UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 6-K
_________________________
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2021
Commission file number 1- 33198
 
_________________________
ALTERA INFRASTRUCTURE L.P.
(Exact name of Registrant as specified in its charter)
_________________________
Altera House, Unit 3, Prospect Park, Arnhall Business Park, Westhill, Aberdeenshire, AB32 6FJ, United Kingdom
(Address of principal executive office)
_________________________
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F  ý            Form 40- F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1). Yes  ¨              No  ý
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7). Yes  ¨              No  ý












ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021
INDEX
PAGE
2





ITEM 1 - FINANCIAL STATEMENTS
ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of U.S. Dollars)
As at As at
September 30, December 31,
2021
2020
Restated(1)
Notes $ $
ASSETS
Current assets
Cash and cash equivalents 194,570 235,734
Financial assets 4 36,300 103,514
Accounts and other receivable, net 177,527 222,629
Vessels and equipment classified as held for sale 5 9,900 7,500
Inventory 20,077 16,308
Due from related parties 12 685 9,980
Other assets 32,141 37,326
Total current assets 471,200 632,991
Non-current assets
Financial assets 4 45,738 36,372
Vessels and equipment 7 3,059,822 3,029,415
Advances on newbuilding contracts 8 39,595 127,335
Equity-accounted investments 257,206 241,731
Deferred tax assets 5,030 5,153
Other assets 146,351 185,521
Goodwill 127,113 127,113
Total non-current assets 3,680,855 3,752,640
Total assets 4,152,055 4,385,631
LIABILITIES
Current liabilities
Accounts payable and other 9 271,692 286,295
Other financial liabilities 10 41,854 198,985
Borrowings 11 565,930 362,079
Due to related parties 12 69,615 16,126
Total current liabilities 949,091 863,485
Non-current liabilities
Accounts payable and other 9 107,056 128,671
Other financial liabilities 10 191,644 144,350
Borrowings 11,12 2,007,639 2,397,638
Due to related parties 12 706,713 605,888
Deferred tax liabilities 700 700
Total non-current liabilities 3,013,752 3,277,247
Total liabilities 3,962,843 4,140,732
EQUITY
Limited partners - Class A common units (3,350) (2,505)
Limited partners - Class B common units (221,675) (157,897)
Limited partners - preferred units 384,368 376,512
General partner 6,319 6,828
Accumulated other comprehensive income 2,919 4,071
Non-controlling interests in subsidiaries 20,631 17,890
Total equity 189,212 244,899
Total liabilities and equity 4,152,055 4,385,631
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

(1)See Note 2c iv) for further details.




Page 1 of 42





ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands of U.S. Dollars, except per unit data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021 2020 2021 2020
Notes $ $ $ $
Revenues 12,13 295,837  286,590  835,526  903,453 
Direct operating costs 14 (154,826) (164,425) (486,604) (483,896)
General and administrative expenses 15 (6,163) (3,035) (27,782) (20,143)
Depreciation and amortization 15 (80,576) (79,049) (239,385) (235,189)
Interest expense 11,12 (53,961) (48,036) (151,120) (142,212)
Interest income 10  190  59  900 
Equity-accounted income (loss) 10,985  11,890  40,598  16,263 
Impairment expense, net 7 —  (4,720) —  (184,997)
Gain (loss) on dispositions, net 6 1,397  (19) 10,504  (1,969)
Realized and unrealized gain (loss) on derivative instruments 10 (403) 2,427  11,944  (103,689)
Foreign currency exchange gain (loss) (671) (2,958) (648) (7,347)
Other income (expenses), net 12,17 (35,910) (4,262) (37,767) (9,628)
Income (loss) before income tax (expense) benefit (24,281) (5,407) (44,675) (268,454)
Income tax (expense) benefit
Current (1,703) (1,639) (3,896) (5,240)
Deferred —  1,091  —  560 
Net income (loss) (25,984) (5,955) (48,571) (273,134)
Attributable to:
Limited partners - common units (32,282) (14,129) (66,551) (288,221)
General partner (247) (106) (509) (2,156)
Limited partners - preferred units 7,880  8,038  23,640  24,114 
Non-controlling interests in subsidiaries (1,335) 242  (5,151) (6,871)
(25,984) (5,955) (48,571) (273,134)
Basic and diluted earnings (loss) per limited partner common unit (0.08) (0.03) (0.16) (0.70)
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
Page 2 of 42



ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands of U.S. Dollars)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021 2020 2021 2020
Notes $ $ $ $
Net income (loss) (25,984) (5,955) (48,571) (273,134)
Other comprehensive income (loss)
Items that may be reclassified subsequently to profit or loss:
To interest expense:
Realized gain on qualifying cash flow hedging instruments 10 (182) (206) (568) (622)
To equity income:
Realized gain on qualifying cash flow hedging instruments (177) (251) (584) (765)
Total other comprehensive income (loss) (359) (457) (1,152) (1,387)
Comprehensive income (loss) (26,343) (6,412) (49,723) (274,521)
Attributable to:
Limited partners - common units (32,638) (14,583) (67,694) (289,597)
General partner (250) (109) (518) (2,167)
Limited partners - preferred units 7,880  8,038  23,640  24,114 
Non-controlling interests in subsidiaries (1,335) 242  (5,151) (6,871)
(26,343) (6,412) (49,723) (274,521)
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

Page 3 of 42



ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands of U.S. Dollars and units)
PARTNERS’ EQUITY
Limited Partners
Class A Common Units
#
Class A Common Units and Additional Paid-in Capital
$
Class B Common Units
#
Class B Common Units and Additional Paid-in Capital
$
Preferred
Units
#
Preferred
Units
$
General
Partner
$
Accumulated Other Comprehensive Income
$
Non- controlling Interests
$
Total
Equity
$
Balance as at January 1, 2021 5,217  (2,505) 405,932  (157,897) 15,489  376,512  6,828  4,071  17,890  244,899 
Net income (loss) —  (845) —  (65,706) —  23,640  (509) —  (5,151) (48,571)
Other comprehensive income (loss) —  —  —  —  —  —  —  (1,152) —  (1,152)
Distributions declared:
Preferred units - Series A ($0.4531 per unit) —  —  —  —  —  (5,326) —  —  —  (5,326)
Preferred units - Series B ($0.5313 per unit) —  —  —  —  —  (5,216) —  —  —  (5,216)
Preferred units - Series E ($0.5547 per unit) —  —  —  —  —  (5,218) —  —  —  (5,218)
Other distributions —  —  —  —  —  —  —  —  (2,058) (2,058)
Contribution of Capital from Brookfield —  —  —  1,928  —  —  —  —  —  1,928 
Distribution to non-controlling interests —  —  —  —  —  —  —  —  (8,000) (8,000)
Contribution from non-controlling interests —  —  —  —  —  —  —  —  17,950  17,950 
Repurchase of preferred units —  —  —  —  (1) (24) —  —  —  (24)
Balance as at September 30, 2021 5,217  (3,350) 405,932  (221,675) 15,488  384,368  6,319  2,919  20,631  189,212 

