6-K 1 altera6-kq3x20doc.htm 6-K Document


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, 2020
Commission file number 1- 33198
 
_________________________
ALTERA INFRASTRUCTURE L.P.
(Exact name of Registrant as specified in its charter)
_________________________
4th Floor, Belvedere Building, 69 Pitts Bay Road, Pembroke, HM 08, Bermuda
(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, 2020
INDEX

PAGE
   January 1, 2019
2
  2019





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 As at
September 30,December 31, January 1,
202020192019
Notes$$$
ASSETS
Current assets
Cash and cash equivalents4236,911 199,388 225,040 
Financial assets543,354 107,992 9,568 
Accounts and other receivable, net6227,675 204,825 143,710 
Vessels and equipment classified as held for sale77,800 15,374 12,528 
Due from related parties19— — 58,885 
Other assets941,924 35,425 41,243 
Total current assets 557,664 563,004 490,974 
Non-current assets
Financial assets526,919 — 2,075 
Accounts and other receivable, net618,636 17,276 36,536 
Vessels and equipment113,181,956 3,025,716 3,548,501 
Advances on newbuilding contracts12109,667 297,100 113,796 
Equity-accounted investments13225,345 232,216 208,819 
Deferred tax assets4,671 7,000 9,168 
Due from related parties19— — 949 
Other assets9222,182 218,813 185,191 
Goodwill127,113 127,113 127,113 
Total non-current assets3,916,489 3,925,234 4,232,148 
Total assets4,474,153 4,488,238 4,723,122 
LIABILITIES
Current liabilities
Accounts payable and other14316,712 272,618 213,480 
Other financial liabilities17204,641 21,697 23,290 
Due to related parties1921,306 183,795 
Borrowings18346,865 353,238 554,336 
Total current liabilities868,225 668,859 974,901 
Non-current liabilities
Accounts payable and other14155,568 222,659 264,732 
Other financial liabilities1785,203 164,511 144,867 
Borrowings18,192,893,165 2,831,274 2,543,406 
Due to related parties19144,236 — — 
Deferred tax liabilities700 3,133 2,183 
Total non-current liabilities3,278,872 3,221,577 2,955,188 
Total liabilities4,147,097 3,890,436 3,930,089 
EQUITY
Limited partners - common units20— 169,737 350,088 
Limited partners - Class A common units20(1,508)— — 
Limited partners - Class B common units20(84,337)— — 
Limited partners - preferred units20384,274 384,274 384,274 
General partner207,431 9,587 10,971 
Accumulated other comprehensive income3,023 4,410 7,361 
Non-controlling interests in subsidiaries 2618,173 29,794 40,339 
Total equity327,056 597,802 793,033 
Total liabilities and equity4,474,153 4,488,238 4,723,122 
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.



Page 1 of 73






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,
2020201920202019
Notes$$$$
Revenues21, 23286,590 299,447 903,453 940,796 
Direct operating costs22(164,425)(148,557)(483,896)(470,185)
General and administrative expenses23(3,035)(6,304)(20,143)(21,069)
Depreciation and amortization23(79,049)(84,639)(235,189)(273,973)
Interest expense19(48,036)(53,675)(142,212)(158,029)
Interest income190 1,776 900 4,099 
Equity-accounted income (loss)1311,890 4,494 16,263 10,610 
Impairment expense, net11(4,720)(1,506)(184,997)(61,326)
Gain (loss) on dispositions, net8(19)— (1,969)12,548 
Realized and unrealized gain (loss) on derivative instruments17, 192,427 (20,510)(103,689)(107,084)
Foreign currency exchange gain (loss)(2,958)(5,387)(7,347)(4,166)
Other income (expenses), net19(4,262)(3,262)(9,628)(10,427)
Income (loss) before income tax (expense) recovery(5,407)(18,123)(268,454)(138,206)
Income tax (expense) recovery
Current(1,639)(1,143)(5,240)(4,239)
Deferred1,091 (5,173)560 (7,524)
Net income (loss)(5,955)(24,439)(273,134)(149,969)
Attributable to:
Limited partners - common units (14,129)(31,102)(288,221)(164,133)
General partner (106)(237)(2,156)(1,257)
Limited partners - preferred units 8,038 8,038 24,114 24,114 
Non-controlling interests in subsidiaries 26242 (1,138)(6,871)(8,693)
(5,955)(24,439)(273,134)(149,969)
Basic and diluted earnings (loss) per limited partner common unit20(0.03)(0.08)(0.70)(0.40)
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
Page 2 of 73



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,
2020201920202019
Notes$$$$
Net income (loss)(5,955)(24,439)(273,134)(149,969)
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss:
To interest expense:
Realized gain on qualifying cash flow hedging instruments17(206)(192)(622)(489)
To equity income:
Realized gain on qualifying cash flow hedging instruments(251)(196)(765)(368)
Total other comprehensive income (loss)(457)(388)(1,387)(857)
Comprehensive income (loss)(6,412)(24,827)(274,521)(150,826)
Attributable to:
Limited partners - common units(14,583)(31,487)(289,597)(164,983)
General partner(109)(240)(2,167)(1,264)
Limited partners - preferred units8,038 8,038 24,114 24,114 
Non-controlling interests in subsidiaries242 (1,138)(6,871)(8,693)
(6,412)(24,827)(274,521)(150,826)
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

Page 3 of 73



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
$
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 December 31, 2019— — — — 411,149 169,737 15,800 384,274 9,587 4,410 29,794 597,802 
Exchange of equity instruments (note 21)5,217 2,154 405,932 167,583 (411,149)(169,737)— — — — — — 
Net loss— (3,657)— (284,564)— — — 24,114 (2,156)— (6,871)(273,134)
Other comprehensive loss (note 20)— — — — — — — — — (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)
Refinancing of GP Loan (note 19a)— — — 33,046 — — — — — — — 33,046 
Equity based compensation and other— (5)— (402)— — — — — — — (407)
Balance as at September 30, 20205,217 (1,508)405,932 (84,337)— — 15,800 384,274 7,431 3,023 18,173 327,056 


 PARTNERS’ EQUITY  
 Limited Partners 
 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, 2019410,315 350,088 15,800 384,274 10,971 7,361 40,339 793,033 
Net income (loss)— (164,133)— 24,114 (1,257)— (8,693)(149,969)
Other comprehensive income (loss) (note 17)— — — — — (857)— (857)
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— — — — — — (3,636)(3,636)
Contributions from non-controlling interests in subsidiaries— — — — — — 1,500 1,500 
Equity based compensation and other873 986 — — — — — 986 
Balance as at September 30, 2019 411,188 186,941 15,800 384,274 9,714 6,504 29,510 616,943 
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
Page 4 of 73



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,
20202019
Notes$$
Operating Activities
Net income (loss)(273,134)(149,969)
Adjusted for the following items:
Depreciation and amortization11235,189 273,973 
Equity-accounted (income) loss, net of distributions received138,919 2,718 
Impairment expense, net11184,997 61,326 
(Gain) loss on dispositions, net81,969 (12,548)
Unrealized (gain) loss on derivative instruments1755,363 84,181 
Deferred income tax expense (recovery)(560)7,524 
Provisions and other items15(3,503)(19,870)
Other non-cash items15,248 (22,195)
Changes in non-cash working capital, net2482 46,850 
Net operating cash flow224,570 271,990 
Financing Activities
Proceeds from borrowings18291,030 286,495 
Repayments of borrowings and settlement of related derivative instruments17,18(239,910)(321,381)
Financing costs related to borrowings18(6,162)(16,060)
Proceeds from borrowings related to sale and leaseback of vessels1247,673 11,900 
Financing costs related to borrowings from sale and leaseback of vessels12(65)(1,082)
Proceeds from borrowings from related parties19155,000 75,000 
Prepayment of borrowings from related parties19— (75,000)
Lease liability repayments10(17,115)(9,922)
Capital provided by others who have interests in subsidiaries— 1,500 
Distributions to limited partners and preferred unitholders20(24,114)(24,114)
Distributions to others who have interests in subsidiaries(4,750)(3,636)
Net financing cash flow201,587 (76,300)
Investing Activities
Additions
Vessels and equipment11,12(449,916)(166,399)
Equity-accounted investments13(2,812)(7,424)
Dispositions
Vessels and equipment818,437 33,341 
Restricted cash539,227 (9,421)
Acquisition of company (net of cash acquired of $6.4 million)6,430 — 
Net investing cash flow(388,634)(149,903)
Cash and cash equivalents
Change during the period37,523 45,787 
Balance, beginning of the period199,388 225,040 
Balance, end of the period236,911 270,827 
Supplemental cash flow information (note 24)
The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.
Page 5 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(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 and formerly Teekay Offshore Partners L.P.) is an international midstream services provider to the offshore oil 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 October 27, 2020. 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 trade 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 4th Floor, Belvedere Building, 69 Pitts Bay Road, Pembroke, HM 08, Bermuda.

Unless the context otherwise requires, the terms "we," "us," or "our," as used herein, refer to the Partnership.

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) and using the accounting policies described below. 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.

As these financial statements are the Partnership’s first financial statements prepared using accounting policies consistent with International Financial Reporting Standards (or IFRS) as issued by the IASB, certain disclosures that are required to be included in the annual financial statements prepared in accordance with IFRS that were accordingly not included in the Partnership’s most recent annual consolidated financial statements prepared in accordance with United States Generally Accepted Accounting Principles (or previous GAAP) have been included in these unaudited interim condensed consolidated financial statements.

In the opinion of management of the Partnership’s general partner, Altera Infrastructure GP L.L.C. (or the general partner), these unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly, in all material respects, the Partnership’s consolidated financial position, results of operations, changes in total equity and cash flows for the interim periods presented. These unaudited interim condensed consolidated financial statements were approved by management and authorized for issue on November 3, 2020.

b.Going concern

As at September 30, 2020, the Partnership had a working capital deficit of $310.6 million primarily relating to the scheduled maturities and repayments of $346.9 million of outstanding borrowings and the settlement of $199.1 million of derivative financial instrument liabilities during the 12 months ending September 30, 2021, which amounts were classified as current as at September 30, 2020. The Partnership also anticipates making payments related to commitments to fund vessels under construction during 2020 through 2022 of $270.0 million; however, the Partnership has secured long-term financing related to these newbuildings.

