MIC MacQuarie Infrastructure Holdings, LLC - 10-K

ITEM 1A. RISK FACTORS

An investment in our units involves risks. The occurrence of any of these risks could have a significant or material adverse effect on our results of operations, cash flows, or financial condition and could cause a corresponding decline in the market price of our units.

Strategic and Economic Risks

If the pending Merger of the Company is not completed, our strategy as an ongoing business will require growth capital expenditures and a failure to make such capital expenditures could have a material adverse effect on our business, financial condition, operating results, and prospects.

If the pending Merger of the Company is not successful, and an alternate transaction is not pursued and completed, our growth will continue to depend on the prudent deployment of capital. Our ability to deploy capital depends on a number of variables including: (i) commodity prices; (ii) customer demand; (iii) competitive and economic conditions; (iv) availability of suitable land on which to operate; (v) ability to obtain required regulatory approvals; and (vi) availability of capital. Our sources of growth capital include retained capital, debt or equity issuances, and/or proceeds from the sales of assets. We may not generate sufficient cash or be able to arrange additional financing to fund our future growth needs on terms acceptable to us or at all. Our ability to arrange financing, if needed, will depend on, among other factors, our credit ratings, leverage, financial and operating performance, general economic, financial, and regulatory conditions, and prevailing capital market conditions. Many of these factors are beyond our control. If we incur significant additional indebtedness, our borrowing costs and our ability to raise capital may be impacted by our then credit rating which could be adversely affected if we do not continue to generate sufficient cash from our operations. If we fail to deploy growth capital as planned, we may be unable to, among other things, expand to meet competitive challenges; take advantage of strategic growth opportunities; upgrade our facilities and systems; and create equity holder value. Any or all of these could have a material adverse effect on our financial condition, operating results, tax positions, and prospects.

The pending Merger is contingent on a number of conditions and may not be completed timely or at all.

The consummation of the Merger is subject to various conditions, including, among others, receipt of regulatory approvals. If the Merger is not completed for any reason, the price of our common units may decline and our business, financial condition and results of operations may be impacted, including: to the extent that the market price of our common units reflects assumptions that the Merger will be completed; based on the significant expenses, such as legal and financial advisory services, which generally must be paid regardless of whether the Merger is completed; and due to the risk that we may be unable to enter into an alternative transaction for the sale of our business on terms as favorable as the Merger or at all. We may receive a termination fee under certain circumstances, but such fee may not adequately compensate us for our losses if the Merger is not completed. In addition, we may be required to pay a termination fee to the purchaser if the Merger Agreement is terminated under certain circumstances.

While the Merger is pending, the Company will be subject to risks and uncertainties and contractual restrictions that could disrupt our business or negatively impact our common unit price.

The announcement and pendency of the Merger could cause disruptions and create uncertainty surrounding our business and affect relationships with customers, suppliers and business partners. These uncertainties could cause customers, suppliers and others that deal with us to seek to change existing business relationships. In addition, employee retention could be negatively impacted during the pendency of the Merger. Pending completion of the Merger, the attention of our management may be focused on the Merger and related matters, and diverted from other opportunities that might benefit us. In addition, pursuant to the Merger Agreement, prior to closing we have agreed to conduct our business in the ordinary course and not to undertake certain actions without the written consent of the purchaser. These restrictions could prevent us from pursuing certain beneficial business opportunities. All of these uncertainties could adversely affect our business, financial condition and results of operations, and could negatively impact the market price of our common units.

As a result of prior sales of operating businesses we have fewer assets and the size of our Company may be sub-scale and more susceptible to adverse events.

Since the completion of the AA Transaction, the size of our Company may be sub-scale for a public company owner of a part regulated gas utility/part liquefied petroleum gas distribution business, and we may have limited access to financing through the capital markets due to our size. We are subject to concentration of risks. We have substantially fewer assets and may experience significant decreases in earnings and cash flow and increases in operating costs or other expenses. We continue to be a public company with ongoing costs associated with public company operations, which are a greater percentage of our revenues, and we are unlikely to recover all of those expenses from rate payers of our regulated utility, Hawaii Gas. The market price of our common units has significantly decreased, and our common units may be more susceptible to market fluctuations.

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Non-U.S. holders of common units may be subject to U.S. federal income tax and U.S. withholding tax upon their participation in the Merger .

In general, under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") provisions of the United States Internal Revenue Code of 1986, as amended, non-U.S. persons are subject to U.S. federal income tax in the same manner as U.S. persons on any gain realized on the disposition of an interest, other than an interest solely as a creditor, in U.S. real property. An interest in U.S. real property includes stock in a U.S. corporation (except for certain stock of publicly traded U.S. corporations) if, with respect to a non-U.S. holder, interests in U.S. real property constituted 50% or more by value of the sum of the corporation’s assets used in a trade or business, its U.S. real property interests and its interests in real property located outside the United States at any point in time during the shorter of the period during which such non-U.S. holder held such stock or the 5-year period ending on the date of the disposition of such interest (a "USRPHC").

It is unclear if the Company's subsidiary holding our operations in Hawaii will be treated as a USRPHC for U.S. federal income tax purposes as of the date of the Merger. If such subsidiary were treated as a USRPHC as of such date, the Merger could have certain negative tax consequences for non-U.S. holders of common units, including causing such non-U.S. holders to be subject to U.S. federal income tax and related withholding under the FIRPTA provisions of the Code on any gain realized by such holder on the Merger.

If you are a non-U.S. holder, you are urged to consult your own tax advisors with regard to the U.S. federal income tax consequences to you (as well as the effects of state, local and non-U.S. tax laws) resulting from participation in the Merger.

COVID-19 could have a material adverse effect on our results of operations, financial condition, liquidity, capital expenditures, and the trading value of our securities .

COVID-19 has negatively affected the global economy, disrupted financial markets, disrupted supply chains, significantly reduced travel, and interrupted business activity. Federal, state, and local governments have implemented mitigation measures including travel restrictions, stay-at-home orders, border closings, restrictions on public gatherings, social distancing, shelter-in-place restrictions, and various limitations on business operations. Although our business is considered an essential service, these government actions have adversely affected the ability of our employees, customers, suppliers, and other business partners to conduct business activities, and could do so for an extended period of time. This could have a material adverse impact on our results of operations, financial condition, liquidity, capital expenditures, and the trading value of our securities. Risks include:

• Impact on demand for our services and supply chain disruption. Tourism in Hawaii has declined, resulting in the full or partial closure of hotels and restaurants, which has reduced the consumption of gas. We cannot predict whether the pandemic will permanently change our customers' behavior or whether such changes could materially impact our businesses. Hawaii Gas’ SNG plant is subject to minimum operating thresholds, and if demand declines such that the SNG plant is not producing the requisite daily volume of SNG to operate safely, the plant will be shut down until minimum production thresholds can again be met. While Hawaii Gas has developed and tested alternatives for the delivery of gas to its utility customers in the event production at the SNG plant is stopped, there can be no assurances that these alternatives would operate as designed or be as effective and efficient from an operating or financial performance perspective as operating the SNG plant. Additionally, the reliability and pricing of the feedstock supply for the SNG plant could be adversely impacted by COVID-19, potentially resulting in higher cost of gas which would be passed through to customers. In addition, disruptions in the supply chain driven by the pandemic could result in a delay or an inability to obtain products, supplies, and services needed in our operations.

• Impact on employees and on cybersecurity. Many of our personnel are working remotely, and many employees at our facilities are abiding by social distancing procedures. In addition, our operations may be negatively affected by employee illness and/or quarantines. Further, our management teams have been required to devote large amounts of time and resources to mitigate the impact of the pandemic, thereby diverting attention from other priorities. In addition, the large scale remote working environment increases the risks posed by information technology systems breaches.

• Impact on liquidity and financial metrics . The ongoing effect of the pandemic on our business could affect our liquidity position, our cost of and ability to access funds from financial institutions and the capital markets and could cause a deterioration in our financial metrics or the business environment that could make it more difficult to meet the financial covenants in our credit facilities.

• Impact on capital expenditures and costs . We have deferred and may defer certain non-essential capital expenditures, including certain growth capital expenditures. If we are unable to deploy growth capital as planned, our long-term development prospects and ability to meet competitive challenges could be compromised. We are also incurring additional costs associated with the Company’s pandemic response measures.

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• Impact on our customers' ability to pay . The pandemic's impact on the financial condition and operating results of our customers may result in delayed payments and uncollectible accounts receivable, and could also result in the bankruptcy, insolvency, or cessation of the business of certain of our customers.

• Impact on trading and asset value. COVID-19 has resulted in volatile equity markets and meaningfully lower stock prices for many companies, including ours, and may do so in the future.

The effects of COVID-19 may continue for an extended period, and the ultimate impact of the pandemic will depend on future developments which are highly uncertain and cannot be predicted including, without limitation, the duration and severity of the pandemic, the duration of governmental mitigation measures, the effectiveness of the actions taken to contain and treat the disease, and the length of time it takes for normal economic and operating conditions to resume. The situation surrounding COVID-19 remains fluid and the potential for material effects on our operating results, financial condition, and liquidity increases the longer the pandemic impacts activity levels in the U.S. and globally.

Fluctuations in economic, equity, and credit market conditions may have a material adverse effect on our results of operations, our liquidity, or our ability to obtain credit on acceptable terms.

Should economic, equity, and credit market conditions, collectively or individually, become disrupted, our ability to raise equity or obtain capital, to repay or refinance credit facilities at maturity, make significant capital expenditures, to pay, maintain or increase a dividend or fund growth may be costly and/or impaired. Our access to debt financing in particular will depend on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to our industry, our credit history and credit capacity, as well as the historical performance of our business and lender perceptions of financial prospects. If we are unable to obtain debt financing, particularly as significant credit facilities mature, our internal sources of liquidity may not be sufficient.

Economic conditions may also increase our counterparty risk, and should conditions deteriorate, we would expect to see increases in counterparty defaults and/or bankruptcies, which could result in an increase in bad debt expense and may cause our operating results to decline.

Volatility in the financial markets may make projections regarding future obligations under pension plans difficult. We maintain defined benefit retirement plans. Future funding obligations under those plans depend in large part on the future performance of plan assets and the mix of investment. These defined benefit plans hold a significant amount of equity and fixed income securities. If the market values of these securities decline or if returns decline, our pension expense and cash funding requirements would increase and, as a result, could materially adversely affect the results and liquidity of the business and our Company.

A tight labor market could increase the cost of operating or make it more difficult to recruit and retain those with appropriate skillsets. In a tight labor market, it may take longer to identify and hire additional employees and such delays could, in turn, increase fees paid to recruiting firms or the amount of overtime paid to existing employees. A tight labor market may also drive the cost of retaining employees with appropriate skillsets higher to the extent we face increased competition from employers willing or able to pay higher wages.

The documents governing our debt impose significant operating and financial restrictions, which may prevent us from pursuing certain business opportunities and taking certain actions.