Page 4 of 42



     
  Limited Partners  
  Class A Common Units
#
Class A Common Units and Additional Paid-in Capital
$
Class B Common Units
#
Class B Common Units and Additional Paid-in Capital
$
Common
Units
#
Common Units and Additional Paid-in Capital
$
Preferred
Units
#
Preferred
Units
$
General
Partner
$
Accumulated Other Comprehensive Income
$
Non- controlling Interests
$
Total
Equity
$
Balance as at January 1, 2020 —  —  —  —  411,149  169,737  15,800  384,274  9,587  4,410  29,794  597,802 
Exchange of equity instruments 5,217  2,154  405,932  167,583  (411,149) (169,737) —  —  —  —  —  — 
Net income (loss) —  (3,657) —  (284,564) —  —  —  24,114  (2,156) —  (6,871) (273,134)
Other comprehensive income (loss) —  —  —  —  —  —  —  —  —  (1,387) —  (1,387)
Distributions declared:
Preferred units - Series A ($0.4531 per unit) —  —  —  —  —  —  —  (8,157) —  —  —  (8,157)
Preferred units - Series B ($0.5313 per unit) —  —  —  —  —  —  —  (7,971) —  —  —  (7,971)
Preferred units - Series E ($0.5547 per unit) —  —  —  —  —  —  —  (7,986) —  —  —  (7,986)
Other distributions —  —  —  —  —  —  —  —  —  —  (4,750) (4,750)
Contribution of Capital from Brookfield —  —  —  33,046  —  —  —  —  —  —  —  33,046 
Equity based compensation and other —  (5) —  (402) —  —  —  —  —  —  —  (407)
Balance as at September 30, 2020 5,217  (1,508) 405,932  (84,337) —  —  15,800  384,274  7,431  3,023  18,173  327,056 
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
Page 5 of 42



ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. Dollars)
 
Nine Months Ended
September 30,
2021 2020
Notes $ $
Operating Activities
Net income (loss) (48,571) (273,134)
Adjusted for the following items:
Depreciation and amortization 7 239,385  235,189 
Equity-accounted (income) loss, net of distributions received (12,348) 8,919 
Impairment expense, net 7 —  184,997 
(Gain) loss on dispositions, net 6 (10,504) 1,969 
Unrealized (gain) loss on derivative instruments 10 (165,989) 55,363 
Deferred income tax expense (benefit) —  (560)
Provisions and other items 9 (293) (3,503)
Other non-cash items 65,654  19,086 
Changes in non-cash working capital, net 51,263  82 
Net operating cash flow 118,597  228,408 
Financing Activities
Proceeds from borrowings 11 85,560  291,030 
Repayments of borrowings and settlement of related derivative instruments 10,11 (282,891) (239,910)
Financing costs related to borrowings (7,720) (6,162)
Proceeds from borrowings related to sale and leaseback of vessels 8 71,400  47,673 
Repayments of borrowings related to sale and leaseback of vessels 8 (8,518) — 
Financing costs related to borrowings from sale and leaseback of vessels 8 (584) (65)
Proceeds from borrowings from related parties 12 147,000  155,000 
Prepayment of borrowings from related parties 12 (30,000) — 
Lease liability repayments (10,861) (17,115)
Capital contribution by non-controlling interests 17,950  — 
Distributions to limited partners and preferred unitholders 16 (15,760) (24,114)
Distributions to non-controlling interests (10,058) (4,750)
Repurchase of preferred units (24) — 
Net financing cash flow (44,506) 201,587 
Investing Activities
Additions
Vessels and equipment 7,8 (198,459) (449,916)
Equity-accounted investments (3,711) (2,812)
Dispositions
Vessels and equipment 6 34,979  18,437 
Restricted cash 4 51,885  39,227 
Acquisition of company (net of cash acquired of $6.4 million) —  6,430 
Net investing cash flow (115,306) (388,634)
Cash and cash equivalents
Change during the period (41,215) 41,361 
Impact of foreign exchange on cash 51  (3,838)
Balance, beginning of the period 235,734  199,388 
Balance, end of the period 194,570  236,911 
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
Page 6 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

1.Nature and Description of the Partnership

Altera Infrastructure L.P. and its wholly-owned or controlled subsidiaries (collectively, the Partnership) is an international infrastructure services provider to the offshore oil and gas industry, focused on the ownership and operation of critical infrastructure assets in offshore oil regions of the North Sea, Brazil and the East Coast of Canada. The Partnership was formed as a limited partnership established under the laws of the Republic of the Marshall Islands in August 2006 and the Partnership's affairs are governed by the Marshall Islands Limited Partnership Act and its limited partnership agreement as amended. The Partnership is a subsidiary of Brookfield Business Partners L.P. (NYSE: BBU) (TSX: BBU.UN) (or with its affiliates, Brookfield).

The Partnership’s preferred equity units are listed on the New York Stock Exchange under the ticker symbols “ALIN PR A”, “ALIN PR B” and “ALIN PR E” respectively.

The registered head office of the Partnership is Altera House, Unit 3, Prospect Park, Arnhall Business Park, Westhill, Aberdeenshire, AB32 6FJ, United Kingdom.

2.Significant Accounting Policies

a.Basis of presentation

These unaudited interim condensed consolidated financial statements of the Partnership have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting (or IAS 34), as issued by the International Accounting Standards Board (or IASB). These interim condensed consolidated financial statements do not include all the information and disclosures required in annual financial statements, and should be read in conjunction with the Partnership’s annual consolidated financial statements as at and for the year ended December 31, 2020, which are included in the Partnership's Annual Report on Form 20-F for the year ended December 31, 2020. The unaudited interim condensed consolidated financial statements have been prepared under the assumption that the Partnership operates on a going concern basis and have been presented in U.S. dollars rounded to the nearest thousand unless otherwise indicated.

The accounting policies adopted in the preparation of these interim condensed consolidated financial statements are consistent with those followed in the preparation of the Partnership’s annual consolidated financial statements as at and for the year ended December 31, 2020, except for the adoption of new standards and changes in the Partnership's accounting policies effective as of 1 January 2021, as described below in Note 2c. There have been no significant changes to the method of determining significant estimates and judgments since December 31, 2020.

These unaudited interim condensed consolidated financial statements were approved by management and authorized for issue on November 5, 2021.

b.Going concern

As at September 30, 2021, the Partnership had a working capital deficit of $477.9 million primarily relating to scheduled maturities and repayments of $565.9 million of outstanding borrowings during the 12 months ending September 30, 2022, which amounts were classified as current as at September 30, 2021.

The working capital deficit of $477.9 million as at September 30, 2021, has increased from $230.5 million as at December 31, 2020. The increase in the working capital deficit was primarily due to a decrease in financial assets of $67.2 million mainly relating to amounts held in escrow for a shuttle tanker newbuilding yard installment payment as at December 31, 2020, a decrease in accounts receivable and other of $45.1 million, an increase of debt repayments of $203.9 million mainly due to the maturity of the Partnership's $250 million senior unsecured bonds due in the third quarter of 2022 and and increase in related party borrowings $53.5 million, partially offset by a decrease in other financial liabilities of $157.1 million primarily due to the termination or amendment of certain interest rate swaps during the nine months ended September 30, 2021 and accounts payable and other of $14.6 million.

