10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2013

OR

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

For the transition period from              to          

Commission file number 001-34733

Niska Gas Storage Partners LLC

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	27-1855740 (IRS Employer Identification number)
1001 Fannin Street, Suite 2500 Houston, TX (Address of principal executive offices)	77002 (Zip Code)

(281) 404-1890

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or  15(d) of the Securities Exchange Act of  1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

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

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

As of August 1, 2013, there were 34,492,245 Common Units outstanding.

Cautionary Statement Regarding Forward-Looking Information

This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future—including statements relating to general views about future operating results—are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include changes in general economic conditions, competitive conditions in our industry, actions taken by third-party operators, processors and transporters, changes in the availability and cost of capital, operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control, the effects of existing and future laws and governmental regulations, the effects of future litigation, and certain factors described in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013, and those described  from time to time in our future reports filed with the Securities and Exchange Commission.

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TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss) for the Three Months Ended June 30, 2013 and 2012	1
	Consolidated Balance Sheets as of June 30, 2013 and March 31, 2013	2
	Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2013 and 2012	3
	Consolidated Statements of Changes in Members’ Equity for the Three Months Ended June 30, 2013 and 2012	4
	Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 6.	Exhibits	31

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PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

Niska Gas Storage Partners LLC

Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss)

(in thousands of U.S. dollars, except for per unit amounts)

(Unaudited)

	Three Months Ended
	June 30,
	2013			2012
Revenues:
Fee-based revenue	$	31,471		$	37,061
Optimization, net	25,718			(39,848		)
	57,189			(2,787		)
Expenses (income):
Operating	10,444			8,091
General and administrative	11,290			9,839
Depreciation and amortization	10,333			11,824
Interest	16,206			16,508
Loss on extinguishment of debt	—			599
Foreign exchange losses (gains)	858			(185		)
Other expense (income)	391			(176		)
INCOME (LOSS) BEFORE INCOME TAXES	7,667			(49,287		)
Income tax benefit	(300		)	(11,941		)
NET EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)	$	7,967		$	(37,346	)
Net earnings (loss) allocated to:
Managing Member	$	158		$	(740	)
Common unitholders	$	7,809		$	(18,487	)
Subordinated unitholder (Notes 1 and 6)	$	—		$	(18,119	)
Earnings (loss) per unit allocated to common unitholders
- basic and diluted	$	0.23		$	(0.54	)
Earnings (loss) per unit allocated to subordinated unitholders
- basic and diluted (Notes 1 and 6)	$	—		$	(0.54	)

(See Notes to Unaudited Consolidated Financial Statements)

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Niska Gas Storage Partners LLC

Consolidated Balance Sheets

(in thousands of U.S. dollars)

(Unaudited)

	June 30,		March 31,
	2013		2013
ASSETS
Current assets
Cash and cash equivalents	$	27,875	$	10,610
Margin deposits	6,924		18,474
Trade receivables	1,707		2,702
Accrued receivables	28,870		106,726
Natural gas inventory	129,109		83,416
Prepaid expenses and other current assets	3,151		4,688
Short-term risk management assets	39,316		21,159
	236,952		247,775
Long-term assets
Property, plant and equipment, net of accumulated depreciation	910,422		918,061
Goodwill	245,604		245,604
Long-term natural gas inventory	15,264		15,264
Intangible assets, net of accumulated amortization	71,515		73,998
Deferred charges, net of accumulated amortization	13,585		14,420
Other assets	2,648		2,677
Long-term risk management assets	5,361		6,593
	1,264,399		1,276,617
TOTAL	$	1,501,351	$	1,524,392
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities
Revolving credit facility	$	11,000	$	65,000
Current portion of obligations under capital lease	1,269		1,259
Trade payables	3,999		1,048
Current portion of deferred taxes	14,304		14,303
Deferred revenue	6,829		568
Accrued liabilities	72,428		39,840
Short-term risk management liabilities	16,290		20,005
	126,119		142,023
Long-term liabilities
Long-term risk management liabilities	5,098		4,574
Asset retirement obligations	1,971		2,007
Other long-term liabilities	1,376		1,461
Deferred income taxes	120,694		120,935
Obligations under capital lease	11,904		12,225
Long-term debt	643,790		643,790
	910,952		927,015
Members’ equity
Common units	314,802		321,642
Subordinated units (Note 1)	—		265,877
Managing Member’s interest	275,597		9,858
	590,399		597,377
Commitments and contingencies (Note 2)
TOTAL	$	1,501,351	$	1,524,392

(See Notes to Unaudited Consolidated Financial Statements)

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Niska Gas Storage Partners LLC

Consolidated Statements of Cash Flows

(in thousands of U.S. dollars)

(Unaudited)

	Three Months Ended
	June 30,
	2013			2012
Operating Activities
Net earnings (loss)	$	7,967		$	(37,346	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Unrealized foreign exchange losses (gains)	980			(83		)
Deferred income tax benefit	(300		)	(11,934		)
Unrealized risk management (gains) losses	(20,118		)	51,148
Depreciation and amortization	10,333			11,824
Deferred charges amortization	835			908
Loss on extinguishment of debt	—			599
Write-down of inventory	—			22,281
Changes in non-cash working capital	84,666			5,553
Net cash provided by operating activities	84,363			42,950
Investing Activities
Property, plant and equipment expenditures	(302		)	(12,438		)
Proceeds on sale of assets	—			2,200
Net cash used in investing activities	(302		)	(10,238		)
Financing Activities
Proceeds from revolver drawings	51,000			65,948
Revolver payments	(105,000		)	(82,948		)
Payment of deferred financing costs	—			(2,908		)
Proceeds from obligations under capital lease	—			677
Repayments of obligations under capital lease	(311		)	—
Distributions to Unitholders	(12,316		)	(12,316		)
Net cash used in financing activities	(66,627		)	(31,547		)
Effect of translation on foreign currency cash and cash equivalents	(169		)	(149		)
Net increase in cash and cash equivalents	17,265			1,016
Cash and cash equivalents, beginning of period	10,610			13,342
Cash and cash equivalents, end of period	$	27,875		$	14,358
Supplemental cash flow disclosures (Note 11)

(See Notes to Unaudited Consolidated Financial Statements)

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Niska Gas Storage Partners LLC

Consolidated Statements of Changes in Members’ Equity

(in thousands of U.S. dollars)

(Unaudited)

							Managing
	Common			Subordinated			Member
	Units			Units			Interest			Total
Balance, April 1, 2012	$	391,585		$	287,105		$	11,700		$	690,390
Net loss	(18,487		)	(18,119		)	(740		)	(37,346		)
Distributions to unitholders	(12,367		)	(295		)	(255		)	(12,917		)
Balance, June 30, 2012	$	360,731		$	268,691		$	10,705		$	640,127
Balance, April 1, 2013	$	321,642		$	265,877		$	9,858		$	597,377
Cancellation of subordinated units	—			(265,877		)	265,877			—
Net income	7,809			—			158			7,967
Distributions to unitholders	(14,649		)	—			(296		)	(14,945		)
Balance, June 30, 2013	$	314,802		$	—		$	275,597		$	590,399

(See Notes to Unaudited Consolidated Financial Statements)

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Niska Gas Storage Partners LLC

Notes to Unaudited Consolidated Financial Statements

(Tabular amounts expressed in thousands of U.S. dollars unless otherwise noted)

1. Organization and Basis of Presentation

Organization

Niska Gas Storage Partners LLC (“Niska Partners” or the “Company”) is a publicly-traded Delaware limited liability company (NYSE:NKA) which independently owns and/or operates natural gas storage assets in North America. The Company operates the Countess and Suffield gas storage facilities (collectively, the AECO Hub™) in Alberta, Canada, and the Wild Goose and Salt Plains gas storage facilities in California and Oklahoma, respectively. Each of these facilities markets natural gas storage services in addition to optimizing storage capacity with its own proprietary gas purchases.

On April 2, 2013, Niska Partners completed an equity restructuring with affiliates of Carlyle/Riverstone Global Energy and Power Fund II, L.P. and Carlyle/Riverstone Global Energy and Power Fund III, L.P. (collectively the “Carlyle/Riverstone Funds”).  In the restructuring, all of the Company’s 33.8 million subordinated units and previous incentive distribution rights (all of which were owned by the Carlyle/Riverstone Funds) were combined into and restructured as a new class of incentive distribution rights (“new IDRs”).   The equity restructuring, which did not require any further consents or approvals, was effective as of the same day.  The transaction was unanimously approved by the Company’s Board of Directors, on the unanimous approval and recommendation of its Conflicts Committee, which is composed solely of independent directors.

The restructuring permanently eliminated all of the Company’s subordinated units and previous incentive distribution rights in return for the new IDRs.  Prior to completion of the restructuring, the Company would have been required to pay the full minimum quarterly distribution of $0.35 per unit on the subordinated units (requiring additional distributions of approximately $12 million per quarter) prior to increasing the quarterly distribution on common units. Quarterly distributions on the subordinated units had not been paid since the quarter ended September 30, 2011.

The new IDRs entitle the Carlyle/Riverstone Funds to receive 48% of any quarterly cash distributions after Niska Partners’ common unit holders 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 unit holders (both common and subordinated) exceeded quarterly distributions ranging from $0.4025 per unit to $0.5250 per unit.  In addition, 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.

At June 30, 2013, Niska Partners had 34,492,245 common units outstanding. Of this amount, 16,992,245 common units are owned by the Carlyle/Riverstone Funds, along with a 1.98% Managing Member’s interest in the Company and all of the Company’s new IDRs. Including all of the common units owned by the Carlyle/Riverstone Funds, along with the 1.98% Managing Member’s interest, the Carlyle/Riverstone Funds have a 50.27% ownership interest in the Company, excluding the IDRs, which are a variable interest. The remaining 17,500,000 common units, representing a 49.73% ownership interest in the Company excluding the IDRs, are owned by the public.

Basis of Presentation

The accounting  policies applied in these unaudited interim financial statements are consistent with the policies applied in the consolidated financial statements of Niska Partners and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

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1. Organization and Basis of Presentation (continued)

In the opinion of management, the accompanying consolidated financial statements of Niska Partners, which are unaudited except the balance sheet at March 31, 2013 which is derived from audited financial statements, include all adjustments necessary to present fairly Niska Partners’ financial position as of June 30, 2013, along with the results of Niska Partners’ operations and its cash flows for the three months ended June 30, 2013 and 2012. The results of operations for the three months ended June 30, 2013 are not necessarily representative of the results to be expected for the full fiscal year ending March 31, 2014.  The optimization of proprietary gas purchases is seasonal with the majority of the revenues and costs associated with the physical sale of proprietary gas generally occurring during the third and fourth fiscal quarters, when demand for natural gas is typically the strongest.

Pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), the unaudited consolidated financial statements do not include all of the information and notes normally included with financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These consolidated financial statements should be read in conjunction with the consolidated financial statements of Niska Partners and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

2. Commitments and Contingencies

Commitments

Niska Partners has entered into non-cancelable operating leases for office space, land use rights at its operating facilities, storage capacity at other facilities, equipment, and vehicles used in its operations. The remaining lease terms expire between December 2013 and August 2056 and require the payment of taxes, insurance and maintenance by the lessee.

Contingencies

Niska Partners and its subsidiaries are subject to various legal proceedings and actions arising in the normal course of business. While the outcome of such legal proceedings and actions cannot be predicted with certainty, it is the view of management that the resolution of such proceedings and actions will not have a material impact on Niska Partners’ unaudited consolidated financial position or results of operations.

3. Debt

Niska Partners’ debt obligations consist of the following:

	June 30,			March 31,
	2013			2013
Senior Notes due 2018	$	643,790		$	643,790
Revolving credit facility	11,000			65,000
Total	654,790			708,790
Less portion classified as current	(11,000		)	(65,000		)
	$	643,790		$	643,790

Senior Notes

Interest on the Senior Notes is payable semi-annually on March 15 and September 15 at a rate of 8.875% per annum. The Senior Notes will mature on March 15, 2018. No principal payments on the Senior Notes are required prior to maturity except in certain instances of default. As at June 30, 2013, the estimated fair value of the Senior Notes was $686.0 million (March 31, 2013 - $669.5 million).

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3. Debt (continued)

The indenture governing the Senior Notes limits Niska Partners’ ability to incur new debt or to pay distributions in respect of, repurchase or pay dividends on its membership interests (or other capital stock) or make other restricted payments. The limitations will apply differently depending on a fixed charge coverage ratio, which is defined as the ratio of cash flow (which is defined in the indenture in a manner substantially consistent with consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”)) to fixed charges, each as defined in the indenture governing the Senior Notes, and measured for the preceding four fiscal quarters.

Under this limitation the indenture would have permitted the Company to distribute approximately $275.8 million as at June 30, 2013.

If the fixed charge coverage ratio is not less than 2.0 to 1.0 (after giving pro forma effect to the incurrence of the additional debt obligations), Niska Partners is generally permitted to incur additional debt obligations beyond the Senior Notes and its $400 million Credit Agreement (discussed below).

If the fixed charge coverage ratio is not less than 1.75 to 1.0, Niska Partners is permitted to make restricted payments if the aggregate restricted payments since the date of the closing of its IPO, excluding certain types or amounts of permitted payments, are less than the sum (which the Company refers to as the restricted payment basket) of a number of items including, most importantly:

·operating surplus (defined similarly to the definition in the Company’s operating agreement) calculated as of the end of its preceding fiscal quarter; and

·the aggregate net cash proceeds received as a capital contribution or from the issuance of equity interests.

If the fixed charge coverage ratio is less than 1.75 to 1.0, Niska Partners is permitted to make restricted payments if the aggregate restricted payments constituting distributions in respect of Niska Partners’ equity interests since the date of the closing of its IPO, excluding certain types or amounts of permitted payments, are less than the sum (which the Company refers to as the restricted payment basket) of a number of items including, most importantly:

·$75.0 million; and

·the aggregate net cash proceeds received as a capital contribution or from the issuance of equity interests, again including the net cash proceeds from the IPO, reduced by the amount distributed before the IPO.

The indenture does not prohibit certain types or amounts of restricted payments, including a general basket of $75.0 million of restricted payments.

At June 30, 2013, the fixed charge coverage ratio was 2.1 to 1.0 and Niska Partners was permitted to pay the distribution described in Note 13. When the ratio declines below 2.0 to 1.0 the Company is restricted in its ability to issue new debt.

$400 Million Credit Agreement

On June 29, 2012, Niska Partners, through its subsidiaries, Niska Gas Storage US, LLC and AECO Gas Storage Partnership, completed an amendment and restatement of its senior secured asset-based revolving credit facilities, consisting of a U.S. revolving credit facility and a Canadian revolving credit facility (the “Credit Facilities” or the “$400 million Credit Agreement”). The $400 million Credit Agreement provides for revolving loans and letters of credit in an aggregate principal amount of up to $200 million for each of the U.S. revolving credit facility and the Canadian revolving credit facility. Subject to certain conditions, each of the revolving credit facilities may be expanded up to a maximum of $100.0 million in additional commitments, and the commitments in each facility may be reallocated on terms and according to procedures to be determined. Loans under the U.S. revolving facility will be denominated in U.S. dollars and loans under the Canadian revolving facility may be denominated, at the Company’s option, in either U.S. or Canadian dollars. Each revolving credit facility matures on June 29, 2016.