Our debt agreements may impose operational and financial restrictions on us. These restrictions could limit or prohibit, among other things, our ability to:

• incur additional indebtedness;

• cause operating companies to make distributions to the holding company, redeem subordinated debt or make other restricted payments;

• make certain investments or acquisitions;

• grant or permit certain liens on our assets;

• enter into certain transactions with affiliates;

• merge, consolidate, or transfer substantially all of our assets; and

• transfer or sell assets, including capital stock of our subsidiaries.

These covenants could adversely affect our ability to finance our future operations or capital needs, withstand a future downturn in our business or the economy in general, engage in business activities, including future opportunities that may be in our interest, and plan for or react to market conditions or otherwise execute our business strategies. If a default occurs, the relevant lenders or holders of such indebtedness could elect to declare the indebtedness, together with accrued interest and other

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fees, to be immediately due and payable and proceed against any collateral securing that indebtedness. There is no guarantee that we would be able to satisfy our obligations if any of our indebtedness is accelerated.

If borrowing costs increase or if debt terms become more restrictive, the cost of refinancing and servicing our debt will increase, reducing our profitability, and ability to freely deploy capital. We and any of our existing or future subsidiaries may incur substantially more indebtedness. This could further exacerbate the risks to our business as described herein.

Most of our indebtedness matures within two years. Refinancing this debt may result in substantially higher interest rates or credit margins or substantially more restrictive covenants. Any of these could limit our operational and financial flexibility, limit or reduce our ability to pay dividends, and/or reduce distributions to our holding company. We cannot provide assurance that we will be willing or able to repay the debt if required.

If we are unsuccessful in concluding the pending Merger, or an alternate transaction, and continue to invest in and grow our business, we may incur substantial additional indebtedness. If new debt is added to our or any of our subsidiaries’ current debt levels, the related risks that we now face could be exacerbated.

The interest rates under our credit facilities may be adjusted for the phase-out of LIBOR.

LIBOR, the London Interbank Offered Rate, is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rates on loans globally. We generally use LIBOR as a reference rate to calculate interest rates under our credit facilities. In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR, and in early 2021 announced USD LIBOR will be phased out by June 30, 2023. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index, the Secured Overnight Financing Rate ("SOFR"), calculated using short-term repurchase agreements backed by Treasury securities. SOFR may be more volatile than LIBOR. If LIBOR ceases to exist, we may need to renegotiate our credit agreements to replace LIBOR, and the interest rates under certain of our credit agreements may change. The new rates may not be as favorable to us as those currently in effect. We may also find it desirable to engage in more frequent interest rate hedging transactions.

Risks Related to Our Business Operations

The operations of our business are subject to a variety of competitive pressures and the actions of competitors could have a material adverse effect on operating results.

Energy resources including diesel, solar, geo-thermal, and wind, may be substituted for gas in certain end-use applications, particularly if the price of gas increases relative to these resources, whether due to higher costs or otherwise. Customers could elect to meet their energy needs through any or all of these alternate resources as a result of higher gas prices, lower costs of alternative generation resources, or convenience. This could have an adverse effect on our results of operations, cash flows, and financial condition.

Our business relies on its SNG plant, including its transmission pipeline, for a significant portion of its sales. Disruptions at that facility could adversely affect our ability to serve customers.

Disruptions at the SNG plant resulting from mechanical or operational issues or power failures could affect our ability to produce SNG. Most of the utility sales on Oahu are of SNG and all SNG is produced at the Oahu plant. We have a back-up system in place, however, disruptions to both the primary and the back-up systems could have a significant adverse effect on our results of operations, cash flows, and financial condition.

Our business obtains its feedstock for its SNG plant from a refinery located on Oahu and sources its LPG supply from an off-island distributor. Supply disruptions may have an adverse effect on the operations of the business.

The extended unavailability of the refinery that supplies SNG feedstock, or the inability to purchase LPG from off-island sources, could adversely affect operations. Our business has a limited ability to store LPG, and any disruption in supply may cause a depletion of LPG stocks. Disruptions in the supply of SNG or LPG, if occurring for an extended period, could materially adversely impact the business’ results of operations, cash flows, and financial condition.

Our business is subject to risks associated with volatility in the Hawaii economy.

Hawaii’s economy and demand for our business’ products are heavily influenced by economic conditions in the U.S. and Asia and their impact on tourism, including the impact of post COVID-19 demand for travel, as well as by government spending. If the decline in the tourism industry in Hawaii is sustained, or there are changes in travel behavior post COVID-19, or the local economy deteriorates, the amount of gas we sell could be negatively affected by business closures or reduced consumption, which could adversely impact the business’ financial performance. Additionally, slow, or no economic growth in Hawaii could adversely impact the amount of gas we sell to new and existing customers and reduce the level of new

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commercial and residential construction. A reduction in visitors to Hawaii or government activity in Hawaii, particularly military activity could also have a negative impact on our business.

Reductions in U.S. military spending could result in a reduction in demand for gas in Hawaii.

The U.S. military has a significant presence in Hawaii and is a substantial contributor to its economy. To the extent that federal spending cuts, including voluntary or mandatory cuts in U.S. military spending result in a reduced military presence in Hawaii, such reductions could reduce the demand for gas and new construction in Hawaii.

Because of its geographic location, Hawaii, and in turn our business, are subject to earthquakes, volcanos, and certain weather risks that could materially disrupt operations.

Hawaii is subject to earthquakes, volcanic activity, and certain weather risks, such as hurricanes, floods, heavy and sustained rains, and tidal waves that could materially disrupt operations. Because our properties, such as our SNG plant, SNG transmission line and several storage facilities, are close to the ocean, weather-related disruptions to operations are possible. In addition, earthquakes and volcanic activity may cause disruptions. These events could damage our assets or could result in wide-spread damage to our customers, thereby reducing the amount of gas sold and, to the extent such damages are not covered by insurance, adversely impact our results of operations, cash flows, and financial condition.

Fluctuations in commodity prices could adversely impact revenue, cost of services/goods sold, and gross margin of our business.

Our revenue is generated primarily from the re-sale of a commodity. LPG, LNG, and feedstock for the SNG plant are commodities and changes in global supply of and demand for these products can have a significant impact on costs. We have no control over commodity prices and, to the extent that these prices cannot be hedged or passed on to customers, our results of operations, cash flows, and financial condition could be adversely affected.

Depending on the terms of our contracts with suppliers, as well as the extent and success of our use of financial instruments to reduce our exposure related to volatility in the cost of LPG, changes in the market price of fuel supplies could create payment obligations that expose our business to increased liquidity risk.

We enter into commodity hedge contracts to hedge against financial risks of commodity price fluctuations of LPG purchases. Depending on the terms of the commodity hedge contracts, as well as our ability to forecast sales volumes, changes in the expected volumes sold and changes in the market price of the commodity hedge contracts could create payment obligations that adversely effect our results of operations, cash flows, and financial conditions.

Our business experiences a measure of seasonality and such seasonality may cause fluctuations in our results of operations.

Our business may generate incrementally more cash during the peak tourism periods in Hawaii between mid-December and the end of March and from mid-June through mid-September. Annualization of peak period performance could result in an overly optimistic estimate of the value of our common units.

We seek to increase our use of renewable feedstocks and to increase the percentage of RNG distributed to our customers. This initiative exposes us to new technology, supply, counterparty, and regulatory risks that could impact the performance of our business.

We are pursuing a range of renewable resources that may provide pipeline quality gas in scalable quantities. These initiatives include the current contract for recovery of biogas from the Honouliuli wastewater treatment plant and ongoing discussions with operators of additional wastewater treatment plants and landfills, and with biomass producers. Blending of RNG with existing fuels and integrating RNG into the pipeline network may present technical challenges resulting in project delays, cost overruns or pipeline disruptions. Use of RNG may also expose us to the risk of supply fluctuations due to the variability in performance of processes such as anaerobic digestion. These technical and supply risks may impact the financial performance of our business.

Energy efficiency and technology advances, as well as conservation efforts and changes in the sources and types of energy produced in the U.S. may result in reduced demand for our products and services.

Conservation and technological advances including installation of improved insulation, the development of more efficient heating and cooling devices and advances in energy generation technology, may reduce demand for certain of our products and services. During periods of high energy commodity costs, the prices of certain of our products and services generally increase, which may also lead to increased conservation. In addition, federal and/or state regulation may require mandatory conservation measures, which could also reduce demand.

The discovery and development of new and unconventional energy sources in the U.S. may drive changes in related energy product logistics chains. The location and exploitation of these new energy sources could result in the dislocation of certain portions of our business. Changes in energy supply chain logistics or trends toward increased conservation could reduce demand for our products and services and could adversely affect our results of operations, cash flows, and financial condition.

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Our business is subject to environmental risks that may impact our future profitability.

Our business is subject to numerous statutes, rules and regulations relating to environmental protection and are exposed to various environmental risk and hazards, including those associated with the refining, storage, and handling of combustible products.

Materialization of these risks could result in substantial losses including personal injury, loss of life, damage or destruction of property and equipment and environmental damage. Any losses we face could be greater than insurance levels and could have an adverse effect on our financial results. We also could be subject to fines and penalties for violation of applicable environmental regulations, which could be substantial. In addition, disruptions to physical assets could reduce our ability to serve customers and adversely affect future sales and cash flows.

Failure to comply with regulations or other claims may interrupt operations and result in civil or criminal penalties, significant unexpected compliance costs and liabilities that could adversely affect the profitability of our business. These rules and regulations are subject to change and compliance with any changes could result in a restriction of the activities, significant capital expenditures, and/or increased ongoing operating costs.

We own or lease properties that have been subject to environmental contamination in the past and could require remediation for which we are or may be liable. The remediation could cost more than anticipated or could be incurred earlier than anticipated, or both. In addition, the business may discover additional environmental contamination that may require remediation at significant cost. Further, the past contamination of the properties, including by former owners or operators of such properties, could result in remediation obligations, personal injury, property damage, environmental damage, or similar claims by third parties.

We may also be required to address other prior or future environmental contamination, including soil and groundwater contamination that results from the spillage of fuel, hazardous materials, or other pollutants. Under various federal, state, and local environmental statutes, rules and regulations, a current or previous owner or operator of real property may be liable for noncompliance with applicable environmental and health and safety requirements and for the costs of investigation, monitoring, removal or remediation of hazardous materials. These laws often impose liability, whether the current owner or operator knew of, or was responsible for, the presence of hazardous materials. Persons who arrange for the disposal or treatment of hazardous materials may also be liable for the costs of removal or remediation of those materials at the disposal or treatment facility, whether or not that facility is or ever was owned or operated by that person and whether or not the original disposal or treatment activity accorded with all regulatory requirements. The presence of hazardous materials on a property could result in personal injury, loss of life, damage or destruction of property and equipment, environmental damage and/or claims by third parties that could have a material adverse effect on our results of operations, cash flows, and financial condition.

Unfavorable publicity or public perception of the industry in which we operate could adversely impact our operating results and our reputation.