Based on these factors, the Partnership will need to obtain additional sources of financing, in addition to amounts generated from operations, to meet its obligations and commitments and the minimum liquidity requirements under its financial covenants. During the three months ended September 30, 2021, the Partnership completed various measures to improve its debt maturity profile and enhance its liquidity and financial flexibility. See Notes 12a and 16 for additional information. Other potential sources of financing that the Partnership is actively pursuing, or may consider pursuing, during the one-year period to September 30, 2022, include entering into new debt facilities, borrowing additional amounts under existing facilities, the refinancing or extension of certain borrowings, selling certain assets, seeking joint venture partners for the Partnership's business interests and/or capital raises. Additional potential sources of amounts generated from operations include the extensions and redeployment of existing assets.

The Partnership is actively pursuing financing initiatives described above, which it considers probable of completion based on the Partnership’s history of being able to raise and refinance borrowings for similar types of vessels and based on the Partnership's assessment of current conditions and estimated future conditions. The Partnership is in various stages of progression on these matters.

Based on the Partnership’s liquidity at the date of these unaudited interim condensed consolidated financial statements, the liquidity it expects to generate from operations over the following year, and by incorporating the Partnership’s plans to increase its liquidity that it
Page 7 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
considers probable of completion, the Partnership expects that it will have sufficient liquidity to enable the Partnership to continue as a going concern for at least the one-year period to September 30, 2022.

c.New standards, interpretations, amendments and policies adopted by the Partnership

The Partnership has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

i.Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

In August 2020, the International Accounting Standards Board published Interest Rate Benchmark Reform — Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) (or Phase 2 Amendments), effective January 1, 2021. The Phase 2 Amendments provide additional guidance to address the issues that will arise during the transition of benchmark interest rates and primarily relate to the modification of financial assets, financial liabilities and lease liabilities where the basis for determining the contractual cash flow changes as a result of the replacement of an existing interest rate benchmark, allowing for prospective application of the new applicable benchmark interest rate, and to the application of hedge accounting, providing an exception such that changes in the designation of hedge accounting relationships that are needed to reflect the changes required by the benchmark interest rate reform do not result in the discontinuation of hedge accounting. The Partnership adopted the Phase 2 Amendments on January 1, 2021. The adoption of the amendments did not have an impact on the Partnership's unaudited interim condensed consolidated financial statements as at and for the three and nine months ended September 30, 2021. The Partnership's risk management strategy has not changed as a result of these matters.

Progress towards implementation of alternative benchmark interest rates

The Partnership is exposed to the impact of interest rate changes, primarily through its floating-rate borrowings that require it to make interest payments based on LIBOR. The Partnership uses interest rate swaps to reduce its exposure to market risk from changes in interest rates.

The Partnership plans to transition the majority of its LIBOR-linked contracts to risk-free rates through amendments to fallback clauses in its floating-rate credit facilities and debt instruments which would change the basis for determining the interest rate cash flows from LIBOR to a risk-free rate at an agreed point in time. During March 2021, ICE Benchmark Administration, an administrator of regulated benchmarks, announced that it has delayed the cessation of the publication of the overnight, one, three, six and 12 month USD LIBOR until June 30, 2023.

Interest rate benchmark transition for non-derivative financial liabilities

As at September 30, 2021, the Partnership had $1.7 billion of outstanding LIBOR-referenced borrowings summarized as follows:
Principal Weighted-average term Transition Progress
$ (years)
Revolving Credit Facilities 361,411  2.39 Expected to amend fallback clauses prior to cessation of publication of LIBOR.
Term Loans 1,122,197  4.10
Public Bonds 200,000  3.05
Total 1,683,608  3.61

Interest rate benchmark transition for derivatives

As at September 30, 2021, the Partnership had an outstanding notional balance of $0.6 billion of LIBOR-referenced interest rate swap agreements.

For all of the Partnership’s LIBOR-referenced derivatives, the International Swaps and Derivative Association’s fallback clauses were made available in late-2020 and the Partnership and its counterparties expect to adhere to this protocol. Such adherence would result in all legacy trade under the derivatives following, on the cessation of LIBOR, the fallback clause provided in the protocol.

ii.Segments

As at January 1, 2021, the Partnership modified the cost allocations between its operating segments. The Partnership's components of the business for which discrete financial information is reviewed to assess performance and make decisions regarding resource allocation is still based upon five operating segments. However, the allocation of certain expenditures, relating to direct operating costs and general and administrative expenses, has been modified to show the impact of certain corporate direct operating costs in the corporate segment before reallocation to the operating segments. Additionally, certain expenditures that relate directly to corporate activities will be retained within the corporate segment. Previously all of these expenditures were allocated directly to the five operating segments based on an estimated use of corporate resources. The 2020 comparative information has been restated as a result of this change and the modifications have been deemed to not be material for all operating segments and all periods presented.



Page 8 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
iii.Estimation uncertainty

COVID-19

The Partnership has not identified any new significant developments related to the COVID-19 pandemic which would impact key critical judgments, estimates and assumptions that affect the reported and contingent amount of assets, liabilities, revenues and expenses, including whether any additional indicators of impairment were present for the three and nine months ended September 30, 2021. The Partnership will continue to monitor the COVID-19 situation and review its critical estimates and judgements as circumstances evolve.

iv.Related Party Borrowings Reclassification

The accounting policy elected historically by the Partnership has reflected its long-term debt within two line items, Borrowings and Due to related parties. Borrowings has included publicly listed debt held by third parties and by Brookfield. The related party component of publicly listed Borrowings has been historically disclosed in the notes to the financial statements.

On August 27, 2021, the Partnership completed a refinancing with Brookfield (or the Brookfield Exchanges) (see Note 12a for additional information) and voluntarily revised the Partnerships accounting policy to classify all debt held by Brookfield, regardless of the nature of the instrument as Due to related parties. The Partnership believes it is preferable to have a consistent practice in showing all related party debt on the same financial statement line items.

The Partnership has reflected this change retrospectively by restating its comparative consolidated statement of financial position. Following the change, debt will continue to be included in two line items, Borrowings, which will include only debt held by third-party counterparties and Due to related parties, which will include all debt where Brookfield or other affiliates are the ultimate counterparty, regardless of whether a debt instrument is publicly listed. Additionally, all accrued interest on related party debt will be reflected within the Due to related parties line item rather than within Accounts payable and other, as previously reported.

The following table provides a reconciliation of the resulting reclassifications directly related to the change in accounting policy discussed above to the Partnerships consolidated statements of financial position:
As at As at
December 31, 2020 December 31, 2020
As Previously Reported Reclassifications
Restated(1)
$ $ $
Accounts payable and other 302,414 (16,119) 286,295
Due to related parties 7 16,119 16,126
Total current liabilities 302,421 302,421
Borrowings 2,808,898 (411,260) 2,397,638
Due to related parties 194,628 411,260 605,888
Total non-current liabilities 3,003,526 3,003,526
Total liabilities 3,305,947 3,305,947
(1)The Partnership has elected to restate its December 31, 2020 consolidated statement of financial position to retrospectively show the change in accounting policy adopted during the three months ended September 30, 2021. The impact of the accounting policy change as at December 31, 2020 is a reclassification of the Partnerships $411.3 million outstanding senior unsecured bonds held by Brookfield from Borrowings (non-current) to Due to related parties (non-current) and $16.1 million in accrued interest on said bonds from Accounts payable and other (current) to Due to related parties (current).