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3. Debt (continued)

As at June 30, 2013, $11.0 million in borrowings, with a weighted average interest rate of 6.00%, were outstanding under the Credit Facilities. Amounts committed in support of letters of credit totaled $25.4 million at June 30, 2013 (March 31, 2013 - $3.3 million). Any borrowings under the $400 million Credit Agreement are classified as current.

Borrowings under the Credit Facilities are limited to a borrowing base calculated as the sum of specified percentages of eligible cash and cash equivalents, eligible accounts receivable, the net liquidating value of hedge positions in broker accounts, eligible inventory, issued but unused letters of credit, and certain fixed assets minus the amount of any reserves and other priority claims. Borrowings will bear interest at prevailing market rates, which (1) in the case of U.S. dollar loans can be either fixed rate plus an applicable margin or, at the Company’s option, a base rate plus an applicable margin, and (2) in the case of Canadian dollar loans can be either the bankers’ acceptance rate plus an applicable margin or, at the Company’s option, a prime rate plus an applicable margin. The credit agreement provides that Niska Partners may borrow only up to the lesser of the level of the then current borrowing base or the committed maximum borrowing capacity, which is currently $400.0 million. As of June 30, 2013, the borrowing base collateral totaled $326.5 million.

The $400 million Credit Agreement contains limitations on Niska Partners’ ability to incur additional debt or to pay distributions in respect of, repurchase or pay dividends on its membership interests (or other capital stock) or make other restricted payments. These limitations are similar to those contained in the indenture governing the Senior Notes, but contain certain substantive differences.  As a result of these differences, the limitations on restricted payments contained in the Credit Agreement should be less restrictive than the limitations contained in the indenture.  As of June 30, 2013, Niska Partners was in compliance with all covenant requirements under the Senior Notes and the $400 million Credit Agreement.

Niska Partners has no independent assets or operations other than its investments in its subsidiaries. Both the Senior Notes and the $400 million Credit Agreement have been jointly and severally guaranteed by Niska Partners and substantially all of its subsidiaries. Niska Partners’ subsidiaries have no significant restrictions on their ability to pay distributions or make loans to Niska Partners, which are prepared and measured on a consolidated basis, and have no restricted assets as of June 30, 2013.

4. Risk Management Activities and Financial Instruments

Risk Management Overview

Niska Partners has exposure to commodity price, foreign currency, counterparty credit, interest rate, and liquidity risk. Risk management activities are tailored to the risks they are designed to mitigate.

Commodity Price Risk

As a result of its natural gas inventory, Niska Partners is exposed to risks associated with changes in price when buying and selling natural gas across future time periods. To manage these risks and reduce variability of cash flows, the Company utilizes a combination of financial and physical derivative contracts, including forwards, futures, swaps and option contracts. The use of these contracts is subject to the Company’s risk management policies. These contracts have not been treated as hedges for financial reporting purposes and therefore changes in fair value are recorded directly in earnings.

Forward contracts and futures contracts are agreements to purchase or sell a specific financial instrument or quantity of natural gas at a specified price and date in the future. Niska Partners enters into forward contracts and futures contracts to mitigate the impact of changes in natural gas prices. In addition to cash settlement, exchange traded futures may also be settled by the physical delivery of natural gas.

Swap contracts are agreements between two parties to exchange streams of payments over time according to specified terms. Swap contracts require receipt of payment for the notional quantity of the commodity based on the difference between a fixed price and the market price on the settlement date. Niska Partners enters into commodity swaps to mitigate the impact of changes in natural gas prices.

Option contracts are contractual agreements to convey the right, but not the obligation, for the purchaser of the option to buy or sell a specific physical or notional amount of a commodity at a fixed price, either at a fixed date or at any time within a specified period. Niska Partners enters into option agreements to mitigate the impact of changes in natural gas prices.

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4. Risk Management Activities and Financial Instruments (continued)

To limit its exposure to changes in commodity prices, Niska Partners enters into purchases and sales of natural gas inventory and concurrently matches the volumes in these transactions with offsetting derivative contracts. To comply with its internal risk management policies, Niska Partners is required to limit its exposure of unmatched volumes of proprietary current natural gas inventory to an aggregate overall limit of 8.0 billion cubic feet (“Bcf”). At June 30, 2013, 36.1 Bcf of natural gas inventory was offset with financial contracts, representing 99.8% of total current inventory. Non-cycling working gas, which is included in long-term inventory, and fuel gas used for operating the facilities are excluded from the coverage requirement. Total volumes of long-term inventory and fuel gas at June 30, 2013 are 3.4 Bcf and 0.0 Bcf, respectively. As of June 30, 2013 and March 31, 2013, the volumes of inventories which were economically hedged using each type of contract were:

	June 30,	March 31,
	2013	2013
Forwards	0.9 Bcf	1.6 Bcf
Futures	29.3 Bcf	14.1 Bcf
Swaps	4.7 Bcf	10.0 Bcf
Options	1.2 Bcf	—
	36.1 Bcf	25.7 Bcf

Counterparty Credit Risk

Niska Partners is exposed to counterparty credit risk on its trade and accrued accounts receivable and risk management assets. Counterparty credit risk is the risk of financial loss to the Company if a customer fails to perform its contractual obligations. Niska Partners engages in transactions for the purchase and sale of products and services with major companies in the energy industry and with industrial, commercial, residential and municipal energy consumers.  Credit risk associated with trade accounts receivable is mitigated by the high percentage of investment grade customers, collateral support of receivables and Niska Partners’ ability to take ownership of customer owned natural gas stored in its facilities in the event of non-payment.  For the three months ended June 30, 2013 and 2012, no trade receivables were deemed to be uncollectible. It is management’s opinion that no allowance for doubtful accounts is required at June 30, 2013 or March 31, 2013 on accrued and trade accounts receivable.

The Company analyzes the financial condition of counterparties prior to entering into an agreement. Credit limits are established and monitored on an ongoing basis. Management believes, based on its credit policies, that the Company’s financial position, results of operations and cash flows will not be materially affected as a result of non-performance by any single counterparty. Credit risk is assessed prior to transacting with any counterparty and each counterparty is required to maintain an investment grade rating, provide a parental guarantee from an investment grade parent, or provide an alternative method of financial assurance (letter of credit, cash, etc) to support proposed transactions. In addition, the Company’s tariffs contain provisions that permit it to take title to a customer’s inventory should the customer’s account remain unpaid for an extended period of time. Although the Company relies on a few counterparties for a significant portion of its revenues, one counterparty making up 42.6% of gross revenues for the three months ended June 30, 2013 is a physical natural gas clearing and settlement facility that requires counterparties to post margin deposits equal to 125% of their net position, which reduces the risk of default.

Exchange traded futures and options comprise approximately 73.7% of Niska Partners’ commodity risk management assets at June 30, 2013. These exchange traded contracts have minimal credit exposure as the exchanges guarantee that every contract will be margined on a daily basis. In the event of any default, Niska Partners’ account on the exchange would be absorbed by other clearing members. Because every member posts an initial margin, the exchange can protect the exchange members if or when a clearing member defaults.

Niska Partners further manages credit exposure by entering into master netting agreements for the majority of non-retail contracts. These master netting agreements provide the Company, in the event of default, the right to offset the counterparty’s rights and obligations.

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4. Risk Management Activities and Financial Instruments (continued)

Interest Rate Risk

Niska Partners assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows. At June 30, 2013, Niska Partners was only exposed to interest rate risk resulting from the variable rates associated with its $400 million Credit Agreement of which $11.0 million was drawn at June 30, 2013.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Niska Partners continues to manage its liquidity risk by ensuring sufficient cash and credit facilities are available to meet its operating and capital expenditure obligations when due, under both normal and stressed conditions.

Foreign Currency Risk

Foreign currency risk is created by fluctuations in foreign exchange rates. As Niska Partners conducts a portion of its activities in Canadian dollars, earnings and cash flows are subject to currency fluctuations. The performance of the Canadian dollar relative to the US dollar could positively or negatively affect earnings. Niska Partners is exposed to cash flow risk to the extent that Canadian currency outflows do not match inflows. The Company enters into currency swaps to mitigate the impact of changes in foreign exchange rates. The notional value of currency swaps at June 30, 2013 was $61.0 million (March 31, 2013 - $84.0 million). These contracts expire on various dates between July 1, 2013 and June 1, 2016. Niska Partners has not elected hedge accounting treatment, therefore, changes in fair value are recorded directly in earnings.

The following tables show the fair values of Niska Partners’ risk management assets and liabilities at June 30, 2013 and March 31, 2013:

	Energy			Currency
June 30, 2013	Contracts			Contracts			Total
Short-term risk management assets	$	38,153		$	1,163		$	39,316
Long-term risk management assets	5,017			344			5,361
Short-term risk management liabilities	(16,290		)	—			(16,290		)
Long-term risk management liabilities	(5,085		)	(13		)	(5,098		)
	$	21,795		$	1,494		$	23,289

	Energy			Currency
March 31, 2013	Contracts			Contracts			Total
Short-term risk management assets	$	20,383		$	776		$	21,159
Long-term risk management assets	6,593			—			6,593
Short-term risk management liabilities	(19,792		)	(213		)	(20,005		)
Long-term risk management liabilities	(4,477		)	(97		)	(4,574		)
	$	2,707		$	466		$	3,173

10

4. Risk Management Activities and Financial Instruments (continued)

Information about the Company’s risk management assets and liabilities that had netting or rights of offset arrangements are as follows:

June 30, 2013	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in the Balance Sheet		Margin Deposits not Offset in the Balance Sheet			Net Amount
Assets
Commodity derivatives	$	108,026	$	(64,856	)	$	43,170	$	(35,999	)	$	7,171
Currency derivatives	1,664		(157		)	1,507		(940		)	567
Total assets	109,690		(65,013		)	44,677		(36,939		)	7,738
Liabilities
Commodity derivatives	86,231		(64,856		)	21,375		(19,786		)	1,589
Currency derivatives	170		(157		)	13		—			13
Total liabilities	86,401		(65,013		)	21,388		(19,786		)	1,602
Net	$	23,289	—			$	23,289	$	(17,153	)	$	6,136

March 31, 2013	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in the Balance Sheet		Margin Deposits not Offset in the Balance Sheet			Net Amount
Assets
Commodity derivatives	$	88,682	$	(61,706	)	$	26,976	$	(15,030	)	$	11,946
Currency derivatives	881		(105		)	776		(776		)	—
Total assets	89,563		(61,811		)	27,752		(15,806		)	11,946
Liabilities
Commodity derivatives	85,975		(61,706		)	24,269		(16,861		)	7,408
Currency derivatives	415		(105		)	310		(164		)	146
Total liabilities	86,390		(61,811		)	24,579		(17,025		)	7,554
Net	$	3,173	$	—		$	3,173	$	1,219		$	4,392

11

4. Risk Management Activities and Financial Instruments (continued)

The Company expects to recognize risk management assets and liabilities outstanding at June 30, 2013 into net earnings and comprehensive income in the fiscal periods as follows:

	Energy			Currency
	Contracts			Contracts		Total
Fiscal year ending March 31, 2014	$	19,744		$	1,070	$	20,814
Fiscal year ending March 31, 2015	2,278			177		2,455
Fiscal year ending March 31, 2016	(391		)	156		(235		)
Thereafter	164			91		255
	$	21,795		$	1,494	$	23,289

Net realized and unrealized optimization gains and losses from the settlement of risk management contracts are summarized as follows:

	Three Months Ended
	June 30,
	2013			2012			Classification
Energy contracts
Realized	$	(6,342	)	$	28,653		Optimization, net
Unrealized	19,090			(52,578		)	Optimization, net
Currency contracts
Realized	1,464			451			Optimization, net
Unrealized	1,028			1,430			Optimization, net
	$	15,240		$	(22,044	)

5. Fair Value Measurements

The carrying amount of cash and cash equivalents, margin deposits, trade receivables, accrued receivables, trade payables, and accrued liabilities reported on the unaudited consolidated balance sheet approximate fair value. The fair value of debt is the estimated amount the Company would have to pay to transfer its debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at the balance sheet date. Fair values are based on valuations of similar debt at the balance sheet date and supported by observable market transactions when available. See Note 3 for disclosures regarding the fair value of debt.

12

5. Fair Value Measurements (continued)

Fair values have been determined as follows for Niska Partners financial assets and liabilities that were accounted for at fair value on a recurring basis:

June 30, 2013	Level 1		Level 2		Level 3		Total
Assets
Commodity derivatives	$	—	$	43,170	$	—	$	43,170
Currency derivatives	—		1,507		—		1,507
Total assets	—		44,677		—		44,677
Liabilities
Commodity derivatives	—		21,375		—		21,375
Currency derivatives	—		13		—		13
Total liabilities	—		21,388		—		21,388
Net	$	—	$	23,289	$	—	$	23,289

March 31, 2013	Level 1		Level 2		Level 3		Total
Assets
Commodity derivatives	$	—	$	26,976	$	—	$	26,976
Currency derivatives	—		776		—		776
Total assets	—		27,752		—		27,752
Liabilities
Commodity derivatives	—		24,269		—		24,269
Currency derivatives	—		310		—		310
Total liabilities	—		24,579		—		24,579
Net	$	—	$	3,173	$	—	$	3,173

The Company’s financial assets and liabilities recorded at fair value on a recurring basis have been categorized as Level 2.  The determination of the fair value of assets and liabilities for Level 2 valuations is generally based on a market approach.  The key inputs used in Niska Partners’ valuation models include transaction-specific details such as notional volumes, contract prices, and contract terms as well as forward market prices and basis differentials for natural gas obtained from third party service providers (typically the New York Mercantile Exchange, or NYMEX).  There were no changes in Niska Partners’ approach to determining fair value and there were no transfers out of Level 2 during the periods ended June 30, 2013 and March 31, 2013.

13

6. 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 unit holder and the Managing Member.

Phantom Unit Performance Plan (the “PUPP”)

Effective April 1, 2011, the Company maintains a compensatory PUPP plan (“the Plan”) to provide long-term incentive compensation for certain employees 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 total unitholder return (“TUR”) metrics compared to such metrics of a select group of peer companies. The TUR metrics are calculated based on the Company’s percentile ranking during the applicable performance period compared to the 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 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.

During the three months ended June 30, 2013, Phantom Units totaling 270,042 were granted at a weighted average price of $12.68.  During the three months ended June 30, 2012, Phantom Units totaling 695,349 were granted at a weighted average price of $9.99.

The Plan is administered by the Compensation Committee of the Board of Directors.  The Plan currently permits 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 June 30, 2013, 1,769,151 units (March 31, 2013 - 2,045,693 units) were available for grant.

The following is a reconciliation of Phantom Units Outstanding as of June 30, 2013:

	Number of Time- Based Units		Number of Performance-Based Units		Total Units
Balance at March 31, 2013	624,518		307,489		932,007
Granted	135,021		135,021		270,042
Forfeited	(17,217	)	(17,217	)	(34,434	)
Distribution equivalent rights	3,250		3,250		6,500
Balance at June 30, 2013	745,572		428,543		1,174,115

Unit-based compensation costs for the three months ended June 30, 2013 and 2012 were $3.2 million and $1.7 million respectively.

14

6. Members’ Equity (Continued)

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 income for the three months ended June 30, 2013, 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 prior-period calculation of earnings per unit.