Negative publicity, public, or investor perception of the energy-related industry in which we operate, including through media coverage of environmental contamination and climate change concerns, could reduce demand for our services and harm our reputation. Any reduction in demand for the services we provide or damage to our reputation could have a material adverse effect on our unit price, results of operations, cash flows, financial condition, and business prospects.

We are dependent on certain key personnel, and the loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our business, results of operations, cash flows, and financial condition.

We rely on an existing management team for day-to-day operations. Consequently, our operational success, as well as the completion of our pending Merger, will depend on the continued efforts of the management team, who have extensive experience in the day-to-day operations of our business. The loss of key personnel, or the inability to retain or replace qualified employees, could have an adverse effect on our business, results of operations, cash flows, and financial condition.

Because of its geographic location and the unique economy of Hawaii, our business is subject to challenges in hiring and maintaining staff with specialized skill sets.

The changing nature of the Hawaii energy complex has had an impact on the business' staffing requirements. Volatility in feedstock prices, together with the impact of the State of Hawaii’s goals to reduce dependency on imported petroleum, requires staff with specialized knowledge of the energy sector. Because the resident labor pool in Hawaii is both small and oriented mainly to Hawaii’s basic industries, it is difficult to find individuals with these specialized skill sets. Unemployment rates in Hawaii are traditionally lower than those in the U.S. Mainland. Moreover, relocation to Hawaii is costly and often requires employees to make cultural and family adjustments not normally required in a relocation. The inability to source and retain staff with appropriate skill sets could adversely impact the performance of our business. In addition, dependence on skilled labor trades could result in constraints on growth and profitability related to competition for a limited labor pool.

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Prolonged work stoppages by employees who are subject to a collective bargaining agreement could adversely affect our financial position.

As of December 31, 2021, approximately 61% of our employees were covered by collective bargaining agreements. Although we believe our employee relations to be generally good, a prolonged work stoppage, strike or other slowdown at any facility with organized labor could significantly disrupt our operations and could have a material adverse effect on our business, results of operations, cash flows, or financial condition. In addition, we cannot ensure that upon the expiration of existing collective bargaining agreements, new agreements will be reached without union action or that any such new agreements will be on terms satisfactory to us. Any renegotiation of labor agreements could significantly increase our costs for wages, healthcare, and other benefits.

Our operations on the islands of Hawaii, Maui and Kauai rely on LPG that is transported from Oahu to those islands by Jones Act qualified barges and by non-Jones Act vessels from off-island ports. Disruptions to service by those vessels could adversely affect the financial performance of our business.

The Jones Act requires that all goods transported by water between U.S. ports be carried in U.S.-flag ships and that they meet certain other requirements. We have time charter agreements for the only two Jones Act qualified barges available in Hawaii capable of carrying large amounts of LPG. If the barges are unable to transport LPG from Oahu and the business is not able to secure off-island sources of LPG or obtain an exemption to the Jones Act that would permit importation of a sufficient quantity of LPG from the U.S. mainland, we could be adversely affected. If the barges require refurbishment or repair at a greater frequency than forecast, cash outflows for capital costs could adversely impact our results of operations, cash flows, and financial condition.

Generation underperformance at individual projects within our business could lead to financial penalties or contract terminations under existing off-take agreements.

Certain distributed generation projects have minimum production terms included in their respective power purchase agreements. These minimum production levels are specified in each respective contract. Failure to meet these minimum production levels, could result in liquidated damages, other financial penalties, or contract termination which could negatively impact our results of operations, cash flows, and financial condition.

Certain projects depend on electric interconnection and transmission facilities that we do not own or control and that are potentially subject to transmission constraints. If these facilities fail to provide adequate transmission capacity, the projects may be restricted in their ability to deliver electricity to customers.

Our electricity generation facilities depend on grid interconnection and transmission facilities owned and operated by others to deliver the power they produce. Certain off-taker contracts include limited provisions allowing for occasional curtailment of electricity generation due to the limitations of the electricity transmission system. Any constraints on, or the failure of, interconnections or transmission facilities could prevent us from selling power and could adversely affect our results of operations, cash flows, and financial condition.

Our business depends on counterparties, including operation and maintenance ("O&M") providers and power purchasers, performing in accordance with their agreements. If they fail to so perform, our business could incur losses of revenue or additional expenses and business disruptions.

Counterparties to long-term agreements with our business may not meet their obligations in accordance with such agreements. Should they fail to perform for any reason, we may be required to seek replacement service providers and customers. The failure of any of the parties to perform in accordance with these agreements could adversely affect our results of operations, cash flows, and financial condition.

Development and investment in our business involves various construction, operational, and regulatory risks that could materially adversely affect our financial results.

The development, construction, operation, and maintenance of our business involve various risks including, mechanical and structural failure, accidents, labor issues, or the failure of technology to perform as anticipated. Events outside our control, such as economic developments, changes in the prices of inputs, or governmental policy changes, could materially reduce the revenues generated or increase the expenses of constructing, operating or maintaining our business. Degradation of the performance of our infrastructure installations may reduce our revenues. Unanticipated capital expenditures associated with maintaining, upgrading, or repairing our infrastructure installations may reduce our profitability. We may also choose or be required to decommission a project or other asset. The decommissioning process could be protracted and result in significant financial and/or regulatory obligations or other uncertainties.

Our business may also face construction risks, including, without limitation:

• labor disputes, work stoppages, or shortages of skilled labor;

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• shortages of fuels or materials;

• slower than projected construction progress and the unavailability or late delivery of necessary equipment;

• delays caused by or in obtaining the necessary regulatory approvals or permits;

• adverse weather conditions and unexpected construction conditions;

• accidents or the breakdown or failure of construction equipment or processes;

• difficulties in obtaining suitable or adequate financing; and

• catastrophic or force majeure events such as explosions, fires and terrorist activities, and other similar events beyond our control.

Such developments could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of construction activities once undertaken. Construction costs may exceed estimates for various reasons, including inaccurate engineering and planning, higher than anticipated labor and building material costs, and unanticipated problems with project start-up. Such unexpected increases may result in increased debt service costs and/or funds being insufficient to complete construction. New infrastructure installations under development may generate little or no cash flow through the date of completion of development and may experience operating deficits after the date of completion. In addition, market conditions may change during construction and make such development less attractive than at the time it was commenced. Any events of this nature could severely delay or prevent the completion of, or significantly increase the cost of, the construction. In addition, there are risks inherent in the construction work which may give rise to claims or demands against us from time to time. Delays in the completion of any project may result in lost revenues or increased expenses.

Warranties provided by our suppliers and contractors may be limited or insufficient to compensate our losses or may not cover the nature of our losses incurred.

We expect to benefit from various warranties, including product quality and performance warranties, provided by our suppliers and contractors. These suppliers and contractors, however, may file for bankruptcy, cease operations, or otherwise become unable or unwilling to fulfill their warranty obligations. Even if a supplier fulfills its warranty obligations, the warranty may not be enough to compensate us for our losses. In addition, the warranty period generally expires several years after the date that the equipment is delivered or commissioned and is subject to liability limits. Where damages are caused by defective products provided by our suppliers or construction services delivered by our contractors, our suppliers or contractors may be unable or unwilling to perform their warranty obligations as a result of their financial condition or otherwise, or if the warranty period has expired or a liability limit has been reached, there may be a reduction or loss of warranty protection for the affected projects, which could have a material adverse effect on our business’ results of operations, cash flows, and financial condition.

Security breaches or interruptions in our information technology systems, the loss or misappropriation of confidential information, or cyber-attacks on our facilities or those of third parties on which we rely, could materially adversely affect our business.

We rely on information technology networks and systems to process, transmit, and store electronic information used to operate our business, make operational decisions, and manage inventory. The information technology we use, as well as the information technology systems used by our Manager and third-party providers, could be vulnerable to security breach, damage or interruption from computer viruses, cyber-attacks, cyber terrorism, natural disasters, or telecommunications failures. If our technology systems, or those of our Manager or third-party providers, were to fail or be breached and we were unable to restore them in a timely manner, we may be unable to maintain critical business functions and/or confidential data could be compromised, we may incur substantial repair or replacement costs and/or our reputation could be damaged. The occurrence of any of these could have a material adverse effect on our business, results of operations, cash flows, and financial condition.

We transmit confidential credit card information by way of secure private retail networks and rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure transmission and storage of confidential information, such as customer credit card information. Any material failure by us to achieve or maintain compliance with the Payment Card Industry security requirements or to rectify a security issue may result in fines and the imposition of restrictions on our ability to accept credit cards as a form of payment. Any loss, disclosure or misappropriation of, or access to, customers’, employees’ or business partners’ information or other breach of our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may have a negative impact on our reputation, could result in loss of customers, could lead to regulatory enforcement actions against us, and could materially adversely affect our business, results of operations, cash flows, and financial condition.

If our information technology systems, or the information technology systems of third parties on which we rely, cease to function properly or our cybersecurity is breached, we could suffer disruptions to our normal operations including: (i) unauthorized access to our facilities or a cyber-attack on our automated systems, or the power grids or communications

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networks we use, that could cause operational disruption and potential environmental hazards; (ii) a cyber-attack on third-party transportation systems that could result in supply chain disruptions, or prevent our business from transporting product to our customers; and (iii) a cyber-attack on power generation facilities or refineries that could significantly impact prices and demand in the commodities markets. Any of these events could materially adversely affect our operating results. Additionally, certain cyber incidents may remain undetected for an extended period. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

Regulatory and Governmental Risks

Our utility operations are subject to regulation by the HPUC and actions by the HPUC or changes to the regulatory environment may constrain the operation or profitability of the business.

The HPUC regulates all public service companies operating in Hawaii. The HPUC prescribes rates, tariffs, charges and fees; determines the allowable rate of return on equity; issues guidelines concerning the general management of utility businesses and acts on requests for the acquisition, sale, disposition or other exchange of utility properties, including mergers and consolidations.

Any adverse decision by the HPUC concerning the level or method of determining utility rates, the items and amounts that may be included in the rate base, the returns on equity or rate base, the potential consequences of exceeding or not meeting such returns, or any prolonged delay in rendering a decision in a rate or other proceeding, could have an adverse effect on our business.

On November 25, 2020, the HPUC initiated further proceedings consistent with the Hawaii Supreme Court’s order remanding the rate case for consideration, among other things, of greenhouse gas emission occurring outside the state's borders. We cannot predict the timing or outcome of this proceeding, or the effects of that outcome on our business.

Natural gas has increasingly been the subject of political and public scrutiny, including a desire by some to further limit or eliminate reliance on natural gas as an energy source. The enactment of state legislation in 2018 requiring Hawaii to be carbon neutral by 2045 or a potential Renewable Portfolio Standard ("RPS") for utility gas usage or supply, similar to the one implemented for electric utility generation, could result in supply disruptions, increased energy costs to ratepayers or a negative impact on the future financial performance of our business.

The Hawaii legislature or municipal governments could impose a gas RPS, enact other restrictive legislation or impose changes to building codes, which may result in increased energy costs to the business and its customers (i.e. the cost of finding new renewable fuel supplies or developing new technologies could be prohibitive), in supply disruptions and/or in restriction of existing and future business. Similar impacts could result from the enactment of the carbon neutrality legislation in 2018.

