking statements include those discussed in Part I, Item 1A, “Risk Factors,” of our 2022 annual report and in Part II, Item 1A, “Risk Factors,” in this report, or incorporated by reference. Specifically, we may experience fluctuations in future operating results due to changes in general economic, market or business conditions; foreign imports of ethanol; fluctuations in demand for ethanol and other fuels; risks of accidents or other unscheduled shutdowns affecting our assets, including mechanical breakdown of equipment or infrastructure; risks associated with changes to federal policy or regulation; ability to comply with changing government usage mandates and regulations affecting the ethanol industry; price, availability and acceptance of alternative fuels and alternative fuel vehicles, and laws mandating such fuels or vehicles; changes in operational costs at our facilities and for our railcars; failure to realize the benefits projected for capital projects; competition; inability to successfully implement growth strategies; the supply of corn and other feedstocks; unusual or severe weather conditions and natural disasters; ability and willingness of parties with whom we have material relationships, including Green Plains Trade, to fulfill their obligations; labor and material shortages; changes in the availability of unsecured credit and changes affecting the credit markets in general; disruption caused by health epidemics, such as the COVID-19 outbreak; and other risk factors detailed in our reports filed with the SEC.

We believe our expectations regarding future events are based on reasonable assumptions. However, these assumptions may not be accurate or account for all risks and uncertainties. Consequently, forward-looking statements are not guaranteed. Actual results may vary materially from those expressed or implied in our forward-looking statements. In addition, we are not obligated nor do we intend to update our forward-looking statements as a result of new information unless it is required by applicable securities laws. We caution investors not to place undue reliance on forward-looking statements, which represent management’s views as of the date of this report or documents incorporated by reference.

Overview

Green Plains Partners provides fuel storage and transportation services by owning, operating, developing and acquiring ethanol and fuel storage facilities, terminals, transportation assets and other related assets and businesses. We are Green Plains’ primary downstream logistics provider and generate a substantial portion of our revenues under fee-based commercial agreements with Green Plains Trade for receiving, storing, transferring and transporting ethanol and other fuels, which are supported by minimum volume or take-or-pay capacity commitments.

Recent Developments

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of the partnership's unitholders. There can be no assurance that the parties will reach agreement on the terms of a transaction, that a definitive agreement will be executed or that a transaction will be approved or consummated.

Results of Operations

During the second quarter of 2023, our parent maintained an average utilization rate of approximately 81.5% of capacity. Ethanol throughput was 196.1 mmg, which was below the contracted minimum volume commitment per quarter. As a result, the Partnership charged Green Plains Trade $1.2 million related to the minimum volume commitment deficiency for the quarter, resulting in a credit to be applied against excess volumes in future periods. The cumulative balance of minimum volume deficiency credits available to Green Plains Trade is $1.7 million as of June 30, 2023. These credits expire, if unused, as follows:

•$0.5 million, expiring on March 31, 2024; and

•$1.2 million, expiring on June 30, 2024.

Our parent’s operating strategy is to transform to a value-added agricultural technology company creating sustainable high value ingredients. Depending on the margin environment, our parent may exercise operational discretion that results in reductions in throughput volumes. It is possible that throughput volumes could be below minimum volume commitments in the future, depending on various factors that drive each of our parent's biorefineries variable contribution margin, including future driving and gasoline demand for the industry and the availability and price of renewable feedstocks. As part of this strategy, our parent is deploying MSC™ technology, to help meet growing global demand for protein feed ingredients and low-carbon renewable corn oil, which could lead to our parent having more consistent margins and operating throughput rates over time.

Adjusted EBITDA and Distributable Cash Flow

Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization excluding the amortization of right-of-use assets, plus adjustments for transaction costs related to acquisitions or financing transactions, unit-based compensation expense, net gains or losses on asset sales, and our proportional share of EBITDA adjustments of our equity method investee.

Distributable cash flow is defined as adjusted EBITDA less interest paid or payable, net of interest income received, income taxes paid or payable, maintenance capital expenditures, which are defined under our partnership agreement as cash expenditures (including expenditures for the construction or development of new capital assets or the replacement, improvement or expansion of existing capital assets) made to maintain our operating capacity or operating income, and our proportional share of distributable cash flow adjustments of our equity method investee.

Adjusted EBITDA and distributable cash flow are supplemental financial measures that we use to assess our financial performance. We believe their presentation provides useful information to investors in assessing our financial condition and results of operations. However, these presentations are not made in accordance with GAAP. The GAAP measure most directly comparable to adjusted EBITDA and distributable cash flow is net income. Since adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definitions of adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, diminishing their utility. Adjusted EBITDA and distributable cash flow should not be considered in isolation or as alternatives to net income or any other measure of financial performance presented in accordance with GAAP to analyze our financial performance and operating results.

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The following table presents reconciliations of net income to adjusted EBITDA and to distributable cash flow, for the three and six months ended June 30, 2023 and 2022 (unaudited, dollars in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Reconciliations to Non-GAAP Financial Measures:
Net income	$	9,346		$	10,519		$	19,258		$	20,869
Interest expense, net	1,672			1,384			3,444			2,623
Income tax expense	293			39			194			77
Depreciation and amortization	828			823			1,644			1,721
Transaction costs	455			—			455			—
Unit-based compensation expense	60			60			119			119
Proportional share of EBITDA adjustments of equity method investee (1)	45			45			90			90
Adjusted EBITDA	12,699			12,870			25,204			25,499
Interest paid or payable, net of interest received	(1,672)			(1,384)			(3,444)			(2,623)
Income taxes paid or payable	(293)			(39)			(194)			(77)
Maintenance capital expenditures	(4)			(126)			(84)			(258)
Distributable cash flow (2)	$	10,730		$	11,321		$	21,482		$	22,541

Distributions declared (3)	$	10,802		$	10,666		$	21,595		$	21,213

Coverage ratio	0.99		x	1.06		x	0.99		x	1.06		x

(1) Represents our proportional share of depreciation and amortization of our equity method investee.