	Three Months Ended
	June 30,
	2013			2012
Numerator:
Net income (loss) attributable to Niska Partners	$	7,967		$	(37,346	)
Less:
Managing Member’s interest	(158		)	740
Net income (loss) attributable to common and subordinated unitholders	$	7,809		$	(36,606	)
Denominator:
Basic:
Weighted average units outstanding	34,492,245			68,296,990
Diluted:
Weighted average units outstanding	34,492,245			68,296,990
Income (loss) per unit:
Basic	$	0.23		$	(0.54	)
Diluted	$	0.23		$	(0.54	)

7. Revenues

Niska Partners’ fee-based revenue consists of the following:

	Three Months Ended
	June 30,
	2013		2012
Long-term contract revenue	$	20,596	$	27,661
Short-term contract revenue	10,875		9,400
Total	$	31,471	$	37,061

Optimization, net consists of the following:

	Three Months Ended
	June 30,
	2013		2012
Realized optimization revenue, net	$	5,600	$	33,621
Unrealized risk management income (losses)	20,118		(51,188		)
Write-down of inventory	—		(22,281		)
Total	$	25,718	$	(39,848	)

15

8. Income Taxes

Income taxes included in the consolidated financial statements were as follows:

	Three Months Ended
	June 30,
	2013			2012
Income tax benefit	$	(300	)	$	(11,941	)
Effective income tax rate	-4		%	24		%

Income tax benefit was $0.3 million for the three months ended June 30, 2013 compared to a benefit of $11.9 million in the same period of the prior year. The income tax benefit in the current period is due mainly to the recognition of losses in certain taxable Canadian entities.

The effective tax rate for the three months ended June 30, 2013 and 2012 differs from the U.S. statutory federal rate of 35% primarily due to the income attributable to flow-through entities for tax purposes.

9. Accrued Liabilities

Niska Partners’ accrued liabilities consist of the following:

	June 30,		March 31,
	2013		2013
Accrued gas purchases	$	39,095	$	14,213
Accrued interest	17,269		2,845
Employee-related accruals	9,801		13,836
Other accrued liabilities	6,263		8,946
	$	72,428	$	39,840

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10. Changes in Non-Cash Working Capital

Changes in non-cash working capital for the three months ended June 30, 2013 and 2012 consists of the following:

	Three Months Ended
	June 30,
	2013			2012
Margin deposits	$	11,551		$	(22,321	)
Trade receivables	960			2,110
Accrued receivables	77,427			22,920
Natural gas inventory	(45,693		)	7,216
Prepaid expenses and other current assets	1,538			(954		)
Other assets	(63		)	—
Trade payables	336			(489		)
Accrued liabilities	32,428			8,306
Deferred revenue	6,261			(11,235		)
Other long-term liabilities	(79		)	—
Total	$	84,666		$	5,553

During the three months ended June 30, 2012, changes in non-cash working capital include the receipt of proceeds of $14.2 million (June 30, 2013 - $ nil) from sales of cushion gas. The Company included such proceeds in cash flows from operations since the predominant source of cash flows for natural gas purchases and sales are operating in nature.

11. Supplemental Cash Flow Disclosures

	Three Months Ended
	June 30,
	2013		2012
Interest paid	$	948	$	4,225
Taxes recovered	$	—	$	(7	)
Interest capitalized	$	—	$	1,622
Non-cash increase (decrease) in working capital related to property, plant and equipment expenditures	$	130	$	(2,857	)

17

12. Segment Disclosures

The Company’s process for the identification of reportable segments involves examining the nature of services offered, the types of customer contracts entered into and the nature of the economic and regulatory environment.

Niska Partners operates along functional lines in its commercial, engineering, and operations teams for operations in Alberta, Northern California, and the U.S. Mid-continent.  All functional lines and facilities offer the same services: fee-based revenue, and optimization. The Company has a small marketing business which is an extension of the Company’s proprietary optimization activities. Proprietary optimization activities occur when the Company purchases, stores and sells natural gas for its own account in order to utilize or optimize storage capacity that is not contracted or available to third party customers. All services are delivered using reservoir storage.  The Company measures profitability consistently along all functional lines based on revenues and earnings before interest, taxes, depreciation and amortization, before unrealized risk management gains and losses.  The Company has aggregated its operating segments into one reportable segment as at June 30, 2013 and March 31, 2013 and for each of the quarters ended June 30, 2013 and 2012.

Information pertaining to the Company’s short-term and long-term contract services and net optimization revenues is presented in the consolidated statements of earnings and comprehensive income.  All facilities have the same types of customers: major companies in the energy industry, industrial, commercial, and local distribution companies, and municipal energy consumers.

The following tables summarize the net revenues and long-lived assets by geographic area:

	Three Months Ended
	June 30,
	2013		2012
Net realized revenues
U.S.	$	8,494	$	11,919
Canada	28,577		36,482
Net unrealized revenues
U.S.	12,454		(15,378		)
Canada	7,664		(35,810		)
Inter-entity
U.S.	—		—
Canada	—		—
	$	57,189	$	(2,787	)

	June 30,		March 31,
	2013		2013
Long-lived assets (at period end)
U.S.	$	407,430	$	411,420
Canada	851,608		858,604
	$	1,259,038	$	1,270,024

18

13. Subsequent Events

Distributions

On July 31, 2013, the Board of Directors of Niska Partners approved a distribution of $0.35 per common unit, payable on August 15, 2013 to unitholders of record on August 12, 2013. The total distribution is expected to be approximately $12.3 million.

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. As of August 1, 2013, the Company had not yet issued any units under this registration statement.

19

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

The following information should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included in this report. The following information and such unaudited consolidated financial statements should also be read in conjunction with the consolidated financial statements and related notes, management’s discussion and analysis of financial condition and results of operations and other information included our Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

Overview of Critical Accounting Policies and Estimates

The process of preparing financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires estimates and judgments to be made regarding certain items and transactions. It is possible that materially different amounts could be recorded if these estimates and judgments change or if the actual results differ from these estimates and judgments. Our most critical accounting estimates, which involve the judgment of our management, were fully disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 and remained unchanged as of June 30, 2013.

Overview of Our Business

We operate the Countess and Suffield gas storage facilities (collectively, the AECO HubTM) in Alberta, Canada, and the Wild Goose and Salt Plains gas storage facilities in California and Oklahoma, respectively. Niska Partners markets gas storage services of working gas capacity in addition to optimizing storage capacity with its own proprietary gas purchases at each of these facilities. We also operate a natural gas marketing business which is an extension of our propriety optimization activities in Canada.

We earn revenues by leasing storage on a long-term firm (“LTF”) contract basis for which we receive monthly reservation fees for fixed amounts of storage, leasing storage on a short-term firm (“STF”) contract basis, where customers inject and withdraw specified amounts of gas and pay fees on specific dates, and optimization, where we purchase and sell gas on an economically hedged basis in order to improve facility utilization at margins higher than those from third-party contracts. Proprietary optimization activities occur when the Company purchases and sells natural gas for its own account. Our revenues related to our marketing business are included in proprietary optimization activities.

The Company has a total of 225.5 billion cubic feet (“Bcf”) of working gas capacity among its facilities, including 8.5 Bcf leased from a third-party pipeline company.

In June 2013 we received approval from the California Public Utilities Commission for an expansion of working gas storage capacity of 25 Bcf at our Wild Goose facility.  We plan to release that capacity to our customers by December 2013.  When fully available, our total working gas capacity will be 75 Bcf at Wild Goose and 250.5 Bcf across all of our facilities.

We have aggregated all of our activities in one reportable operating segment for financial reporting purposes. Our consolidated financial statements are prepared in accordance with GAAP.

Factors that Impact Our Business

There have been no material changes in the disclosure made in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 regarding this matter.

20

Results of Operations

A summary of financial data for each of the three months ended June 30, 2013 and 2012 is as follows:

	Three Months Ended
	June 30,
	2013			2012
	(unaudited)
Consolidated Statement of Earnings (Loss) and Comprehensive Income (Loss) Data:
Revenues:
Fee-based revenue	$	31,471		$	37,061
Optimization, net	25,718			(39,848		)
	57,189			(2,787		)
Expenses (income):
Operating	10,444			8,091
General and administrative	11,290			9,839
Depreciation and amortization	10,333			11,824
Interest	16,206			16,508
Loss on extinguishment of debt	—			599
Foreign exchange losses (gains)	858			(185		)
Other expense (income)	391			(176		)
Income (loss) before income taxes	7,667			(49,287		)
Income tax benefit	(300		)	(11,941		)
Net earnings (loss) and comprehensive income (loss)	$	7,967		$	(37,346	)
Reconciliation of Adjusted EBITDA and Cash Available for Distribution to Net Earnings (Loss)
Net earnings (loss)	$	7,967		$	(37,346	)
Add/(deduct):
Interest expense	16,206			16,508
Income tax benefit	(300		)	(11,941		)
Depreciation and amortization	10,333			11,824
Unrealized risk management (gains) losses	(20,118		)	51,148
Loss on extinguishment of debt	—			599
Foreign exchange losses (gains)	858			(185		)
Other expense (income)	391			(176		)
Write-down of inventory	—			22,281
Adjusted EBITDA	15,337			52,712
Less:
Cash interest expense, net	15,371			15,594
Income taxes recovered	—			(7		)
Maintenance capital expenditures	57			—
Other expense (income)	391			(176		)
Cash Available for Distribution	$	(482	)	$	37,301

21

Non-GAAP Financial Measures

Adjusted EBITDA and Cash Available for Distribution

We use the non-GAAP financial measures Adjusted EBITDA and Cash Available for Distribution in this report. A reconciliation of Adjusted EBITDA and Cash Available for Distribution to net earnings, the most directly comparable financial measure as calculated and presented in accordance with GAAP, is shown above.

We define Adjusted EBITDA as net earnings before interest, income taxes, depreciation and amortization, unrealized risk management gains and losses, loss on extinguishment of debt, foreign exchange gains and losses, inventory impairment write-downs, gains and losses on asset dispositions, asset impairments and other income. We believe the adjustments for other income are similar in nature to the traditional adjustments to net earnings used to calculate EBITDA and adjustment for these items results in an appropriate representation of this financial measure. Cash Available for Distribution is defined as Adjusted EBITDA reduced by interest expense (excluding amortization of deferred financing costs and the effects of unrealized gains or losses on interest rate swaps), income taxes paid, maintenance capital expenditures and other income. Adjusted EBITDA and Cash Available for Distribution are used as supplemental financial measures by our management and by external users of our financial statements, such as commercial banks and ratings agencies, to assess:

·the financial performance of our assets, operations and return on capital without regard to financing methods, capital structure or historical cost basis;

·the ability of our assets to generate cash sufficient to pay interest on our indebtedness and make distributions to our equity holders;

·repeatable operating performance that is not distorted by non-recurring items or market volatility; and

·the viability of acquisitions and capital expenditure projects.

The non-GAAP financial measures of Adjusted EBITDA and Cash Available for Distribution should not be considered as alternatives to net earnings. Adjusted EBITDA and Cash Available for Distribution are not presentations made in accordance with GAAP and have important limitations as analytical tools. Neither Adjusted EBITDA nor Cash Available for Distribution should be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA and Cash Available for Distribution exclude some, but not all, items that affect net earnings and are defined differently by different companies, our definition of Adjusted EBITDA and Cash Available for Distribution may not be comparable to similarly titled measures of other companies.

We recognize that the usefulness of Adjusted EBITDA as an evaluative tool may have certain limitations, including:

·Adjusted EBITDA does not include interest expense. Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and impacts our ability to generate profits and cash flows. Therefore, any measure that excludes interest expense may have material limitations;

·Adjusted EBITDA does not include depreciation and amortization expense. Because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate profits. Therefore, any measure that excludes depreciation and amortization expense may have material limitations;

·Adjusted EBITDA does not include provision for income taxes. Because the payment of income taxes is a necessary element of our costs, any measure that excludes income tax expense may have material limitations;

·Adjusted EBITDA does not reflect cash expenditures or future requirements for capital expenditures or contractual commitments;

·Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; and

·Adjusted EBITDA does not allow us to analyze the effect of certain recurring and non-recurring items that materially affect our net earnings or loss.

Similarly, Cash Available for Distribution has certain limitations because it accounts for some, but not all, of the above limitations.

22

Revenues

Revenues include fee-based revenue and optimization revenue, net. Fee-based revenue consists of long-term contracts for storage fees that are generated when we lease storage capacity on a term basis and short-term fees associated with specified injections and withdrawals of natural gas. Optimization revenue results from the purchase of natural gas inventory and its forward sale to future periods through financial and physical energy trading contracts, with our facilities being used to store the inventory between acquisition and disposition of the natural gas inventory.

Revenues for the three months ended June 30, 2013 and 2012, respectively, consisted of the following:

	Three Months Ended
	June 30,
	2013		2012
	(unaudited)
Long-term contract revenue	$	20,596	$	27,661
Short-term contract revenue	10,875		9,400
Fee-based revenue	31,471		37,061
Realized optimization, net	5,600		33,621
Unrealized risk management gains (losses)	20,118		(51,188		)
Write-down of inventory	—		(22,281		)
Optimization revenue, net	$	25,718	$	(39,848	)

Changes in revenue in the quarter were primarily attributable to the following:

LTF Revenues.  LTF revenues for the three months ended June 30, 2013 declined by $7.1 million (26%) compared to the three months ended June 30, 2012. This decline was due in part to our decision to allocate 22 Bcf less storage capacity to this strategy than in the previous year. In addition, lower average rates for LTF contracts were obtained in the three months ended June 30, 2013 compared to the three months ended June 30, 2012.

STF Revenues.  STF revenues for the three months ended June 30, 2013 increased by $1.5 million (16%) compared to the three months ended June 30, 2012. These increases resulted from more capacity being utilized for this strategy compared to the respective period in the prior year.

Optimization Revenues.  Total optimization revenues, increased to $25.7 million from net losses of $39.8 million in fiscal 2013.  When evaluating the performance of our optimization business, we focus on our realized optimization margins, excluding the impact of unrealized economic hedging gains and losses and inventory write-downs. For financial reporting purposes, our net optimization revenues include the impact of unrealized economic hedging gains and losses and inventory write-downs, which cause our reported revenues to fluctuate from period to period. However, because all inventory is economically hedged, any inventory write-downs are offset by hedging gains and any unrealized hedging losses are offset by realized gains from the sale of physical inventory. The components of optimization revenues are as follows:

·     Realized Optimization Revenue, net. Realized optimization of $5.6 million in the current quarter decreased by $28.0 million from $33.6 million in the first quarter of the previous year. This decrease resulted from a significant reduction in realized gains from financial hedges in the three months ended June 30, 2013, compared to the same period last year. During the first quarter of the prior year, we realized substantial gains on financial hedges for proprietary inventories that had been positioned for sale in spring and early summer.  These financial gains were not offset by realized physical losses because conditions in the natural gas storage market provided incentives to carry that inventory to future periods.  In the three months ended June 30, 2013, we carried significantly less proprietary inventory over year end and therefore had substantially fewer hedges positioned for realization in the first quarter.  During the three month period ended June 30, 2013, we realized losses on these financial hedges as a result of increases in natural gas prices relative to the sales contracts that settled during the period.  However, these losses were more than offset by gains on physical deliveries, as the natural gas storage markets encouraged us to store proprietary inventories for shorter periods. Typically, the recognition of revenue from proprietary optimization activities is lower in the summer months and higher in the winter months as we purchase inventory in the summer for delivery in later periods.  In FY2014, realized

23

optimization is expected to reflect patterns of a more typical storage year. The three month period ended June 30, 2013 also included $2.5 million in optimization revenue related to our marketing business, compared to $2.4 million realized during the three month period ended June 30, 2012.

