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.

Distribution Reinvestment Plan

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

During the three months ended September 30, 2013, the Carlyle/Riverstone Funds elected to participate in the DRIP and were issued 412,717 common units in lieu of receiving cash distributions of $5.9 million.

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. 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 six months ended September 30, 2013, Phantom Units totaling 270,042 were granted at a weighted average price of $12.68. During the six months ended September 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 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 September 30, 2013, 1,724,175 units (March 31, 2013 - 2,045,693 units) were available for grant.

The following is a reconciliation of Phantom Units Outstanding as of September 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
Vested and paid	(61,498	)	(61,498	)	(122,996	)
Forfeited	(21,752	)	(21,752	)	(43,504	)
Distribution equivalent rights	33,274		18,202		51,476
Balance at September 30, 2013	709,563		377,462		1,087,025

Unit-based compensation costs for the three and six months ended September 30, 2013 were $2.3 million and $5.6 million respectively ($2.0 million and $3.7 million for the three and six months ended September 30, 2012, 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 and six months ended September 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 the prior-period calculation of earnings per unit.

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
*Numerator:*
Net earnings (loss) attributable to Niska Partners	$	(7,845	)	$	(15,397	)	$	123		$	(52,742	)
Less:
Managing Member’s interest	154			305			(4		)	1,044
Net earnings (loss) attributable to common and subordinated unitholders	$	(7,691	)	$	(15,092	)	$	119		$	(51,698	)

*Denominator:*
Basic:
Weighted average units outstanding	34,698,604			68,296,990			34,595,988			68,296,990

Diluted:
Weighted average units outstanding	34,698,604			68,296,990			34,595,988			68,296,990

Earnings (loss) per unit:
Basic	$	(0.22	)	$	(0.22	)	$	—		$	(0.76	)
Diluted	$	(0.22	)	$	(0.22	)	$	—		$	(0.76	)