Page 9 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

3.Fair Value of Financial Instruments

The following tables provide the details of the Partnership's financial instruments and their associated classifications as at September 30, 2021 and December 31, 2020:
  September 30, 2021
December 31, 2020
Restated(6)
Measurement Basis
FVTPL(5)
$
Amortized cost
$
Total
$
FVTPL(5)
$
Amortized cost
$
Total
$
Financial assets
Cash and cash equivalents —  194,570  194,570  —  235,734  235,734 
Financial assets (current and non-current) 534  81,504  82,038  6,497  133,389  139,886 
Accounts and other receivable, net (current and
non-current) (1)
—  168,845  168,845  —  212,316  212,316 
Due from related parties (current and non-current) —  685  685  —  9,980  9,980 
Other assets (current and non-current) (2)
—  55,335  55,335  —  59,905  59,905 
Total 534  500,939 501,473 6,497 651,324 657,821
Financial liabilities
Accounts payable and other (3)
—  90,334  90,334  —  81,850  81,850 
Other financial liabilities (current and non-
current) (4)
31,645  201,853  233,498  203,597  139,738  343,335 
Due to related parties (current and non-current) —  776,328  776,328  —  622,014  622,014 
Borrowings (current and non-current) —  2,573,569  2,573,569  —  2,759,717  2,759,717 
Total 31,645  3,642,084 3,673,729 203,597 3,603,319 3,806,916
(1)Excludes sales tax receivable of $8.7 million as at September 30, 2021 (December 31, 2020 - $10.3 million).
(2)Includes investments in finance leases.
(3)Includes accounts payable and lease liabilities. Refer to Note 9 below.
(4)Includes derivative instruments, obligations relating to finance leases and other financial liabilities. Refer to Note 10 below.
(5)Fair value through profit or loss (or FVTPL).
(6)See Note 2c iv) for additional information.

The fair value of all financial assets and liabilities as at September 30, 2021 approximated their carrying values, with the exception of the borrowings, where fair value which was determined using Level 1 and Level 2 inputs and resulted in a fair value of $2,534 million (December 31, 2020 Restated: $2,753 million) compared to a carrying value of $2,574 million (December 31, 2020 Restated: $2,760 million). The fair value of the Partnership’s borrowings is either based on quoted market prices or estimated using discounted cash flow analysis based on rates currently available for debt with similar terms and remaining maturities and the current credit worthiness of the Partnership.

In addition, within the December 31, 2020 Restated Due to related parties (current and non-current) shown above, $411.3 million of the outstanding senior unsecured bonds held by Brookfield were fair valued using Level 1 and Level 2 inputs and resulted in a fair value of $351.4 million.

Fair value hierarchical levels - financial instruments

For assets and liabilities that are recognized at fair value on a recurring basis, the Partnership determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. There were no transfers between levels during the three and nine months ended September 30, 2021, nor during the year ended December 31, 2020. Additionally, there were no changes in the Partnership’s valuation processes, valuation techniques, and types of inputs used in the fair value measurements during the three and nine months ended September 30, 2021. The following table provides the fair value measurement hierarchy of the Partnership's financial assets and
Page 10 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
liabilities measured at fair value through profit or loss on a recurring basis as at September 30, 2021 and December 31, 2020:
September 30, 2021 December 31, 2020
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
$ $ $ $ $ $
Financial assets
Derivative instruments —  534  —  —  6,497  — 
Total —  534  —  —  6,497  — 
Financial liabilities
Derivative instruments —  31,645  —  —  203,597  — 
Total —  31,645  —  —  203,597  — 


4.Financial Assets
September 30, 2021 December 31, 2020
$ $
Current
Restricted cash (1)
35,766  97,017 
Derivative instruments (2)
534  6,497 
Total current 36,300  103,514 
Non-current
Restricted cash (1)
45,738  36,372 
Total non-current 45,738  36,372 
(1)Restricted cash as at September 30, 2021 includes funds for loan facility repayments, withholding taxes and office lease prepayments (December 31, 2020 - amounts held in escrow for a shuttle tanker newbuilding yard installment payment, a deposit related to the sale of a vessel, funds for loan facility repayments, withholding taxes and office lease prepayments).
(2)See Note 10 for additional information.


5.Vessels and Equipment Classified as Held for Sale
September 30, 2021 December 31, 2020
Vessel Segment $ $
Navion Anglia Shuttle Tanker Segment —  4,400 
Navion Oslo Shuttle Tanker Segment —  3,100 
Navion Stavanger Shuttle Tanker Segment 9,900  — 
9,900  7,500 
The fair value of vessels and equipment classified as held for sale measured on a non-recurring basis was $9.9 million and $7.5 million as at September 30, 2021 and December 31, 2020, respectively.


Page 11 of 42




6.Gain (Loss) on Dispositions, Net
Period Vessel Segment Net Proceeds ($) Gain (Loss) on Dispositions, Net ($)
Q3-21 Navion Anglia Shuttle Tanker Segment 6,144  1,397 
Gain (loss) on dispositions, net for the three months ended September 30, 2021
1,397 
Q2-21 Dampier Spirit FSO Segment 3,970  3,970 
Q2-21 Navion Oceania Shuttle Tanker Segment 10,618  2,576 
Q2-21 Navion Oslo Shuttle Tanker Segment 3,160  (29)
Q2-21 Stena Natalita Shuttle Tanker Segment 8,198  (299)
Q2-21(1)
Apollo Spirit FSO Segment 2,889  2,889 
Gain (loss) on dispositions, net for the nine months ended September 30, 2021
10,504 
Q3-20 Navion Bergen Shuttle Tanker Segment 3,385  (19)
Gain (loss) on dispositions, net for the three months ended September 30, 2020
(19)
Q2-20
HiLoad DP unit
Shuttle Tanker Segment —  (1,388)
Q1-20 Petrojarl Cidade de Rio das Ostras FPSO Segment 2,282  (92)
Q1-20 Navion Hispania Shuttle Tanker Segment 6,715  (385)
Q1-20 Stena Sirita Shuttle Tanker Segment 6,055  (85)
Gain (loss) on dispositions, net for the nine months ended September 30, 2020
(1,969)
(1)The Apollo Spirit FSO was sold in December 2020 and a gain on sale of $5.4 million was recorded as at December 31, 2020. An additional gain of $2.9 million was recorded in June 2021 after the official recycling of the vessel was completed based on a recycling rate agreed upon with the buyer per the terms of the contract.