The working capital deficit of $310.6 million as at September 30, 2020, has significantly increased from $105.9 million as at December 31, 2019. The increase in the working capital deficit was primarily due to: a $180.1 million increase in the current portion of derivative liabilities, due to certain interest rate swaps containing early-termination provisions, which, if exercised, would terminate these interest rate swaps during the 12 months ending September 30, 2021 (see note 17); and a $44.1 million increase in accounts payable and other mainly due to deferred revenue related to the Knarr FPSO; partially offset by a $23.3 million increase in accounts and other receivable, net, mainly due to management services related to the Foinaven FPSO.

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 minimum liquidity requirements under its financial covenants. Additional potential sources of financing that the Partnership is actively pursuing, during the one-year period to September 30, 2021, include borrowing additional amounts under existing facilities and the refinancing or extension of certain borrowings and interest rate swaps. Additional potential sources of amounts generated from operations include the extensions and redeployments of existing assets.

The Partnership is actively pursuing the 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 raise additional liquidity that it 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, 2021.

c.Basis of consolidation
Page 6 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

The unaudited interim condensed consolidated financial statements include the accounts of the Partnership and its consolidated subsidiaries, which are the entities over which the Partnership has control. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Non-controlling interests in the equity of the Partnership’s subsidiaries held by others are shown separately in equity in the unaudited interim condensed consolidated statements of financial position. All intercompany balances, transactions, revenues and expenses are eliminated in full in these unaudited interim condensed consolidated financial statements.

d.Interests in other entities

(i) Subsidiaries

These unaudited interim condensed consolidated financial statements include the accounts of the Partnership and subsidiaries over which the Partnership has control. Subsidiaries are consolidated from the date of acquisition, being the date on which the Partnership obtained control, and continue to be consolidated until the date when control is lost.

Non-controlling interests may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition by acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in the Partnership's capital in addition to changes in ownership interests. Total comprehensive income (loss) is attributed to non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

The following provides information about the Partnership's wholly-owned subsidiaries as at September 30, 2020:

Name of SubsidiaryState or Jurisdiction of IncorporationProportion of Ownership Interest
ALP Ace BVNetherlands100%
ALP Centre BVNetherlands100%
ALP Defender BVNetherlands100%
ALP Forward BVNetherlands100%
ALP Guard BVNetherlands100%
ALP Ippon BVNetherlands100%
ALP Keeper BVNetherlands100%
ALP Maritime Contractors BVNetherlands100%
ALP Maritime Group BVNetherlands100%
ALP Maritime Holding BVNetherlands100%
ALP Maritime Services BVNetherlands100%
ALP Ocean Towage Holding BVNetherlands100%
ALP Striker BVNetherlands100%
ALP Sweeper BVNetherlands100%
ALP Winger BVNetherlands100%
Altera Infrastructure Finance Corp.Marshall Islands100%
Altera Infrastructure Group Ltd.Marshall Islands100%
Altera Infrastructure Holdings LLCMarshall Islands100%
Altera Infrastructure Operating GP LLCMarshall Islands100%
Altera infrastructure Operating L.P.Marshall Islands100%
Altera Infrastructure Production (Singapore) Pte. Ltd. Singapore100%
Altera Infrastructure Production ASNorway100%
Altera Infrastructure Production Crew ASNorway100%
Altera Infrastructure Production Holdings ASNorway100%
Altera Infrastructure Services Pte. LtdSingapore100%
Altera Norway Hiload ASNorway100%
Altera Norway Holdings ASNorway100%
Altera Partners Holding ASNorway100%
Altera Shuttle Tankers LLCMarshall Islands100%
Amundsen Spirit LLCMarshall Islands100%
Apollo Spirit LLCMarshall Islands100%
Arendal Spirit ASNorway100%
Arendal Spirit LLCMarshall Islands100%
Page 7 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
Aurora Spirit ASNorway100%
Bossa Nova Spirit LLCMarshall Islands100%
Clipper LLCMarshall Islands100%
Current Spirit ASNorway100%
Dampier Spirit LLCMarshall Islands100%
Gina Krog LLCMarshall Islands100%
Gina Krog Offshore Pte. Ltd.Singapore100%
Golar Nor (UK) LimitedUnited Kingdom100%
Knarr LLCMarshall Islands100%
Lambada Spirit LLCMarshall Islands100%
Logitel Offshore Holding ASNorway100%
Logitel Offshore LLCMarshall Islands100%
Logitel Offshore Norway ASNorway100%
Logitel Offshore Pte. Ltd.Singapore100%
Logitel Offshore Rig I Pte. Ltd.Singapore100%
Logitel Offshore Rig II Pte. Ltd.Singapore100%
Logitel Offshore Rig II LLCMarshall Islands100%
Logitel Offshore Rig III LLCMarshall Islands100%
Logitel Offshore Rig IV LLCMarshall Islands100%
Nansen Spirit LLCMarshall Islands100%
Navion Bergen ASNorway100%
Navion Bergen LLCMarshall Islands100%
Navion Gothenburg ASNorway100%
Navion Offshore Loading ASNorway100%
Altera Norway Holdings Ltd.Marshall Islands100%
Peary Spirit LLCMarshall Islands100%
Petrojarl I LLCMarshall Islands100%
Petrojarl I Production ASNorway100%
Altera Petrojarl FPSO Petrolífera do Brasil Ltda.Brazil100%
Piranema LLCMarshall Islands100%
Piranema Production ASNorway100%
Rainbow Spirit ASNorway100%
Salamander Production (UK) LimitedUnited Kingdom100%
Samba Spirit LLCMarshall Islands100%
Scott Spirit LLCMarshall Islands100%
Sertanejo Spirit LLCMarshall Islands100%
Siri Holdings LLCMarshall Islands100%
Altera (Atlantic) Chartering ULCCanada100%
Altera (Atlantic) Management ULCCanada100%
Altera Al Rayyan LLCMarshall Islands100%
Teekay Australia Offshore Holdings Pty Ltd.Australia100%
Altera Luxembourg S.a.r.l.Luxembourg100%
Teekay FSO Finance Pty Ltd.Australia100%
Gina Krog ASNorway100%
Altera Grand Banks ASNorway100%
Altera Grand Banks Shipping ASNorway100%
Teekay Hiload LLCMarshall Islands100%
Altera Knarr ASNorway100%
Altera Libra Netherlands BVNetherlands100%
Altera do Brasil Servicos Maritimos Ltda.Brazil100%
Altera Shuttle Loading Pte. Ltd.Singapore100%
Altera Netherlands BVNetherlands100%
Altera Nordic Holdings Inc.Marshall Islands100%
Altera Norway Marine ASNorway100%
Page 8 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
Altera Norway ASNorway100%
Altera Operations Australia Pty Ltd.Australia100%
Teekay Offshore Business Process Services Inc.Philippines100%
Altera Infrastructure Chartering LLCMarshall Islands100%
Altera Infrastructure Crewing ASNorway100%
Altera Infrastructure Cooperatief U.A.Netherlands100%
Altera Infrastructure Operating Holdings LLCMarshall Islands100%
Altera Infrastructure Holdings Pte. Ltd.Singapore100%
Altera Shuttle Tanker Finance LLCMarshall Islands100%
Altera Petrojarl I Servicos de Petroleo Ltda.Brazil100%
Altera Production UK LimitedUnited Kingdom100%
Altera Piranema Servicos Petroleo Ltda.Brazil100%
Altera Wave ASNorway100%
Altera Wind ASNorway100%
Altera Infrastructure Norway ASNorway100%
Altera Varg Production Limited.Norway100%
Altera Voyageur Production Limited.United Kingdom100%
Tide Spirit ASNorway100%
Tiro Sidon Holdings LLCMarshall Islands100%
Tiro Sidon LLCMarshall Islands100%
Tiro Sidon UK L.L.P.United Kingdom100%
Teekay Petrojarl Offshore Siri ASNorway100%
TPO Siri LLCMarshall Islands100%
Ugland Nordic Shipping ASNorway100%
Varg LLCMarshall Islands100%
Varg Production ASNorway100%
Voyageur LLCMarshall Islands100%

The following table presents details of non-wholly owned subsidiaries of the Partnership:

Name of SubsidiaryState or Jurisdiction of IncorporationProportion of Ownership Interest
KS Apollo SpiritNorway89%
Navion Gothenburg LLCMarshall Islands50%
Nordic Rio LLCMarshall Islands50%
Partrederiet Stena Ugland Shuttle Tankers I DANorway50%
Partrederiet Stena Ugland Shuttle Tankers II DANorway50%
Partrederiet Stena Ugland Shuttle Tankers III DANorway50%

The Partnership has determined that the above entities are non-wholly owned subsidiaries of the Partnership based on its assessment of control. For non-wholly owned subsidiaries, the Partnership is exposed to variable returns from its involvement with the investee and has substantive decision making authority to affect the returns of its investment, as well as the power to direct the activities of the entities that can significantly impact the economic performance of the entity.

(ii) Joint ventures

Joint ventures are joint arrangements whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control over an arrangement, which exists when decisions about the relevant activities require unanimous consent of the parties sharing control. The Partnership accounts for joint ventures using the equity method of accounting within equity-accounted investments in the unaudited interim condensed consolidated statements of financial position.

