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Equity-Indexed Compensation Plans
 9 Months Ended
Sep. 30, 2013
Equity-Indexed Compensation Plans  
Equity-Indexed Compensation Plans

Note 10—Equity-Indexed Compensation Plans

 

We refer to the PAA and PNG LTIP Plans, Special PAA Awards and Class B Units of Plains AAP, L.P. collectively as our “Equity-indexed compensation plans.” For additional discussion of our equity-indexed compensation plans and awards, see Note 15 to our Consolidated Financial Statements included in Part IV of our 2012 Annual Report on Form 10-K.

 

Class B Units of Plains AAP, L.P. The following table contains a summary of Class B Units of Plains AAP, L.P.:

 

 

 

 

 

 

 

 

 

Grant Date

 

 

 

 

 

 

 

 

 

Fair Value of Outstanding

 

 

 

Reserved for Future

 

 

 

Outstanding Units

 

Class B Units (2)

 

 

 

Grants (1)

 

Outstanding (1)

 

Earned (1)

 

(in millions)

 

Balance at December 31, 2012

 

17,875

 

182,125

 

130,250

 

$

44

 

Granted

 

(4,500

)

4,500

 

—

 

7

 

Earned

 

N/A

 

N/A

 

50,125

 

N/A

 

Balance at September 30, 2013

 

13,375

 

186,625

 

180,375

 

$

51

 

 

(1)                       In connection with the initial public offering of PAGP and the recapitalization of Plains AAP, L.P. on October 21, 2013, the number of Class B Units of Plains AAP, L.P. was adjusted; as such, as of such date, the number of Class B Units of Plains AAP, L.P. reserved for future grants, outstanding and earned following this adjustment was 3,483,102 units, 48,642,833 units and 47,013,803 units, respectively.

(2)                       Of the grant date fair value, approximately $4 million was recognized as expense during the nine months ended September 30, 2013.

 

Special PAA Awards. In February 2013, we granted 143,000 Special PAA Awards to certain members of PNG’s management.  These awards are denominated in PAA common units and will vest 50% on PAA’s August 2018 distribution date and 50% on PAA’s August 2019 distribution date provided that PNG’s annualized distribution averages at least $1.48 and $1.43 per unit, respectively, for the twelve months prior to each vesting date. DERs associated with these awards will vest on the date that we pay an annualized distribution of $2.40 per unit, provided that PNG’s quarterly distribution remains at least $1.43 (annualized) per unit. Any unvested Special PAA Awards that remain outstanding on December 31, 2020 will be forfeited.

 

PAA and PNG LTIP Awards. Our equity compensation activity for LTIP awards denominated in PAA and PNG units is summarized in the following table (units in millions):

 

 

 

PAA Units (1) (2) (3)

 

PNG Units (4)

 

 

 

Units

 

Weighted Average Grant
Date
Fair Value per Unit

 

Units

 

Weighted Average Grant
Date
Fair Value per Unit

 

Outstanding at December 31, 2012

 

6.0

 

$

25.55

 

0.9

 

$

17.49

 

Granted

 

4.1

 

$

47.60

 

0.4

 

$

17.51

 

Vested

 

(1.8

)

$

24.82

 

—

 

$

18.88

 

Cancelled or forfeited

 

(0.3

)

$

36.32

 

—

 

$

13.33

 

Outstanding at September 30, 2013

 

8.0

 

$

36.74

 

1.3

 

$

17.55

 

 

(1)                       Amounts do not include Class B Units of Plains AAP, L.P.

(2)                       Amounts include Special PAA Awards.

(3)                       Approximately 0.5 million PAA common units were issued, net of approximately 0.3 million units withheld for taxes, for PAA units that vested during the nine months ended September 30, 2013. The remaining 1.0 million PAA units that vested were settled in cash.

(4)                       Less than 0.1 million PNG units vested and less than 0.1 million units were forfeited during the nine months ended September 30, 2013.

 

In February 2013, we granted 2.4 million equity-classified phantom unit awards and 1.5 million liability-classified phantom unit awards under our PAA LTIPs.  Substantially all of the equity-classified awards vest as follows: (i) one-third will vest upon the later of the August 2016 distribution date and the date we pay an annualized quarterly distribution of at least $2.35 per common unit, (ii) one-third will vest upon the later of the August 2017 distribution date and the date we pay an annualized quarterly distribution of at least $2.50 per common unit, and (iii) one-third will vest upon the later of the August 2018 distribution date and the date we pay an annualized quarterly distribution of at least $2.65 per unit.  Any of these equity-classified awards and associated DERs that have not vested as of the August 2019 distribution date will be forfeited.  Substantially all of the liability-classified awards are expected to vest on dates ranging from the August 2015 distribution date to the August 2018 distribution date and vest dependent on PAA paying annualized quarterly distributions ranging from $2.30 per common unit to $2.65 per common unit. Certain of these phantom unit awards include DERs that will vest in one-third increments upon achieving distributions of $2.35, $2.50 and $2.65 per common unit, without regard to the minimum service period.

 

Other Equity-Indexed Compensation Information.  The table below summarizes the expense recognized and the value of vesting (settled both in units and cash) related to our equity-indexed compensation plans and includes both liability-classified and equity-classified awards (in millions):

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Equity-indexed compensation expense

 

$

17

 

$

22

 

$

96

 

$

82

 

LTIP unit-settled vestings (1)

 

$

1

 

$

2

 

$

47

 

$

60

 

LTIP cash-settled vestings

 

$

—

 

$

1

 

$

61

 

$

66

 

DER cash payments

 

$

2

 

$

2

 

$

5

 

$

5

 

 

(1)                       For the nine months ended September 30, 2012, less than $1 million relates to unit-settled vestings that were settled with PNG common units.