Our income may be adversely affected if additional compliance costs are required as a result of new safety, health, and/or environmental regulation.

Our business is subject to federal, state, and local safety, health, and environmental laws and regulations. These laws and regulations affect many aspects of their operations and are modified frequently. There is a risk that our business may not be able to comply with some aspect of these laws and regulations, resulting in fines or penalties. Additionally, if new laws and regulations are adopted or if interpretations of existing laws and regulations change, we could be required to increase capital spending and/or incur increased operating expenses to comply. Because the regulatory environment changes frequently, we cannot predict when or how we may be affected by such changes. Emissions and other compliance testing technologies continue to improve, which may result in more stringent, targeted environmental regulations, and compliance obligations in the future, the costs of which could be material and adversely affect our results of operations, cash flows, and financial condition.

Our business is dependent on our contractual and regulatory relationships with government entities that may have significant leverage over us. Government entities may be influenced by political considerations to take actions adverse to us.

Our business generally is, and will continue to be, subject to substantial regulation by governmental agencies. In addition, our business relies on obtaining and maintaining government permits, licenses, concessions, leases, or contracts. Government entities, due to the wide-ranging scope of their authority, have significant leverage over us in their contractual and regulatory relationships with us that they may exercise in a manner that causes delays in the operation of our business or pursuit of our strategy, or increased administrative expense. Furthermore, government operating requirements, permits, licenses, concessions, leases, and contracts are generally very complex, and may result in periods of non-compliance, or disputes over interpretation or enforceability. If we fail to comply with these regulations or contractual obligations, we could be subject to financial penalties or we may lose our rights to operate the affected business, or both. Where our ability to operate is subject to a concession or lease from government entities, the concession or lease may restrict our ability to operate in a way that maximizes cash flows and profitability. Further, our ability to grow may require consent of numerous government regulators. Increased regulation restricting the ownership or management of U.S. assets by non-U.S. persons, given the non-U.S. ultimate ownership

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of our Manager, may limit our ability to pursue acquisitions. Any such regulation may also limit our Manager’s ability to continue to manage our operations, which could cause disruption to our business and a decline in our performance. In addition, any required government consents may be costly to seek and we may not be able to obtain them. Failure to obtain any required consents could limit our ability to grow.

Our contracts with government entities may also contain clauses more favorable to the government counterparty than a typical commercial contract. For instance, a lease, concession, or general service contract may enable the government to terminate the agreement without adequate compensation. In addition, government counterparties also may have the discretion to change or increase regulation of our operations, or implement laws or regulations affecting our operations, separate from any contractual rights they may have. Governments have considerable discretion in implementing regulations that could impact these businesses. Governments may be influenced by political considerations to take actions that may hinder the efficient and profitable operation of our business.

Many of our contracts, especially those with government entities or quasi-governmental entities are long-term contracts. These long-term contracts may be difficult to replace if terminated. In addition, buy-out or other early termination provisions could adversely affect our results of operations, cash flows, and financial condition if exercised before the end of the contract.

Government agencies may determine the prices we charge and may be able to restrict our ability to operate our businesses to maximize profitability.

We are subject to rate regulation in respect of our regulated utility in Hawaii. We may also face fees or other charges over which we have no control that increase our costs. We may be subject to increases in fees or unfavorable price determinations that may be final with no right of appeal or that, despite a right of appeal, could result in our profits being negatively affected. In addition, we may have very little negotiating leverage in establishing contracts with government entities, which may decrease the prices that we otherwise might be able to charge or the terms upon which we provide products or services. Businesses we may acquire in the future may also be subject to rate regulation or similar negotiating limitations.

Failure to comply with government regulations could result in loss of franchise contract terminations or we may be unable to enter into future government contracts.

Our regulated utility business is the only gas distribution franchise in Hawaii and is subject to significant regulation. The HPUC prescribes rates, tariffs, charges and fees; determines the allowable rate of return on equity; issues guidelines concerning the general management of utility businesses and acts on requests for the acquisition, sale, disposition or other exchange of utility properties, including mergers and consolidations. If we fail to comply with any of these regulations, requirements, or statutes we could lose the franchise.

From time to time, we sign government contracts that are subject to various uncertainties, restrictions, and regulations which could result in withholding or delay of payments. In addition, government contracts are subject to specific regulations as well as various statutes related to employment practices, environmental protection, recordkeeping, and accounting. These regulations and laws impact how we transact business with governmental clients and, in some instances, impose significant costs on business operations. If we fail to comply with any of these regulations, requirements or statutes, our existing government contracts could be terminated, and we could be temporarily or permanently barred from government contracting or subcontracting. If one or more of our government contracts are terminated or if we are barred from government contract work, or if reimbursement of our cost is disallowed, we could suffer a significant reduction in expected revenue and profits.

Delays in the government budget process or a government shutdown may adversely affect our operating results.

We provide services to government customers, often under long-term contracts. Any delay in the federal or state government budget process or a federal or state government shutdown may result in our incurring substantial costs without reimbursement under service contracts that we may have with government customers for extended periods. In addition, our business relies on obtaining and maintaining government permits, licenses, concessions, and leases. Governmental budget delays or government shutdowns could also negatively impact our ability to timely obtain approvals and consents needed to operate and grow our business. Any of these consequences could have an adverse impact on our operating results.

Climate change, climate change regulations, and greenhouse effects may adversely impact our operations and markets.

Climate change and the outcome of federal and state actions to address global climate change could result in significant new regulations, additional changes to fund energy efficiency activities, or other regulatory actions. These actions could increase the cost of operating our business, reduce the demand for our products and services, and impact the prices we charge our customers, any or all of which could adversely affect our results of operations. In addition, climate change could make severe weather events more frequent and increase the likelihood of capital expenditures to replace damaged physical property at our business.

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Restrictions on emissions of methane or carbon dioxide that may be imposed could adversely impact the demand for, price of, and value of our products. As our operations also emit greenhouse gases directly, current and future laws or regulations limiting such emissions could increase our own costs. Future laws or regulations addressing greenhouse gas emissions could adversely impact our business.

Risks Related to Having an External Manager

We are subject to the terms and conditions of the Management Services Agreement and Disposition Agreement between us and our Manager, which limit our ability to take certain actions and may make strategic transactions more costly.

We cannot unilaterally amend the Management Services Agreement between us and our Manager. Changes in the compensation of our Manager, certain rights held by our Manager or other components of the Management Services Agreement require the approval of our Manager and limit our ability to make changes that could be beneficial to equity holders generally without the consent of our Manager.

On October 30, 2019, we signed a Disposition Agreement with our Manager to facilitate our pursuit of strategic alternatives (see Exhibit 10.3 of this Form 10-K). Outside of this agreement, we do not have the ability to terminate the Management Services Agreement other than in limited circumstances. The Disposition Agreement will terminate on the earlier to occur of (i) the termination of the Management Services Agreement and (ii) the sixth anniversary of the Disposition Agreement, subject to extension under certain circumstances if a transaction is pending.

Our Manager owns a significant portion of our outstanding common units. A sale of all or a portion of the common units owned by our Manager could be interpreted by the equity markets as a lack of confidence in our prospects.

Our Manager, in its sole discretion, determines whether to reinvest base management and performance fees, if any, in common units and whether to hold or sell those securities. Reinvestment of base management and performance fees, if any, in additional common units would increase our Manager’s ownership stake in our Company. On December 31, 2021, our Manager owned 16.66% of our outstanding common units. Our Manager has sold and could from time to time sell the common units that it acquires via reinvestment of fees. If our Manager decides to sell any of its common units in our Company, such sales may be interpreted by some market participants as a lack of confidence in our Company and put downward pressure on the market price of our common units. Sales of common units by our Manager would increase the supply and could decrease the price if demand is insufficient to absorb such sales.

Outside of the construct created by our pursuit of strategic alternatives, and the execution of the Disposition Agreement, certain provisions of our Management Services Agreement, articles of organization, and operating agreement would otherwise make it difficult for third parties to acquire control of our Company and could deprive investors of the opportunity to obtain a takeover premium for their shares of common units.

Subject to terms of the Disposition Agreement, there are limited circumstances in which our Manager can be terminated under our Management Services Agreement. The Management Services Agreement provides that in circumstances where our common units ceases to be listed on a recognized U.S. exchange as a result of the acquisition of our common units by third parties in an amount that results in our common units ceasing to meet the distribution and trading criteria on such exchange or market, our Manager has the option to either propose an alternate fee structure and remain as our Manager or resign, terminate the Management Services Agreement upon 30 days’ written notice and be paid a substantial termination fee. The termination fee payable on our Manager’s exercise of its right to resign as our Manager subsequent to a delisting of our common units could delay or prevent a change in control that may favor our equity holders. Furthermore, in the event of such a delisting, any proceeds from the sale, lease, or exchange of a significant amount of assets must be reinvested in new assets of our Company, subject to debt repayment obligations. We would also be prohibited from incurring any new indebtedness or engaging in any transactions with equity holders or our affiliates without the prior written approval of our Manager. These provisions could deprive equity holders of opportunities to realize a premium on the common units owned by them. The Disposition Agreement provides that the Management Services Agreement will terminate as to any businesses, or substantial portions thereof, that are sold, and certain payments will be made to our Manager in connection therewith.

Our operating agreement contains provisions that could have the effect of making it more difficult for a third-party to acquire, or discouraging a third-party from acquiring, control of our Company. These provisions include:

• restrictions on our ability to enter into certain transactions with our major equity holders, with the exception of our Manager;

• allowing only our Board to fill vacancies, including newly created directorships, and requiring that directors may be removed with or without cause by a common unit holder vote of 66 2/3%;

• requiring that only the chairman or Board may call a special meeting of our common unit holders;

• prohibiting common unit holders from taking any action by written consent;

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• establishing advance notice requirements for nominations of candidates for election to our Board or for proposing matters that can be acted upon by our equity holders at an common unit holders’ meeting; and

• having a substantial number of additional common units authorized but unissued.

Our Manager’s decision to reinvest its monthly base management fees and quarterly performance fees, if any, in common units or retain the cash will affect equity holders differently.

Our Manager is paid a base management fee based on our market capitalization and potentially performance fees based on the total return generated relative to a U.S. utilities index benchmark. Our Manager, in its sole discretion, may elect to retain base management fees and performance fees, if any, paid in cash or to reinvest such payments in additional common units. In the event our Manager chooses not to reinvest the fees to which it is entitled in additional common units, the amount paid will reduce the cash that may otherwise be distributed as a dividend to all equity holders or used in our Company’s operations. In the event our Manager chooses to reinvest the fees to which it is entitled in additional common units, effectively returning the cash to us, such reinvestment and the issuance of new common units will dilute existing equity holders by the increase in the percentage of common units owned by our Manager. Either option may adversely impact the market for our common units.