Interests in joint ventures accounted for using the equity method are initially recognized at cost. Subsequent to initial recognition, the carrying value of the Partnership’s interest in a joint venture is adjusted for the Partnership’s share of comprehensive income and distributions of the investee. Profit and losses resulting from transactions with a joint venture are recognized in the unaudited interim condensed consolidated financial statements based on the interests of unrelated investors in the investee. The carrying value of joint ventures is assessed for impairment at each reporting date. Impairment losses on equity-accounted investments may be subsequently reversed in net income. Further information on the impairment of long-lived assets is available in Note 2(k).
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ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

The following table presents details of the Partnership's joint ventures:

Name of Joint VentureState or Jurisdiction of IncorporationProportion of Ownership Interest
OOG-TKP FPSO GmbHAustria50%
OOG-TKP FPSO GmbH & Co KGAustria50%
OOG-TKP Oil Services Ltd.Cayman Islands50%
OOG-TK Libra GmbHAustria50%
OOG-TK Libra GmbH & Co KGAustria50%
TK-Ocyan Libra Oil Services Ltd.Cayman Islands50%

e.Foreign currency translation

The U.S. dollar is the functional and presentation currency of the Partnership. The Partnership’s vessels operate in international shipping markets in which substantially all income and expenses are settled in U.S. dollars. In addition, the Partnership's most significant assets, its vessels and equipment, are bought and sold in U.S. dollars and the Partnership's most significant liabilities, its commercial bank borrowings, are denominated in U.S. dollars. Foreign currency denominated monetary assets and liabilities are translated using the rate of exchange prevailing at the reporting date and non-monetary assets and liabilities are measured at historic cost and are translated at the rate of exchange at the transaction date. Foreign currency denominated revenues and expenses are measured at average rates during the period. Gains or losses on translation of these items are included in foreign currency exchange gain (loss) in the unaudited interim condensed consolidated statements of income (loss).

f.Cash and cash equivalents

Cash and cash equivalents include cash on hand, non-restricted deposits and short-term investments with original maturities of three months or less.

g.Accounts and other receivable, net

Accounts and other receivable, net includes trade receivables and other unbilled receivables, which are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less any allowance for expected credit losses.

h.Related party transactions

In the normal course of operations, the Partnership enters into various transactions with related parties, which have been measured at their exchange value and are recognized in the unaudited interim condensed consolidated financial statements. Related party transactions are further described in Note 19.

i.Vessels and equipment

Vessels and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset including the cost of materials and direct labor, any other costs directly attributable to bringing the assets to a working condition for their intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. All pre-delivery costs incurred during the construction of vessels and equipment, including interest, supervision and technical costs, are capitalized. The acquisition cost and all costs incurred to restore used vessels and equipment purchased by the Partnership to the standard required to service the Partnership’s customers are capitalized.

Depreciation of an asset commences when it is available for use. Vessels and equipment are depreciated for each component of the asset classes as follows:

ComponentEstimated Useful Life
Dry docks and Overhauls2.5 - 5 years
Capital Modifications (1)
3 - 20 years
Vessels and Equipment (2)
9 - 35 years

(1)Includes field and contract specific equipment for the Partnership's floating production, storage and off-loading (or FPSO) units and floating storage and off-loading (or FSO) units, capital upgrades for the Partnership's shuttle tankers and mid-life refurbishments for the Partnership's unit for maintenance and safety (or UMS).
(2)Certain of the Partnership's FPSO units and FSO units have undergone conversions or capital upgrades prior to commencing operations under their current contracts. The estimated useful lives of such vessels is generally substantially lower than that of a comparable newbuilding vessel. For a newbuilding vessel, the Partnership uses an estimated useful life of 20 to 25 years for its FPSO units, 20 years for its shuttle tankers, 35 years for its UMS and 25 years for its towage and offshore installation (or Towage) vessels. The estimated useful life of the Partnership's FSO units are generally the contract term for the unit, inclusive of extension options.

Page 10 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
Depreciation on vessels and equipment is calculated on a straight-line basis so as to write-off the net cost of each asset over its expected useful life to its estimated residual value. Residual value of the vessel hull is estimated as the lightweight tonnage of each vessel multiplied by scrap value per ton. The estimated useful lives, residual values and depreciation methods are reviewed annually, with the effect of any changes recognized on a prospective basis.

Vessel capital modifications include the addition of new equipment or can encompass various modifications to the vessel which are aimed at improving or increasing the operational efficiency and functionality of the asset. This type of expenditure is amortized over the estimated useful life of the modification. Expenditures covering recurring routine repairs or maintenance are expensed as incurred.

Generally, the Partnership dry docks each shuttle tanker and towage vessel every two and a half to five years, depending on the nature of work and external requirements. The vessels are required to undergo planned dry-dockings for replacement of certain components, major repairs and major maintenance of other components, which cannot be carried out while the vessels are operating. The Partnership capitalizes a portion of the costs incurred during dry docking and amortizes those costs on a straight-line basis from the completion of a dry docking over the estimated useful life of the dry dock, which is generally until the commencement of the subsequent dry dock. Included in capitalized dry docking are costs incurred as part of the dry docking to meet regulatory requirements, or expenditures that either add economic life to the vessel, increase the vessel’s earning capacity or improve the vessel’s operating efficiency. A portion of the cost of acquiring a new vessel is allocated to the components expected to be replaced or refurbished at the next dry-docking. The Partnership expenses costs related to routine repairs and maintenance performed during dry docking that do not improve operating efficiency or extend the useful lives of the assets.

Advances on newbuilding contracts consists of prepayments related to newbuilding contracts for vessels and equipment not yet delivered to the Partnership and include the share of borrowing costs that are directly attributable to the acquisition of the underlying vessel. When a vessel is delivered, the prepaid amount is reallocated to Vessels and equipment.

j.Right-of-use assets and lease obligations

The Partnership assesses whether a contract is, or contains, a lease component at inception of the contract. A right-of-use asset and corresponding lease liability is recognized at the lease commencement date for contracts that are, or contain, a lease component, except for short-term leases and leases of low value.

Agreements to charter in vessels and to lease land and buildings for which the Partnership substantially has the right to control the asset for a period of time in exchange for consideration are recognized in the unaudited interim condensed consolidated statements of financial position as right-of-use assets within Other assets and are initially measured at cost, which comprises the initial amount of the lease liabilities adjusted for any lease payments made at or before the commencement date. Subsequently, the right-of-use assets are measured at cost less accumulated depreciation and impairment losses, if any. The right-of-use assets are depreciated on a straight-line basis over the lesser of the lease term or remaining life of the underlying asset, depending on the lease terms.

The Partnership charters in vessels from other vessel owners on time-charter contracts, whereby the vessel owner provides use of the vessel to the Partnership, as well as operates the vessel for the Partnership. A time-charter contract is typically for a fixed period of time, although in certain cases the Partnership may have the option to extend the charter. The Partnership will typically pay the owner a daily hire rate that is fixed over the duration of the charter. The Partnership is generally not required to pay the daily hire rate during periods the vessel is not able to operate.

The Partnership has determined that all of its time-charter-in contracts contain both a lease component (lease of the vessel) and a non-lease component (operation of the vessel). The Partnership has allocated the contract consideration between the lease component and non-lease component on a relative standalone selling price basis. Given that there are no observable standalone selling prices for either of these two components, judgment is required in determining the standalone selling price of each component. The standalone selling price of the non-lease component has been determined using a cost-plus approach, whereby the Partnership estimates the cost to operate the vessel using cost benchmarking studies prepared by a third party, when available, or internal estimates when not available, plus a profit margin. The standalone selling price of the lease component has been determined using an adjusted market approach, whereby the Partnership calculates a rate excluding the operating component based on a market time-charter rate from published broker estimates, when available, or internal estimates when not available. The discount rate of the lease is determined using the Partnership’s incremental borrowing rate, which is based on the fixed interest rate the Partnership could obtain when entering into a secured loan facility of similar term.

The Partnership has elected to recognize the lease payments of short-term leases in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred, which is consistent with the recognition of payment for the non-lease component. Short-term leases are leases with an original term of one year or less, excluding those leases with an option to extend the lease for greater than one year or an option to purchase the underlying asset, that the lessee is reasonably certain to exercise.

The corresponding lease obligation is recognized as a liability in the unaudited interim condensed consolidated statements of financial position under Accounts payable and other and initially measured at the present value of the outstanding lease payments at the commencement date.

The Partnership recognizes the lease payments for short-term leases and leases of low value as an operating expense on a straight-line basis over the term of the lease.

k.Asset impairment

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ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
At each reporting date the Partnership assesses whether there is any indication that assets or cash generating units, relating specifically to its vessels and equipment and right-of use-assets, are impaired. This assessment includes a review of internal and external factors which includes, but is not limited to, changes in the technological, political, economic or legal environments in which the Partnership operates, structural changes in the industry, changes in the level of demand, physical damage and obsolescence due to technological changes. The Partnership has determined that, for impairment purposes, each individual vessel is a cash generating unit.

An impairment is recognized if the recoverable amount, determined as the higher of the estimated fair value less costs of disposal or the value in use, is less than the carrying value of the asset or cash generating unit. In cases where an active second hand sale and purchase market does not exist, the Partnership uses a discounted cash flow approach to estimate the fair value of its vessel and equipment. In cases where an active second hand sale and purchase market exists, an appraised value is used to estimate the fair value of the vessel and equipment. An appraised value is generally the amount the Partnership would expect to receive if it were to sell the vessel. Such appraisal is normally completed by the Partnership. The value in use is the present value of the future cash flows that the Partnership expects to derive from the asset or cash generating unit. The projections of future cash flows take into account the relevant operating plans and management’s best estimate of the most probable set of conditions anticipated to prevail.

At each reporting date the Partnership assesses whether there is any indication that an impairment loss may have decreased. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash generating unit is increased to the revised estimate.

l.Goodwill

Goodwill represents the excess of the price paid for the acquisition of a business over the fair value of the net tangible and intangible assets and liabilities acquired. Goodwill is allocated to the cash generating unit or units to which it relates. The Partnership identifies cash generating units as identifiable groups of assets whose cash inflows largely independent of the cash inflows from other assets or groups of assets. The Partnership has identified the shuttle tanker segment as the group of cash generating units to which the Partnership's goodwill relates.

