Investor Center

Investor FAQ

1.What are MLPs?
2.If distributions are tax-deferred, is an MLP investment is tax-free until I sell it?
3.How are MLP units different from corporate stock?
4.Do MLPs pay a dividend?
5.What are the incentive distribution rights?
6.Do I have to file tax returns in all the states listed in the tax package?
7.Does Niska Gas Storage offer a Direct Purchase Plan (DPP) or a Dividend Re-Investment Plan (DRIP)?
8.How can I get more information?
1.What are MLPs?
 MLPs are publicly traded partnerships (PTPs): limited partnerships the interests in which, known as "units," are traded on public securities exchanges much like corporate stock. Buying MLP units makes you a limited partner in that MLP. Sometimes an MLP is technically not a partnership but a publicly traded limited liability company (LLC) which has chosen partnership taxation. There are some differences between the two, but for tax purposes they are the same. The term MLP generally is applied to PTPs that operate active businesses. There are a number of commodity fund PTPs that are simply investment funds and are not considered MLPs.

2.If distributions are tax-deferred, is an MLP investment is tax-free until I sell it?
 Not quite. As a limited partner, you will be allocated your proportionate share of the MLP's income and capital gain and will be responsible for paying tax on it. However, you will also be allocated a proportionate share of the MLP's deductions (such as depreciation), losses and credits. These will offset much, and in some cases all, of the income. All of these are allocated to you only on paper and are completely separate from the cash distribution.

3.How are MLP units different from corporate stock?
 In some ways, they are very similar. They may be bought and sold on the New York, NASDAQ, and other public exchanges, and most of them pay a regular quarterly cash distribution. The big difference is that because MLPs are not corporations, they do not pay a corporate tax. Instead, all tax items pass through to the partners. This leaves more of the MLP's earnings free to pass on to you. Moreover, for most of the time you hold your MLP units, you will not have to pay tax on the distributions the way you do on corporate dividends. They are considered a tax-deferred "return of capital"-- that is, payback on your investment. They reduce the basis of your partnership units but are not taxed as current income.

On the other hand, you will be responsible for paying tax on your share of the partnership’s taxable income. However, most MLPs pay cash distributions that are well in excess of any tax owed.

4.Do MLPs pay a dividend?
 MLPs make cash distributions to their partners, usually on a quarterly basis. Each MLP is governed by its partnership agreement that specifies the manner in which cash distributions will be made to its general partner and limited partners. Generally, an MLP's partnership agreement mandates that it distribute 100% of its available cash flow (defined in the partnership agreements, and often referred to as distributable cash flow) to its unitholders within 45 days after the end of a quarter. Distributable cash flow generally means the amount of cash flow that is available to be distributed to partners after expenses, such as interest payments and maintenance capital expenditures, have been paid. The general partner has the discretion to retain a portion of the distributable cash flow in the partnership in order to meet its needs by making reserves. Most MLPs have fiscal year ends in December; therefore distributions are typically paid in mid-February, May, August and November.

5.What are the incentive distribution rights?
 The incentive distribution rights, also known as "splits", give a general partner the right to an increasing percentage of the incremental distributable cash flow generated by a partnership as the per unit distribution to the partnership's limited partners increases. Each MLP's partnership agreement defines the target distribution levels and the corresponding "splits" on the incremental distributable cash flow. The incentive distribution rights are generally thought to incentivize the general partner to rapidly grow the distributions to its limited partners.

6.Do I have to file tax returns in all the states listed in the tax package?
 Tax laws vary among states and ownership of our units may require you to file a return in a given state even though you do not reside in that state. Please consult your tax advisor for assistance in this area.

7.Does Niska Gas Storage offer a Direct Purchase Plan (DPP) or a Dividend Re-Investment Plan (DRIP)?
 Niska does not offer a DPP, but does offer a DRIP. Further information regarding the DRIP can be found here:
http://investor.niskapartners.com/phoenix.zhtml?c=235313&p=irol-drip

8.How can I get more information?
 Contact Sarah Steel or Kim Jackson at ir@niskapartners.com or 403-513-8650

Site designed and developed by PITCH