7.Vessels and Equipment
September 30, 2021 December 31, 2020
$ $
Gross carrying amount:
Opening balance at beginning of year 4,025,498  3,531,827 
Additions 28,897  41,346 
Dispositions (1)
(48,914) (29,242)
Transferred from advances on newbuilding contracts 253,301  543,131 
Vessels and equipment reclassified as held for sale (2)
(36,500) (61,564)
Closing balance at end of period 4,222,282  4,025,498 
Accumulated Depreciation and Impairment:
Opening balance at beginning of year (996,083) (506,111)
Depreciation and amortization (3)
(226,893) (295,610)
Impairment expense, net (4)
—  (245,396)
Dispositions (1)
33,916  15,050 
Vessels and equipment reclassified as held for sale (2)
26,600  35,984 
Closing balance at end of period (1,162,460) (996,083)
Net book value 3,059,822  3,029,415 
(1)Includes the sale of vessels and the disposal upon the replacement of certain components of vessels and equipment.
(2)See Note 5 for additional information.
(3)Excludes depreciation and amortization on the Partnership's right-of-use assets, office equipment and software.
(4)See below for additional information. Excludes impairment expense on vessels and equipment classified as held for sale during the nine months ended September 30, 2021 and year ended December 31, 2020.

Impairment expense, net

The Partnership incurred no impairment expense for the three and nine months ended September 30, 2021. The table below indicates impairment expense, net for the three and nine months ended September 30, 2020.
Page 12 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
Period Vessel Segment Event Fair Value Hierarchical Level Valuation Techniques and Key Inputs Impairment Expense
$
Q3 2020(1)
Apollo Spirit FSO Expected sale of the vessel Level 2 Fair value less cost to sell using an appraised valuation 1,620 
Q3 2020(1)
Navion Anglia Shuttle Tanker Expected sale of the vessel Level 2 Fair value less cost to sell using an appraised valuation 3,100 
Impairment expense, net for the three months ended September 30, 2020 4,720 
Q2 2020(1)
Dampier Spirit FSO Expected sale of the vessel Level 2 Fair value less cost to sell using an appraised valuation 6,685 
Q2 2020 Navion Bergen Shuttle Tanker Expected sale of the vessel Level 2 Fair value less cost to sell using an appraised valuation 1,715 
Q1 2020 ALP Forward Towage Change in the expected earnings of the vessels Level 3 Discounted cash flow valuation 8,361 
Q1 2020 ALP Winger Towage 12,479 
Q1 2020 ALP Ippon Towage 1,360 
Q1 2020 ALP Ace Towage 731 
Q1 2020 Petrojarl I FPSO Change in the expected earnings of the vessel Level 3 Discounted cash flow valuation 42,367 
Q1 2020 Petrojarl Varg FPSO Change in future redeployment assumptions Level 3 Discounted cash flow valuation 27,202 
Q1 2020 Petrojarl Knarr FPSO Change in expected earnings of the vessel Level 3 Discounted cash flow valuation 56,599 
Q1 2020 Navion Stavanger Shuttle Tanker Change in expected earnings of the vessel Level 3 Discounted cash flow valuation 3,606 
Q1 2020 Navion Gothenburg Shuttle Tanker Change in future redeployment assumptions Level 3 Discounted cash flow valuation 16,772 
Q1 2020 Navion Bergen Shuttle Tanker Expected sale of the vessel Level 2 Fair value less cost to sell using an appraised valuation 2,400 
Impairment expense, net for the nine months ended September 30, 2020 184,997 
(1)Vessels and equipment were classified as held for sale as at September 30, 2020.

The fair value of vessels and equipment measured on a non-recurring basis was $nil and $140.5 million as at September 30, 2021 and December 31, 2020, respectively.

8.Advances on Newbuilding Contracts
September 30, 2021 December 31, 2020
$ $
Opening balance at beginning of year 127,335  297,100 
Additions 164,807  368,588 
Capitalized borrowing costs 754  4,778 
Transferred to vessels and equipment (253,301) (543,131)
Closing balance at end of period 39,595  127,335 

As at September 30, 2021, the Partnership has commitments relating to shipbuilding contracts for one shuttle tanker newbuilding, which is expected to be delivered in 2022. As at September 30, 2021, gross payments made towards this vessel was $39.6 million. The Partnership secured $105.6 million of borrowings relating to this shuttle tanker newbuilding, which as at September 30, 2021 had an undrawn balance of $73.9 million (see Note 11 for additional information).

As at September 30, 2021, the contractual maturities of the Partnership's obligations under its newbuilding contracts were as follows:
Total 1 Year 2 Years 3 Years 4 Years 5 Years Thereafter
(in millions of U.S. Dollars)
Newbuilding contracts 86.3  86.3  —  —  —  —  — 


Page 13 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

9.Accounts Payable and Other
September 30, 2021
December 31, 2020 Restated(3)
$ $
Current
Accounts payable 64,416  46,022 
Accrued liabilities 113,954  127,541 
Provisions (1)
1,299  7,522 
Deferred revenues 77,970  91,392 
Lease liabilities 14,053  13,818 
Total current 271,692  286,295 
Non-current
Deferred revenues 483  11,616 
Lease liabilities 11,865  22,010 
Provisions (1)
60,220  60,179 
Decommissioning liability (2)
33,495  33,901 
Other 993  965 
Total non-current 107,056  128,671 
(1)See below for additional information.
(2)Decommissioning liability relates to the Partnership’s requirement to remove the sub-sea mooring and riser system associated with the Randgrid FSO unit and restore the environment surrounding the facility. The liability represents the estimated cost to remove this equipment and restore the environment and takes into account the estimated timing of the cost to be incurred in future periods. There were no changes in the Partnership's valuation process, valuation techniques, and types of inputs used to determine the liability as at September 30, 2021.
(3)See Note 2c iv) for additional information.

Provisions
September 30, 2021 December 31, 2020
$ $
Opening balance at beginning of year 67,701  67,906 
Additional provisions recognized 153  12,033 
Reduction arising from payments / derecognition (6,335) (12,238)
Closing balance at end of period 61,519  67,701 


10.Other Financial Liabilities
September 30, 2021 December 31, 2020
$ $
Current
Derivative instruments 30,867  189,647 
Obligations relating to finance leases 10,987  8,839 
Other —  499 
Total current 41,854  198,985 
Non-current
Derivative instruments 778  13,950 
Obligations relating to finance leases 190,866  130,400 
Total non-current 191,644  144,350 

As at September 30, 2021, the contractual maturities of the Partnership's obligations relating to the finance leases under the sale and leaseback transactions were as follows:
Total 1 Year 2 Years 3 Years 4 Years 5 Years Thereafter
(in millions of U.S. Dollars)
Obligations related to finance leases 204.5  11.3  11.3  11.3  11.3  11.3  148.0 

Page 14 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
The liability for the finance leases accrues interest at a variable rate of LIBOR plus a margin of 2.85%. As at September 30, 2021, the Partnership was in compliance with all covenant requirements of its finance leases.

Derivative Financial Instruments

The Partnership’s activities expose it to a variety of financial risks, including liquidity risk, interest rate risk, foreign currency risk and credit risk. The Partnership selectively uses derivative financial instruments principally to manage certain of these risks.