Goodwill is evaluated for impairment on an annual basis or more frequently if an event occurs or circumstances change that would indicate that the recoverable amount of a reporting unit was below its carrying value. Impairment is determined for goodwill by assessing if the carrying value of a cash generating unit, including the allocated goodwill, exceeds its recoverable amount determined as the greater of the estimated fair value less costs of disposal or the value in use. Impairment losses recognized in respect of a cash generating unit are first allocated to the carrying value of goodwill and any excess is allocated to the carrying amount of assets in the cash generating unit. Any goodwill impairment is charged to Impairment expense, net on the unaudited interim condensed consolidated statements of income (loss) in the period in which the impairment is identified. Impairment losses on goodwill are not subsequently reversed.

m.Revenue from contracts with customers

Each vessel charter may, depending on its terms, contain a lease component, a non-lease component or both. Revenues that are fixed on or prior to the commencement of the contract are recognized by the Partnership on a straight-line basis daily over the term of the contract.

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, contracts of affreightment (or CoAs), time-charter contracts, bareboat charter contracts and voyage charter contracts.

IFRS requires that a highly probable criterion be met with regards to recognizing revenue arising from variable consideration resulting from contract modifications and claims. For variable consideration, revenue is only recognized to the extent that it is highly probable that a significant reversal in the amount of revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

(i) FPSO Contracts

Pursuant to an FPSO contract, the Partnership charters an FPSO unit to a customer for a fixed period of time, generally more than one year. The obligations within an FPSO contract, which include the lease of the FPSO unit to the charterer as well as the operation of the FPSO unit, are satisfied as services are rendered over the duration of such contract, as measured using the time that has elapsed from commencement of performance. Fees relating to the lease and operation of the FPSO (or hire) are typically invoiced monthly in arrears, based on a fixed daily hire amount. In certain FPSO contracts, the Partnership is entitled to a lump sum amount due upon commencement of the contract and may also be entitled to termination fees if the contract is canceled early. While the fixed daily hire amount may be the same over the term of the FPSO contract, in certain cases, the daily hire amount declines over the duration of the FPSO contract. As a result of the Partnership accounting for compensation from such charters on a straight-line basis over the duration of the charter, FPSO contracts where revenues are recognized before the Partnership is entitled to such amounts under the FPSO contracts will result in the Partnership recognizing a contract asset and FPSO contracts where revenues are recognized after the Partnership is entitled to such amounts under the FPSO contracts will result in the Partnership recognizing a contract liability.

Some FPSO contracts include variable consideration components in the form of expense adjustments or reimbursements, incentive compensation and penalties. For example, some FPSO contracts contain provisions that allow the Partnership to be compensated for increases in the Partnership's costs to operate the unit during the term of the contract. Such provisions may be in the form of annual hire rate adjustments for changes in inflation indices or foreign currency rates, or in the form of cost reimbursements for vessel operating expenditures incurred. The Partnership may also earn additional compensation from periodic production tariffs, which are based on the volume of oil produced, the price of oil, as well as other monthly or annual operational performance measures. During periods in which
Page 12 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
production on the FPSO unit is interrupted, penalties may be imposed. Variable consideration under the Partnership’s contracts is typically recognized as incurred as either such revenues are allocated and accounted for under lease accounting requirements or, alternatively, when such consideration is allocated to the distinct period in which such variable consideration was earned. The Partnership does not engage in any specific activities to minimize residual value risk. Given the uncertainty involved in oil field production estimates and the resulting impact on oil field life, FPSO contracts typically will include extension options or options to terminate early.

The Partnership has allocated the contract consideration between the lease component and non-lease component on a relative standalone selling price basis. Given that there are no observable standalone selling prices for either of these two components, judgment is required in determining the standalone selling price of each component. The standalone selling price of the non-lease component has been determined using a cost-plus approach, whereby the Partnership estimates the cost to operate the unit using internal estimates, plus a profit margin. The standalone selling price of the lease component has been determined using an adjusted market approach, whereby the Partnership calculates a rate excluding the operating component based on a market rate from published broker estimates, when available, or internal estimates when not available.

(ii) CoAs

Voyages performed pursuant to a CoA for the Partnership’s shuttle tankers are priced based on the pre-agreed terms in the CoA. The obligations within a voyage performed pursuant to a CoA, which will typically include the lease of the vessel to the charterer as well as the operation of the vessel, are satisfied as services are rendered over the duration of the voyage, as measured using the time that has elapsed from commencement of performance. In addition, any expenses that are unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions, are the responsibility of the vessel owner. Consideration for such voyages consists of a fixed daily hire rate for the duration of the voyage, the reimbursement of costs incurred from fuel consumed during the voyage, as well as a fixed lump sum intended to compensate for time necessary for the vessel to return to the field following completion of the voyage. While such consideration is generally fixed, certain sources of variability exist, including variability in the duration of the voyage and the actual quantity of fuel consumed during the voyage. Payment for the voyage is not due until the voyage is completed. The duration of a single voyage will typically be less than two weeks. The Partnership does not engage in any specific activities to minimize residual value risk due to the short-term nature of the contracts.

The Partnership has allocated the contract consideration between the lease component and non-lease component on a relative standalone selling price basis. Given that there are no observable standalone selling prices for either of these two components, judgment is required in determining the standalone selling price of each component. The standalone selling price of the non-lease component has been determined using a cost-plus approach, whereby the Partnership estimates the cost to operate the vessel using internal estimates, plus a profit margin. The standalone selling price of the lease component has been determined using an adjusted market approach, whereby the Partnership calculates a rate excluding the operating component based on a market rate from published broker estimates, when available, or internal estimates when not available.

(iii) Time Charter Contracts

Pursuant to a time charter contract, the Partnership charters a vessel or FSO unit to a customer for a fixed period of time, generally one year or more. The obligations under a time-charter contract, which includes the lease of the vessel to the charterer as well as the operation of the vessel, are satisfied as services are rendered over the duration of such contract, as measured using the time that has elapsed from commencement. In addition, any expenses that are unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions, are the responsibility of the customer, as long as the vessel is not off-hire. Hire is typically invoiced monthly in advance for time-charter contracts, based on a fixed daily hire amount. In certain long-term time-charters, the fixed daily hire amount will increase on an annual basis by a fixed amount to offset expected increases in operating costs.

As a result of the Partnership accounting for compensation from such charters on a straight-line basis over the duration of the charter, such fixed increases in rate will result in revenues being accrued in the first portion of the charter and such amount drawn down in the last portion of the charter. Some time charters include variable consideration components in the form of expense adjustments or reimbursements, incentive compensation and penalties. For example, certain time charters contain provisions that allow the Partnership to be compensated for increases in the Partnership's costs during the term of the charter. Such provisions may be in the form of annual hire rate adjustments for changes in inflation indices or in the form of cost reimbursements for vessel operating expenditures or drydocking expenditures. During periods in which the vessels are off-hire or minimum speed and performance metrics are not met, penalties may be imposed. Variable consideration under the Partnership’s contracts is typically recognized as incurred as either such revenues are allocated and accounted for under lease accounting requirements or, alternatively, as such consideration is allocated to the distinct period in which such variable consideration was earned. The Partnership does not engage in any specific activities to minimize residual value risk.

The Partnership has allocated the contract consideration between the lease component and non-lease component on a relative standalone selling price basis. Given that there are no observable standalone selling prices for either of these two components, judgment is required in determining the standalone selling price of each component. The standalone selling price of the non-lease component has been determined using a cost-plus approach, whereby the Partnership estimates the cost to operate the vessel using internal estimates, plus a profit margin. The standalone selling price of the lease component has been determined using an adjusted market approach, whereby the Partnership calculates a rate excluding the operating component based on a market rate from published broker estimates, when available, or internal estimates when not available.

(iv) Bareboat Charter Contracts

Page 13 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
Pursuant to a bareboat charter contract, the Partnership charters a vessel or FSO unit to a customer for a fixed period of time, generally one year or more, at rates that are generally fixed. The customer is responsible for operation and maintenance of the vessel with their own crew as well as any expenses that are unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. If the vessel goes off-hire due to a mechanical issue or any other reason, the monthly hire received by the vessel owner is normally not impacted by such events. Revenue is recognized over the duration of such contract, as measured using the time that has elapsed from commencement of the lease. Hire is typically invoiced monthly in advance for bareboat charters, based on a fixed daily hire amount.

(v) Voyage Charters

Voyage charters are charters for a specific voyage. Voyage charters for the Partnership’s shuttle tankers and towage vessels are priced on a current or “spot” market rate. The obligations within a voyage charter contract, which will typically include the lease of the vessel to the charterer as well as the operation of the vessel, are satisfied as services are rendered over the duration of the voyage, as measured using the time that has elapsed from commencement of performance. In addition, expenses that are unique to a particular voyage, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions, are the responsibility of the vessel owner. The Partnership’s voyage charters for shuttle tankers normally contain a lease, whereas for towage vessels such contracts do not normally contain a lease. Such determination involves judgment about the decision-making rights the charterer has under the contract. Consideration for such contracts is generally fixed; however, certain sources of variability exist. Delays caused by the charterer result in additional consideration. Payment for the voyage is not due until the voyage is completed. The duration of a single voyage will typically be less than three months. The Partnership does not engage in any specific activities to minimize residual value risk due to the short-term nature of the contracts.

Where the term of the contract is based on the duration of a single voyage, the Partnership uses a load-to-discharge basis in determining proportionate performance. Consequently, the Partnership does not begin recognizing revenue until a voyage charter has been agreed to by the customer and the Partnership, even if the vessel has discharged its prior cargo and is sailing to the anticipated load location for its next voyage. For towage voyages, proportionate performance is determined based on commencement of the tow to completion of the tow.

The unaudited interim condensed consolidated statements of financial position reflect, in Other assets, the accrued portion of revenues for those voyages that commence prior to the unaudited interim condensed consolidated statement of financial position date and complete after the date of the unaudited interim condensed consolidated statement of financial position and reflect, in Accounts payable and other, the deferred portion of revenues which will be earned in subsequent periods.

