14. Members' Equity

Equity restructuring

As described in Note 1, the Company completed an equity restructuring on April 2, 2013 to eliminate its subordinated units and previous IDRs in exchange for new IDRs. This was accounted for as an exchange of equity between the subordinated unitholder and the Managing Member.

Distribution Reinvestment Plan

Niska Partners filed a registration statement with the SEC to authorize the issuance of up to 7,500,000 common units in connection with a distribution reinvestment plan ("DRIP"). The DRIP provides unitholders of record and beneficial owners of common units a voluntary means by which unitholders can increase the number of common units owned by reinvesting the quarterly cash distributions unitholders would otherwise receive in the purchase of additional common units. This registration statement became effective on July 31, 2013. Common units purchased under the DRIP will come from the Company's authorized but unissued common units or from common units purchased on the open market.

During the year ended March 31, 2014, Unitholders, substantially all of which were represented by the Carlyle/Riverstone Funds, elected to participate in the DRIP and were issued 1,252,815 common units in lieu of receiving cash distributions of $18.3 million.

At-The-Market Program

On October 30, 2013, Niska Partners filed a prospectus supplement with the SEC to authorize an At-The-Market program which allows the issuance of up to $75.0 million in additional common units. The units will be issued pursuant to the Company's Shelf Registration Statement on Form S-3. As of March 31, 2014, the Company had not yet issued any units under this registration statement.

Limited Liability

No member of Niska Partners will be obligated personally for any obligation of the Company solely by reason of being a member.

Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 18-607 of the Delaware Limited Liability Company Act, or the Delaware Act, Niska Partners may not make a distribution to unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three years from the date of an impermissible distribution, members who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited liability company for the distribution amount. A purchaser of common units will be liable for the obligations of the transferor to make contributions to us that are known to such purchaser at the time it became a member and for unknown obligations if the liabilities could be determined from the Company's Operating Agreement.

Summary of changes in Managing Member, Common, and Subordinated units:

The following is a reconciliation of units outstanding for the period indicated:



Units outstanding at March 31, 2011	33,804,745	33,804,745		67,609,490
Units issued August 24, 2011	687,500	—		687,500


Units outstanding at March 31, 2012 and 2013	34,492,245	33,804,745		68,296,990
Subordinated units cancelled April 2, 2013	—	(33,804,745	)	(33,804,745	)
Units issued under the DRIP	1,252,815	—		1,252,815


Units outstanding at March 31, 2014	35,745,060	—		35,745,060

On August 24, 2011, the Company completed the issuance and sale 687,500 common units at a price of $16.00 per unit to Sponsor Holdings. Total proceeds of $11.0 million were used to reduce amounts owing under the 8.875% Senior Notes.

Managing Member units

The managing member units are held by Niska Gas Storage Management LLC, (the "Managing Member" or the "Manager"), which has a 1.91% managing member interest in Niska Partners. The operating agreement provides that the managing member interest entitles the manager the right to receive distributions of Available Cash (as defined in the operating agreement) each quarter.

The Manager has sole responsibility for conducting the Company's business and for managing its operations. Pursuant to the operating agreement, the manager has delegated the power to conduct Niska Partners' business and manage its operations to the Company's board of directors, all of the members of which are appointed by the manager.

The Manager has agreed not to withdraw voluntarily prior to March 31, 2020 subject to certain conditions outlined in the operating agreement. Prior to that time, the manager may not be removed unless that removal is approved by the vote of the holders of not less than 66²/3% of the outstanding units, voting together as a single class, including units held by the manager and its affiliates. Any removal of the manager is also subject to the approval of a successor manager by the vote of the holders of a majority of the outstanding common units and notional subordinated units, voting as separate classes. The ownership of more than 33¹/3% of the outstanding units by the manager and its affiliates gives them the ability to prevent the manager's removal. At March 31, 2014, Sponsor Holdings, which is an affiliate of the manager, owned approximately 51.04% of the outstanding common and 100% of the notional subordinated units. At any time, the owners of the manager may sell or transfer all or part of their ownership interests in the manager to an affiliate or a third-party without the approval of the unitholders.

