(12) Employee Incentive Plans


(a)	Long-Term Incentive Plans

ENLC and ENLK each have similar unit-based compensation payment plans for officers and employees. ENLC grants unit-based awards under the EnLink Midstream, LLC 2014 Long-Term Incentive Plan (the “LLC Plan”), and ENLK grants unit-based awards under the amended and restated EnLink Midstream GP, LLC Long-Term Incentive Plan (the “GP Plan”).

We account for unit-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”), which requires that compensation related to all unit-based awards be recognized in the consolidated financial statements. Unit-based compensation cost is recognized as expense over each award’s requisite service period with a corresponding increase to equity or liability based on the terms of each award and the appropriate accounting treatment under ASC 718. Unit-based compensation associated with ENLC’s unit-based compensation plan awarded to our officers and employees is recorded by ENLK since ENLC has no substantial or managed operating activities other than its interests in ENLK and EnLink Oklahoma T.O.

Amounts recognized in the consolidated financial statements with respect to these plans are as follows (in millions):



	Three Months Ended March 31,
	2017		2016
Cost of unit-based compensation charged to general and administrative expense	$	14.4	$	6.3
Cost of unit-based compensation charged to operating expense	5.0		1.7
Total unit-based compensation expense	$	19.4	$	8.0
Interest of non-controlling partners in unit-based compensation	$	7.3	$	2.9
Amount of related income tax expense recognized in net income	$	4.6	$	1.9


(b)	EnLink Midstream Partners, LP Restricted Incentive Units

ENLK restricted incentive units are valued at their fair value at the date of grant, which is equal to the market value of common units on such date. A summary of the restricted incentive unit activity for the three months ended March 31, 2017 is provided below:



	Three Months Ended March 31, 2017
EnLink Midstream Partners, LP Restricted Incentive Units:	Number of Units			Weighted Average Grant-Date Fair Value
Non-vested, beginning of period	2,024,820			$	19.05
Granted (1)	822,865			18.46
Vested (1)(2)	(795,188		)	25.84
Forfeited	(6,997		)	16.87
Non-vested, end of period	2,045,500			$	16.18
Aggregate intrinsic value, end of period (in millions)	$	37.4

(1)

Restricted incentive units were issued in the first quarter of 2017 to officers and other employees. These restricted incentive units typically vest at the end of three years. In March 2017, ENLK issued 262,288 restricted incentive units with a fair value of $5.1 million to officers and certain employees as bonus payments for 2016, and these restricted incentive units vested immediately and are included in the restricted incentive units granted and vested line items.


(2)	Vested units include 258,145 units withheld for payroll taxes paid on behalf of employees.

A summary of the restricted incentive units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) for the three months ended March 31, 2017 and 2016, respectively, is provided below (in millions):



	Three Months Ended March 31,
EnLink Midstream Partners, LP Restricted Incentive Units:	2017		2016
Aggregate intrinsic value of units vested	$	15.3	$	3.7
Fair value of units vested	$	20.5	$	9.0

As of March 31, 2017, there was $20.7 million of unrecognized compensation cost related to non-vested ENLK restricted incentive units for officers and employees. That cost is expected to be recognized over a weighted-average period of 2.0 years.


(c)	EnLink Midstream Partners, LP Performance Units

For the three months ended March 31, 2017, the General Partner and our Managing Member granted performance awards under the GP Plan and the LLC Plan, respectively. The performance award agreements provide that the vesting of restricted incentive units granted thereunder is dependent on the achievement of certain total shareholder return (“TSR”) performance goals relative to the TSR achievement of a peer group of companies (the “Peer Companies”) over the applicable performance period. The performance award agreements contemplate that the Peer Companies for an individual performance award (the “Subject Award”) are the companies comprising the Alerian MLP Index for Master Limited Partnerships (“AMZ”), excluding ENLC and ENLK (collectively, “EnLink”), on the grant date for the Subject Award. The performance units will vest based on the percentile ranking of the average of ENLC’s and ENLK’s TSR achievement (“EnLink TSR”) for the applicable performance period relative to the TSR achievement of the Peer Companies.