(vi) Management Fees and Other

The Partnership also generates revenues from the operation of volatile organic compounds (or 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 these assets. Such services include the arrangement of third-party goods and services for the asset’s disponent owner or charterer. The obligations within these contracts typically consists of crewing, technical management, insurance and, potentially, commercial management. The obligations are satisfied concurrently and rendered over the duration of the management contract, as measured using the time that has elapsed from commencement of the contract. Consideration for such contracts generally consists of a fixed monthly management fee, plus the reimbursement of crewing costs for vessels being managed and all operational costs for the VOC systems. Management fees are typically invoiced monthly.

n.Direct operating costs

Direct operating cost include the following expenses: voyage expenses; operating expenses; charter hire and compensation. Voyage expenses are all expenses unique to a particular voyage, including bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. Operating expenses include ship management services, repairs and maintenance, insurance, stores, lube oils and communication expenses. Charter hire expenses represent the cost to charter-in a vessel for a fixed period of time. Compensation includes the compensation costs for crewing and shore-based employees.

Voyage expenses and operating expenses are recognized when incurred except when the Partnership incurs pre-operational costs related to the repositioning of a vessel that relates directly to a specific customer contract, that generates or enhances resources of the Partnership that will be used in satisfying performance obligations in the future, and where such costs are expected to be recovered via the customer contract. In this case, such costs are capitalized as contract costs and amortized over the duration of the customer contract.

The Partnership recognizes operating leases from vessels chartered from other owners in charter hire expenses.

o.Financial instruments

Classification and measurement

The table below summarizes the Partnership’s classification and measurement of financial assets and liabilities:

Page 14 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
Measurement CategoryUnaudited Interim Condensed Consolidated Statement of Financial Position Account
Financial assets
Cash and cash equivalentsAmortized costCash and cash equivalents
Restricted cashAmortized costFinancial assets
Derivative instrumentsFVTPLFinancial assets
Other financial assetsAmortized costFinancial assets
Accounts receivableAmortized costAccounts and other receivable, net
Due from related partiesAmortized costDue from related parties
Investment in finance leasesAmortized costOther assets
Financial liabilities
Accounts payable and otherAmortized costAccounts payable and other
Derivative instrumentsFVTPLOther financial liabilities
Obligations relating to finance leasesAmortized costOther financial liabilities
Due to related partiesAmortized costDue to related parties
BorrowingsAmortized costBorrowings

The classification of financial assets depends on the specific business model for managing the financial assets and the contractual cash flow characteristics of the financial asset.

At initial recognition, the Partnership measures a financial asset or liability at its fair value plus, in the case of a financial asset not at fair value through profit or loss (or FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets and liabilities carried at FVTPL are expensed in Other income (expenses), net in the unaudited interim condensed consolidated statements of income (loss).

Financial assets are measured at amortized cost based on their contractual cash flow characteristics and the business model for which they are held. Financial assets classified as amortized cost are recorded initially at fair value, then subsequently measured at amortized cost using the effective interest rate method, less any impairment.

Financial liabilities measured at amortized cost are initially recorded at fair value and, in the case of borrowings, net of directly attributable transaction costs. Financial liabilities are then subsequently measured at amortized cost using the effective interest rate method with gains or losses recognized in the unaudited interim condensed consolidated statements of income (loss).

Impairment

The Partnership recognizes a loss allowance for expected credit losses (or ECL) on financial assets measured subsequently at amortized cost, including trade receivables, amounts due from related parties, investments in finance leases and contract assets. The ECL is recognized upon inception of the financial asset and revised at each reporting date thereafter until maturity or disposal of the financial asset. The Partnership measures the loss allowance for a financial asset at an amount equal to the lifetime ECL if the credit risk on a financial asset has increased significantly since initial recognition. If the credit risk on a financial asset has not increased significantly, the Partnership measures the loss allowance for that financial instrument at an amount equal to 12-months ECL. In making this assessment, the Partnership considers information that is reasonable and supportable, including historical experience and forward looking information that is available without undue cost or effort.

The Partnership utilizes a simplified approach for measuring the loss allowance at an amount equal to the lifetime ECL for trade receivables, contract assets and investments in finance leases. The ECL on trade receivables are estimated using by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, which also forms a basis for the Partnership's future expectations for potential defaults of the debtor.

The ECL is presented as a direct reduction to the carrying value of the financial asset it relates to. The initial recognition of an ECL and all changes to an ECL at each reporting date thereafter are reflected in Other income (expenses), net in the unaudited interim condensed consolidated statements of income (loss). The Partnership has not recorded an ECL for all periods presented in these unaudited interim condensed consolidated financial statements.

Derivative instruments

The Partnership selectively utilizes derivative financial instruments primarily to manage financial risks, including foreign exchange risks and interest rate risks. All derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying unaudited interim condensed consolidated statements of financial position and subsequently remeasured to fair value, regardless of the purpose or intent for holding the derivative instrument.

Hedge accounting is applied when the derivative is designated as a hedge of a specific exposure and there is assurance that it will continue to be highly effective as a hedge based on an expectation of offsetting cash flows or fair value. Hedge accounting is not applied if the hedge is not effective or will no longer be effective, the derivative was sold or exercised, or the hedged item was sold, repaid or is no
Page 15 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
longer probable of occurring. Hedge accounting is discontinued prospectively when the derivative no longer qualifies as a hedge or the hedging relationship is terminated. Once discontinued, the cumulative change in fair value of a derivative that was previously recorded in Other comprehensive income by the application of hedge accounting will be recognized in the Partnership's profit or loss over the remaining term of the original hedging relationship as amounts related to the hedged item are recognized in profit or loss. The Partnership has not designated, for accounting purposes, any derivatives as hedges of a specific exposure for all periods presented in these unaudited interim condensed consolidated financial statements.

For derivative financial instruments that are not designated as accounting hedges, the changes in the fair value of the derivative financial instruments are recognized in earnings. Gains and losses from the Partnership’s non-designated foreign currency forward contracts and interest rate swaps are recorded in realized and unrealized gain (loss) on derivative instruments in the unaudited interim condensed consolidated statements of income (loss). The assets or liabilities relating to unrealized mark-to-market gains and losses on derivative financial instruments are recorded in financial assets and other financial liabilities, respectively.

p.Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Partnership takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

Fair value measurement is disaggregated into three hierarchical levels: Level 1, 2 or 3. Fair value hierarchical levels are based on the degree to which the inputs to the fair value measurement are observable. The levels are as follows:

Level 1 -Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 -Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the asset’s or liability’s anticipated life.
Level 3 -Inputs are unobservable and reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs in determining the estimate.
Further information on fair value measurements is described in Note 4.

q.Income taxes

The Partnership is subject to income taxes relating to its subsidiaries in Norway, Australia, Brazil, the United Kingdom, Singapore, Qatar, Canada, Luxembourg and the Netherlands.

(i) Current income tax

Current income tax assets and liabilities are measured at the amount expected to be paid to tax authorities, net of recoveries based on the tax rates and laws enacted or substantively enacted at the reporting date.

(ii) Deferred income tax

Deferred income tax liabilities are provided for using the liability method on temporary differences between the tax bases used in the computation of taxable income and carrying amounts of assets and liabilities in the unaudited interim condensed consolidated financial statements.

Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that deductions, tax credits and tax losses can be utilized. Such deferred income tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable income nor the accounting income, other than in a business combination. The carrying amount of deferred income tax assets are reviewed at each reporting date and reduced to the extent it is no longer probable that the income tax asset will be recovered.

Deferred income tax liabilities are recognized for taxable temporary differences associated with equity-accounted investments, except where the Partnership is able to control the reversal of the temporary difference and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent that it is probable that there will be sufficient taxable income against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred income tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Partnership expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Page 16 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority within a single taxable entity or the Partnership intends to settle its current tax assets and liabilities on a net basis in the case where there exist different taxable entities in the same taxation authority and when there is a legally enforceable right to set off current tax assets against current tax liabilities.

r.Provisions

Provisions are recognized when the Partnership has a present obligation, either legal or constructive, as a result of a past event, it is probable that the Partnership will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are recorded within Accounts payable and other in the unaudited interim condensed consolidated statements of financial position.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

(i) Decommissioning liability

The Partnership has a decommissioning liability related to the requirement to remove the sub-sea mooring and riser system associated with the Randgrid FSO unit and to restore the environment surrounding the facility. The costs associated with this decommissioning liability are to be reimbursed by the charterer, if certain conditions associated with the work are met. The obligation is expected to be settled at the end of the contract under which the FSO unit currently operates.

The Partnership recognizes a decommissioning liability in the period in which it has a present legal or constructive liability and a reasonable estimate of the amount can be made. Liabilities are measured based on current requirements, technology and price levels and the present value is calculated using amounts discounted over the period for which the cash flows are expected to occur. Amounts are discounted using a rate that reflects the risks specific to the liability. On a periodic basis, management reviews these estimates and changes, if any, will be applied prospectively. The estimated decommissioning liability is recorded as a non-current liability, with a corresponding increase in the carrying amount of the related asset. As the decommissioning liability will be covered by contractual payments to be received from the charterer, the Partnership has recorded a separate receivable. The liability and associated receivable are increased in each reporting period due to the passage of time, and the amount of accretion is charged to Other income (expense), net in the period. Periodic revisions to the estimated timing of cash flows, to the original estimated undiscounted cost and to changes in the discount rate can also result in an increase or decrease to the decommissioning liability and associated receivable. Actual costs incurred upon settlement of the obligation are recorded against the decommissioning liability to the extent of the liability recorded.

s.Assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification subject to limited exceptions.

Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell and are classified as current. Once classified as held for sale, vessels and equipment are no longer depreciated.

t.Deferred financing costs

Deferred financing costs related to a borrowing, including bank fees, commissions and legal expenses, are capitalized and amortized, over the term of the relevant loan facility, to interest expense using an effective interest rate method. Deferred financing costs are presented as a reduction from the carrying amount of the related financial liability, unless no amounts have been drawn under the debt liability or the debt issuance costs exceed the carrying value of the related debt liability, in which case the debt issuance costs are presented as Other non-current assets.