In addition, our Manager has typically elected to invest its fees in common units, and, unless otherwise agreed with us, can only change this election during a 20-trading day window following our earnings release. Any change would apply to fees incurred thereafter. Accordingly, equity holders would generally have notice of our Manager’s intent to receive fees in cash rather than reinvest before the change was effective.

Our Manager is not required to offer all acquisition opportunities to us and may offer such opportunities to other entities. Our management may waive investment opportunities presented by our Manager.

Pursuant to our Management Services Agreement, we have first priority ahead of all current and future funds, investment vehicles, separate accounts, and other entities managed by our Manager or by members of the Macquarie Group with respect to four specific types of acquisition opportunities within the United States. These include FBOs, airport parking, district energy, and “user pays”, contracted, and regulated assets that represent an investment of greater than AUD $40 million. Other than these types of opportunities, our Manager does not have an obligation to offer to us any particular acquisition opportunities, even if they meet our investment objectives, and our Manager and its affiliates can offer any or all other acquisition opportunities on a priority basis or otherwise to current and future funds, investment vehicles, and accounts sponsored by our Manager or its affiliates. We may compete with these entities for investment opportunities, and there can be no assurance that we will prevail with respect to such investments.

In addition, our management may determine not to pursue investment opportunities presented to us by our Manager, including those presented on a priority basis. If our management waives any such opportunity, our Manager and its affiliates may offer such opportunity to any other entity, including any entities sponsored or advised by members of the Macquarie Group. As such, not every acquisition opportunity presented to us by our Manager may be pursued by us and may ultimately be presented to entities with whom we compete for investments.

Our Manager can resign with 90 days’ notice, and our CEO or CFO could be removed by our Manager, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations, which could adversely affect our financial results and negatively impact the market price of our common units.

Our Manager has the right, under the Management Services Agreement, to resign at any time with 90 days’ notice, whether we have found a replacement manager or not. In addition, our Manager could re-assign or remove our CEO and/or our CFO from their positions and responsibilities at our Company without our Board's approval and with little or no notice. If our Manager resigns or our CEO and/or CFO are removed, we may not be able to find a new external manager or hire internal management with similar expertise within 90 days to provide the same or equivalent services on acceptable terms, or at all. If we are unable to do so, our operations are likely to experience a disruption, our financial results could be adversely affected, perhaps materially, and the market price of our common units may decline substantially. In addition, the coordination of our internal management, acquisition activities, and supervision of our businesses is likely to suffer if we were unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our Manager and its affiliates.

Furthermore, if our Manager resigns, we and our subsidiaries will be required to cease use of the Macquarie brand and change their names to remove any reference to “Macquarie”. This may cause the value of our Company and the market price of our common units to decline.

Our externally managed model may not be viewed favorably by investors.

We are externally managed by a member of the Macquarie Group. Our Manager receives a fee for the corporate headquarters functions it provides including the compensation of our management team and those who provide services to us on

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a shared basis, health and welfare benefits, the provision of facilities, technology, and insurance (other than directors and officers). The fee is based on our equity market capitalization and thus increases as we grow. The size of the fee may bear no direct correlation with the actual cost of providing the agreed upon services and may be higher than the cost of managing our Company internally. Per the terms of the Management Services Agreement with our Manager, the current default election for satisfying any base management or performance fees, if any, to which our Manager may be entitled is the issuance of additional common units. To the extent fees continue to be reinvested in our common units, all equity holders will be diluted.

Our Manager’s affiliation with Macquarie Group Limited and the Macquarie Group may result in conflicts of interest or a decline in the market price of our common units.

Our Manager is an affiliate of Macquarie Group Limited and a member of the Macquarie Group. From time to time, we have entered into, and in the future, we may enter into, transactions and relationships involving Macquarie Group Limited, its affiliates, or other members of the Macquarie Group. Such transactions have included and may include, among other things, the entry into debt facilities and derivative instruments with members of the Macquarie Group serving as lender or counterparty, and financial advisory or equity and debt underwriting services provided to us by the Macquarie Group.

Although our Audit Committee, all of the members of which are independent directors, is required to review and approve in advance of any related party transactions, including those involving members of the Macquarie Group or its affiliates, the relationship of our Manager to the Macquarie Group may result in conflicts of interest.

In addition, as a result of our Manager’s being a member of the Macquarie Group, negative market perceptions of Macquarie Group Limited generally or of Macquarie’s infrastructure management model, or Macquarie Group statements or actions with respect to other managed vehicles, may affect market perceptions of us and cause a decline in the price of our common units unrelated to our financial performance and prospects.

In the event of the underperformance of our Manager, we may be unable to remove our Manager, which could limit our ability to improve our performance and could adversely affect the market price of our common units.

Under the terms of the Management Services Agreement, our Manager must significantly underperform for the Management Services Agreement to be terminated. Our Board cannot remove our Manager unless:

• our common units underperforms a weighted average of two benchmark indices by more than 30% in relative terms and more than 2.5% in absolute terms in 16 out of 20 consecutive quarters prior to and including the most recent full quarter, and the holders of a minimum of 66.67% of our common units (excluding any common units owned by our Manager or any affiliate of our Manager) vote to remove our Manager;

• our Manager materially breaches the terms of the Management Services Agreement and such breach has been unremedied within 60 days after notice;

• our Manager acts with gross negligence, willful misconduct, bad faith or reckless disregard of its duties in carrying out its obligations under the Management Services Agreement, or engages in fraudulent or dishonest acts; or

• our Manager experiences certain bankruptcy events.

Our Board cannot remove our Manager unless the market performance of our common units also significantly underperforms the benchmark index. If we were unable to remove our Manager in circumstances where the absolute market performance of our common units does not meet expectations, the market price of our common units could be negatively affected.

Risks Related to Ownership of Our Common Units

The market price and marketability of our common units may from time to time be significantly affected by numerous factors beyond our control, which may adversely affect our ability to raise capital through future equity financings.

The market price of our common units may fluctuate significantly. Many factors that are beyond our control may significantly affect the market price and marketability of our common units and may adversely affect our ability to raise capital through equity financings should we need or want to do so. These factors include, but are not limited to:

• any developments impacting our ability to consummate the Merger;

• significant volatility in the market price and trading volume of securities of Macquarie Group Limited and/or vehicles managed by the Macquarie Group or branded under the Macquarie name or logo;

• significant volatility in the market price and trading volume of securities of registered investment companies, business development companies, or companies in our sector;

• changes in our earnings or variations in operating results;

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• publications by ratings agencies;

• any shortfall in EBITDA excluding non-cash items or Free Cash Flow from levels expected by us or by securities analysts;

• changes in regulatory policies or tax law;

• operating performance of companies comparable to us;

• loss of funding sources; and

• substantial sales of our common units by our Manager or other significant equity holders.

Actions of activist equity holders could have an adverse impact on the value of our securities.

We value constructive input from our equity holders and the investment community. However, there is no assurance that the actions taken by our Board and management in seeking to maintain constructive engagement with our equity holders will be successful. Certain of our equity holders may express views with respect to the operation of our business, our business strategy, corporate governance considerations or other matters that are contrary to ours. Responding to these, or to actions that may be taken by activist equity holders can be costly and time-consuming, disruptive to our operations, and divert the attention of management and our employees. The perceived uncertainties as to our strategy as a result of the actions of activist equity holders could affect the market price of our securities, result in the loss of potential business opportunities, and make it more difficult to attract and retain qualified personnel, board members, and business partners.

The price of our common units may be vulnerable to actions of market participants whose strategies may not involve buying and holding our securities in pursuit of an attractive return.

Our common units have been the subject of short selling efforts by certain market participants. Short sales are transactions in which a market participant borrows, then sells a security that it does not own. The market participant is obligated to replace the security borrowed by purchasing the security at or before the time the security is recalled. If the price at the time of replacement/recall is lower than the price at which the security was originally sold by the market participant, then the market participant will realize a gain on the transaction. Thus, it is in the market participant’s interest for the price of the security to decline during the period up to the time of replacement/recall.

Previous short selling efforts have had an impact on, and may in the future impact, the value of our common units in an extreme and volatile manner to our detriment and the detriment of our equity holders. In addition, market participants have published, and may in the future publish, negative, inaccurate, or misleading information regarding our Company and our management team. We believe that the publication of such information has led, and may in the future lead to, significant downward pressure on the price of our common units to our detriment and the further detriment of our equity holders. These and other efforts by certain market participants to unduly influence the price of our common units for financial gain may cause value of our equity holders’ investments to decline, may make it more difficult for us to raise equity capital when or if needed without significantly diluting existing equity holders, and may reduce demand from new investors to purchase our common units.

We previously identified a material weakness in our internal control over financial reporting, and the failure to maintain an effective system of internal controls in the future could result in loss of investor confidence and adversely impact our common unit price.

Effective internal controls are necessary for us to provide reliable and accurate financial statements. If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process, and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could cause investors to lose confidence in our reported financial information and have a negative effect on the price of our common units and our access to capital. In addition, implementing any appropriate changes to internal controls will result in additional expenses.

Our reported Income per Unit, as defined under GAAP, does not reflect the cash generated by our business and may result in unfavorable comparisons with other businesses.

We own and invest in high-value, long-lived assets that generate substantial amounts of depreciation and amortization. Depreciation and amortization are non-cash expenses that serve to reduce reported income per unit. We pay our Manager base management fees and may pay performance fees both of which may be reinvested in additional common units thereby rendering them a non-cash expense. Whether the fees are settled in cash or reinvested in additional common units, they have the effect of reducing income per unit. As a result, our financial performance may appear to be substantially worse compared with other businesses. To the extent that our results appear to be worse, we may have relatively greater difficulty attracting investors in our common units.

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Our total assets include a substantial amount of goodwill and other intangible assets. The write-off of a significant portion of intangible assets would negatively affect our reported earnings.

Our total assets reflect a substantial amount of goodwill and other intangible assets. On December 31, 2021, goodwill and other intangible assets, net, represented approximately 23% of our total assets. Goodwill and other intangible assets were generated primarily through the acquisition of Hawaii Gas. Other intangible assets consist of trade names. On at least an annual basis, we assess whether there has been any impairment in the value of goodwill and other intangible assets or when there are triggering events or circumstances. If the carrying value of the tested asset exceeds its estimated fair value, impairment is deemed to have occurred. In that event, the intangible is written down to fair value. Under current accounting rules, this would result in a charge to reported earnings. Impairments requiring the write-off of a significant portion of goodwill or other intangible assets would negatively affect our reported earnings and total capitalization and could be material. In addition, the ongoing impact of the pandemic on our business could cause an impairment to goodwill or long-lived assets of the Company.

Our total assets include a substantial amount of intangible assets and fixed assets. The depreciation and amortization of these assets may negatively impact our reported earnings.

The high level of intangible and physical assets written up to fair value upon acquisition generates substantial amounts of depreciation and amortization. These non-cash items serve to lower net income as reported in our consolidated statement of operations as well as our taxable income. The generation of net losses or relatively small net income may contribute to a net operating loss ("NOL") carryforward that can be used to offset current taxable income in future periods. However, the continued reporting of little or negative net income may adversely affect the attractiveness of our Company to some potential investors and may reduce the market for our common units.