Common units

The common units are a class of non-managing membership interests in Niska Partners. The holders of the common units are entitled to participate in the Company's distributions and exercise the rights and privileges available to members under the Company's operating agreement. The operating agreement provides that, during the subordination period, the common unitholders have the right to receive distributions of Available Cash (as defined in the operating agreement) each quarter in an amount equal to $0.35 per common unit (the "Minimum Quarterly Distribution"), plus any arrearages in the payment of the Minimum Quarterly Distribution.

Subordinated units

All of the subordinated units were held by Sponsor Holdings.

On April 2, 2013, the Company completed an equity restructuring which permanently eliminated Niska Partners' subordinated units and previous incentive distribution rights in return for the new IDRs. However, for a period of five years, and provided that the Carlyle/Riverstone Funds continue to own a majority of both the managing member and the new IDRs, the Carlyle/Riverstone Funds will be deemed to own 33.8 million "Notional Subordinated Units" in connection with votes to remove and replace the managing member. These Notional Subordinated Units are not entitled to distributions, but preserve the Carlyle/Riverstone Fund's voting rights with respect to removal of the managing member.

Acquisition of Assets from Parent

On December 20, 2011 Niska Partners purchased certain assets from companies that are all effectively owned by the same parent company as Niska Partners. As the transaction was completed between entities under common control the assets have been recorded at the parent's carrying value and the difference between the carrying value and the amount of proceeds transferred to the parent has been recognized in equity. Please refer to Note 18—Related Party Transactions for details.

Acquisition of Interest in Parent

Sponsor Holdings is wholly-owned, directly and indirectly, by Niska Holdings L.P ("Niska Holdings Canada"). Niska Holdings Canada's equity consists of Class A and Class B units. Niska Holdings Canada's Class A Units are owned principally by Carlyle/Riverstone Global Energy and Power Fund III, L.P. and Carlyle/Riverstone Global Energy and Power Fund II, L.P. and affiliated entities (together, the "Carlyle/Riverstone Funds") and certain current and former members of Niska Partners' management. The Class B units are owned by certain current and former members of Niska Partners' management and non-executive employees. The Class B units were originally issued by Niska Predecessor in conjunction with a long-term incentive plan and were subject to service and performance conditions, all of which were satisfied in May 2009. The Class B units were, therefore, fully vested. Niska Predecessor had previously recorded compensation expense with respect to the Class B units throughout the vesting period. Upon vesting and the holders of the units being exposed to the risks and rewards of ownership for a reasonable period of time, the compensation arrangement became equity classified.

On June 24, 2011, certain Class B units of Niska Holdings Canada held by non-executive employees were purchased by Niska Partners at fair value. The aggregate purchase price of $2.2 million was recorded as a reduction of equity in the accompanying financial statements, with no gain or loss recognized.

The Class B units represent profit interests in Niska Holdings Canada, and entitle the holders to share in distributions made by Niska Holdings Canada once the Class A units have received distributions equal to their contributed capital plus an 8% cumulative rate of return. The Class B units held by Niska Partners do not currently participate in the earnings of or distributions paid by Niska Partners.

Phantom Unit Performance Plan (the "PUPP")

Effective April 1, 2011, the Company implemented two compensatory PUPP plans to provide long-term incentive compensation for certain employees, consultants and directors and to align their economic interest with those of common unitholders.

A Phantom Unit is a notional unit granted under the PUPP that represents the right to receive a cash payment equal to the fair market value of a unit of the Company's common units, following the satisfaction of certain time periods and/or certain performance criteria. Phantom Units are granted unvested and subject to both time and performance conditions. The default time period over which a Phantom Unit vests is three years from the date of grant. The performance measure is based upon distributed cash flow ("DCF") and total unitholder return ("TUR") metrics compared to such metrics of a select group of peer companies to the Company. The DCF and TUR metrics are calculated based on the Company's percentile ranking during the applicable performance period compared to a peer group. Provided that the Company has satisfied its minimum quarterly distribution targets for the underlying units, the Phantom Units will vest variably according to the Company's performance relative to its peer group.

The plan was amended effective April 1, 2012. The performance measure for Phantom Units granted after that date is based on total unitholder return ("TUR") metrics compared to such metrics of a select group of peer companies to the Company. The TUR metrics are calculated based on the Company's percentile ranking during the applicable performance period compared to a peer group. Provided that the Company has satisfied its minimum quarterly distribution targets for the common units, the Phantom Units will vest variably according to the Company's performance relative to its peer group.