If a debt modification is considered substantial, fees paid to amend an arrangement pursuant to which a credit facility is extinguished are associated with the extinguishment of the old debt instrument and included in determining the debt extinguishment gain or loss to be recognized. Any unamortized deferred financing costs are written off. If a debt modification is not considered substantial, then the fees are associated with the modification, along with any existing unamortized deferred financing costs and premium or discount, are amortized as an adjustment of interest expense over the remaining term of the modified debt instrument using the effective interest method.

u.Critical accounting judgments and key sources of estimation uncertainty

The preparation of financial statements requires management to make critical judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenues and expenses that are not readily apparent from other
Page 17 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
sources, during the reporting period. These estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgments and estimates made by management and utilized in the normal course of preparing the Partnership’s unaudited interim condensed consolidated financial statements are outlined below.

(i) Determination of control

The Partnership consolidates an investee when it controls the investee, with control existing if, and only if, the Partnership has (a) power over the investee, (b) exposure, or rights, to variable returns from involvement with the investee and (c) the ability to use that power over the investee to affect the amount of the Partnership’s returns.

In determining if the Partnership has power over an investee, judgments are made when identifying which activities of the investee are relevant in significantly affecting returns of the investee and the extent of existing rights that give the Partnership the current ability to direct the relevant activities of the investee. Judgments are required to assess the Partnership's control over its non-wholly owned subsidiaries and investments in joint ventures. Judgments are made as to the amount of potential voting rights, the existence of contractual relationships that provide voting power and the ability for the Partnership to appoint directors. The Partnership enters into voting agreements which provide it the ability to contractually direct the relevant activities of the investee (formally referred to as “power” within IFRS 10, Consolidated financial statements). In assessing if the Partnership has exposure, or rights, to variable returns from involvement with the investee, judgments are made concerning whether returns from an investee are variable and how variable those returns are on the basis of the substance of the arrangement, the size of those returns and the size of those returns relative to others, particularly in circumstances where the Partnership’s voting interest differs from the ownership interest in an investee. In determining if the Partnership has the ability to use its power over the investee to affect the amount of its returns, judgments are made when the Partnership is an investor as to whether it is a principal or agent and whether another entity with decision making rights is acting as the Partnership’s agent. If it is determined that the Partnership is acting as an agent, as opposed to a principal, the Partnership does not control the investee.

(ii) Impairment

Judgment is applied when determining whether indicators of impairment exist when assessing the carrying values of the Partnership’s assets, the likelihood the Partnership will sell the vessel or equipment prior to the end of its useful life, the estimation of a cash generating unit’s future revenues and direct costs, and the determination of discount rates.

(iii) Revenue recognition

At the inception of the charter, the classification of the lease as an operating lease or a finance lease may involve the use of judgment as to the determination of the lease term. Such judgment is required as the duration of certain of the Partnership's charters is unknown at commencement of the charter. The charterer may have the option to extend the charter or terminate the charter early. In addition, certain charters impose penalties on the charterer if it terminates the charter early and such penalties can vary in size depending on when, during the term of the charter, the termination right is exercised. Such penalties could impact the determination of the lease term and requires the use of judgment.

(iv) Decommissioning liabilities

Decommissioning costs will be incurred at the end of the operating life of one of the Partnership’s vessels. This obligation is often many years in the future and requires judgment to estimate. The estimate of decommissioning costs can vary in response to many factors including changes in relevant legal, regulatory, and environmental requirements, the emergence of new restoration techniques or experience at other production sites. Inherent in the calculations of these costs are assumptions and estimates including the ultimate settlement amounts, inflation factors, discount rates, and timing of settlements.

(v) Vessels and equipment

The cost of the Partnership's vessels and equipment are depreciated on a straight-line basis over each asset's estimated useful life to an estimated residual value. The estimated useful life of the Partnership's vessels, including individual components, takes into account design life, commercial considerations and regulatory restrictions. The determination of the components, if any, of an asset and the estimated useful life of such asset or components involves judgment.

(vi) Taxes

The future realization of deferred tax assets depends on the existence of sufficient taxable income to utilize tax losses. This analysis requires, among other things, the use of estimates and projections in determining future reversals of temporary differences, forecasts of future profitability and evaluating potential tax-planning strategies.

(vii) Going concern

Page 18 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
The Partnership's assessment of its ability to continue operating on a going concern basis requires judgment and the estimation of the probability in obtaining additional sources of financing to meet its obligations and commitments and minimum liquidity requirements under its financial covenants. See note 2(b) for additional information.

(ix) COVID-19

In March 2020, the World Health Organization declared a global pandemic related to COVID-19. To date, there have been significant volatility in capital markets, commodity prices and foreign currencies, restrictions on the conduct of business in many jurisdictions, and the global movement of people and some goods has become restricted. The Partnership considered the impacts of these circumstances on the key critical judgments, estimates and assumptions that affect the reported and contingent amount of assets, liabilities, revenues and expenses, including whether any indicators of impairment were present for the period ended September 30, 2020. Based on the Partnership’s assessments, no additional impairments were required as at September 30, 2020 and the Partnership has not experienced any material business interruptions or financial impact as a result of the COVID-19 pandemic. The Partnership will continue to monitor the situation and review its critical estimates and judgments as circumstances evolve.

v.Earnings (loss) per Limited Partnership Unit

The Partnership calculates basic earnings (loss) per unit by dividing net income (loss) attributable to limited partners by the weighted average number of limited partnership common units outstanding during the period. The net income (loss) attributable to limited partners is allocated between the Class A and Class B limited partners' based on their proportionate ownership percentages. Basic earnings (loss) per unit has been presented on an aggregate basis and includes net income (loss) attributable to Class A limited partners and net income (loss) attributable Class B limited partners, which, if disaggregated, would not have a material effect.

For the purpose of calculating diluted earnings (loss) per unit, the Partnership adjusts net income (loss) attributable to limited partners, and the weighted average number of limited partnership common units outstanding, for the effects of all dilutive potential limited partnership common units, consisting of restricted common units and any warrants exercisable for common units. Consequently, the weighted average number of common units outstanding is increased assuming conversion of the restricted units and exercise of the warrants using the treasury stock method. The computation of diluted earnings (loss) per unit does not assume the issuance of common units if the effect would be anti-dilutive.

w.Segments

The Partnership’s operating segments are components of the business for which discrete financial information is reviewed regularly by the Chief Operating Decision Maker (or CODM) to assess performance and make decisions regarding resource allocation. The Partnership has assessed the CODM to be its Chief Executive Officer. The Partnership’s operating segments are FPSO, Shuttle tanker, FSO, UMS and Towage.

x.Employee Pension Plans

The Partnership has defined contribution pension plans covering the majority of its employees. Pension costs associated with the Partnership’s required contributions under its defined contribution pension plans are based on a percentage of employees’ salaries and are charged to earnings in the year incurred.

The Partnership also has defined benefit pension plans covering a small number of active and retired employees in Norway. The Partnership accrues the costs and related obligations associated with its defined benefit pension plans based on actuarial computations using the projected benefits obligation method and management’s best estimates of expected plan investment performance, salary escalation, and other relevant factors. For the purpose of calculating the expected return on plan assets, those assets are valued at fair value. The overfunded or underfunded status of the defined benefit pension plans is recognized as assets or liabilities in the unaudited interim condensed consolidated statements of financial position. The Partnership recognizes as a component of Other comprehensive income (loss), the gains or losses that arise during a period but that are not recognized as part of net periodic benefit costs. The pension assets have been guaranteed a minimum rate of return by the provider, thus reducing potential exposure to the Partnership to the extent the provider honors its obligations.

3.Transition to IFRS

The Partnership adopted IFRS effective September 30, 2020. Prior to the adoption of IFRS, the Partnership prepared its financial statements in accordance with its previous GAAP. As a result, the 2019 comparative information has been adjusted from amounts previously reported in the Partnership’s financial statements prepared in accordance with its previous GAAP. The Partnership’s consolidated financial statements for the year ending December 31, 2020 will be the first annual consolidated financial statements that comply with IFRS. IFRS 1 – First-time Adoption of International Financial Reporting Standards (or IFRS 1), which requires first-time adopters to apply IFRS retrospectively. The Partnership’s transition date is January 1, 2019 (or the Transition Date) and a consolidated statement of financial position has been prepared as at that date. These unaudited interim condensed consolidated financial statements, including all periods presented, have been prepared in accordance with the IFRS accounting policies described in Note 2, which consist of IFRS effective as of September 30, 2020.

a.Presentation of unaudited interim condensed consolidated financial statements

Page 19 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
The only significant change to the Partnership's unaudited interim condensed consolidated statements of income (loss) included in this report compared to the Partnership’s prior financial statements prepared in accordance with its previous GAAP is that the Partnership has made an accounting policy change to the presentation of total compensation expenses. Previously, compensation expenses relating to shore-based employees were included in general and administrative expenses, whereas the Partnership has included these expenses as a component of direct operating costs in its unaudited interim condensed consolidated statements of income (loss) included in this report.