(2) Distributable cash flow does not include adjustments for the principal payment on the term loan of $1.5 million for the three and six months ended June 30, 2023. Distributable cash flow does not include adjustments for the principal payment on the term loan of $1.0 million for the six months ended June 30, 2022.

(3) Represents distributions declared for the applicable period and paid in the subsequent quarter.

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Selected Financial Information and Operating Data

The following discussion reflects the results of the partnership for the three and six months ended June 30, 2023 and 2022.

Selected financial information for the three and six months ended June 30, 2023 and 2022, is as follows (unaudited, in thousands):


	Three Months Ended June 30,					Six Months Ended June 30,
	2023		2022		% Var.	2023		2022		% Var.
Revenues
Storage and throughput services	$	11,565	$	11,570	—%	$	23,129	$	23,128	—%
Railcar transportation services	6,369		5,119		24.4	12,678		9,771		29.8
Terminal services	2,173		2,036		6.7	4,250		4,120		3.2
Trucking and other	416		929		(55.2)	1,241		1,735		(28.5)
Total revenues	20,523		19,654		4.4	41,298		38,754		6.6
Operating expenses
Operations and maintenance (excluding depreciation and amortization reflected below)	7,070		6,160		14.8	14,323		11,725		22.2
General and administrative	1,625		925		75.7	2,855		2,110		35.3
Depreciation and amortization	828		823		0.6	1,644		1,721		(4.5)
Total operating expenses	9,523		7,908		20.4	18,822		15,556		21.0
Operating income	$	11,000	$	11,746	(6.4)%	$	22,476	$	23,198	(3.1)%

Selected operating data for the three and six months ended June 30, 2023 and 2022, is as follows (unaudited):


	Three Months Ended June 30,			Six Months Ended June 30,
	2023	2022	% Var.	2023	2022	% Var.
Product volumes (mmg)
Storage and throughput services	196.1	232.5	(15.7)%	404.2	429.7	(5.9)%

Terminal services
Affiliate	30.1	27.7	8.7	56.4	55.0	2.5
Non-affiliate	25.9	23.7	9.3	50.5	45.2	11.7
	56.0	51.4	8.9	106.9	100.2	6.7

Railcar capacity billed (daily avg.)	70.7	74.5	(5.1)	71.7	72.1	(0.6)

Three Months Ended June 30, 2023, Compared with the Three Months Ended June 30, 2022

Consolidated revenues for the three months ended June 30, 2023 increased $0.9 million compared with the same period for 2022. Storage and throughput services revenue and terminal services revenue were consistent with the prior year. Railcar transportation services revenue increased $1.3 million primarily due to an increase in transportation service fees charged as a result of upgrading our leased railcar fleet to comply with DOT 117 regulations. Trucking and other revenue decreased $0.5 million compared to the prior year primarily due to the discontinuance of trucking operations that occurred during the period.

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Operations and maintenance expenses increased $0.9 million for the three months ended June 30, 2023, compared with the same period for 2022 primarily due to higher railcar lease expense as a result of upgrading our leased railcar fleet to comply with DOT 117 regulations.

General and administrative expenses increased $0.7 million for the three months ended June 30, 2023 compared with the same period for 2022 primarily due to $0.5 million in transaction costs related to the proposal from our parent to acquire all outstanding units of the partnership.

Distributable cash flow decreased $0.6 million for the three months ended June 30, 2023, compared with the same period for 2022, primarily associated with a $1.2 million decrease in net income offset by $0.5 million in transaction costs.

Six Months Ended June 30, 2023, Compared with the Six Months Ended June 30, 2022

Consolidated revenues increased $2.5 million for the six months ended June 30, 2023, compared with the same period for 2022. Storage and throughput services revenue and terminal services revenue were consistent with the prior year. Railcar transportation services revenue increased $2.9 million primarily due to an increase in transportation service fees charged as a result of upgrading our leased railcar fleet to comply with DOT 117 regulations. Trucking and other revenue decreased $0.5 million primarily due to the discontinuance of trucking operations that occurred during the period.

Operations and maintenance expenses increased $2.6 million for the six months ended June 30, 2023, compared with the same period for 2022 primarily due to higher railcar lease expense as a result of upgrading our leased railcar fleet to comply with DOT 117 regulations.

General and administrative expenses increased $0.7 million for the six months ended June 30, 2023 compared with the same period for 2022 primarily due to $0.5 million in transaction costs related to the proposal from our parent to acquire all outstanding units of the partnership.

Distributable cash flow decreased $1.1 million for the six months ended June 30, 2023, compared with the same period for 2022, associated with a $1.6 million decrease in net income offset by $0.5 million in transaction costs.

Industry Factors Affecting our Results of Operations

U.S. Ethanol Supply and Demand

According to the EIA, domestic ethanol production averaged 1.01 million barrels per day during the second quarter of 2023, which was consistent with same

SEC Form 10-Q filed by Green Plains Partners LP