Risks Related to Taxation

The current treatment of qualified dividend income and long-term capital gains under U.S. federal income tax law may be changed in the future.

Under current law, qualified dividend income and long-term capital gains are taxed to non-corporate investors at a maximum U.S. federal income tax rate of 20%. In addition, certain holders that are individuals, estates, or trusts are subject to 3.8% surtax on all or a portion of their “net investment income,” which may include all or a portion of their dividend income and net gains from the disposition of our common units. This tax treatment may be adversely affected, changed or repealed in the future and may affect market perceptions of our Company and the market price of our common units could be negatively affected.

The treatment of depreciation and other tax deductions under current U.S. federal income tax law may be adversely affected, changed, or repealed in the future.

Under current law, certain capital expenditures are eligible for accelerated depreciation, including 100% bonus depreciation for qualifying assets purchased and placed in service after September 27, 2017 and prior to January 1, 2023, for U.S. federal income tax purposes. In addition, certain other expenses are eligible to be deducted for U.S. federal income tax purposes. This tax treatment may be adversely affected, changed, or repealed by future changes in tax laws at any time, which may affect market perceptions of our Company and the market price of our common units could be negatively affected.

Our Company could be adversely affected by changes in tax laws and/or changes in the interpretation of existing tax laws.

We are subject to various taxing regimes, including federal, state, local and foreign taxes such as income, excise, sales/use, payroll, franchise, property, gross receipts, withholding, and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations or the interpretation thereof are continuously being enacted or proposed and could result in increased expenditures for tax in the future and could have a material adverse effect on our Company’s results of operations, cash flows, and financial condition.

Our property taxes could increase due to reassessment or property tax rate changes.

We are required to pay real property taxes in respect of our properties and such taxes may increase as our properties are reassessed by taxing authorities or as property tax rates change. An increase in the assessed value of our properties or our property tax rates may not be passed along to our customers and could adversely impact our results of operations, cash flows, and financial condition.

Our Company is subject to examinations and challenges by taxing authorities.

Periodic examinations or audits by taxing authorities could increase our tax liabilities and result in the imposition of interest and penalties. If challenges arising from such examinations and audits are not resolved in our Company’s favor, they could have a material adverse effect on our Company’s results of operations, cash flows, and financial condition.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of Macquarie Infrastructure Holdings, LLC should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere herein.

Recent Developments

HPUC Integrated Resource Plan Order

As anticipated, in January 2022, the HPUC issued an order requiring us to develop an Integrated Resource Plan ("IRP") in accordance with the HPUC’s Framework for Integrated Resource Planning and to file an IRP Report and Action Plan in the first quarter of 2023. The IRP will set out how we intend to meet near- and long-term energy objectives and satisfy customer needs consistent with the State’s energy policies and our goals of doing so in a safe, reliable, and cost-effective manner. We are currently reviewing the order. Under the Framework, we are entitled to recover all appropriate and reasonable integrated resource planning and implementation costs, as approved by the HPUC.

Results of Operations

Our business includes Hawaii Gas and smaller operations collectively engaged in efforts to reduce the cost and improve the reliability and sustainability of energy in Hawaii. We generate revenue primarily from the provision of gas to commercial, residential, and governmental customers and the generation of power.

Our financial performance is a function of the number of customers served, their consumption of energy and the prices achieved on sales by each of Hawaii Gas’s utility and non-utility operations and under power purchase agreements. The amount of gas consumed is positively correlated with visitor arrivals and general economic activity over the long term. Consumption trends and prices are a function of, among other factors, energy efficiency, weather, the range of competitive energy sources, and commodity input costs.

We continue to closely monitor the effects of COVID-19 and are actively managing our response by placing a priority on the health and safety of our employees and their families, contractors, customers, and the broader communities in which we operate. Our business' operations are classified as providers of essential services, are fully operational, and are adhering to pandemic response plans and are following guidance from the Centers for Disease Control and Prevention ("CDC") as well as federal, state, and local governments with respect to conducting operations safely.

In addition to standard operating procedures designed to maintain safe operations, we have implemented additional measures including: (i) work from home and related travel policies; (ii) enhanced cleaning and disinfecting of facilities; (iii) limited interactions between employees and customers through social distancing; (iv) mandated use of personal protective equipment by employees; and (v) education of customers on alternative payment and customer care options as a means of limiting interactions with employees. Management is engaged in ongoing communications with employees, customers, vendors, lenders, and other stakeholders apprising them of the business' response to the pandemic. We believe our staff and customers of our business can access our facilities safely and in compliance with relevant directives.

Visitor arrivals to Hawaii, the primary driver of increases in demand for gas in Hawaii, improved sequentially in the fourth quarter of 2021 as increased visitor confidence levels due to the availability of COVID-19 vaccines and a relatively low level of infections in the islands combined to create an attractive environment for visitors from the U.S. mainland. The rate of recovery in the number of visitors to Hawaii in the future remains uncertain. COVID-19 continues to negatively affect the performance of the Hawaii businesses, although the effects have diminished relative to this time last year. The easing of travel restrictions has resulted in an increase in economic activity and the number of primarily domestic visitors to Hawaii, but not to pre-COVID-19 levels. A significant surge in COVID-19 rates could negatively impact the number of visitors to Hawaii, which would adversely impact our operating results.

Trends in the number of visitors to Hawaii and demand for gas were positive in the fourth quarter of 2021, although our financial performance continues to be adversely affected relative to pre-COVID-19 periods. The number of visitors to Hawaii increased to 1.9 million and 6.8 million for the quarter and year ended December 31, 2021, respectively, from 497,000 and 2.7 million for the quarter and year ended December 31, 2020, respectively. The resulting improvement in hotel occupancy, restaurants patronage, and use of commercial laundry services contributed to an increase in gas consumption of 29% and 21% during the quarter and year ended December 31, 2021, respectively, versus the comparable periods in 2020. The number of visitors to Hawaii was lower by 25% and 35% in the quarter and year ended December 31, 2021, respectively, and overall gas consumption was lower by 6% and 11% versus the comparable periods in 2019. The rate of recovery in the number of visitors to Hawaii in the future remains uncertain and a significant surge in COVID-19 cases could negatively impact Hawaii tourism.

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Results of Operations — (continued)

The wholesale cost of LPG increased by approximately 60% between December 2020 and December 2021. We enter into commodity hedges to mitigate the medium to longer term impact of rising costs. The percentage of our expected LPG purchases that is hedged varies over time based on our assessment of the potential volatility in LPG costs and the duration and cost of the hedges. We pass some of our increased LPG cost through to customers in our regulated business through the fuel adjustment clause mechanism. In addition, as has been the case from time to time historically, we may pass some or all of the increased cost of LPG through to our customers in our unregulated business subject to competitive dynamics in Hawaii's energy market.

Results of Operations: 2020 vs. 2019

During the quarter ended September 30, 2021, Atlantic Aviation was classified as a discontinued operation and eliminated as a reportable segment. All periods reported herein reflect this change. For additional information, see Note 4, “Discontinued Operations and Dispositions”, in our consolidated financial statements in "Financial Statements and Supplementary Data" in Part II, Item 8, of this Form 10-K.

Unless specified below, for a comparison and discussion of our consolidated and operating businesses' results of operations for 2020 compared with 2019, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7, in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the U.S. Securities and Exchange Commission on February 17, 2021.

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Results of Operations — (continued)

Results of Operations: 2021 vs. 2020

Our consolidated results of operations for 2021 compared with 2020 are as follows:

Year Ended

December 31,

Change

Favorable/(Unfavorable)

($ in Thousands, Except Unit and Per Unit Data) (Unaudited)

Revenue

Product revenue

Total revenue

Costs and expenses

Cost of product sales

Selling, general and administrative

Disposition payment to manager

Total Selling, general and administrative

Fees to Manager - related party

Depreciation and amortization

Total operating expenses

Operating loss

Other income (expense)

Interest income

Interest expense (1)

Other income (expense), net

Net loss from continuing operations before income taxes

Benefit (provision) for income taxes

Net loss from continuing operations

Discontinued Operations

Net income (loss) from discontinued operations before income taxes

Provision for income taxes

Net income (loss) from discontinued operations

Net income (loss)

Net loss from continuing operations

Less: net income attributable to noncontrolling interests

Net loss from continuing operations attributable to MIH

Net income (loss) from discontinued operations

Net income (loss) from discontinued operations attributable

to MIH

Net income (loss) attributable to MIH

Basic loss per unit from continuing operations attributable to MIH

Basic income (loss) per unit from discontinued operations attributable

to MIH

Basic income (loss) per unit attributable to MIH

Weighted average number of units outstanding: basic

NM — Not meaningful

(1) Interest expense includes non-cash gains on derivative instruments of $333,000 in 2021 and non-cash losses on derivative instruments of $912,000 in 2020.

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Results of Operations — (continued)

Revenue

We generate most of our revenue from the sale of gas. Accordingly, revenue can fluctuate based on the wholesale cost of gas and/or feedstock and may not reflect our ability to effectively manage the amount of gas sold and the margins achieved on those sales. For example, an increase in revenue may be attributable to an increase in the wholesale cost of gas and not an increase in the amount of gas sold or margin achieved. Conversely, a decline in revenue may be attributable to a decrease in the wholesale cost of gas and not a reduction in the amount of gas sold or margin achieved.

Revenue increased for 2021 compared with 2020 primarily as a result of an increase in the amount of gas sold. The increase in the amount of gas sold reflects increased consumption by commercial and industrial customers driven by an increase in the number of visitors to Hawaii and increased commercial activity as Hawaii recovers from the impact of COVID-19.

Cost of Services and Product Sales

Cost of product sales increased for 2021 compared with 2020 primarily as a result of increases in the cost of gas sold. The increase in cost of product sales was partially offset by favorable mark-to-market adjustments of the value of commodity hedge contracts for wholesale LPG.

We recorded favorable adjustments of $437,000 and $7.3 million in the mark-to-market adjustment of the value of the commodity hedge contracts for 2021 and 2020, respectively. The change in the mark-to-market adjustment of the value of the commodity hedges during 2021 primarily reflects higher forecast wholesale cost of LPG relative to the hedged cost.

As noted above, we use commodity hedges to reduce the financial risks of commodity price fluctuations associated with wholesale LPG purchases. We have entered into hedges with varying maturities through May 2024 and with respect to a varying percentage of our expected LPG purchases over that time.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased for 2021 compared with 2020 primarily as a result of (i) a disposition payment of $228.6 million paid to our Manager in connection with the AA Transaction, (ii) higher transaction costs; (iii) increases in salaries and benefits; and (iv) higher insurance costs.