A full reconciliation of the Partnership's unaudited interim condensed consolidated statements of financial position reported under its previous GAAP to that prepared under IFRS is presented below:

Page 20 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)

As at January 1, 2019
Previous IFRSIFRS
GAAPReclassificationsAdjustmentsIFRS
Previous GAAP$$$$IFRS
ASSETSASSETS
CurrentCurrent Assets
Cash and cash equivalents225,040 — — 225,040  Cash and cash equivalents
Restricted cash8,540 1,028 — 9,568  Financial assets
Accounts receivable141,903 1,807 — 143,710  Accounts and other receivable, net
Vessels held for sale12,528 — — 12,528  Vessels and equipment classified
as held for sale
Due from affiliates 58,885 — — 58,885  Due from related parties
Prepaid expenses32,199 9,044 — 41,243  Other assets
Other current assets11,879 (11,879)— — 
Total current assets490,974 — — 490,974 Total current assets
Non-current assets
2,075 — 2,075  Financial assets
36,536 — 36,536  Accounts and other receivable, net
Vessels and equipment, at cost
less accumulated depreciation
4,196,909 — (648,408)3,548,501  Vessels and equipment
Advances on newbuilding
contracts and conversion costs
73,713 — 40,083 113,796 
 Advances on newbuilding __contracts
Investments in equity-accounted
joint ventures
212,202 — (3,383)208,819  Equity-accounted investments
Deferred tax asset9,168 — — 9,168  Deferred tax assets
Due from affiliates 949 — — 949  Due from related parties
Other assets198,992 (38,611)24,810 185,191  Other assets
Goodwill129,145 — (2,032)127,113  Goodwill
4,821,078 — (588,930)4,232,148 Total non-current assets
Total assets5,312,052  (588,930)4,723,122 Total assets
LIABILITIES AND EQUITYLIABILITIES
CurrentCurrent liabilities
Accounts payable16,423 200,708 (3,651)213,480  Accounts payable and other
Accrued liabilities129,896 (129,896)— — 
Deferred revenues55,750 (55,750)— — 
Current portion of derivative
instruments
23,290 — — 23,290  Other financial liabilities
Due to affiliates183,795 — — 183,795  Due to related parties
Current portion of long-term debt554,336 — — 554,336  Borrowings
Other current liabilities15,062 (15,062)— — 
Total current liabilities978,552 — (3,651)974,901 Total current liabilities
Non-current liabilities
Other long-term liabilities236,616 (2,183)30,299 264,732  Accounts payable and other
Derivatives instruments94,354 — 50,513 144,867  Other financial liabilities
Long-term debt2,543,406 — — 2,543,406  Borrowings
2,183 — 2,183  Deferred tax liabilities
2,874,376 — 80,812 2,955,188 Total non-current liabilities
Total liabilities3,852,928 — 77,161 3,930,089 Total liabilities
EQUITYEQUITY
Limited partners - common units883,090 — (533,002)350,088 Limited partners - common units
Limited partners - preferred units384,274 — — 384,274 Limited partners - preferred units
General partner15,055 — (4,084)10,971 General partner
Warrants132,225 — (132,225)— 
Accumulated other
comprehensive income
7,361 — — 7,361 Accumulated other
comprehensive income
Non-controlling interests37,119 — 3,220 40,339 Non-controlling interests in
subsidiaries
Total equity1,459,124 — (666,091)793,033 Total equity
Total liabilities and equity5,312,052  (588,930)4,723,122 Total liabilities and equity
Page 21 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)


As at December 31, 2019
Previous IFRSIFRS IFRS
GAAPReclassificationsAdjustments
Previous GAAP$$$$IFRS
ASSETSASSETS
CurrentCurrent Assets
Cash and cash equivalents199,388 — — 199,388  Cash and cash equivalents
Restricted cash17,798 1,124 89,070 107,992  Financial assets
Accounts receivable204,020 805 — 204,825  Accounts and other receivable, net
Vessels held for sale15,374 — — 15,374  Vessels and equipment classified
as held for sale
Prepaid expenses29,887 5,538 — 35,425  Other assets
Other current assets7,467 (7,467)— — 
Total current assets473,934 — 89,070 563,004 Total current assets
Non-current assets
Restricted cash - long-term89,070 — (89,070)—  Financial assets
17,276 — 17,276  Accounts and other receivable, net
Vessels and equipment, at cost
less accumulated depreciation
3,511,758 — (486,042)3,025,716  Vessels and equipment
Advances on newbuilding
contracts
257,017 — 40,083 297,100  Advances on newbuilding
contracts
Investments in equity-accounted
joint ventures
234,627 — (2,411)232,216  Equity-accounted investments
Deferred tax asset7,000 — — 7,000  Deferred tax assets
Other assets220,716 (17,276)15,373 218,813  Other assets
Goodwill129,145 — (2,032)127,113  Goodwill
4,449,333 — (524,099)3,925,234 Total non-current assets
Total assets4,923,267  (435,029)4,488,238 Total assets
LIABILITIES AND EQUITYLIABILITIES
CurrentCurrent liabilities
Accounts payable56,699 206,756 9,163 272,618  Accounts payable and other
Accrued liabilities140,976 (140,976)— — 
Deferred revenues53,728 (53,728)— — 
Current portion of derivative
instruments
18,956 2,741 — 21,697  Other financial liabilities
Due to related parties20,000 — 1,306 21,306  Due to related parties
Current portion of long-term debt353,238 — — 353,238  Borrowings
Other current liabilities14,793 (14,793)— — 
Total current liabilities658,390 — 10,469 668,859 Total current liabilities
Non-current liabilities
Other long-term liabilities223,877 (24,422)23,204 222,659  Accounts payable and other
Derivatives instruments143,222 21,289 — 164,511  Other financial liabilities
Long-term debt2,825,712 — 5,562 2,831,274  Borrowings
3,133 — 3,133  Deferred tax liabilities
3,192,811 — 28,766 3,221,577 Total non-current liabilities
Total liabilities3,851,201 — 39,235 3,890,436 Total liabilities
EQUITYEQUITY
Limited partners - common units505,394 — (335,657)169,737 Limited partners - common units
Limited partners - preferred units384,274 — — 384,274 Limited partners - preferred units
General partner12,164 — (2,577)9,587 General partner
Warrants132,225 — (132,225)— 
Accumulated other
comprehensive income
4,410 — — 4,410 Accumulated other comprehensive
income
Non-controlling interests33,599 — (3,805)29,794 Non-controlling interests in
subsidiaries
Total equity1,072,066 — (474,264)597,802 Total equity
Total liabilities and equity4,923,267  (435,029)4,488,238 Total liabilities and equity

Page 22 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
b.Elected optional exemptions from full retrospective application

IFRS 1 provides entities preparing their first interim financial statements in accordance with IAS 34 with several optional exemptions from full retrospective application of IFRS. The Partnership has applied certain of these optional exemptions as described below:

Business combinations

This exemption allows the Partnership to not apply IFRS 3 – Business Combinations retrospectively to past business combinations. The Partnership has elected to apply this exemption and therefore has not restated business combinations that took place prior to the Transition Date. Any goodwill arising on such business combinations before the Transition Date remains at the carrying value determined under its previous GAAP.

Share-based payment transactions

This exemption allows the Partnership to not apply IFRS 2 – Share-based Payments to equity instruments granted on or before November 7, 2002, or to equity instruments granted after November 7, 2002 and vested before the Transition Date. This exemption also allows the Partnership to not apply IFRS 2 – Share-based Payments to liabilities arising from share-based payment transactions that were settled before the Transition date. The Partnership has elected to apply this exemption and therefore not to apply IFRS 2 to equity instruments granted on or before November 7, 2002, to equity instruments granted after November 7, 2002 that had vested by the Transition Date and to liabilities arising from share-based payment transactions that were settled before the Transition Date.

Fair value as deemed cost

This exemption allows the Partnership to initially measure an item of property, plant and equipment, investment property, right-of-use assets or intangible asset at its fair value, or an amount determined by a previous GAAP revaluation and use that amount as deemed cost as at the Transition Date on an asset-by-asset basis. The Partnership has elected to apply this exemption and measure all of its Vessels and equipment and advances on newbuilding contracts at their fair value as at the Transition Date.

Assets and liabilities of subsidiaries, joint ventures and associates

This exemption allows the Partnership to measure the assets and liabilities in subsidiaries, joint ventures and associates, which transitioned to IFRS at a date earlier than the Transition Date for the Partnership, at the carrying amounts in those subsidiaries, joint ventures or associates financial statements, after adjusting for equity accounting adjustments and differences in accounting policies. The Partnership has elected to apply this exemption to its equity-accounted investments.

c.Mandatory exceptions to retrospective application of IFRS

In preparing these unaudited interim condensed consolidated financial statements in accordance with IFRS 1, the Partnership has applied the following mandatory exceptions, which had an impact on the Partnership, from full retrospective application of IFRS:

Derecognition of financial assets and liabilities

A first-time adopter is required to apply the derecognition requirements in IFRS 9 - Financial Instruments prospectively to transactions occurring on or after the Transition Date, but not retrospectively to financial assets or liabilities already derecognized prior to the Transition Date. The Partnership has applied this mandatory exception for the derecognition of financial assets and liabilities occurring on or after the Transition Date and has not applied this requirement retrospectively.

Impairment of financial assets

A first-time adopter is required to apply the impairment requirements of IFRS 9 - Financial Instruments. The Partnership has determined that an ECL provision is not material and therefore has not recognized an ECL provision as at the Transition Date.