·     Unrealized Risk Management Gains (Losses).   Unrealized risk management gains in the three month period ended June 30, 2013 resulted from increases in the value of financial hedges as a result of natural gas prices decreasing relative to average sales contract prices in future months. In the prior year, unrealized risk management losses resulted from decreases in the value of financial hedges due to increases in natural gas prices relative to the average sales contract prices for the three month period, as well as the realization during the period of significant amounts of previously unrealized gains. The three month period ended June 30, 2013 also included $3.8 million in unrealized risk management losses related to our marketing business, compared to $0.6 million in unrealized risk management gains during the three month period ended June 30, 2012. The unrealized risk management losses in the marketing business in the three month period ended June 30, 2013 resulted from decreases in the value of financial hedges as a result of natural gas prices decreasing relative to average purchase contract prices in future months.

·     Write-Down of Inventory. During the fourth quarter of fiscal 2012, near-term prices of natural gas fell dramatically. This reduction increased the value of our economic hedges and decreased the value of the proprietary optimization inventory underlying those hedges. Concurrently, the steepening of the forward curve at that time as noted above encouraged us to realize incremental revenues through the repositioning of inventory deliveries from the fourth quarter of fiscal 2012 into future periods in fiscal 2013 or beyond. Natural gas prices continued to fall during the first quarter of fiscal 2013. Consequently, the market value of our inventories fell below the carrying cost by the end of the first quarter and we wrote down our proprietary inventories by $22.3 million to the lower of cost or market value. No write-down occurred in the current period.

Operating Expenses

Operating expenses for the three months ended June 30, 2013 and 2012 consisted of the following:

	Three Months Ended
	June 30,
	2013		2012
	(unaudited)
Lease costs and property taxes	$	3,625	$	3,548
Fuel and electricity	3,551		1,905
Salaries and benefits	1,821		1,434
Maintenance	826		649
General operating costs	621		555
Total operating expenses	$	10,444	$	8,091

Operating expenses for the quarter ended June 30, 2013 increased by $2.4 million (29%) compared to the quarter ended June 30, 2012. A 57% increase in cycled volumes resulting in increased fuel and power consumption, combined with high power prices led to an increase of $1.6 million in fuel and electricity costs compared to the same period in the prior year.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2013 and 2012 consisted of the following:

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	Three Months Ended
	June 30,
	2013		2012
	(unaudited)
Compensation costs	$	7,077	$	5,920
General costs, including office and information technology costs	1,208		1,339
Legal, audit and regulatory costs	3,005		2,580
Total general and administrative expenses	$	11,290	$	9,839

General and administrative expenses for the quarter ended June 30, 2013 increased by $1.5 million (15%) compared to the quarter ended June 30, 2012. Compensation costs increased principally as a result of higher incentive compensation accruals principally related to long-term compensation plans.

Depreciation and Amortization Expense

Depreciation and amortization expense for the quarter ended June 30, 2013 decreased by $1.5 million (13%) compared to the quarter ended June 30, 2012. The decrease for the three month period was primarily attributable to a reduction in cushion gas migration at one of our facilities ($2.4 million), offset by additional depreciation from equipment purchased as part of our capacity expansion ($0.9 million).

Interest Expense

	Three Months Ended
	June 30,
	2013		2012
	(unaudited)
Interest on senior notes	$	14,284	$	14,284
Interest on revolving credit facility	806		2,561
Amortization of deferred charges	835		908
Other interest	281		377
	16,206		18,130
Less: Capitalized interest	—		1,622
Total interest expenses	$	16,206	$	16,508

Interest expense for the three months ended June 30, 2013 decreased by $0.3 million (2%) compared to the three months ended June 30, 2012 as a result of lower utilization of the revolving credit facility, offset by an absence of capitalized interest due to the completion of a project at our Wild Goose facility in fiscal 2013.

Loss on Extinguishment of Debt

We amended and restated our $400 million Credit agreement on June 29, 2012.  The write-off of a portion of deferred financing costs associated with the prior agreement resulted in a loss on debt extinguishment of $0.6 million in the prior period.

Income Taxes

Income tax benefit was $0.3 million for the three months ended June 30, 2013 compared to a benefit of $11.9 million for the same period of the prior year.  Income tax benefit in the current three month period is primarily due to the Canadian subsidiaries recognizing aggregate losses for tax purposes in the period.

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The effective tax rate for the three months ended June 30, 2013 differs from the U.S. statutory federal rate of 35% primarily due to the recognition of losses in taxable entities which have a lower statutory rate.

Liquidity and Capital Resources

Sources and Uses of Liquidity

Our primary short-term liquidity needs are to pay interest and principal payments under our $400 million Credit Agreement and interest payments on our 8.875% Senior Notes due 2018 (the “Senior Notes”), to fund our operating expenses and maintenance capital expenditures, to pay for the acquisition of proprietary optimization inventory along with associated margin requirements and to pay quarterly distributions, to the extent declared by our board of directors.  We fund these expenditures through a combination of cash on hand, cash from operations and borrowings under our $400 million Credit Agreement.

Our medium-term and long-term liquidity needs primarily relate to potential debt repurchases, organic expansion opportunities and asset acquisitions. We expect to finance the cost of any expansion projects and acquisitions from borrowings under our existing and possible future credit facilities or a mix of borrowings and additional equity offerings as well as cash on hand and cash from operations.

Our principal debt covenant is our fixed charge coverage ratio (“FCCR”), which is included in both our $400 million Credit Agreement and the indenture on our Senior Notes. When our FCCR, which is calculated on a trailing-twelve month basis by dividing Adjusted EBITDA (defined substantially the same as presented herein) by fixed charges (which are measured as interest expense plus the amount of interest capitalized, but giving pro forma credit for the all of the previous twelve months for certain debt purchases and acquisitions), is less than 2.0 to 1.0, we are restricted in our ability to issue new debt. However, this restriction does not impact our ability to access our existing $400 million Credit Facility, or to amend, extend or replace that facility. When our FCCR is below 1.75 to 1.0, we are restricted in our ability to pay distributions. At June 30, 2013, our FCCR was 2.1 to 1.0. If our fixed charge coverage ratio were to fall below 1.75 to 1.0, we would be permitted thereafter to pay $75 million of distributions. This $75 million amount is cumulative for all periods that our FCCR is below 1.75 to 1.0. The appropriateness and amount of distributions are determined by our board of directors on a quarterly basis.

In order to enhance our financial flexibility, in June 2012 we amended and restated our $400 million Credit Agreement.  The new agreement is substantially the same as the prior agreement, except that the maturity has been extended from March 5, 2014 to June 29, 2016, and pricing has been improved due to a more favorable pricing grid based on leverage levels and the elimination of a floor of 150 basis points on LIBOR-based borrowings.  At June 30, 2013, we had $11.0 million in borrowings, $25.4 million committed in support of letters of credit and $363.6 million of unutilized capacity related to our credit facility.

We believe that our existing sources of liquidity described above will be sufficient to fund our short-term liquidity needs through the upcoming twelve month period.  Funding of material acquisitions and longer-term liquidity needs will depend on the availability and cost of capital in the debt and equity markets, as well as compliance with our debt covenants.   Accordingly, the availability of any such potential funding on economic terms is uncertain.

Management does not believe that the operation of its existing business is impacted by the availability of capital for expansion projects or acquisitions.

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Cash Flows from Operations and Investing Activities

The following table summarizes our sources and uses of cash for the three months ended June 30, 2013 and 2012, respectively:

	Three Months Ended
	June 30,
	2013			2012
	(unaudited)
Operating Activities:
Net earnings (loss)	$	7,967		$	(37,346	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Unrealized foreign exchange losses (gains)	980			(83		)
Deferred income tax benefit	(300		)	(11,934		)
Unrealized risk management (gains) losses	(20,118		)	51,148
Depreciation and amortization	10,333			11,824
Deferred charges amortization	835			908
Loss on extinguishment of debt	—			599
Write-down of inventory	—			22,281
Changes in non-cash working capital	84,666			5,553
Net cash provided by operating activities	84,363			42,950
Net cash used in investing activities	(302		)	(10,238		)
Net cash used in financing activities	(66,627		)	(31,547		)
Effect of translation of foreign currency on cash and cash equivalents	(169		)	(149		)
Net Increase in Cash and Cash Equivalents	$	17,265		$	1,016

The variability in net cash provided by operating activities is primarily due to fluctuating market conditions that exist in any particular fiscal period, which impacts the margins and fees under each of our LTF, STF and optimization activities and impacts our decision to buy or sell significant volumes of inventory or hold existing inventories over a fiscal period end and sell them in the future if there is an economic incentive to do so.

During the three months ended June 30, 2013, we realized a significant increase in cash from operations compared to the three months ended June 30, 2012.  This increase resulted principally from the collection in April 2013 of accounts receivable generated in March 2013 from substantial sales of proprietary optimization inventory.  The proceeds from these receivables realizations were principally used to repay amounts outstanding under our revolving credit facilities and finance inventory purchases for the current fiscal year.

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Changes in non-cash working capital consisted of the following:

	Three Months Ended
	June 30,
	2013			2012
	(unaudited)
Changes in non-cash working capital
Margin deposits	$	11,551		$	(22,321	)
Trade receivables	960			2,110
Accrued receivables	77,427			22,920
Natural gas inventory	(45,693		)	7,216
Prepaid expenses and other current assets	1,538			(954		)
Other assets	(63		)	—
Trade payables	336			(489		)
Accrued liabilities	32,428			8,306
Deferred revenue	6,261			(11,235		)
Other long-term liabilities	(79		)	—
Total	$	84,666		$	5,553

As noted above, working capital can change significantly from period to period and is primarily affected by timing differences between the purchase and sale of natural gas inventory, including margin requirements and cash settlement on related risk management instruments, and the timing of collections from our customers. Non-cash working capital increased to $84.7 million compared to $5.6 million in the same period of the prior year.

Investing Activities

Substantially all of our cash used for investing activities consisted of capital expenditures in each of the three months ended June 30, 2013 and 2012. Capital expenditures in each three month period consisted of the following:

	Three Months Ended
	June 30,
	2013		2012
	(unaudited)
Maintenance capital	$	57	$	—
Expansion capital	115		15,295
Total capital expenditures	172		15,295
Change in accrued capital expenditures	130		(2,857		)
Proceeds from sale of assets	—		(2,200		)
Net cash used in investing activities	$	302	$	10,238

Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets, to maintain the existing operating capacity of our assets and to extend their useful lives. Expansion capital expenditures are made to acquire additional assets to grow our business, to expand and upgrade our facilities and to acquire similar operations or facilities. During the three months ended June 30, 2012, we spent a total of $15.3 million on expansion capital, the majority of which related to a project at our Wild Goose facility. The project was completed and put into service during fiscal 2013, leading to a significant reduction in expansion capital.

Under our current plan, we expect to continue to spend between approximately $1.0 million and $2.0 million per year for maintenance capital expenditures to maintain the integrity of our storage facilities and ensure the reliable injection, storage and withdrawal of natural gas for our customers. Expansion capital for the balance of fiscal 2014 is expected to be approximately $10.0 million and relates principally to enhancing existing capacity and developing new projects.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the disclosures made in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013 regarding this matter.

At June 30, 2013, 36.1 Bcf of natural gas inventory was economically hedged, representing 99.8% of our total current inventory. Because inventory is recorded at the lower of cost or market, not fair value, if the price of natural gas increased by $1.00 per Mcf the value of inventory would increase by $36.2 million, the fair value or mark-to-market value of our economic hedges would decrease by $36.1 million, and the impact due to the non-economically hedged position would be $0.1 million. Similarly, if the price of natural gas declined by $1.00 per Mcf, the value of inventory would decrease by $36.2 million while the fair value of our economic hedges would increase by $36.1 million and the impact due to the non-economically hedged position would be $0.1 million. Long-term inventory and fuel gas used for operating our facilities are not offset. Total volumes of long-term inventory and fuel gas at June 30, 2013 are 3.4 Bcf and 0.0 Bcf, respectively.

At June 30, 2013, we were exposed to interest rate risk resulting from the variable rates associated with our $400 million Credit Agreement. A balance of $11.0 million was drawn on the Credit Facilities at June 30, 2013.  The interest rate applicable on the Credit Facilities is subject to change based on certain ratios and the magnitude of our drawings on the facility.  At June 30, 2013, a one percent increase or decrease in interest rates would have an impact of approximately $0.1 million on our interest expense.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

Our principal executive officer (“CEO”) and principal financial officer (“CFO”) undertook an evaluation of our disclosure controls and procedures as of the end of the period covered by this report. The CEO and the CFO have concluded that our controls and procedures were effective as of June 30, 2013. For purposes of this section, the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. However, a controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.  Legal Proceedings

For information on legal proceedings, see Part 1, Item 1, Financial Statements, Note 2, “Commitments and Contingencies” in the Notes to Unaudited Consolidated Financial Statements included in this quarterly report, which is incorporated into this item by reference.

Item 1A.  Risk Factors

There have been no material changes from the risk factors described previously in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013, filed on June 7, 2013.

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Item 6.  Exhibits

Exhibit Number		Description
3.1	—	Certificate of formation of Niska Gas Storage Partners LLC (incorporated by reference to exhibit 3.1 to Amendment No. 2 to the Company’s registration statement on Form S-1 (Registration No. 333-165007), filed on April 15, 2010)
3.2	—	Amendment No. 1 to the First Amended and Restated Operating Agreement of Niska Gas Storage Partners LLC dated April 2, 2013 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on April 3, 2013.
3.3	—	Second Amended and Restated Operating Agreement of Niska Gas Storage Partners LLC dated April 2, 2013 (incorporated by reference to exhibit 3.2 of the Company’s Current Report on Form 8-K filed on April 3, 2013)
10.1	—	Sponsor Equity Restructuring Agreement, by and among Niska Gas Storage Partners LLC and Niska Sponsor Holdings Coöperatief U.A. dated April 2, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on April 3, 2013.
31.1*	—	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2*	—	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1*	—	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	—	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	—	XBRL Instance Document.
101.SCH*	—	XBRL Taxonomy Extension Schema Document.
101.CAL*	—	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*	—	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	—	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*	—	Taxonomy Extension Definition Linkbase Document.

*Filed herewith.

31

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NISKA GAS STORAGE PARTNERS LLC
Date: August 2, 2013	By:	/s/ VANCE E. POWERS
		Vance E. Powers
		Chief Financial Officer
		(Principal Accounting Officer)

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EX-31.1

Exhibit 31.1

Certifications

I, Simon Dupéré, certify that:

1.             I have reviewed this quarterly report on Form 10-Q of Niska Gas Storage Partners LLC;

2.             Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.             Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.             The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)           Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.             The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2013

/s/ SIMON DUPÉRÉ

Simon Dupéré

Chief Executive Officer

EX-31.2

Exhibit 31.2

Certifications

I, Vance E. Powers, certify that:

1.             I have reviewed this quarterly report on Form 10-Q of Niska Gas Storage Partners LLC;

2.             Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.             Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.             The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)           Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.             The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2013

/s/ VANCE E. POWERS

Vance E. Powers

Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer Pursuant To

18 U.S.C. Section 1350, as Adopted Pursuant To

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Niska Gas Storage Partners LLC (the “Company”) for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Simon Dupéré, as Interim Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

1.             The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.             The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ SIMON DUPÉRÉ
	Name: Simon Dupéré Title: Chief Executive Officer

Date: August 2, 2013

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer Pursuant To

18 U.S.C. Section 1350, as Adopted Pursuant To

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Niska Gas Storage Partners LLC (the “Company”) for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Vance E. Powers, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

1.             The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.             The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ VANCE E. POWERS
	Name: Vance E. Powers Title: Chief Financial Officer

Date: August 2, 2013

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request

XML

Segment Disclosures

3 Months Ended

Jun. 30, 2013

Segment Disclosures

Segment Disclosures

12. Segment Disclosures

The Company’s process for the identification of reportable segments involves examining the nature of services offered, the types of customer contracts entered into and the nature of the economic and regulatory environment.