Fees to Manager

Our Manager is entitled to a monthly base management fee based on our market capitalization and potentially a quarterly performance fee based on our total return relative to a U.S. utilities index. For 2021 and 2020, we incurred base management fees of $21.9 million and $21.1 million, respectively. The increase in base management fees reflects an increase in our average market capitalization and the decrease in our average holding company cash balance during 2021. No performance fees were incurred in either the current or prior comparable periods. The unpaid portion of base management fees and performance fees, if any, at the end of each reporting period is included in the line item Due to Manager-related party in our consolidated balance sheets.

In accordance with the Management Services Agreement, our Manager elected to reinvest any fees to which it was entitled in new primary units in all of the periods shown below and has currently elected to reinvest future base management fees and performance fees, if any, in new primary units.

Period

Base Management

Fee Amount

($ in Thousands)

Performance

Fee Amount

($ in Thousands)

Units

Issued

2021 Activities:

Fourth quarter 2021

Third quarter 2021

Second quarter 2021

First quarter 2021

2020 Activities:

Fourth quarter 2020

Third quarter 2020

Second quarter 2020

First quarter 2020

(1) Our Manager elected to reinvest all of the monthly base management fees for the quarter ended December 31, 2021 in new primary units. We issued 217,273 units for the quarter ended December 31, 2021, including 72,323 units that were issued in January 2022 for the December 2021 monthly base management fee.

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Results of Operations — (continued)

Interest Expense, net, and Gains (Losses) on Derivative Instruments

Interest expense includes non-cash gains on derivative instruments of $333,000 in 2021 and non-cash losses of $912,000 for 2020, and the amortization of debt financing costs and debt discounts. Gains (losses) on derivatives recorded in interest expense are attributable to the change in fair value of interest rate hedges. For 2021, interest expense also includes non-cash write-offs of debt financing costs of $4.8 million related to the repurchase of our 2.00% Convertible Senior Notes, the cancellation of our holding company revolving credit facility, and the full repayment of $100.0 million of senior secured notes at Hawaii Gas.

Excluding the non-cash adjustments and write-offs, cash interest expense totaled $10.0 million and $14.5 million in 2021 and 2020, respectively. The decrease in cash interest expense primarily reflects a lower weighted average debt balance, partially offset by a $4.7 million 'make-whole' payment related to the full repayment of $100.0 million of senior secured notes at Hawaii Gas in April 2021.

Discontinued Operations

For 2021 and 2020, discontinued operations reflects the operating results of the businesses sold as part of the AA Transaction. The AA Transaction closed on September 23, 2021. For 2020, discontinued operations also reflects the operating results of IMTT. The IMTT Transaction closed on December 23, 2020.

Income Taxes

MIH is a limited liability company classified as a partnership for tax purposes. Taxable income or losses reported by MIH will be passed-through to the unitholders and reported on a Schedule K-1. MIH does not pay federal or state income tax. As a partnership, MIH itself will not pay income tax on the gain from the AA Transaction.

As part of the reorganization, the entity holding the businesses comprising MIC's MIC Hawaii segment was distributed to and became a direct subsidiary of Macquarie Infrastructure Holdings, LLC. For tax purposes, the distribution was deemed to be a sale of MIC Hawaii by MIC and unitholders were deemed to have received a distribution of the fair market value of the equity of that segment.

Our intermediate holding company is organized as a limited liability company and classified as a corporation for tax purposes. The intermediate holding company will file a consolidated federal income tax return for periods after the reorganization. The intermediate holding company will continue to file a combined Hawaii state income tax return.

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Results of Operations — (continued)

Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA") excluding non-cash items and Free Cash Flow

In addition to our results under U.S. GAAP, we use the non-GAAP measures EBITDA excluding non-cash items and Free Cash Flow to assess the performance and prospects of our business.

We measure EBITDA excluding non-cash items as it reflects our businesses’ ability to effectively manage the amount of products sold or services provided, the operating margin earned on those transactions, and the management of operating expenses independent of our capitalization and tax position.

We believe investors use EBITDA excluding non-cash items primarily as a measure of our operating performance and to make comparisons with the operating performance of other businesses whose depreciation and amortization expense may vary from ours, particularly where acquisitions and other non-operating factors are involved. We define EBITDA excluding non-cash items as net income (loss) or earnings — the most comparable GAAP measure — before interest, taxes, depreciation and amortization, and non-cash items including impairments, unrealized derivative gains and losses, adjustments for other non-cash items, and pension expense reflected in the statements of operations. Other non-cash items, net, excludes the adjustment to bad debt expense related to the specific reserve component, net of recoveries . EBITDA excluding non-cash items also excludes base management fees and performance fees, if any, whether paid in cash or units.

We define Free Cash Flow as cash from operating activities — the most comparable GAAP measure — less maintenance capital expenditures and adjusted for changes in working capital.

We use Free Cash Flow as a measure of our ability to fund acquisitions, invest in growth projects, reduce or repay indebtedness, and/or return capital to unitholders. GAAP metrics such as net income (loss) do not provide us with the same level of visibility into our performance and prospects as a result of: (i) the capital intensive nature of our businesses and the generation of non-cash depreciation and amortization; (ii) units issued to our Manager under the Management Services Agreement; (iii) the ability of our subsidiaries to defer all or a portion of current federal income taxes; (iv) non-cash mark-to-market adjustment of the value of derivative instruments; (v) gains (losses) related to the write-off or disposal of assets or liabilities; (vi) non-cash compensation expense incurred in relation to the incentive plans for senior management of our operating businesses; and (vii) pension expenses. Pension expenses primarily consist of interest expense, expected return on plan assets, and amortization of actuarial and performance gains and losses. Any cash contributions to pension plans are reflected as a reduction to Free Cash Flow and are not included in pension expense. We believe that external consumers of our financial statements, including investors and research analysts, could use Free Cash Flow to assess our Company's ability to fund acquisitions, invest in growth projects, reduce or repay indebtedness, and/or return capital to unitholders.

We believe that both EBITDA excluding non-cash items and Free Cash Flow support a more complete and accurate understanding of the financial and operating performance of our Company than would otherwise be achieved using GAAP results alone.

Free Cash Flow does not take into consideration required payments on indebtedness and other fixed obligations or other cash items that are excluded from our definition of Free Cash Flow. We note that Free Cash Flow may be calculated differently by other companies thereby limiting its usefulness as a comparative measure. Free Cash Flow should be used as a supplemental measure to help understand our financial performance and not in lieu of our financial results reported under GAAP.

Classification of Maintenance Capital Expenditures and Growth Capital Expenditures

We categorize capital expenditures as either maintenance capital expenditures or growth capital expenditures. As neither maintenance capital expenditure nor growth capital expenditure is a GAAP term, we have adopted a framework to categorize specific capital expenditures. In broad terms, maintenance capital expenditures primarily maintain our business at current levels of operations, capability, profitability or cash flow, while growth capital expenditures primarily provide new or enhanced levels of operations, capability, profitability or cash flow. We consider various factors in determining whether a specific capital expenditure will be classified as maintenance or growth.

We do not bifurcate specific capital expenditures into maintenance and growth components. Each discrete capital expenditure is considered within the above framework and the entire capital expenditure is classified as either maintenance or growth.

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Results of Operations — (continued)

A reconciliation of net loss from continuing operations to EBITDA excluding non-cash items from continuing operations and a reconciliation from cash used in operating activities from continuing operations to Free Cash Flow from continuing operations, on a consolidated basis, is provided below.

Year Ended

December 31,

Change

Favorable/(Unfavorable)

($ In Thousands) (Unaudted)

Net loss from continuing operations

Interest expense, net (1)

(Benefit) provision for income taxes

Depreciation and amortization

Fees to Manager- related party

Other non-cash expense (income), net (2)

EBITDA excluding non-cash items - continuing operations

EBITDA excluding non-cash items - continuing operations

Interest expense, net (1)

Non-cash interest expense, net (1)

Benefit (provision) for current income taxes (3)

Changes in working capital

Cash used in operating activities - continuing operations

Changes in working capital

Maintenance capital expenditures

Free cash flow - continuing operations

NM — Not meaningful

(1) Interest expense, net, includes non-cash adjustments to derivative instruments, non-cash amortization of debt financing costs, and non-cash amortization of debt discounts related to our 2.00% Convertible Senior Notes. For the year ended December 31, 2021, interest expense also includes non-cash write-offs of debt financing costs related to the repurchase of our 2.00% Convertible Senior Notes and the full repayment of $100.0 million of senior secured notes at Hawaii Gas. In connection with the repayment of the Hawaii Gas $100.0 million senior secured notes, the Company paid a $4.7 million 'make-whole' payment.

(2) Other non-cash expense (income), net, includes primarily non-cash mark-to-market adjustment of the value of the commodity hedge contracts, non-cash compensation expense incurred in relation to the incentive plans for senior management of our operating businesses, and non-cash gains (losses) related to the write-off or disposal of assets or liabilities. Other non-cash expense (income), net, excludes the adjustment to bad debt expense related to the specific reserve component, net of recoveries, for which this adjustment is reported in working capital in the above table. See “ Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") excluding non-cash items and Free Cash Flow ” above for further discussion.

(3) Current income taxes in 2021 includes a $7.4 million benefit for income taxes that will be utilized by discontinued operations as a result of the reorganization.

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Liquidity and Capital Resources

General

Cash requirements of our business includes primarily normal operating expenses, debt service, debt principal payments, and capital expenditures.

We may from time to time seek to purchase or retire our outstanding debt in open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on market conditions, our liquidity needs, and other factors.

2.00% Convertible Senior Notes

On February 17, 2021, we initiated a tender offer for any and all of our 2.00% Convertible Senior Notes outstanding. On March 16, 2021, we repurchased $358.6 million in aggregate principal amount of the Notes in the tender offer. During the second quarter of 2021, we repurchased an additional $9.9 million of Notes in the open market and reduced the outstanding balance to $34.0 million. On September 23, 2021, we initiated an offer to repurchase any and all Notes outstanding and on October 22, 2021, we repurchased $26.9 million in aggregate principal amount of the Notes outstanding. On December 31, 2021, we had $6.8 million of 2.00% Convertible Senior Notes outstanding.

Hawaii Gas Senior Secured Notes

On April 19, 2021, Hawaii Gas fully repaid all of its $100.0 million senior secured notes outstanding and incurred a $4.7 million 'make-whole' payment.

Ongoing Operations

We currently expect to service and/or repay our debts, make required tax payments, fund maintenance capital expenditures, and deploy growth capital during 2022 using cash generated from operations and cash on hand.

Debt

On December 31 2021 our consolidated debt outstanding totaled $99.5 million. We had access to an undrawn revolving credit facility of $60.0 million. The ratio of net debt/EBITDA excluding non-cash items for our continuing operations was 1.33x on December 31, 2021.

The following table shows our debt obligations from continuing operations on February 18, 2022 ($ in thousands):

Debt

Weighted

Average

Remaining Life

(in years)

Balance

Outstanding

Weighted

Average Rate (1)

2.00% Convertible Senior Notes

Term Loan- Hawaii Gas

Term Loan- Solar facilities in Hawaii (2)

Total (3)

(1) Reflects annualized interest rate on all facilities including interest rate hedges.