The aggregate amount of the Partnership's derivative financial instrument positions is as follows:
September 30, 2021 December 31, 2020
Financial Asset Financial Liability Financial Asset Financial Liability
$ $ $ $
Interest rate swaps —  31,070  —  203,597 
Foreign currency forward contracts 534  575  6,497  — 
Total 534  31,645  6,497  203,597 
Total current 534  30,867  6,497  189,647 
Total non-current —  778  —  13,950 

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Partnership is exposed to the impact of interest rate changes, primarily through its floating-rate borrowings that require it to make interest payments based on LIBOR. Significant increases in interest rates could adversely affect operating margins, results of operations and the Partnership's ability to service its debt. The Partnership uses interest rate swaps to reduce its exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with the Partnership's floating-rate debt.

The Partnership enters into interest rate swaps, which exchange a receipt of floating interest for a payment of fixed interest, to reduce the Partnership’s exposure to interest rate variability on its outstanding floating-rate debt. The Partnership has not designated, for accounting purposes, any of its interest rate swaps as hedges of variable rate debt. Certain of the Partnership's interest rate swaps are secured by vessels.

In February 2021, the Partnership terminated two and amended two of its interest rate swap agreements, which as at December 31, 2020, had a total notional amount of $600.3 million and a total fair value liability of $147.5 million. These interest rate swaps included early termination provisions, which if exercised, would have terminated these interest rate swaps in February 2021. Following the terminations and amendments, the total notional amount relating to the two remaining interest rate swap agreements was reduced to $132.0 million in April 2021. These agreements include mandatory termination provisions which terminate these interest rate swaps February 2022.

In March 2021, the Partnership terminated one of its interest rate swaps, which as at December 31, 2020, had a notional value of $90.4 million and a fair value liability of $37.1 million. This interest rate swap included an early termination provision, which was exercised in March 2021.

As at September 30, 2021, the Partnership and its consolidated subsidiaries were committed to the following interest rate swap agreements:
Interest
Rate
Index
Notional
Amount
$
Fair Value /
Carrying
Amount of
Asset (Liability)(1)
$
Weighted-
Average
Remaining
Term
(years)
Fixed
Interest
Rate
(%)(2)
U.S. Dollar-denominated interest rate swaps (3)
LIBOR 152,903  (8,392) 0.80  2.6  %
U.S. Dollar-denominated interest rate swaps (4)
LIBOR 424,100  (22,678) 0.98  2.5  %
577,003  (31,070)
(1)Excludes accrued interest of $3.5 million.
(2)Excludes the margins the Partnership pays on its variable-rate debt, which as at September 30, 2021, ranged between 1.10% and 6.50%.
(3)Notional amount remains constant over the term of the swap, unless the swap is partially terminated.
(4)Principal amount reduces quarterly or semi-annually.

Total realized and unrealized gain (loss) on the Partnership's derivative financial instruments that are not designated, for accounting purposes, as hedges are recognized in earnings and reported in realized and unrealized gain (loss) on derivative instruments in the unaudited interim condensed consolidated statements of income (loss) for the three and nine months ended September 30, 2021 and 2020 as follows:
Page 15 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
  Three Months Ended September 30, Nine Months Ended September 30,
  2021 2020 2021 2020
$ $ $ $
Realized gain (loss) on derivative instruments
Interest rate swaps (3,528) (14,244) (160,398) (45,887)
Foreign currency forward contracts 343  675  6,353  (2,439)
(3,185) (13,569) (154,045) (48,326)
Unrealized gain (loss) on derivative instruments
Interest rate swaps 3,651  14,174  172,527  (56,667)
Foreign currency forward contracts (869) 1,822  (6,538) 1,304 
2,782  15,996  165,989  (55,363)
Total realized and unrealized gain (loss) on derivative instruments (403) 2,427  11,944  (103,689)

The following table presents the notional amounts underlying the Partnership's derivative financial instruments by term to maturity as at September 30, 2021:
Total 1 Year 2 Years 3 Years 4 Years 5 Years Thereafter
(in millions of U.S. Dollars)
Fair value through profit or loss
Interest rate swaps 577.0  554.9  3.8  3.8  3.8  3.8  6.9 
Foreign currency forward contracts 49.0  49.0  —  —  —  —  — 
Total 626.0  603.9  3.8  3.8  3.8  3.8  6.9 


11.Borrowings
Weighted average term Weighted average rate
September 30, 2021
December 31, 2020 Restated(1)
September 30, 2021
December 31, 2020 Restated(1)
September 30, 2021
December 31, 2020 Restated(1)
$ $ (years) (years) (%) (%)
Revolving Credit Facilities 361,411  439,600  2.39 3.07 2.73  2.81 
Term Loans 1,326,490  1,426,370  4.93 5.51 2.65  2.69 
Public Bonds (1)
727,480  726,826  1.82 2.57 7.51  7.53 
Non-Public Bonds 187,823  206,870  4.29 5.04 6.13  6.13 
Total 2,603,204  2,799,666  3.66 4.33 4.27  4.22 
Less: deferred financing costs and other (29,635) (39,949)
Total borrowings 2,573,569  2,759,717 
Less current portion (565,930) (362,079)
Long-term portion 2,007,639  2,397,638 
(1)See Note 2c iv) for additional information.

Revolving Credit Facilities

As at September 30, 2021, the Partnership had two revolving credit facilities (December 31, 2020 - two), which, as at such date, provided for total borrowings of up to $361.4 million (December 31, 2020 - $439.6 million), and were fully drawn (December 31, 2020 - fully drawn).

Term Loans

As at September 30, 2021, the Partnership had term loans which totaled $1.3 billion (December 31, 2020 - $1.4 billion). The term loans reduce over time with monthly, quarterly or semi-annual payments and have varying maturities through 2034. As at September 30, 2021, the Partnership, a subsidiary of the Partnership or the other owner in the Partnership's 50%-owned subsidiaries had guaranteed all of these term loans.

In February 2021, the Partnership refinanced an existing term loan relating to the financing of the Petrojarl I FPSO unit. The new facility provides for borrowings of $75.0 million, which reduces over time with monthly payments and matures in February 2024. The interest payments on the new facility are based on LIBOR plus a margin of 3.50% per annum.

Page 16 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
Public and Non-Public Bonds

As at September 30, 2021, the Partnership had public bonds outstanding which totaled $727.5 million (December 31, 2020 Restated - $726.8 million) and non-public bonds outstanding which totaled $187.8 million (December 31, 2020 - $206.9 million). The public bonds have varying maturities through 2024 and the non-public bonds reduce over time with semi-annual payments and varying maturities through 2027.

In August 2021, a subsidiary of the Partnership entered into an agreement with Brookfield, which involved the exchange of $411.3 million in aggregate principal amount of the 8.50% Senior Notes due 2023 for newly issued 11.50% Senior Secured PIK Notes due August 2026 (or the New PIK Notes) in an equal aggregate principal amount. See Note 12a for a detailed description of the Brookfield Exchanges.