Niska Partners operates along functional lines in its commercial, engineering, and operations teams for operations in Alberta, Northern California, and the U.S. Mid-continent.  All functional lines and facilities offer the same services: fee-based revenue, and optimization. The Company has a small marketing business which is an extension of the Company’s proprietary optimization activities. Proprietary optimization activities occur when the Company purchases, stores and sells natural gas for its own account in order to utilize or optimize storage capacity that is not contracted or available to third party customers. All services are delivered using reservoir storage.  The Company measures profitability consistently along all functional lines based on revenues and earnings before interest, taxes, depreciation and amortization, before unrealized risk management gains and losses.  The Company has aggregated its operating segments into one reportable segment as at June 30, 2013 and March 31, 2013 and for each of the quarters ended June 30, 2013 and 2012.

Information pertaining to the Company’s short-term and long-term contract services and net optimization revenues is presented in the consolidated statements of earnings and comprehensive income.  All facilities have the same types of customers: major companies in the energy industry, industrial, commercial, and local distribution companies, and municipal energy consumers.

The following tables summarize the net revenues and long-lived assets by geographic area:

	Three Months Ended
	June 30,
	2013		2012
Net realized revenues
U.S.	$	8,494	$	11,919
Canada	28,577		36,482
Net unrealized revenues
U.S.	12,454		(15,378		)
Canada	7,664		(35,810		)
Inter-entity
U.S.	—		—
Canada	—		—
	$	57,189	$	(2,787	)

	June 30,		March 31,
	2013		2013
Long-lived assets (at period end)
U.S.	$	407,430	$	411,420
Canada	851,608		858,604
	$	1,259,038	$	1,270,024

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Operating Activities
Net earnings (loss)	$ 7,967	$ (37,346)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Unrealized foreign exchange losses (gains)	980	(83)
Deferred income tax benefit	(300)	(11,934)
Unrealized risk management (gains) losses	(20,118)	51,148
Depreciation and amortization	10,333	11,824
Deferred charges amortization	835	908
Loss on extinguishment of debt		599
Write-down of inventory		22,281
Changes in non-cash working capital	84,666	5,553
Net cash provided by operating activities	84,363	42,950
Investing Activities
Property, plant and equipment expenditures	(302)	(12,438)
Proceeds on sale of assets		2,200
Net cash used in investing activities	(302)	(10,238)
Financing Activities
Proceeds from revolver drawings	51,000	65,948
Revolver payments	(105,000)	(82,948)
Payment of deferred financing costs		(2,908)
Proceeds from obligations under capital lease		677
Repayments of obligations under capital lease	(311)
Distributions to Unitholders	(12,316)	(12,316)
Net cash used in financing activities	(66,627)	(31,547)
Effect of translation on foreign currency cash and cash equivalents	(169)	(149)
Net increase in cash and cash equivalents	17,265	1,016
Cash and cash equivalents, beginning of period	10,610	13,342
Cash and cash equivalents, end of period	$ 27,875	$ 14,358

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Fair Value Measurements

3 Months Ended

Jun. 30, 2013

Fair Value Measurements

Fair Value Measurements

5. Fair Value Measurements

The carrying amount of cash and cash equivalents, margin deposits, trade receivables, accrued receivables, trade payables, and accrued liabilities reported on the unaudited consolidated balance sheet approximate fair value. The fair value of debt is the estimated amount the Company would have to pay to transfer its debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at the balance sheet date. Fair values are based on valuations of similar debt at the balance sheet date and supported by observable market transactions when available. See Note 3 for disclosures regarding the fair value of debt.

Fair values have been determined as follows for Niska Partners financial assets and liabilities that were accounted for at fair value on a recurring basis:

June 30, 2013	Level 1		Level 2		Level 3		Total
Assets
Commodity derivatives	$	—	$	43,170	$	—	$	43,170
Currency derivatives	—		1,507		—		1,507
Total assets	—		44,677		—		44,677
Liabilities
Commodity derivatives	—		21,375		—		21,375
Currency derivatives	—		13		—		13
Total liabilities	—		21,388		—		21,388
Net	$	—	$	23,289	$	—	$	23,289

March 31, 2013	Level 1		Level 2		Level 3		Total
Assets
Commodity derivatives	$	—	$	26,976	$	—	$	26,976
Currency derivatives	—		776		—		776
Total assets	—		27,752		—		27,752
Liabilities
Commodity derivatives	—		24,269		—		24,269
Currency derivatives	—		310		—		310
Total liabilities	—		24,579		—		24,579
Net	$	—	$	3,173	$	—	$	3,173

The Company’s financial assets and liabilities recorded at fair value on a recurring basis have been categorized as Level 2.  The determination of the fair value of assets and liabilities for Level 2 valuations is generally based on a market approach.  The key inputs used in Niska Partners’ valuation models include transaction-specific details such as notional volumes, contract prices, and contract terms as well as forward market prices and basis differentials for natural gas obtained from third party service providers (typically the New York Mercantile Exchange, or NYMEX).  There were no changes in Niska Partners’ approach to determining fair value and there were no transfers out of Level 2 during the periods ended June 30, 2013 and March 31, 2013.

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Income Taxes (Tables)

3 Months Ended

Jun. 30, 2013

Income Taxes

Schedule of income taxes

	Three Months Ended
	June 30,
	2013			2012
Income tax benefit	$	(300	)	$	(11,941	)
Effective income tax rate	-4		%	24		%

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Subsequent Events

3 Months Ended

Jun. 30, 2013

Subsequent Events

Subsequent Events

13. Subsequent Events

Distributions

On July 31, 2013, the Board of Directors of Niska Partners approved a distribution of $0.35 per common unit, payable on August 15, 2013 to unitholders of record on August 12, 2013. The total distribution is expected to be approximately $12.3 million.

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. As of August 1, 2013, the Company had not yet issued any units under this registration statement.

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Members' Equity (Details 2) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Numerator:
Net income (loss)	$ 7,967	$ (37,346)
Managing Member's interest	(158)	740
Net income (loss) attributable to common and subordinated unitholders	$ 7,809	$ (36,606)
Basic:
Weighted average units outstanding (in shares)	34,492,245	68,296,990
Diluted:
Weighted average units outstanding (in shares)	34,492,245	68,296,990
Income (loss) per unit:
Basic (in dollars per unit)	$ 0.23	$ (0.54)
Diluted (in dollars per unit)	$ 0.23	$ (0.54)

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Supplemental Cash Flow Disclosures (Tables)

3 Months Ended

Jun. 30, 2013

Supplemental Cash Flow Disclosures

Schedule of supplemental cash flow disclosures

	Three Months Ended
	June 30,
	2013		2012
Interest paid	$	948	$	4,225
Taxes recovered	$	—	$	(7	)
Interest capitalized	$	—	$	1,622
Non-cash increase (decrease) in working capital related to property, plant and equipment expenditures	$	130	$	(2,857	)

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Changes in Non-Cash Working Capital (Tables)

3 Months Ended

Jun. 30, 2013

Changes in Non-Cash Working Capital

Schedule of changes in non-cash working capital

	Three Months Ended
	June 30,
	2013			2012
Margin deposits	$	11,551		$	(22,321	)
Trade receivables	960			2,110
Accrued receivables	77,427			22,920
Natural gas inventory	(45,693		)	7,216
Prepaid expenses and other current assets	1,538			(954		)
Other assets	(63		)	—
Trade payables	336			(489		)
Accrued liabilities	32,428			8,306
Deferred revenue	6,261			(11,235		)
Other long-term liabilities	(79		)	—
Total	$	84,666		$	5,553

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Risk Management Activities and Financial Instruments (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Risk management activities and financial instruments
Fiscal year ending March 31, 2014	$ 20,814
Fiscal year ending March 31, 2015	2,455
Fiscal year ending March 31, 2016	(235)
Thereafter	255
Total	23,289	3,173
Energy Contracts
Risk management activities and financial instruments
Fiscal year ending March 31, 2014	19,744
Fiscal year ending March 31, 2015	2,278
Fiscal year ending March 31, 2016	(391)
Thereafter	164
Total	21,795	2,707
Currency contracts
Risk management activities and financial instruments
Fiscal year ending March 31, 2014	1,070
Fiscal year ending March 31, 2015	177
Fiscal year ending March 31, 2016	156
Thereafter	91
Total	$ 1,494	$ 466

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Income Taxes
Income tax benefit	$ (300)	$ (11,941)
Effective income tax rate (as a percent)	(4.00%)	24.00%
U.S. statutory federal rate (as a percent)	35.00%	35.00%

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Risk Management Activities and Financial Instruments (Details) (USD $)	3 Months Ended						3 Months Ended
	Jun. 30, 2013 item	Jun. 30, 2012	Mar. 31, 2013	Jun. 30, 2013 Revolving credit facility	Jun. 29, 2012 Revolving credit facility	Jun. 30, 2013 Exchange traded futures and options	Jun. 30, 2013 Commodity derivatives MMcf	Mar. 31, 2013 Commodity derivatives MMcf	Jun. 30, 2013 Commodity derivatives Forward contracts MMcf	Mar. 31, 2013 Commodity derivatives Forward contracts MMcf	Jun. 30, 2013 Commodity derivatives Futures MMcf	Mar. 31, 2013 Commodity derivatives Futures MMcf	Jun. 30, 2013 Commodity derivatives Swaps MMcf	Mar. 31, 2013 Commodity derivatives Swaps MMcf	Jun. 30, 2013 Commodity derivatives Options MMcf	Jun. 30, 2013 Currency contracts Currency swap	Mar. 31, 2013 Currency contracts Currency swap
Risk management activities and financial instruments
Aggregate overall exposure limit of unmatched volumes of proprietary current natural gas inventory (in million cubic feet)							8,000
Volume of current natural gas inventory offset with derivative contracts (in million cubic feet)							36,100	25,700	900	1,600	29,300	14,100	4,700	10,000	1,200
Percentage of the total current inventory of natural gas offset with derivative contracts							99.80%
Volume of non-cycling working gas (in million cubic feet)							3,400
Volume of fuel gas (in million cubic feet)							0
Deemed to be uncollectible trade receivable	$ 0	$ 0
Allowance for doubtful accounts required on accrued and trade accounts receivable	0		0
Number of significant counterparties	1
Percentage of revenue from one counterparty	42.60%
Required margin deposits as percentage of net position to reduce risk of default	125.00%
Exchange-traded derivative instruments as percentage of commodity risk management assets						73.70%
Maximum borrowing capacity				400,000,000	400,000,000
Borrowings outstanding	11,000,000		65,000,000	11,000,000
Notional value of currency swaps																$ 61,000,000	$ 84,000,000

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Supplemental Cash Flow Disclosures (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Supplemental Cash Flow Disclosures
Interest paid	$ 948	$ 4,225
Taxes recovered		(7)
Interest capitalized		1,622
Non-cash increase (decrease) in working capital related to property, plant and equipment expenditures	$ 130	$ (2,857)

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Accrued Liabilities (Tables)

3 Months Ended

Jun. 30, 2013

Accrued Liabilities

Schedule of accrued liabilities

	June 30,		March 31,
	2013		2013
Accrued gas purchases	$	39,095	$	14,213
Accrued interest	17,269		2,845
Employee-related accruals	9,801		13,836
Other accrued liabilities	6,263		8,946
	$	72,428	$	39,840

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Organization and Basis of Presentation

3 Months Ended

Jun. 30, 2013

Organization and Basis of Presentation

Organization and Basis of Presentation

1. Organization and Basis of Presentation

Organization

Niska Gas Storage Partners LLC (“Niska Partners” or the “Company”) is a publicly-traded Delaware limited liability company (NYSE:NKA) which independently owns and/or operates natural gas storage assets in North America. The Company operates the Countess and Suffield gas storage facilities (collectively, the AECO Hub™) in Alberta, Canada, and the Wild Goose and Salt Plains gas storage facilities in California and Oklahoma, respectively. Each of these facilities markets natural gas storage services in addition to optimizing storage capacity with its own proprietary gas purchases.

On April 2, 2013, Niska Partners completed an equity restructuring with affiliates of Carlyle/Riverstone Global Energy and Power Fund II, L.P. and Carlyle/Riverstone Global Energy and Power Fund III, L.P. (collectively the “Carlyle/Riverstone Funds”).  In the restructuring, all of the Company’s 33.8 million subordinated units and previous incentive distribution rights (all of which were owned by the Carlyle/Riverstone Funds) were combined into and restructured as a new class of incentive distribution rights (“new IDRs”).   The equity restructuring, which did not require any further consents or approvals, was effective as of the same day.  The transaction was unanimously approved by the Company’s Board of Directors, on the unanimous approval and recommendation of its Conflicts Committee, which is composed solely of independent directors.

The restructuring permanently eliminated all of the Company’s subordinated units and previous incentive distribution rights in return for the new IDRs.  Prior to completion of the restructuring, the Company would have been required to pay the full minimum quarterly distribution of $0.35 per unit on the subordinated units (requiring additional distributions of approximately $12 million per quarter) prior to increasing the quarterly distribution on common units. Quarterly distributions on the subordinated units had not been paid since the quarter ended September 30, 2011.

The new IDRs entitle the Carlyle/Riverstone Funds to receive 48% of any quarterly cash distributions after Niska Partners’ common unit holders 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 unit holders (both common and subordinated) exceeded quarterly distributions ranging from $0.4025 per unit to $0.5250 per unit.  In addition, 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.

At June 30, 2013, Niska Partners had 34,492,245 common units outstanding. Of this amount, 16,992,245 common units are owned by the Carlyle/Riverstone Funds, along with a 1.98% Managing Member’s interest in the Company and all of the Company’s new IDRs. Including all of the common units owned by the Carlyle/Riverstone Funds, along with the 1.98% Managing Member’s interest, the Carlyle/Riverstone Funds have a 50.27% ownership interest in the Company, excluding the IDRs, which are a variable interest. The remaining 17,500,000 common units, representing a 49.73% ownership interest in the Company excluding the IDRs, are owned by the public.

Basis of Presentation

The accounting  policies applied in these unaudited interim financial statements are consistent with the policies applied in the consolidated financial statements of Niska Partners and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

In the opinion of management, the accompanying consolidated financial statements of Niska Partners, which are unaudited except the balance sheet at March 31, 2013 which is derived from audited financial statements, include all adjustments necessary to present fairly Niska Partners’ financial position as of June 30, 2013, along with the results of Niska Partners’ operations and its cash flows for the three months ended June 30, 2013 and 2012. The results of operations for the three months ended June 30, 2013 are not necessarily representative of the results to be expected for the full fiscal year ending March 31, 2014.  The optimization of proprietary gas purchases is seasonal with the majority of the revenues and costs associated with the physical sale of proprietary gas generally occurring during the third and fourth fiscal quarters, when demand for natural gas is typically the strongest.

Pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), the unaudited consolidated financial statements do not include all of the information and notes normally included with financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These consolidated financial statements should be read in conjunction with the consolidated financial statements of Niska Partners and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

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Debt

3 Months Ended

Jun. 30, 2013

Debt

Debt

3. Debt

Niska Partners’ debt obligations consist of the following:

	June 30,			March 31,
	2013			2013
Senior Notes due 2018	$	643,790		$	643,790
Revolving credit facility	11,000			65,000
Total	654,790			708,790
Less portion classified as current	(11,000		)	(65,000		)
	$	643,790		$	643,790

Senior Notes

Interest on the Senior Notes is payable semi-annually on March 15 and September 15 at a rate of 8.875% per annum. The Senior Notes will mature on March 15, 2018. No principal payments on the Senior Notes are required prior to maturity except in certain instances of default. As at June 30, 2013, the estimated fair value of the Senior Notes was $686.0 million (March 31, 2013 - $669.5 million).

The indenture governing the Senior Notes limits Niska Partners’ ability to incur new debt or to pay distributions in respect of, repurchase or pay dividends on its membership interests (or other capital stock) or make other restricted payments. The limitations will apply differently depending on a fixed charge coverage ratio, which is defined as the ratio of cash flow (which is defined in the indenture in a manner substantially consistent with consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”)) to fixed charges, each as defined in the indenture governing the Senior Notes, and measured for the preceding four fiscal quarters.

Under this limitation the indenture would have permitted the Company to distribute approximately $275.8 million as at June 30, 2013.

If the fixed charge coverage ratio is not less than 2.0 to 1.0 (after giving pro forma effect to the incurrence of the additional debt obligations), Niska Partners is generally permitted to incur additional debt obligations beyond the Senior Notes and its $400 million Credit Agreement (discussed below).

If the fixed charge coverage ratio is not less than 1.75 to 1.0, Niska Partners is permitted to make restricted payments if the aggregate restricted payments since the date of the closing of its IPO, excluding certain types or amounts of permitted payments, are less than the sum (which the Company refers to as the restricted payment basket) of a number of items including, most importantly:

· operating surplus (defined similarly to the definition in the Company’s operating agreement) calculated as of the end of its preceding fiscal quarter; and

· the aggregate net cash proceeds received as a capital contribution or from the issuance of equity interests.

If the fixed charge coverage ratio is less than 1.75 to 1.0, Niska Partners is permitted to make restricted payments if the aggregate restricted payments constituting distributions in respect of Niska Partners’ equity interests since the date of the closing of its IPO, excluding certain types or amounts of permitted payments, are less than the sum (which the Company refers to as the restricted payment basket) of a number of items including, most importantly:

· $75.0 million; and

· the aggregate net cash proceeds received as a capital contribution or from the issuance of equity interests, again including the net cash proceeds from the IPO, reduced by the amount distributed before the IPO.

The indenture does not prohibit certain types or amounts of restricted payments, including a general basket of $75.0 million of restricted payments.

At June 30, 2013, the fixed charge coverage ratio was 2.1 to 1.0 and Niska Partners was permitted to pay the distribution described in Note 13. When the ratio declines below 2.0 to 1.0 the Company is restricted in its ability to issue new debt.

$400 Million Credit Agreement

On June 29, 2012, Niska Partners, through its subsidiaries, Niska Gas Storage US, LLC and AECO Gas Storage Partnership, completed an amendment and restatement of its senior secured asset-based revolving credit facilities, consisting of a U.S. revolving credit facility and a Canadian revolving credit facility (the “Credit Facilities” or the “$400 million Credit Agreement”). The $400 million Credit Agreement provides for revolving loans and letters of credit in an aggregate principal amount of up to $200 million for each of the U.S. revolving credit facility and the Canadian revolving credit facility. Subject to certain conditions, each of the revolving credit facilities may be expanded up to a maximum of $100.0 million in additional commitments, and the commitments in each facility may be reallocated on terms and according to procedures to be determined. Loans under the U.S. revolving facility will be denominated in U.S. dollars and loans under the Canadian revolving facility may be denominated, at the Company’s option, in either U.S. or Canadian dollars. Each revolving credit facility matures on June 29, 2016.

As at June 30, 2013, $11.0 million in borrowings, with a weighted average interest rate of 6.00%, were outstanding under the Credit Facilities. Amounts committed in support of letters of credit totaled $25.4 million at June 30, 2013 (March 31, 2013 - $3.3 million). Any borrowings under the $400 million Credit Agreement are classified as current.

Borrowings under the Credit Facilities are limited to a borrowing base calculated as the sum of specified percentages of eligible cash and cash equivalents, eligible accounts receivable, the net liquidating value of hedge positions in broker accounts, eligible inventory, issued but unused letters of credit, and certain fixed assets minus the amount of any reserves and other priority claims. Borrowings will bear interest at prevailing market rates, which (1) in the case of U.S. dollar loans can be either fixed rate plus an applicable margin or, at the Company’s option, a base rate plus an applicable margin, and (2) in the case of Canadian dollar loans can be either the bankers’ acceptance rate plus an applicable margin or, at the Company’s option, a prime rate plus an applicable margin. The credit agreement provides that Niska Partners may borrow only up to the lesser of the level of the then current borrowing base or the committed maximum borrowing capacity, which is currently $400.0 million. As of June 30, 2013, the borrowing base collateral totaled $326.5 million.

The $400 million Credit Agreement contains limitations on Niska Partners’ ability to incur additional debt or to pay distributions in respect of, repurchase or pay dividends on its membership interests (or other capital stock) or make other restricted payments. These limitations are similar to those contained in the indenture governing the Senior Notes, but contain certain substantive differences.  As a result of these differences, the limitations on restricted payments contained in the Credit Agreement should be less restrictive than the limitations contained in the indenture.  As of June 30, 2013, Niska Partners was in compliance with all covenant requirements under the Senior Notes and the $400 million Credit Agreement.

Niska Partners has no independent assets or operations other than its investments in its subsidiaries. Both the Senior Notes and the $400 million Credit Agreement have been jointly and severally guaranteed by Niska Partners and substantially all of its subsidiaries. Niska Partners’ subsidiaries have no significant restrictions on their ability to pay distributions or make loans to Niska Partners, which are prepared and measured on a consolidated basis, and have no restricted assets as of June 30, 2013.

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Members' Equity

3 Months Ended

Jun. 30, 2013

Members' Equity

Members' Equity

6. 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 unit holder and the Managing Member.

Phantom Unit Performance Plan (the “PUPP”)

Effective April 1, 2011, the Company maintains a compensatory PUPP plan (“the Plan”) to provide long-term incentive compensation for certain employees 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 total unitholder return (“TUR”) metrics compared to such metrics of a select group of peer companies. The TUR metrics are calculated based on the Company’s percentile ranking during the applicable performance period compared to the 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 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.

During the three months ended June 30, 2013, Phantom Units totaling 270,042 were granted at a weighted average price of $12.68.  During the three months ended June 30, 2012, Phantom Units totaling 695,349 were granted at a weighted average price of $9.99.

The Plan is administered by the Compensation Committee of the Board of Directors.  The Plan currently permits 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 June 30, 2013, 1,769,151 units (March 31, 2013 - 2,045,693 units) were available for grant.

The following is a reconciliation of Phantom Units Outstanding as of June 30, 2013:

	Number of Time- Based Units		Number of Performance-Based Units		Total Units
Balance at March 31, 2013	624,518		307,489		932,007
Granted	135,021		135,021		270,042
Forfeited	(17,217	)	(17,217	)	(34,434	)
Distribution equivalent rights	3,250		3,250		6,500
Balance at June 30, 2013	745,572		428,543		1,174,115

Unit-based compensation costs for the three months ended June 30, 2013 and 2012 were $3.2 million and $1.7 million 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 income for the three months ended June 30, 2013, 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 prior-period calculation of earnings per unit.

	Three Months Ended
	June 30,
	2013			2012
Numerator:
Net income (loss) attributable to Niska Partners	$	7,967		$	(37,346	)
Less:
Managing Member’s interest	(158		)	740
Net income (loss) attributable to common and subordinated unitholders	$	7,809		$	(36,606	)
Denominator:
Basic:
Weighted average units outstanding	34,492,245			68,296,990
Diluted:
Weighted average units outstanding	34,492,245			68,296,990
Income (loss) per unit:
Basic	$	0.23		$	(0.54	)
Diluted	$	0.23		$	(0.54	)

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Risk Management Activities and Financial Instruments

3 Months Ended

Jun. 30, 2013

Risk Management Activities and Financial Instruments

Risk Management Activities and Financial Instruments

4. Risk Management Activities and Financial Instruments

Risk Management Overview

Niska Partners has exposure to commodity price, foreign currency, counterparty credit, interest rate, and liquidity risk. Risk management activities are tailored to the risks they are designed to mitigate.

Commodity Price Risk

As a result of its natural gas inventory, Niska Partners is exposed to risks associated with changes in price when buying and selling natural gas across future time periods. To manage these risks and reduce variability of cash flows, the Company utilizes a combination of financial and physical derivative contracts, including forwards, futures, swaps and option contracts. The use of these contracts is subject to the Company’s risk management policies. These contracts have not been treated as hedges for financial reporting purposes and therefore changes in fair value are recorded directly in earnings.

Forward contracts and futures contracts are agreements to purchase or sell a specific financial instrument or quantity of natural gas at a specified price and date in the future. Niska Partners enters into forward contracts and futures contracts to mitigate the impact of changes in natural gas prices. In addition to cash settlement, exchange traded futures may also be settled by the physical delivery of natural gas.

Swap contracts are agreements between two parties to exchange streams of payments over time according to specified terms. Swap contracts require receipt of payment for the notional quantity of the commodity based on the difference between a fixed price and the market price on the settlement date. Niska Partners enters into commodity swaps to mitigate the impact of changes in natural gas prices.

Option contracts are contractual agreements to convey the right, but not the obligation, for the purchaser of the option to buy or sell a specific physical or notional amount of a commodity at a fixed price, either at a fixed date or at any time within a specified period. Niska Partners enters into option agreements to mitigate the impact of changes in natural gas prices.

To limit its exposure to changes in commodity prices, Niska Partners enters into purchases and sales of natural gas inventory and concurrently matches the volumes in these transactions with offsetting derivative contracts. To comply with its internal risk management policies, Niska Partners is required to limit its exposure of unmatched volumes of proprietary current natural gas inventory to an aggregate overall limit of 8.0 billion cubic feet (“Bcf”). At June 30, 2013, 36.1 Bcf of natural gas inventory was offset with financial contracts, representing 99.8% of total current inventory. Non-cycling working gas, which is included in long-term inventory, and fuel gas used for operating the facilities are excluded from the coverage requirement. Total volumes of long-term inventory and fuel gas at June 30, 2013 are 3.4 Bcf and 0.0 Bcf, respectively. As of June 30, 2013 and March 31, 2013, the volumes of inventories which were economically hedged using each type of contract were:

	June 30,	March 31,
	2013	2013
Forwards	0.9 Bcf	1.6 Bcf
Futures	29.3 Bcf	14.1 Bcf
Swaps	4.7 Bcf	10.0 Bcf
Options	1.2 Bcf	—
	36.1 Bcf	25.7 Bcf

Counterparty Credit Risk

Niska Partners is exposed to counterparty credit risk on its trade and accrued accounts receivable and risk management assets. Counterparty credit risk is the risk of financial loss to the Company if a customer fails to perform its contractual obligations. Niska Partners engages in transactions for the purchase and sale of products and services with major companies in the energy industry and with industrial, commercial, residential and municipal energy consumers.  Credit risk associated with trade accounts receivable is mitigated by the high percentage of investment grade customers, collateral support of receivables and Niska Partners’ ability to take ownership of customer owned natural gas stored in its facilities in the event of non-payment.  For the three months ended June 30, 2013 and 2012, no trade receivables were deemed to be uncollectible. It is management’s opinion that no allowance for doubtful accounts is required at June 30, 2013 or March 31, 2013 on accrued and trade accounts receivable.

The Company analyzes the financial condition of counterparties prior to entering into an agreement. Credit limits are established and monitored on an ongoing basis. Management believes, based on its credit policies, that the Company’s financial position, results of operations and cash flows will not be materially affected as a result of non-performance by any single counterparty. Credit risk is assessed prior to transacting with any counterparty and each counterparty is required to maintain an investment grade rating, provide a parental guarantee from an investment grade parent, or provide an alternative method of financial assurance (letter of credit, cash, etc) to support proposed transactions. In addition, the Company’s tariffs contain provisions that permit it to take title to a customer’s inventory should the customer’s account remain unpaid for an extended period of time. Although the Company relies on a few counterparties for a significant portion of its revenues, one counterparty making up 42.6% of gross revenues for the three months ended June 30, 2013 is a physical natural gas clearing and settlement facility that requires counterparties to post margin deposits equal to 125% of their net position, which reduces the risk of default.

Exchange traded futures and options comprise approximately 73.7% of Niska Partners’ commodity risk management assets at June 30, 2013. These exchange traded contracts have minimal credit exposure as the exchanges guarantee that every contract will be margined on a daily basis. In the event of any default, Niska Partners’ account on the exchange would be absorbed by other clearing members. Because every member posts an initial margin, the exchange can protect the exchange members if or when a clearing member defaults.

Niska Partners further manages credit exposure by entering into master netting agreements for the majority of non-retail contracts. These master netting agreements provide the Company, in the event of default, the right to offset the counterparty’s rights and obligations.

Interest Rate Risk

Niska Partners assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows. At June 30, 2013, Niska Partners was only exposed to interest rate risk resulting from the variable rates associated with its $400 million Credit Agreement of which $11.0 million was drawn at June 30, 2013.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Niska Partners continues to manage its liquidity risk by ensuring sufficient cash and credit facilities are available to meet its operating and capital expenditure obligations when due, under both normal and stressed conditions.

Foreign Currency Risk

Foreign currency risk is created by fluctuations in foreign exchange rates. As Niska Partners conducts a portion of its activities in Canadian dollars, earnings and cash flows are subject to currency fluctuations. The performance of the Canadian dollar relative to the US dollar could positively or negatively affect earnings. Niska Partners is exposed to cash flow risk to the extent that Canadian currency outflows do not match inflows. The Company enters into currency swaps to mitigate the impact of changes in foreign exchange rates. The notional value of currency swaps at June 30, 2013 was $61.0 million (March 31, 2013 - $84.0 million). These contracts expire on various dates between July 1, 2013 and June 1, 2016. Niska Partners has not elected hedge accounting treatment, therefore, changes in fair value are recorded directly in earnings.