At the end of the vesting period, recipients receive distribution equivalents, if any, with respect to the number of performance units vested. The vesting of units range from zero to 200% of the units granted depending on the EnLink TSR as compared to the TSR of the Peer Companies on the vesting date. The fair value of each performance unit is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all performance unit grants made under the plan: (i) a risk-free interest rate based on United States Treasury rates as of the grant date; (ii) a volatility assumption based on the historical realized price volatility of ENLK’s common units and the designated peer group securities; (iii) an estimated ranking of ENLK among the designated peer group; and (iv) the distribution yield. The fair value of the performance unit on the date of grant is expensed over a vesting period of approximately three years. The following table presents a summary of the grant-date fair values of performance units granted and the related assumptions:



EnLink Midstream Partners, LP Performance Units:	March 2017
Beginning TSR Price	$	17.55
Risk-free interest rate	1.62		%
Volatility factor	43.94		%
Distribution yield	8.7		%

The following table presents a summary of the performance units:



	Three Months Ended March 31, 2017
EnLink Midstream Partners, LP Performance Units:	Number of Units		Weighted Average Grant-Date Fair Value
Non-vested, beginning of period	408,637		$	11.53
Granted	176,648		25.73
Forfeited	—		—
Non-vested, end of period	585,285		$	15.82
Aggregate intrinsic value, end of period (in millions)	$	10.7

As of March 31, 2017, there was $8.0 million of unrecognized compensation expense that related to non-vested ENLK performance units. That cost is expected to be recognized over a weighted-average period of 2.3 years.


(d)	EnLink Midstream, LLC Restricted Incentive Units

ENLC restricted incentive units are valued at their fair value at the date of grant, which is equal to the market value of the ENLC common units on such date. A summary of the restricted incentive unit activity for the three months ended March 31, 2017 is provided below:



	Three Months Ended March 31, 2017
EnLink Midstream, LLC Restricted Incentive Units:	Number of Units			Weighted Average Grant-Date Fair Value
Non-vested, beginning of period	1,897,298			$	19.96
Granted (1)	781,842			19.29
Vested (1)(2)	(726,692		)	28.07
Forfeited	(6,706		)	17.58
Non-vested, end of period	1,945,742			$	16.67
Aggregate intrinsic value, end of period (in millions)	$	37.7

(1)

Restricted incentive units were issued in the first quarter of 2017 to officers and other employees. These restricted incentive units typically vest at the end of three years. In March 2017, we issued 258,606 restricted incentive units with a fair value of $5.0 million to officers and certain employees as bonus payments for 2016, and these restricted incentive units vested immediately and are included in the restricted incentive units granted and vested line items.


(2)	Vested units include 224,709 units withheld for payroll taxes paid on behalf of employees.



	Three Months Ended March 31,
EnLink Midstream LLC Restricted Incentive Units:	2017		2016
Aggregate intrinsic value of units vested	$	14.3	$	3.8
Fair value of units vested	$	20.4	$	11.8

As of March 31, 2017, there was $20.2 million of unrecognized compensation costs related to non-vested ENLC restricted incentive units for directors, officers and employees. The cost is expected to be recognized over a weighted-average period of 2.0 years.


(e)	EnLink Midstream, LLC’s Performance Units

For the three months ended March 31, 2017, ENLC granted performance awards under the LLC Plan. At the end of the vesting period, recipients receive distribution equivalents, if any, with respect to the number of performance units vested. The vesting of units range from zero to 200% of the units granted depending on the EnLink TSR as compared to the TSR of the Peer Companies on the vesting date. The fair value of each performance unit is estimated as of the date of grant using a Monte Carlo simulation with the following assumptions used for all performance unit grants made under the plan: (i) a risk-free interest rate based on United States Treasury rates as of the grant date; (ii) a volatility assumption based on the historical realized price volatility of ENLC’s common units and the designated peer group securities; (iii) an estimated ranking of ENLC among the designated peer group and (iv) the distribution yield. The fair value of the unit on the date of grant is expensed over a vesting period of approximately three years. The following table presents a summary of the grant-date fair values of performance units granted and the related assumptions:



EnLink Midstream, LLC Performance Units:	March 2017
Beginning TSR Price	$	18.29
Risk-free interest rate	1.62		%
Volatility factor	52.07		%
Distribution yield	5.4		%

The following table presents a summary of the performance units:



	Three Months Ended March 31, 2017
EnLink Midstream, LLC Performance Units:	Number of Units		Weighted Average Grant-Date Fair Value
Non-vested, beginning of period	384,264		$	19.30
Granted	164,575		28.77
Forfeited	—		—
Non-vested, end of period	548,839		$	22.14
Aggregate intrinsic value, end of period (in millions)	$	10.6

As of March 31, 2017, there was $8.1 million of unrecognized compensation expense that related to non-vested ENLC performance units. That cost is expected to be recognized over a weighted-average period of 2.3 years.