As at September 30, 2021, the contractual maturities of the Partnership were as follows:
Total 1 Year 2 Years 3 Years 4 Years 5 Years Thereafter
(in millions of U.S. Dollars)
Borrowings:
Secured debt - scheduled repayments 1,132.7  273.9  243.6  190.2  125.8  115.2  184.0 
Secured debt - repayments on maturity 743.0  41.8  266.1  237.5  —  197.6  — 
Public bond repayments 727.5  251.8  275.7  —  200.0  —  — 
Total borrowings 2,603.2  567.5  785.4  427.7  325.8  312.8  184.0 
Unsecured revolving credit facilities - due
  to related parties (1)
769.3  70.0  —  —  —  699.3  — 
(1)See Note 12 for additional information.

As at September 30, 2021, the Partnership was in compliance with all financial covenants under its borrowings.

Interest paid on the Partnership's borrowings during the three and nine months ended September 30, 2021 was $61.4 million and $141.6 million, respectively (three and nine months ended September 30, 2020 - $56.7 million and $152.2 million, respectively).


12.Related Party Transactions

The key management personnel that are principally responsible for the operations of the Partnership are as follows:
Name Position
Ingvild Sæther President and Chief Executive Officer, Altera Infrastructure Group Ltd.
Jan Rune Steinsland Chief Financial Officer, Altera Infrastructure Group Ltd.
Duncan Donaldson General Counsel, Altera Infrastructure Group Ltd.

During the three and nine months ended September 30, 2021, total compensation expenses of these three key management personnel of the Partnership were $0.4 million and $2.1 million, respectively (three and nine months ended September 30, 2020 - $0.3 million and $1.9 million, respectively).

The Partnership is a party to the following transactions with related parties:

a)On August 27, 2021, a wholly owned subsidiary of the Partnership, Altera Infrastructure Holdings L.L.C., as issuer, and the Partnership, as parent guarantor, entered into an agreement to exchange an aggregate of $699.3 million of indebtedness in the Partnership with interest rates ranging from 5.00% to 11.50% and with maturities ranging from 2022 to 2024, including $415.2 million in aggregate principal amount of the 8.50% Senior Notes due 2023, $236.9 million in aggregate principal amount of loans relating to an unsecured revolving credit facility provided by Brookfield, which was due to mature in October 2024, $30.0 million in aggregate principal amount of loans relating to an unsecured revolving credit facility provided by Brookfield, which was due to mature in February 2022, and $17.2 million in aggregate principal amount of loans relating to an unsecured revolving credit facility provided by Brookfield, which was due to mature in July 2022, in each case for newly issued 11.50% Senior Secured PIK Notes due August 2026 in an equal aggregate principal amount. As at September 30, 2021, the Partnership has accrued a total of $7.4 million of PIK interest, increasing the principal amount of the New PIK Notes in an amount equal to the interest. Any outstanding principal balances are due on the maturity date.

On July 2, 2018, the Partnership issued, in a U.S. private placement, a total of $700.0 million of five-year senior unsecured bonds that mature in July 2023. The interest payments on the bonds are fixed at a rate 8.50% (see Note 11 for additional information). Brookfield purchased $500.0 million of these bonds and as at the date of the Brookfield Exchanges, August 27, 2021, Brookfield held $411.3 million of these bonds (December 31, 2020 - $411.3 million). As part of the Brookfield Exchanges, an additional aggregate principal amount in New PIK Notes equal to the accrued and unpaid interest with respect to the foregoing exchanged indebtedness amounted to $4.0 million. In line with the Partnership’s new accounting policy election these notes have been retrospectively reclassified from Borrowings (non-current) to Due to related parties (non-current) on the Partnership's unaudited interim condensed consolidated statements of financial position. Please refer to Note 2c iv) for additional information.
Page 17 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

As at the date of the Brookfield Exchanges, August 27, 2021, the Partnership had an undrawn balance of $nil (December 31, 2020 - $nil) relating to an unsecured revolving credit facility provided by Brookfield, which had previously provided for borrowings of up to $225.0 million and matured on October 31, 2024. The interest payments on the facility were based on LIBOR plus a margin of 5.00%. The agreement provided the Partnership the option to defer interest payments of up to $25.0 million until maturity. As at August 27, 2021, the Partnership had deferred a total of $11.9 million of interest payments were exchanged for an additional aggregate principal amount in New PIK Notes per the terms of the Brookfield Exchanges per the terms of the Brookfield Exchanges. Any outstanding principal balances were due on the maturity date. The Partnership previously determined that as the interest rate under the facility was deemed to be at below market terms, Brookfield was acting in its capacity as an equity owner and the Partnership recorded a $37.1 million decrease in the carrying value of the facility, which was classified as an equity contribution in the Partnership's unaudited interim condensed consolidated statements of changes in equity during the year ended December 31, 2020. As a result of the Brookfield Exchanges, the Partnership determined that the New PIK Notes were issued at fair value and therefore the remaining unamortized discount of $28.0 million was recorded as a loss through Other income (expense), net on the Partnership’s unaudited interim condensed consolidated statements of income (loss) during the three and nine months ended September 30, 2021.

Prior to the Brookfield Exchanges, during the nine months ended September 30, 2021, the Partnership entered into an unsecured revolving credit facility provided by Brookfield, which had previously provided for borrowings of up to $30.0 million and as at the date of the Brookfield Exchanges, August 27, 2021, was fully drawn. The interest payments on the facility were based on LIBOR plus a margin of 5.00% and the facility matured in February 2022. Any outstanding principal balances were due on the maturity date. During the nine months ended September 30, 2021, the Partnership determined that the interest rate under the facility was deemed to be at below market terms and therefore, Brookfield was acting in its capacity as an equity owner. The Partnership recorded a $1.3 million decrease in the carrying value of the facility, which was classified as an equity contribution in the Partnership's unaudited interim condensed consolidated statements of changes in equity during the nine months ended September 30, 2021. As a result of the Brookfield Exchanges, the Partnership determined that the New PIK Notes were issued at fair value and therefore the remaining unamortized discount of $0.5 million was recorded as a loss through Other income (expense), net on the Partnership’s unaudited interim condensed consolidated statements of income (loss) during the three and nine months ended September 30, 2021.

Prior to the Brookfield Exchanges, during the three and nine months ended September 30, 2021, a subsidiary of the Partnership entered into an unsecured revolving credit facility provided by Brookfield, which had previously provided for borrowings of up to $17.0 million and as at the date of the Brookfield Exchanges, August 27, 2021, was fully drawn. The PIK Term Loan bore interest solely in kind at a rate of 11.5% per annum. The PIK Term Loan had a maturity date of July 2022. Any outstanding principal balances were due on the maturity date. As part of the Brookfield Exchanges, an additional aggregate principal amount in New PIK Notes equal to the accrued and unpaid interest with respect to the foregoing exchanged indebtedness amounted to $0.2 million.

b)During the nine months ended September 30, 2021, a subsidiary of the Partnership entered into an unsecured revolving credit facility provided by Brookfield, which provides for borrowings of up to $70 million and as at September 30, 2021, was fully drawn. The interest payments on the facility are based on LIBOR plus a margin of 5.00% and the facility matures in February 2022. Any outstanding principal balances are due on the maturity date. During the nine months ended September 30, 2021, the Partnership determined that the interest rate under the facility was deemed to be at below market terms and therefore, Brookfield was acting in its capacity as an equity owner. The Partnership recorded a $0.6 million decrease in the carrying value of the facility, which was classified as an equity contribution in the Partnership's unaudited interim condensed consolidated statements of changes in equity during the nine months ended September 30, 2021. As at September 30, 2021, the Partnership was in compliance with the covenant requirements of this revolving credit facility.