The following tables show the fair values of Niska Partners’ risk management assets and liabilities at June 30, 2013 and March 31, 2013:

	Energy			Currency
June 30, 2013	Contracts			Contracts			Total
Short-term risk management assets	$	38,153		$	1,163		$	39,316
Long-term risk management assets	5,017			344			5,361
Short-term risk management liabilities	(16,290		)	—			(16,290		)
Long-term risk management liabilities	(5,085		)	(13		)	(5,098		)
	$	21,795		$	1,494		$	23,289

	Energy			Currency
March 31, 2013	Contracts			Contracts			Total
Short-term risk management assets	$	20,383		$	776		$	21,159
Long-term risk management assets	6,593			—			6,593
Short-term risk management liabilities	(19,792		)	(213		)	(20,005		)
Long-term risk management liabilities	(4,477		)	(97		)	(4,574		)
	$	2,707		$	466		$	3,173

Information about the Company’s risk management assets and liabilities that had netting or rights of offset arrangements are as follows:

June 30, 2013	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in the Balance Sheet		Margin Deposits not Offset in the Balance Sheet			Net Amount
Assets
Commodity derivatives	$	108,026	$	(64,856	)	$	43,170	$	(35,999	)	$	7,171
Currency derivatives	1,664		(157		)	1,507		(940		)	567
Total assets	109,690		(65,013		)	44,677		(36,939		)	7,738
Liabilities
Commodity derivatives	86,231		(64,856		)	21,375		(19,786		)	1,589
Currency derivatives	170		(157		)	13		—			13
Total liabilities	86,401		(65,013		)	21,388		(19,786		)	1,602
Net	$	23,289	—			$	23,289	$	(17,153	)	$	6,136

March 31, 2013	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in the Balance Sheet		Margin Deposits not Offset in the Balance Sheet			Net Amount
Assets
Commodity derivatives	$	88,682	$	(61,706	)	$	26,976	$	(15,030	)	$	11,946
Currency derivatives	881		(105		)	776		(776		)	—
Total assets	89,563		(61,811		)	27,752		(15,806		)	11,946
Liabilities
Commodity derivatives	85,975		(61,706		)	24,269		(16,861		)	7,408
Currency derivatives	415		(105		)	310		(164		)	146
Total liabilities	86,390		(61,811		)	24,579		(17,025		)	7,554
Net	$	3,173	$	—		$	3,173	$	1,219		$	4,392

The Company expects to recognize risk management assets and liabilities outstanding at June 30, 2013 into net earnings and comprehensive income in the fiscal periods as follows:

	Energy			Currency
	Contracts			Contracts		Total
Fiscal year ending March 31, 2014	$	19,744		$	1,070	$	20,814
Fiscal year ending March 31, 2015	2,278			177		2,455
Fiscal year ending March 31, 2016	(391		)	156		(235		)
Thereafter	164			91		255
	$	21,795		$	1,494	$	23,289

Net realized and unrealized optimization gains and losses from the settlement of risk management contracts are summarized as follows:

	Three Months Ended
	June 30,
	2013			2012			Classification
Energy contracts
Realized	$	(6,342	)	$	28,653		Optimization, net
Unrealized	19,090			(52,578		)	Optimization, net
Currency contracts
Realized	1,464			451			Optimization, net
Unrealized	1,028			1,430			Optimization, net
	$	15,240		$	(22,044	)

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Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Accrued Liabilities
Accrued gas purchases	$ 39,095	$ 14,213
Accrued interest	17,269	2,845
Employee-related accruals	9,801	13,836
Other accrued liabilities	6,263	8,946
Total	$ 72,428	$ 39,840

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Segment Disclosures (Tables)

3 Months Ended

Jun. 30, 2013

Segment Disclosures

Summary of net revenues and long-lived assets by geographic area

	Three Months Ended
	June 30,
	2013		2012
Net realized revenues
U.S.	$	8,494	$	11,919
Canada	28,577		36,482
Net unrealized revenues
U.S.	12,454		(15,378		)
Canada	7,664		(35,810		)
Inter-entity
U.S.	—		—
Canada	—		—
	$	57,189	$	(2,787	)

	June 30,		March 31,
	2013		2013
Long-lived assets (at period end)
U.S.	$	407,430	$	411,420
Canada	851,608		858,604
	$	1,259,038	$	1,270,024

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Risk Management Activities and Financial Instruments (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Fair value of risk management assets and liabilities
Short-term risk management assets	$ 39,316	$ 21,159
Long-term risk management assets	5,361	6,593
Short-term risk management liabilities	(16,290)	(20,005)
Long-term risk management liabilities	(5,098)	(4,574)
Total	23,289	3,173
Not designated as hedge
Fair value of risk management assets and liabilities
Short-term risk management assets	39,316	21,159
Long-term risk management assets	5,361	6,593
Short-term risk management liabilities	(16,290)	(20,005)
Long-term risk management liabilities	(5,098)	(4,574)
Total	23,289	3,173
Energy Contracts
Fair value of risk management assets and liabilities
Total	21,795	2,707
Energy Contracts | Not designated as hedge
Fair value of risk management assets and liabilities
Short-term risk management assets	38,153	20,383
Long-term risk management assets	5,017	6,593
Short-term risk management liabilities	(16,290)	(19,792)
Long-term risk management liabilities	(5,085)	(4,477)
Total	21,795	2,707
Currency contracts
Fair value of risk management assets and liabilities
Total	1,494	466
Currency contracts | Not designated as hedge
Fair value of risk management assets and liabilities
Short-term risk management assets	1,163	776
Long-term risk management assets	344
Short-term risk management liabilities		(213)
Long-term risk management liabilities	(13)	(97)
Total	$ 1,494	$ 466

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Members' Equity (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Mar. 31, 2013
Additional disclosures
Unit-based compensation costs	$ 3.2	$ 1.7
Phantom Units
Members Equity
Period over which units vest	3 years
Number of units authorized under the PUPP (in shares)	3,380,474
Weighted average price of granted units (in dollars per share)	$ 12.68	$ 9.99
Number of units available for grant (in shares)	1,769,151		2,045,693
Reconciliation of Phantom Units Outstanding
Balance at the beginning of the period (in shares)	932,007
Granted (in shares)	270,042	695,349
Forfeited (in shares)	(34,434)
Distribution equivalent rights (in shares)	6,500
Balance at the end of the period (in shares)	1,174,115
Time-based phantom units
Reconciliation of Phantom Units Outstanding
Balance at the beginning of the period (in shares)	624,518
Granted (in shares)	135,021
Forfeited (in shares)	(17,217)
Distribution equivalent rights (in shares)	3,250
Balance at the end of the period (in shares)	745,572
Performance-Based phantom units
Reconciliation of Phantom Units Outstanding
Balance at the beginning of the period (in shares)	307,486
Granted (in shares)	135,021
Forfeited (in shares)	(17,217)
Distribution equivalent rights (in shares)	3,250
Balance at the end of the period (in shares)	428,543

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Subsequent Events (Details) (Subsequent events, USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended
	Jul. 31, 2013
Subsequent events
Distribution to common unitholders (in dollars per unit)	$ 0.35
Expected total distribution	$ 12.3
Maximum
Subsequent events
Common units authorized under DRIP (in units)	7,500,000

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Current assets
Cash and cash equivalents	$ 27,875	$ 10,610
Margin deposits	6,924	18,474
Trade receivables	1,707	2,702
Accrued receivables	28,870	106,726
Natural gas inventory	129,109	83,416
Prepaid expenses and other current assets	3,151	4,688
Short-term risk management assets	39,316	21,159
Total current assets	236,952	247,775
Long-term assets
Property, plant and equipment, net of accumulated depreciation	910,422	918,061
Goodwill	245,604	245,604
Long-term natural gas inventory	15,264	15,264
Intangible assets, net of accumulated amortization	71,515	73,998
Deferred charges, net of accumulated amortization	13,585	14,420
Other assets	2,648	2,677
Long-term risk management assets	5,361	6,593
Total long-term assets	1,264,399	1,276,617
TOTAL	1,501,351	1,524,392
Current liabilities
Revolving credit facility	11,000	65,000
Current portion of obligations under capital lease	1,269	1,259
Trade payables	3,999	1,048
Current portion of deferred taxes	14,304	14,303
Deferred revenue	6,829	568
Accrued liabilities	72,428	39,840
Short-term risk management liabilities	16,290	20,005
Total current liabilities	126,119	142,023
Long-term liabilities
Long-term risk management liabilities	5,098	4,574
Asset retirement obligations	1,971	2,007
Other long-term liabilities	1,376	1,461
Deferred income taxes	120,694	120,935
Obligations under capital lease	11,904	12,225
Long-term debt	643,790	643,790
Total liabilities	910,952	927,015
Members' equity
Common units	314,802	321,642
Subordinated units (Note 1)		265,877
Managing Member's interest	275,597	9,858
Total members' equity	590,399	597,377
Commitments and contingencies (Note 2)
TOTAL	$ 1,501,351	$ 1,524,392

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Accrued Liabilities

3 Months Ended

Jun. 30, 2013

Accrued Liabilities

Accrued Liabilities

9. Accrued Liabilities

Niska Partners’ accrued liabilities consist of the following:

	June 30,		March 31,
	2013		2013
Accrued gas purchases	$	39,095	$	14,213
Accrued interest	17,269		2,845
Employee-related accruals	9,801		13,836
Other accrued liabilities	6,263		8,946
	$	72,428	$	39,840

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Consolidated Statements of Changes in Members' Equity (USD $) In Thousands, unless otherwise specified	Total	Common Units	Subordinated Units	Managing Member Interest
Balance at Mar. 31, 2012	$ 690,390	$ 391,585	$ 287,105	$ 11,700
Increase (Decrease) in Stockholders' Equity
Net income (loss)	(37,346)	(18,487)	(18,119)	(740)
Distributions to unitholders	(12,917)	(12,367)	(295)	(255)
Balance at Jun. 30, 2012	640,127	360,731	268,691	10,705
Balance at Mar. 31, 2013	597,377	321,642	265,877	9,858
Increase (Decrease) in Stockholders' Equity
Cancellation of subordinated units			(265,877)	265,877
Net income (loss)	7,967	7,809		158
Distributions to unitholders	(14,945)	(14,649)		(296)
Balance at Jun. 30, 2013	$ 590,399	$ 314,802		$ 275,597

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Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Revenues:
Fee-based revenue	$ 31,471	$ 37,061
Optimization, net	25,718	(39,848)
Total revenues	57,189	(2,787)
Expenses (income):
Operating	10,444	8,091
General and administrative	11,290	9,839
Depreciation and amortization	10,333	11,824
Interest	16,206	16,508
Loss on extinguishment of debt		599
Foreign exchange losses (gains)	858	(185)
Other expense (income)	391	(176)
INCOME (LOSS) BEFORE INCOME TAXES	7,667	(49,287)
Income tax benefit	(300)	(11,941)
NET EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)	7,967	(37,346)
Net earnings (loss) allocated to:
Managing Member	158	(740)
Common unitholders	7,809	(18,487)
Subordinated unitholder (Notes 1 and 6)		$ (18,119)
Earnings (loss) per unit allocated to common unitholders
basic (in dollars per unit)	$ 0.23	$ (0.54)
diluted (in dollars per unit)	$ 0.23	$ (0.54)
Earnings (loss) per unit allocated to subordinated unitholders
basic (in dollars per unit) (Notes 1 and 6)		$ (0.54)
diluted (in dollars per unit) (Notes 1 and 6)		$ (0.54)

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Organization and Basis of Presentation (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		0 Months Ended										3 Months Ended
	Jun. 30, 2013	Jun. 30, 2013 Carlyle/Riverstone Funds	Apr. 02, 2013 Previous structure Carlyle/Riverstone Funds	Apr. 02, 2013 Previous structure Subordinated Units	Apr. 02, 2013 Previous structure Subordinated Units Minimum Quarterly Distribution	Apr. 02, 2013 Previous structure Subordinated Units Carlyle/Riverstone Funds	Apr. 02, 2013 Unitholders Minimum Previous structure	Apr. 02, 2013 Unitholders Maximum Previous structure	Apr. 02, 2013 Common unitholders New structure Minimum Quarterly Distribution	Apr. 02, 2013 IDR Holder New structure Carlyle/Riverstone Funds	Apr. 02, 2013 IDR Holder Minimum Previous structure Carlyle/Riverstone Funds	Apr. 02, 2013 IDR Holder Maximum Previous structure Carlyle/Riverstone Funds	Jun. 30, 2013 Public owners
Members' equity
Subordinated units outstanding						33,800,000
Notional Subordinated Units (in shares)						33,800,000
Additional distributions per quarter prior to increasing the quarterly distribution on Niska Partners' common units				$ 12
Total Quarterly Distribution per Unit Target Amount (in dollars per unit)					$ 0.35		$ 0.4025	$ 0.5250	$ 0.35
Marginal Percentage Interest in Cash Distributions										48.00%	13.00%	48.00%
Period for which Carlyle Riverstone Funds will be deemed to own Notional Subordinated Units			5 years
Common units outstanding	34,492,245	16,992,245											17,500,000
Managing member's interest (as a percent)	1.98%	1.98%
Ownership interest (as a percent)		50.27%											49.73%

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Revenue (Tables)

3 Months Ended

Jun. 30, 2013

Revenues

Schedule of components of fee-based revenue

	Three Months Ended
	June 30,
	2013		2012
Long-term contract revenue	$	20,596	$	27,661
Short-term contract revenue	10,875		9,400
Total	$	31,471	$	37,061

Schedule of components of optimization, net

	Three Months Ended
	June 30,
	2013		2012
Realized optimization revenue, net	$	5,600	$	33,621
Unrealized risk management income (losses)	20,118		(51,188		)
Write-down of inventory	—		(22,281		)
Total	$	25,718	$	(39,848	)

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Segment Disclosures (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Jun. 30, 2013 item	Jun. 30, 2012 item	Mar. 31, 2013 item
Segment Disclosures
Number of reporting segments	1	1	1
Segment disclosures
Total revenues	$ 57,189	$ (2,787)
Long-lived assets	1,259,038		1,270,024
U.S.
Segment disclosures
Net realized revenues	8,494	11,919
Net unrealized revenues	12,454	(15,378)
Long-lived assets	407,430		411,420
Canada
Segment disclosures
Net realized revenues	28,577	36,482
Net unrealized revenues	7,664	(35,810)
Long-lived assets	$ 851,608		$ 858,604

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Revenue (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Fee-based Revenue
Long-term Contract Revenue	$ 20,596	$ 27,661
Short-term Contract Revenue	10,875	9,400
Total	31,471	37,061
Optimization Revenue
Realized optimization revenue, net	5,600	33,621
Unrealized risk management income (losses)	20,118	(51,188)
Write-down of inventory		(22,281)
Total	$ 25,718	$ (39,848)

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Risk Management Activities and Financial Instruments (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Net realized and unrealized optimization gains and losses from the settlement of risk management contracts
Unrealized	$ 20,118	$ (51,148)
Not designated as hedge
Net realized and unrealized optimization gains and losses from the settlement of risk management contracts
Total	15,240	(22,044)
Energy Contracts | Not designated as hedge
Net realized and unrealized optimization gains and losses from the settlement of risk management contracts
Realized	(6,342)	28,653
Unrealized	19,090	(52,578)
Currency contracts | Not designated as hedge
Net realized and unrealized optimization gains and losses from the settlement of risk management contracts
Realized	1,464	451
Unrealized	$ 1,028	$ 1,430

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Assets
Total assets	$ 44,677	$ 27,752
Liabilities
Total liabilities	21,388	24,579
Total	23,289	3,173
Commodity derivatives
Assets
Total assets	43,170	26,976
Liabilities
Total liabilities	21,375	24,269
Total	21,795	2,707
Currency derivatives
Assets
Total assets	1,507	776
Liabilities
Total liabilities	13	310
Total	1,494	466
Recurring | Level 2
Assets
Total assets	44,677	27,752
Liabilities
Total liabilities	21,388	24,579
Total	23,289	3,173
Recurring | Level 2 | Commodity derivatives
Assets
Total assets	43,170	26,976
Liabilities
Total liabilities	21,375	24,269
Recurring | Level 2 | Currency derivatives
Assets
Total assets	1,507	776
Liabilities
Total liabilities	13	310
Recurring | Total
Assets
Total assets	44,677	27,752
Liabilities
Total liabilities	21,388	24,579
Total	23,289	3,173
Recurring | Total | Commodity derivatives
Assets
Total assets	43,170	26,976
Liabilities
Total liabilities	21,375	24,269
Recurring | Total | Currency derivatives
Assets
Total assets	1,507	776
Liabilities
Total liabilities	$ 13	$ 310

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Income Taxes

3 Months Ended

Jun. 30, 2013

Income Taxes

Income Taxes

8. Income Taxes

Income taxes included in the consolidated financial statements were as follows:

	Three Months Ended
	June 30,
	2013			2012
Income tax benefit	$	(300	)	$	(11,941	)
Effective income tax rate	-4		%	24		%

Income tax benefit was $0.3 million for the three months ended June 30, 2013 compared to a benefit of $11.9 million in the same period of the prior year. The income tax benefit in the current period is due mainly to the recognition of losses in certain taxable Canadian entities.