The Plans are administered by the Compensation Committee of the Board of Directors. The Plans currently permit the grant of unit awards, restricted units, phantom units, unit options, unit appreciation rights, other unit-based awards, distribution equivalent rights and substitution awards covering an aggregate of 3,380,474 units. As of March 31, 2014, 1,483,708 units (March 31, 2013—2,045,693 units) were available for grant.

The following tables summarize the Company's Phantom Units outstanding and nonvested Phantom Units as of March 31, 2014:



Phantom Units outstanding—March 31, 2013	624,518		307,489		932,007
Granted	219,018		219,018		438,036
Exercised	(61,498	)	(61,498	)	(122,996	)
Forfeited	(24,718	)	(23,719	)	(48,437	)
Distribution equivalent rights	78,040		45,910		123,950


Phantom Units outstanding—March 31, 2014	835,360		487,200		1,322,560



Nonvested Phantom Units—March 31, 2013	563,020		245,991		809,011
Granted	219,018		219,018		438,036
Vested	(368,502	)	(174,436	)	(542,938	)
Forfeited	(24,718	)	(23,719	)	(48,437	)
Distribution equivalent rights	78,040		45,910		123,950


Nonvested Phantom Units—March 31, 2014	466,858		312,764		779,622

As of March 31, 2014, there was $5.9 million of total unrecognized compensation cost related to nonvested Phantom Units granted that were subject to both time and performance conditions. That cost was expected to be recognized of over the next two years.

Information on weighted average unit price at grant date and number of Phantom Units granted follows:

	Year ended March 31,

	2014		2013		2012
Weighted average price per unit at grant date	$	12.68	$	9.99	$	21.95
Number of Phanton Units Granted		438,036		695,349		518,425

Unit-based compensation costs for the year ended March 31, 2014 were $11.2 million (March 31, 2013—$7.0 million; March 31, 2012—$0.5 million). Cash paid to employees who exercised their Phantom Units for the years ended March 31, 2014, 2013 and 2012 was $2.3 million, $ nil and $ nil, respectively.

Incentive distribution rights

IDRs are a separate interest and represent participating securities. The new IDRs entitle the Carlyle/Riverstone Funds to receive 48% of any quarterly cash distributions after Niska Partners' common unitholders have received the full minimum quarterly distribution ($0.35 per unit) for each quarter plus any arrearages from prior quarters (of which there are currently none). The previous incentive distribution rights entitled the Carlyle/Riverstone Funds to receive increasing percentages (ranging from 13% to 48%) of incremental cash distributions after the unitholders (both common and subordinated) exceeded quarterly distributions ranging from $0.4025 per unit to $0.5250 per unit. To date, the Company has not made any payments with respect to the previous incentive distribution rights or the new IDRs.

Within 45 days after the end of each quarter Niska Partners may make cash distributions to the members of record on the applicable record date. Niska Partners distributed $52.3 million and $51.3 million to the holders of common units and the Managing Member during the years ended March 31, 2014 and 2013, respectively.

Earnings per unit

Niska Partners uses the two-class method for allocating earnings per unit. The two-class method requires the determination of net income allocated to member interests as shown below. Net earnings (loss) for the year ended March 31, 2014, after the allocation to Managing Member's interest, was only attributable to common unitholders as a result of cancellation of the Company's subordinated units at the beginning of the current fiscal year. The cancellation of subordinated units has not impacted the prior-period calculation of earnings per unit.

	Year ended March 31,

	2014			2013			2012
*Numerator:*
Net earnings (loss) attributable to Niska Partners	$	(8,957	)	$	(43,601	)	$	(165,772	)
Less:
Managing Member's interest		171			863			3,283


Net earnings (loss) attributable to common and subordinated unitholders	$	(8,786	)	$	(42,738	)	$	(162,489	)




*Denominator:*
Basic:
Weighted average units outstanding		34,941,036			68,296,990			68,010,532
Diluted:
Weighted average units outstanding		34,941,036			68,296,990			68,010,532
Earnings (loss) per unit allocated to common unitholders—basic and diluted	$	(0.25	)	$	(0.63	)	$	(2.39	)




Earnings (loss) per unit allocated to subordinated unitholders—basic and diluted	$	—		$	(0.63	)	$	(2.39	)