The Partnership also reimburses its general partner for expenses incurred by the general partner that are necessary or appropriate for the conduct of the Partnership’s business. The Partnership's related party transactions recognized in the unaudited interim condensed consolidated statements of income (loss) were as follows for the periods indicated:
  Three Months Ended September 30, Nine Months Ended September 30,
  2021 2020 2021 2020
$ $ $ $
Revenues (1)
2,184  1,941  7,127  5,967 
General and administrative expenses (2)
(306) (107) (828) (363)
Depreciation and amortization (55) (50) (158) (160)
Interest expense (3)(4)(5)
(18,707) (12,016) (47,830) (30,576)
Other income (expense), net (6)
(28,517) —  (28,517) — 
(1)Includes revenue from services provided to the Partnership's equity-accounted investments.
(2)Includes reimbursements to the general partner for costs incurred on the Partnership’s behalf.
(3)Includes interest expense of $5.4 million and $22.8 million for the three and nine months ended September 30, 2021 (three and nine months ended September 30, 2020 - $8.7 million and $26.2 million), incurred on a portion of five-year senior unsecured bonds held by Brookfield (see Note 12a for additional information).
(4)Includes interest expense of $3.3 million and $10.3 million for the three and nine months ended September 30, 2021 (three and nine months ended September 30, 2020 - $2.4 million and $4.7 million), and an accretion expense of $2.6 million and $7.4 million for the three and nine months ended September 30, 2021 (three and nine months ended September 30, 2020 - accretion expense of $1.0 million and $1.0 million, accretion income of $nil million and $1.3 million) incurred on the unsecured revolving credit facilities provided by Brookfield (see Notes 12a and 12b for additional information).
Page 18 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
(5)Includes interest expense of $7.4 million and $7.4 million for the three and nine months ended September 30, 2021 (three and nine months ended September 30, 2020 - $nil and $nil), incurred on the New PIK Notes (see Note 12a for additional information).
(6)Includes the write off of unamortized discounts of $28.5 million and $28.5 million for the three and nine months ended September 30, 2021 (three and nine months ended September 30, 2020 - $nil and $nil), incurred on the unsecured revolving credit facilities provided by Brookfield (see Note 12a additional information).

As at September 30, 2021, the carrying value of amounts due from related parties totaled $0.7 million (December 31, 2020 - $10.0 million). As at September 30, 2021, the carrying value of amounts due to related parties totaled $776.3 million (December 31, 2020 Restated - $622.0 million) and consisted only of 11.50% New PIK Notes and unsecured revolving credit facilities provided by Brookfield (see Note 12a and 12b).


13.Revenues

The Partnership’s primary source of revenues is chartering its vessels and offshore units to its customers. The Partnership utilizes five primary forms of contracts, consisting of FPSO contracts, contract of affreightment (CoAs), time-charter contracts, bareboat charter contracts and voyage charter contracts. All of the Partnership's revenues relate to services transferred over a period of time. During the three and nine months ended September 30, 2021, the Partnership also generated revenues from the operation of volatile organic compound (VOC) systems on certain of the Partnership’s shuttle tankers, and from the management of certain vessels on behalf of the disponent owners or charterers of those vessels.

The following tables contain the Partnership’s revenues for the three and nine months ended September 30, 2021 and 2020, by contract type and by segment:
Three Months Ended September 30, 2021 FPSO Segment Shuttle Tanker Segment FSO Segment UMS Segment Towage Segment
Corporate/Eliminations(1)
Total
Revenues from contracts with customers
FPSO contracts 36,287  —  —  —  —  —  36,287 
CoAs —  19,187  —  —  —  (487) 18,700 
Time charters —  23,399  8,805  —  —  —  32,204 
Bareboat charters —  —  —  —  —  —  — 
Voyage charters —  —  —  —  24,249  (2,163) 22,086 
Management fees and other 37,855  1,979  1,250  227  43  —  41,354 
74,142  44,565  10,055  227  24,292  (2,650) 150,631 
Other revenues
FPSO contracts 60,886  —  —  —  —  —  60,886 
CoAs —  25,718  —  —  —  —  25,718 
Time charters —  40,336  10,135  —  —  —  50,471 
Bareboat charters —  1,748  —  —  —  —  1,748 
Voyage charters —  6,383  —  —  —  —  6,383 
60,886  74,185  10,135  —  —  —  145,206 
Total revenues 135,028  118,750  20,190  227  24,292  (2,650) 295,837 
Page 19 of 42


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
Three Months Ended September 30, 2020 FPSO Segment Shuttle Tanker Segment FSO Segment UMS Segment Towage Segment
Corporate/Eliminations(1)
Total
Revenues from contracts with customers
FPSO contracts 39,163  —  —  —  —  —  39,163 
CoAs —  18,838  —  —  —  —  18,838 
Time charters —  22,449  9,403  —  —  —  31,852 
Bareboat charters —  —  —  —  —  —  — 
Voyage charters —  1,119  —  —  16,929  —  18,048 
Management fees and other 36,343  847  370  462  —  —  38,022 
75,506  43,253  9,773  462  16,929  —  145,923 
Other revenues
FPSO contracts 41,939  —  —  —  —  —  41,939 
CoAs —  31,037  —  —  —  —  31,037 
Time charters —  35,642  18,077  —  —  —  53,719 
Bareboat charters —  4,326  3,735  —  —  —  8,061 
Voyage charters —  5,911  —  —  —  —  5,911 
41,939  76,916  21,812  —  —  —  140,667 
Total revenues 117,445  120,169  31,585  462  16,929  —  286,590 
Nine Months Ended September 30, 2021 FPSO Segment Shuttle Tanker Segment FSO Segment UMS Segment Towage Segment
Corporate/Eliminations(1)
Total
Revenues from contracts with customers
FPSO contracts 94,772  —  —  —  —  —  94,772 
CoAs —  64,658  —  —  —  (487) 64,171 
Time charters —  69,332  24,820  —  —  —  94,152 
Bareboat charters —  —  —  —  —  —  — 
Voyage charters —  —  —  —  49,665  (8,821) 40,844 
Management fees and other 117,382  11,943  2,530  666  178  —  132,699 
212,154  145,933  27,350  666  49,843  (9,308) 426,638 
Other revenues
FPSO contracts 141,599  —  —  —  —  —  141,599 
CoAs —  92,478  —  —  —  —  92,478 
Time charters —  119,321  29,356  —  —  —  148,677 
Bareboat charters —  6,394  1,273  —  —  —  7,667