The effective tax rate for the three months ended June 30, 2013 and 2012 differs from the U.S. statutory federal rate of 35% primarily due to the income attributable to flow-through entities for tax purposes.

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Debt (Details) (USD $)	3 Months Ended		3 Months Ended						3 Months Ended
	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2013 Minimum	Jun. 30, 2013 Senior Notes due 2018 item	Mar. 31, 2013 Senior Notes due 2018	Jun. 30, 2013 Revolving credit facility	Mar. 31, 2013 Revolving credit facility	Jun. 29, 2012 Revolving credit facility	Jun. 30, 2013 U.S. revolving credit facility	Jun. 30, 2013 Canadian revolving credit facility
Debt
Long-term debt	$ 654,790,000	$ 708,790,000		$ 643,790,000	$ 643,790,000	$ 11,000,000	$ 65,000,000
Less portion classified as current	(11,000,000)	(65,000,000)
Long-term debt, less current portion	643,790,000	643,790,000
Interest rate (as a percent)				8.875%
Principal payments required prior to maturity				0
Estimated fair value of debt				686,000,000	669,500,000
Number of preceding quarters for which fixed charge coverage ratio is measured				4
Amount permitted to be distributed by the indenture under the limitation				275,800,000
Minimum fixed charge coverage ratio required to make restricted payments	1.75			1.75
Actual fixed charge coverage ratio	2.10			2.10
Amount included in the general basket of restricted payments				75,000,000
Maximum borrowing capacity						400,000,000		400,000,000	200,000,000	200,000,000
Amount by which maximum borrowing capacity may be expanded in additional commitments									100,000,000	100,000,000
Borrowing base collateral						326,500,000
Borrowings outstanding	11,000,000	65,000,000				11,000,000
Weighted average interest rate (as a percent)						6.00%
Letters of credit issued						$ 25,400,000	$ 3,300,000
Fixed charge coverage ratio required to incur additional debt obligations			2.0

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Changes in Non-Cash Working Capital (Details) (USD $)	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Changes in Non-Cash Working Capital
Margin deposits	$ 11,551,000	$ (22,321,000)
Trade receivables	960,000	2,110,000
Accrued receivables	77,427,000	22,920,000
Natural gas inventory	(45,693,000)	7,216,000
Prepaid expenses and other current assets	1,538,000	(954,000)
Other assets	(63,000)
Trade payables	336,000	(489,000)
Accrued liabilities	32,428,000	8,306,000
Deferred revenue	6,261,000	(11,235,000)
Other long-term liabilities	(79,000)
Total	84,666,000	5,553,000
Proceeds from sales of cushion gas		$ 14,200,000

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Supplemental Cash Flow Disclosures

3 Months Ended

Jun. 30, 2013

Supplemental Cash Flow Disclosures

Supplemental Cash Flow Disclosures

11. Supplemental Cash Flow Disclosures

	Three Months Ended
	June 30,
	2013		2012
Interest paid	$	948	$	4,225
Taxes recovered	$	—	$	(7	)
Interest capitalized	$	—	$	1,622
Non-cash increase (decrease) in working capital related to property, plant and equipment expenditures	$	130	$	(2,857	)

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Revenues

3 Months Ended

Jun. 30, 2013

Revenues

Revenues

7. Revenues

Niska Partners’ fee-based revenue consists of the following:

	Three Months Ended
	June 30,
	2013		2012
Long-term contract revenue	$	20,596	$	27,661
Short-term contract revenue	10,875		9,400
Total	$	31,471	$	37,061

Optimization, net consists of the following:

	Three Months Ended
	June 30,
	2013		2012
Realized optimization revenue, net	$	5,600	$	33,621
Unrealized risk management income (losses)	20,118		(51,188		)
Write-down of inventory	—		(22,281		)
Total	$	25,718	$	(39,848	)

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Commitments and Contingencies

3 Months Ended

Jun. 30, 2013

Commitments and Contingencies

Commitments and Contingencies

2. Commitments and Contingencies

Commitments

Niska Partners has entered into non-cancelable operating leases for office space, land use rights at its operating facilities, storage capacity at other facilities, equipment, and vehicles used in its operations. The remaining lease terms expire between December 2013 and August 2056 and require the payment of taxes, insurance and maintenance by the lessee.

Contingencies

Niska Partners and its subsidiaries are subject to various legal proceedings and actions arising in the normal course of business. While the outcome of such legal proceedings and actions cannot be predicted with certainty, it is the view of management that the resolution of such proceedings and actions will not have a material impact on Niska Partners’ unaudited consolidated financial position or results of operations.

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Risk Management Activities and Financial Instruments (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Assets
Gross Amounts Recognized	$ 109,690	$ 89,563
Gross Amounts Offset in the Balance Sheet	(65,013)	(61,811)
Net Amounts Presented in the Balance Sheet	44,677	27,752
Margin Deposits not Offset in the Balance Sheet	(36,939)	(15,806)
Net Amount	7,738	11,946
Liabilities
Gross Amounts Recognized	86,401	86,390
Gross Amounts offset in the Balance Sheets	(65,013)	(61,811)
Net Amounts Presented in the Balance Sheets	21,388	24,579
Margin Deposits not Offset in the Balance Sheet	(19,786)	(17,025)
Net Amounts	1,602	7,554
Net - Amounts Presented in the Balance Sheets	23,289	3,173
Net - Margin Deposits not Offset in the Balance Sheet	(17,153)	1,219
Net	6,136	4,392
Commodity derivatives
Assets
Gross Amounts Recognized	108,026	88,682
Gross Amounts Offset in the Balance Sheet	(64,856)	(61,706)
Net Amounts Presented in the Balance Sheet	43,170	26,976
Margin Deposits not Offset in the Balance Sheet	(35,999)	(15,030)
Net Amount	7,171	11,946
Liabilities
Gross Amounts Recognized	86,231	85,975
Gross Amounts offset in the Balance Sheets	(64,856)	(61,706)
Net Amounts Presented in the Balance Sheets	21,375	24,269
Margin Deposits not Offset in the Balance Sheet	(19,786)	(16,861)
Net Amounts	1,589	7,408
Net - Amounts Presented in the Balance Sheets	21,795	2,707
Currency contracts
Assets
Gross Amounts Recognized	1,664	881
Gross Amounts Offset in the Balance Sheet	(157)	(105)
Net Amounts Presented in the Balance Sheet	1,507	776
Margin Deposits not Offset in the Balance Sheet	(940)	(776)
Net Amount	567
Liabilities
Gross Amounts Recognized	170	415
Gross Amounts offset in the Balance Sheets	(157)	(105)
Net Amounts Presented in the Balance Sheets	13	310
Margin Deposits not Offset in the Balance Sheet		(164)
Net Amounts	13	146
Net - Amounts Presented in the Balance Sheets	$ 1,494	$ 466

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Debt (Tables)

3 Months Ended

Jun. 30, 2013

Debt

Schedule of debt obligations

	June 30,			March 31,
	2013			2013
Senior Notes due 2018	$	643,790		$	643,790
Revolving credit facility	11,000			65,000
Total	654,790			708,790
Less portion classified as current	(11,000		)	(65,000		)
	$	643,790		$	643,790

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Changes in Non-Cash Working Capital

3 Months Ended

Jun. 30, 2013

Changes in Non-Cash Working Capital

Changes in Non-Cash Working Capital

10. Changes in Non-Cash Working Capital

Changes in non-cash working capital for the three months ended June 30, 2013 and 2012 consists of the following:

	Three Months Ended
	June 30,
	2013			2012
Margin deposits	$	11,551		$	(22,321	)
Trade receivables	960			2,110
Accrued receivables	77,427			22,920
Natural gas inventory	(45,693		)	7,216
Prepaid expenses and other current assets	1,538			(954		)
Other assets	(63		)	—
Trade payables	336			(489		)
Accrued liabilities	32,428			8,306
Deferred revenue	6,261			(11,235		)
Other long-term liabilities	(79		)	—
Total	$	84,666		$	5,553

During the three months ended June 30, 2012, changes in non-cash working capital include the receipt of proceeds of $14.2 million (June 30, 2013 - $ nil) from sales of cushion gas. The Company included such proceeds in cash flows from operations since the predominant source of cash flows for natural gas purchases and sales are operating in nature.

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Members' Equity (Tables)

3 Months Ended

Jun. 30, 2013

Members' Equity

Schedule of reconciliation of phantom units outstanding

	Number of Time- Based Units		Number of Performance-Based Units		Total Units
Balance at March 31, 2013	624,518		307,489		932,007
Granted	135,021		135,021		270,042
Forfeited	(17,217	)	(17,217	)	(34,434	)
Distribution equivalent rights	3,250		3,250		6,500
Balance at June 30, 2013	745,572		428,543		1,174,115

Schedule of net income (loss) allocation and income (loss) per unit calculation

	Three Months Ended
	June 30,
	2013			2012
Numerator:
Net income (loss) attributable to Niska Partners	$	7,967		$	(37,346	)
Less:
Managing Member’s interest	(158		)	740
Net income (loss) attributable to common and subordinated unitholders	$	7,809		$	(36,606	)
Denominator:
Basic:
Weighted average units outstanding	34,492,245			68,296,990
Diluted:
Weighted average units outstanding	34,492,245			68,296,990
Income (loss) per unit:
Basic	$	0.23		$	(0.54	)
Diluted	$	0.23		$	(0.54	)

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Risk Management Activities and Financial Instruments (Tables)

3 Months Ended

Jun. 30, 2013

Risk Management Activities and Financial Instruments

Schedule of volumes of inventories which were economically hedged using each type of contract

	June 30,	March 31,
	2013	2013
Forwards	0.9 Bcf	1.6 Bcf
Futures	29.3 Bcf	14.1 Bcf
Swaps	4.7 Bcf	10.0 Bcf
Options	1.2 Bcf	—
	36.1 Bcf	25.7 Bcf

Schedule of fair values of risk management assets and liabilities

	Energy			Currency
June 30, 2013	Contracts			Contracts			Total
Short-term risk management assets	$	38,153		$	1,163		$	39,316
Long-term risk management assets	5,017			344			5,361
Short-term risk management liabilities	(16,290		)	—			(16,290		)
Long-term risk management liabilities	(5,085		)	(13		)	(5,098		)
	$	21,795		$	1,494		$	23,289

	Energy			Currency
March 31, 2013	Contracts			Contracts			Total
Short-term risk management assets	$	20,383		$	776		$	21,159
Long-term risk management assets	6,593			—			6,593
Short-term risk management liabilities	(19,792		)	(213		)	(20,005		)
Long-term risk management liabilities	(4,477		)	(97		)	(4,574		)
	$	2,707		$	466		$	3,173

Schedule of risk management assets and liabilities that had netting or rights of offset arrangements

June 30, 2013	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in the Balance Sheet		Margin Deposits not Offset in the Balance Sheet			Net Amount
Assets
Commodity derivatives	$	108,026	$	(64,856	)	$	43,170	$	(35,999	)	$	7,171
Currency derivatives	1,664		(157		)	1,507		(940		)	567
Total assets	109,690		(65,013		)	44,677		(36,939		)	7,738
Liabilities
Commodity derivatives	86,231		(64,856		)	21,375		(19,786		)	1,589
Currency derivatives	170		(157		)	13		—			13
Total liabilities	86,401		(65,013		)	21,388		(19,786		)	1,602
Net	$	23,289	—			$	23,289	$	(17,153	)	$	6,136

March 31, 2013	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet			Net Amounts Presented in the Balance Sheet		Margin Deposits not Offset in the Balance Sheet			Net Amount
Assets
Commodity derivatives	$	88,682	$	(61,706	)	$	26,976	$	(15,030	)	$	11,946
Currency derivatives	881		(105		)	776		(776		)	—
Total assets	89,563		(61,811		)	27,752		(15,806		)	11,946
Liabilities
Commodity derivatives	85,975		(61,706		)	24,269		(16,861		)	7,408
Currency derivatives	415		(105		)	310		(164		)	146
Total liabilities	86,390		(61,811		)	24,579		(17,025		)	7,554
Net	$	3,173	$	—		$	3,173	$	1,219		$	4,392

Schedule of risk management assets and liabilities outstanding expected to be recognized into net earnings and comprehensive income in the fiscal periods

	Energy			Currency
	Contracts			Contracts		Total
Fiscal year ending March 31, 2014	$	19,744		$	1,070	$	20,814
Fiscal year ending March 31, 2015	2,278			177		2,455
Fiscal year ending March 31, 2016	(391		)	156		(235		)
Thereafter	164			91		255
	$	21,795		$	1,494	$	23,289

Summary of net realized and unrealized optimization gains and losses from the settlement of risk management contracts

	Three Months Ended
	June 30,
	2013			2012			Classification
Energy contracts
Realized	$	(6,342	)	$	28,653		Optimization, net
Unrealized	19,090			(52,578		)	Optimization, net
Currency contracts
Realized	1,464			451			Optimization, net
Unrealized	1,028			1,430			Optimization, net
	$	15,240		$	(22,044	)

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Document and Entity Information	3 Months Ended
	Jun. 30, 2013	Aug. 01, 2013
Entity Registrant Name	Niska Gas Storage Partners LLC
Entity Central Index Key	0001483830
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		34,492,245
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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Fair Value Measurements (Tables)

3 Months Ended

Jun. 30, 2013

Fair Value Measurements

Schedule of financial assets and liabilities that were accounted for at fair value on a recurring basis

June 30, 2013	Level 1		Level 2		Level 3		Total
Assets
Commodity derivatives	$	—	$	43,170	$	—	$	43,170
Currency derivatives	—		1,507		—		1,507
Total assets	—		44,677		—		44,677
Liabilities
Commodity derivatives	—		21,375		—		21,375
Currency derivatives	—		13		—		13
Total liabilities	—		21,388		—		21,388
Net	$	—	$	23,289	$	—	$	23,289

March 31, 2013	Level 1		Level 2		Level 3		Total
Assets
Commodity derivatives	$	—	$	26,976	$	—	$	26,976
Currency derivatives	—		776		—		776
Total assets	—		27,752		—		27,752
Liabilities
Commodity derivatives	—		24,269		—		24,269
Currency derivatives	—		310		—		310
Total liabilities	—		24,579		—		24,579
Net	$	—	$	3,173	$	—	$	3,173