(2) The weighted average remaining life does not reflect the scheduled amortization on these facilities.

(3) Hawaii Gas also has a $60.0 million revolving credit facility that was undrawn.

We generally capitalize our business in part using floating rate debt with medium-term maturities. We have in the past also used longer dated private placement debt and other forms of capital including bond or hybrid debt instruments to capitalize our business. Except for the 2.00% Convertible Senior Notes, our debt facilities are non-recourse to the Company.

COMMITMENTS AND CONTINGENCIES

The following table summarizes our future obligations for continuing operations, by period due, as of December 31, 2021, under our various contractual obligations and commitments. We had no other off-balance sheet arrangements at that date or currently.

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Liquidity and Capital Resources — (continued)

Payments Due by Period

Total

Less than

One Year

1 – 3 Years

3 – 5 Years

More than

5 Years

($ In Thousands)

Long-term debt (1)

Interest obligations (2)

Operating lease obligations (3)

Pension and post-retirement benefit obligations (4)

Purchase commitments

Service commitments

Total contractual cash obligations (5)(6)

(1) The long-term debt represents the consolidated principal obligations to various lenders. The primary debt facilities are subject to certain covenants, the violation of which could result in acceleration of the maturity dates. For a description of the material terms, see Note 9, “Long-Term Debt”, in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K.

(2) The variable rate portion on the interest obligation on long-term debt was calculated using the three-months LIBOR forward spot rate on December 31, 2021.

(3) This represents the aggregate minimum annual rent required to be paid under non-cancellable operating leases with terms in excess of one year. See Note 5, "Leases", in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K for further discussion.

(4) The pension and post-retirement benefit obligation represents actuarial forecasts of required payments for the next ten years.

(5) The above table does not reflect certain long-term obligations for which we are unable to estimate the period in which the obligation will be incurred.

(6) The above table does not reflect certain expenses that we may incur dependent on the outcome of our pursuit of strategic alternatives. These include payments to our Manager calculated in accordance with the Disposition Agreement, fees to financial advisors and other professional services providers, and transaction related payments to our employees.

In addition to these commitments and contingencies, we typically incur capital expenditures on a regular basis. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —  Classification of Maintenance Capital Expenditures and Growth Capital Expenditures ” and “Investing Activities” below for further discussion of growth capital expenditures. Maintenance capital expenditures are discussed above in “Results of Operations.”

We also have other contingencies, including pending or threatened legal and administrative proceedings that are not reflected above as amounts at this time are not ascertainable. See “Legal Proceedings” in Part I, Item 3.

Our sources of cash to meet these obligations include:

• cash on hand;

• cash generated from our operations (see “Operating Activities” in “Liquidity and Capital Resources”); and

• cash available from undrawn credit facilities (see “Financing Activities” in “Liquidity and Capital Resources”).

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Liquidity and Capital Resources — (continued)

ANALYSIS OF CONSOLIDATED HISTORICAL CASH FLOWS FROM CONTINUING OPERATIONS

The following section discusses our sources and uses of cash from continuing operations. All intercompany activities such as corporate allocations, capital contributions and distributions have been excluded from the tables as these transactions are eliminated on consolidation.

Year Ended

December 31,

Change

Favorable/(Unfavorable)

($ In Thousands)

Cash used in operating activities

Cash used in investing activities

Cash used in financing activities

NM — Not meaningful

Historical Cash Flows: 2020 vs. 2019

During the quarter ended September 30, 2021, Atlantic Aviation was classified as a discontinued operation and eliminated as a reportable segment. All periods reported herein reflect this change. For additional information, se e Note 4, “Discontinued Operations and Dispositions”, in our consolidated financial statements in "Financial Statements and Supplementary Data" in Part II, Item 8, of this Form 10-K.

For a comparison and discussion of our consolidated liquidity and capital resources and our cash flow activities for 2020 compared with 2019, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7, in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the U.S. Securities and Exchange Commission on February 17, 2021.

Operating Activities from Continuing Operations

Cash provided by (used in) operating activities is generally comprised of EBITDA excluding non-cash items (as defined by us), less cash interest, cash taxes, and pension payments, and changes in working capital. See “Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations ” for discussions around the components of EBITDA excluding non-cash items on a consolidated basis.

The increase in consolidated cash used in operating activities in 2021 compared with 2020 was primarily due to:

• a decrease in EBITDA excluding non-cash items, primarily due to the disposition payment and transaction costs incurred and paid during 2021;

• an unfavorable change to accounts receivable and inventory and favorable change to accounts payable resulting from the decline in business activity and cost of gas from the impact of COVID-19 during 2020; partially offset by

• an increase in benefit for current taxes;

• a decrease in cash interest expense.

We believe our operating activities overall provide a source of sustainable and stable cash flows over the long-term as a result of:

• consistent customer demand driven by the basic nature of the products sold;

• our strong competitive position due to factors including:

◦ high initial development and construction costs;

◦ difficulty in obtaining suitable land on which to operate;

◦ government franchise, leases, or customer contracts;

◦ required government approvals, which may be difficult or time-consuming to obtain;

◦ lack of immediate cost-effective alternatives for the products sold; and

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Liquidity and Capital Resources — (continued)

• product pricing that we expect will keep pace with cost increases as a result of the basic nature of the products sold.

Investing Activities from Continuing Operations

Cash provided by investing activities include proceeds from divestitures of businesses and disposal of fixed assets. Cash used in investing activities include acquisitions of businesses in new and existing segments and capital expenditures.

The decrease in cash used in investing activities for 2021 compared with 2020 is primarily attributable to lower capital expenditures.

Financing Activities from Continuing Operations

Cash provided by financing activities includes new equity and debt issuances. Cash used in financing activities includes distributions paid to our equityholders and the repayment of debt principal.

The increase in cash used in financing activities for 2021 compared with 2020 is primarily attributable to a special dividend of $11.00 per unit declared and paid out of the proceeds from the IMTT Transaction in January 2021, a one-time distribution of $37.386817 per unit declared and paid out of the proceeds from the AA Transaction in October 2021, repurchase of a portion of our 2.00% Convertible Senior Notes outstanding, and the full repayment of $100.0 million senior secured notes at Hawaii Gas.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions and judgments and uncertainties, and potentially could result in materially different results under different conditions. Our critical accounting policies and estimates are discussed below. These estimates and policies are consistent with the estimates and accounting policies followed by the businesses we own and operate.

Business Combinations

Our acquisitions of businesses that we control are accounted for under the purchase method of accounting. The amounts assigned to the identifiable assets acquired and liabilities assumed in connection with acquisitions are based on estimated fair values as of the date of the acquisition, with the remainder, if any, recorded as goodwill. The fair values are determined by our management, taking into consideration information supplied by the management of acquired entities and other relevant information. Such information includes valuations supplied by independent appraisal experts for significant business combinations. The valuations are generally based upon future cash flow projections for the acquired assets, discounted to a present value. The determination of fair values requires significant judgment both by management and outside experts engaged to assist in this process.

Goodwill, Intangible Assets and Property, Plant and Equipment

Significant assets acquired in connection with our acquisition of businesses include contractual arrangements, customer relationships, non-compete agreements, trademarks, property and equipment, and goodwill.

Goodwill and Trademarks

Trademarks are generally considered to be indefinite life intangibles. Trademarks and goodwill are not amortized in most circumstances although it may be appropriate to amortize some trademarks. We are required to perform annual impairment reviews (or more frequently in certain circumstances) for unamortized intangible assets.

ASU No. 2011-08, Intangibles — Goodwill and Other (Topic 350) : Testing Goodwill for Impairment , permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test, as discussed below. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test.

ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, simplifies the measurement of goodwill and no longer requires an entity to perform a hypothetical purchase price allocation when computing the estimated fair value to measure goodwill impairment. Instead, impairment will be assessed by quantifying the difference between the fair value of a reporting unit and its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, on condition that the charge doesn’t exceed the total amount of goodwill allocated to that reporting unit.

If an entity concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if there is a triggering event that indicates impairment, the entity needs to perform a quantitative impairment test. This requires management to make judgments in determining what assumptions to use in the calculation. The first step is to determine the estimated fair value of each reporting unit with goodwill.

The Company estimates the fair value by estimating the present value of the future discounted cash flows or value expected to be realized in a third-party sale. If the recorded net assets are less than the estimated fair value, then no impairment is indicated. If the recorded amount of goodwill exceeds the estimated fair value, an impairment charge is recorded for the excess.

The impairment test for trademarks, which are not amortized, requires the determination of the fair value of such assets. If the fair value of the trademarks is less than their carrying value, an impairment loss is recognized in an amount equal to the difference. We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and/or intangible assets. Such events include, but are not limited to, the potential failure to complete the Merger, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our customer base, or a material negative change in relationship with significant customers.

We test for goodwill impairment on October 1 of each year and between annual tests if a triggering event indicates the possibility of an impairment. We monitor changing business conditions as well as industry and economic factors, among others, for events which could trigger the need for an interim impairment analysis. With the signing of the Merger, the Company will evaluate goodwill for impairment having regard to the Merger transaction value. On December 31, 2021, there were no new triggering events that indicated impairment.

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Property, Plant and Equipment and Intangible Assets

Property and equipment is initially stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the property and equipment after consideration of historical results and anticipated results based on our current plans. Our estimated useful lives represent the period the asset remains in service assuming normal routine maintenance. We review the estimated useful lives assigned to property and equipment when our business experience suggests that they do not properly reflect the consumption of economic benefits embodied in the property and equipment nor result in the appropriate matching of cost against revenue. Factors that lead to such a conclusion may include physical observation of asset usage, examination of realized gains and losses on asset disposals, and consideration of market trends such as technological obsolescence or change in market demand.

Significant intangibles, including contractual arrangements, customer relationships, non-compete agreements, and technology are amortized using the straight-line method over the estimated useful lives of the intangible asset after consideration of historical results and anticipated results based on our current plans.

We perform impairment reviews of property and equipment and intangibles subject to amortization when events or circumstances indicate that fair value of the assets are less than their carrying amount and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. In this circumstance, the impairment charge is determined based upon the amount by which the net book value of the assets exceeds their fair market value. Any impairment is measured by comparing the fair value of the asset to its carrying value.

The estimated fair value of property and equipment and intangible assets is determined by our management and is generally based upon future cash flow projections for the acquired assets, discounted to present value. We use outside valuation experts when management considers that it is appropriate to do so.

We test for goodwill and indefinite-lived intangible assets annually as of October 1 or when there is an indicator of impairment. See Note 7, “Property, Equipment, Land and Leasehold Improvements”, and Note 8, “Intangible Assets and Goodwill”, in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K for financial information and further discussion.

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Accounting Policies, Accounting Changes, and Future Application of Accounting Standards

See Note 2, “Summary of Significant Accounting Policies”, in our consolidated financial statements in “Financial Statements and Supplementary Data” in Part II, Item 8, of this Form 10-K for financial information and further discussion and for a summary of the Company’s significant accounting policies, including a discussion of recently adopted and issued accounting pronouncements.