Estimates

Estimates made by the Partnership under its previous GAAP have been reassessed under IFRS. IFRS has a lower threshold for the recognition of a provision and requires the recognition of the mid-point of a range of estimates in situations where no single outcome within the range represents the best outcome, whereas the Partnership's previous GAAP required the recognition of the minimum amount of the range.

d.Reconciliation of Equity from previous GAAP to IFRS

The following is a reconciliation of the Partnership's equity reported in accordance with previous GAAP to its equity reported in accordance with IFRS at the Transition Date:

Page 23 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
PARTNER'S EQUITY
LIMITED PARTNERS
NoteCommon Units and Additional Paid-in Capital
$
Preferred
Units
$
General Partner
$
Warrants
$
Accumulated Other Comprehensive Income
$
Non- controlling Interests
$
Total
Equity
$
As reported under previous
GAAP - December 31, 2018
883,090 384,274 15,055 132,225 7,361 37,119 1,459,124 
Transitional adjustments increasing
(decreasing) reported amount:
Vessels and equipment(i)(646,673)— (4,955)— — 3,220 (648,408)
Advances on newbuilding contracts(ii)39,778 — 305 — — — 40,083 
Equity-accounted investments(iii)(3,357)— (26)— — — (3,383)
Goodwill(iv)(2,017)— (15)— — — (2,032)
Provisions(v)(16,771)— (129)— — — (16,900)
Off-market contract(vi)14,947 — 115 — — — 15,062 
Warrants(vii)81,091 — 621 (132,225)— — (50,513)
As reported under IFRS -
January 1, 2019
350,088 384,274 10,971 — 7,361 40,339 793,033 

The following is a reconciliation of the Partnership's equity reported in accordance with previous GAAP to its equity reported in accordance with IFRS at September 30, 2019:

PARTNER'S EQUITY
LIMITED PARTNERS
NoteCommon Units and Additional Paid-in Capital
$
Preferred
Units
$
General Partner
$
Warrants
$
Accumulated Other Comprehensive Income
$
Non- controlling Interests
$
Total
Equity
$
As reported under previous
GAAP - September 30, 2019
796,815 384,274 14,385 132,225 6,504 33,452 1,367,655 
Transitional adjustments increasing
(decreasing) reported amount:
Vessels and equipment(i)(697,417)— (5,342)— — (3,942)(706,701)
Advances on newbuilding contracts(ii)39,778 — 305 — — — 40,083 
Equity-accounted investments(iii)565 — — — — 568 
Goodwill(iv)(2,017)— (15)— — — (2,032)
Provisions(v)(16,771)— (129)— — — (16,900)
Warrants(vii)73,891 — 566 (132,225)— — (57,768)
Derecognition of financial liabilities(viii)(7,868)— (59)— — — (7,927)
Other(35)— — — — — (35)
As reported under IFRS -
September 30, 2019
186,941 384,274 9,714 — 6,504 29,510 616,943 

The following is a reconciliation of the Partnership's equity reported in accordance with previous GAAP to its equity reported in accordance with IFRS at December 31, 2019:
Page 24 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
PARTNER'S EQUITY
LIMITED PARTNERS
NoteCommon Units and Additional Paid-in Capital
$
Preferred
Units
$
General Partner
$
Warrants
$
Accumulated Other Comprehensive Income
$
Non- controlling Interests
$
Total
Equity
$
As reported under previous
GAAP - December 31, 2019
505,394 384,274 12,164 132,225 4,410 33,599 1,072,066 
Transitional adjustments increasing
(decreasing) reported amount:
Vessels and equipment(i)(478,567)— (3,670)— — (3,805)(486,042)
Advances on newbuilding contracts(ii)39,778 — 305 — — — 40,083 
Equity-accounted investments(iii)(2,389)— (20)— — — (2,409)
Goodwill(iv)(2,017)— (15)— — — (2,032)
Provisions(v)(16,771)— (129)— — — (16,900)
Warrants(vii)131,221 — 1,004 (132,225)— — — 
Derecognition of financial liabilities(viii)(6,816)— (51)— — — (6,867)
Other(96)— (1)— — — (97)
As reported under IFRS - December 31, 2019169,737 384,274 9,587 — 4,410 29,794 597,802 

(i)Vessels and equipment - Under the Partnership's previous GAAP, vessels and equipment were measured at cost less accumulated depreciation and adjusted for impairments. As part of the transition to IFRS, the Partnership elected to apply the fair value as deemed cost optional exemption to its vessels and equipment as at the Transition Date. The decrease in equity is the net difference between the fair value of vessels and equipment used as a deemed cost and the carrying amounts under the Partnership's previous GAAP.

IFRS requires the Partnership to componentize amounts initially recorded in respect of vessels and equipment into their significant components and depreciate each component separately over its expected useful life to its estimated residual value. The Partnership identified additional components relating to its FPSO units, FSO units and Towage vessels, which resulted in a higher depreciation and amortization expense compared to the Partnership's previous GAAP.

Under the Partnership's previous GAAP, vessels and equipment were tested for impairment by first comparing the undiscounted cash flows generated by the asset or cash generating unit to the carrying amount. If this test indicated an impairment, the amount of the impairment was then calculated by comparing the discounted cash flows or appraised values to the carrying amount of the asset or cash generating unit. Under IFRS, an impairment is recognized if the recoverable amount, determined as the higher of the estimated fair value less costs of disposal or the value in use, is less than the carrying value of the asset or cash generating unit, whereby the estimated fair value is either the discounted cash flows generated or an appraised value. As a result, the Partnership recorded impairment expenses on additional vessels and equipment under IFRS, when compared to its previous GAAP.

(ii)Advances on newbuilding contracts - Under the Partnership's previous GAAP, advances on newbuilding contracts were measured at cost. As part of the transition to IFRS, the Partnership elected to apply the fair value as deemed cost optional exemption to its advances on newbuilding contracts as at the Transition Date. The increase in equity is the net difference between the fair value used as deemed cost and the carrying amount under the Partnership's previous GAAP. When the vessels and equipment are delivered to the Partnership, this associated increase in the advances in newbuildings balance will be depreciated on a straight-line basis over the vessel and equipment's expected useful life to their estimated residual value.

(iii)Equity-accounted investments - The Partnership's equity-accounted investments, which are all joint ventures, transitioned to IFRS at a date earlier than the Transition Date for the Partnership. The Partnership elected the apply the optional exemption to measure the assets and liabilities in its equity-accounted investments at their carrying amount, after adjusting for equity accounting adjustments and differences in accounting policies. This exemption was applied by the Partnership as at the Transition Date and in all subsequent periods.

(iv)Goodwill - As at the Transition Date, the Partnership determined that the carrying amount of goodwill associated with its Towage segment was $nil.

(v)Provisions - Estimates for provisions made by the Partnership under its previous GAAP were reassessed under IFRS, which requires a lower threshold for recognition and requires the recognition of the mid-point of a range of estimates in situations where no single outcome within the range represents the best outcome. As at the Transition Date, the provisions recognized by the Partnership decreased equity by $16.9 million when compared to its previous GAAP.

(vi)Off-market contract - As at the Transition Date, the carrying amount of an off-market contract liability pertaining to the Piranema Spirit FPSO unit was derecognized under IFRS due to the requirement to offset the off-market contract against the cost of the vessel
Page 25 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
and equipment under IFRS and the Partnership's election to apply the fair value as deemed cost optional exemption to its vessels and equipment as at the Transition Date.

(vii)Warrants - Warrants which the Partnership had previously issued were recorded at their fair value or relative fair value as at the date of issuance and were classified as an equity instrument under the Partnership's previous GAAP. As at the Transition Date, the Partnership classified these warrants as financial liability derivative instruments, which are measured at fair value through profit or loss under IFRS. This classification was applied by the Partnership as at the Transition Date and in all subsequent periods for which the warrants existed.

(viii)Derecognition of financial liabilities - The Partnership has applied the derecognition requirements in IFRS 9 - Financial Instruments prospectively to transactions occurring on or after the Transition Date, but not retrospectively to financial liabilities already derecognized prior to the Transition Date. Under IFRS, the amortized cost of a modified financial liability, in which the terms of the financial liability are not determined to be substantially modified, is recalculated as the present value of the estimated future contractual cash flows, discounted at the original effective interest rate. The resulting gains or losses are recognized in profit or loss. Under the Partnership's previous GAAP, such gains or losses were not recognized.

e.Reconciliation of Net Income and Comprehensive Income from previous GAAP to IFRS

The following is a reconciliation of the Partnership's net income (loss) and comprehensive income (loss) reported in accordance with its previous GAAP to its net income (loss) and comprehensive income (loss) in accordance with IFRS for the three and nine months ended September 30, 2019 and the year ended December 31, 2019:
NoteThree months ended
September 30, 2019
Nine months ended September 30, 2019Year ended December 31, 2019
Net income (loss) as reported under previous
GAAP
(34,769)(65,346)(350,895)
Transitional adjustments increasing (decreasing)
reported net income (loss):
Vessels and equipment(i)4,904 (58,295)162,366 
Equity-accounted investments(ii)1,109 3,951 974 
Off-market contract(iii)— (15,062)(15,062)
Warrants(iv)7,090 (7,255)50,513 
Derecognition of financial liabilities(v)(2,824)(7,927)(6,867)
Other51 (35)(96)
Total adjustments 10,330 (84,623)191,828 
Net income (loss) as reported under IFRS(24,439)(149,969)(159,067)
Attributable to:
Limited partners - common units(31,102)(164,133)(181,424)
General partner(237)(1,257)(1,384)
Limited partners - preferred units8,038 24,114 32,150 
Non-controlling interests in subsidiaries(1,138)(8,693)(8,409)

Three months ended
September 30, 2019
Nine months ended September 30, 2019Year ended December 31, 2019
Other comprehensive income (loss) as reported under
previous GAAP
(35,157)(66,203)(353,846)
Transitional adjustments increasing (decreasing) reported
comprehensive income (loss):
Adjustments in net income (loss)10,330 (84,623)191,828 
Other comprehensive income (loss) as reported under
IFRS
(24,827)(150,826)(162,018)
Attributable to:
Limited partners - common units(31,487)(164,983)(184,353)
General partner(240)(1,264)(1,406)
Limited partners - preferred units8,038 24,114 32,150 
Non-controlling interests in subsidiaries(1,138)(8,693)(8,409)

(i)Vessels and equipment - The Partnership elected to apply the fair value as deemed cost optional exemption to its vessels and equipment as at the Transition Date. The lower carrying values from this election decreased the related depreciation and amortization and impairment expense - net.

Page 26 of 73


ALTERA INFRASTRUCTURE L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As at September 30, 2020, December 31, 2019 and January 1, 2019 and for the three and nine months ended September 30, 2020 and 2019
(all tabular amounts stated in thousands of U.S. Dollars, except unit and per unit data)
Additionally, certain significant components identified are depreciated over a shorter estimated useful life and impairment expenses, net were also impacted by a lower impairment recognition threshold under IFRS compared to the Partnership's previous GAAP. Both of these adjustments resulted in an increase in the related depreciation and amortization and impairment expense - net.

(ii)Equity-accounted investments - The difference in net income (loss) reflects the impact of the Partnership adopting the IFRS carrying values of its equity-accounted investments after adjusting for equity accounting adjustments and differences in accounting policies.