EX-13.2 3 trp-09302018xfinstmts.htm THIRD QUARTER FINANCIAL STATEMENTS Exhibit
EXHIBIT 13.2

Condensed consolidated statement of income
 
 
three months ended
September 30
 
nine months ended
September 30
(unaudited - millions of Canadian $, except per share amounts)
 
2018

 
2017

 
2018

 
2017

 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Canadian Natural Gas Pipelines
 
934

 
921

 
2,772

 
2,725

U.S. Natural Gas Pipelines
 
967

 
811

 
2,988

 
2,684

Mexico Natural Gas Pipelines
 
156

 
139

 
460

 
432

Liquids Pipelines
 
564

 
437

 
1,831

 
1,410

Energy
 
535

 
887

 
1,724

 
2,581

 
 
3,156

 
3,195

 
9,775

 
9,832

Income from Equity Investments
 
147

 
156

 
492

 
527

Operating and Other Expenses
 
 

 
 

 
 

 
 

Plant operating costs and other
 
884

 
929

 
2,580

 
2,962

Commodity purchases resold
 
318

 
621

 
1,239

 
1,711

Property taxes
 
127

 
127

 
429

 
442

Depreciation and amortization
 
564

 
506

 
1,669

 
1,539

 
 
1,893

 
2,183

 
5,917

 
6,654

(Loss)/Gain on Sales of Assets
 
—

 
(9
)
 
—

 
489

Financial Charges
 
 

 
 

 
 

 
 

Interest expense
 
577

 
504

 
1,662

 
1,528

Allowance for funds used during construction
 
(147
)
 
(145
)
 
(365
)
 
(367
)
Interest income and other
 
(168
)
 
(84
)
 
(139
)
 
(193
)
 
 
262

 
275

 
1,158

 
968

Income before Income Taxes
 
1,148

 
884

 
3,192

 
3,226

Income Tax Expense
 
 

 
 

 
 

 
 

Current
 
30

 
6

 
169

 
128

Deferred
 
90

 
182

 
225

 
653

 
 
120

 
188

 
394

 
781

Net Income
 
1,028

 
696

 
2,798

 
2,445

Net income attributable to non-controlling interests
 
59

 
44

 
229

 
189

Net Income Attributable to Controlling Interests
 
969

 
652

 
2,569

 
2,256

Preferred share dividends
 
41

 
40

 
122

 
120

Net Income Attributable to Common Shares
 
928

 
612

 
2,447

 
2,136

Net Income per Common Share
 
 

 
 

 
 

 
 

Basic
 

$1.02

 

$0.70

 

$2.72

 

$2.46

Diluted
 

$1.02

 

$0.70

 

$2.72

 

$2.45

Dividends Declared per Common Share
 

$0.69

 

$0.625

 

$2.07

 

$1.875

Weighted Average Number of Common Shares (millions)
 
 

 
 

 
 

 
 

Basic
 
906

 
873

 
898

 
870

Diluted
 
907

 
875

 
898

 
872

 
See accompanying notes to the Condensed consolidated financial statements.

TRANSCANADA [54
THIRD QUARTER 2018                                        

Condensed consolidated statement of comprehensive income
 
 
three months ended September 30
 
nine months ended September 30
(unaudited - millions of Canadian $)
 
2018

 
2017

 
2018

 
2017

 
 
 
 
 
 
 
 
 
Net Income
 
1,028

 
696

 
2,798

 
2,445

Other Comprehensive (Loss)/Income, Net of Income Taxes
 
 

 
 

 
 

 
 

Foreign currency translation gains and losses on net investment in foreign operations
 
(282
)
 
(370
)
 
409

 
(721
)
Reclassification of foreign currency translation gains on net investment on disposal of foreign operations
 
—

 
—

 
—

 
(77
)
Change in fair value of net investment hedges
 
9

 
(1
)
 
(6
)
 
(3
)
Change in fair value of cash flow hedges
 
4

 
1

 
9

 
4

Reclassification to net income of gains and losses on cash flow hedges
 
6

 
—

 
16

 
(1
)
Unrealized actuarial gains and losses on pension and other post-retirement benefit plans
 
—

 
2

 
—

 
2

Reclassification of actuarial gains and losses on pension and other post-retirement benefit plans
 
10

 
4

 
10

 
11

Other comprehensive income on equity investments
 
6

 
3

 
18

 
6

Other comprehensive (loss)/income
 
(247
)
 
(361
)
 
456

 
(779
)
Comprehensive Income
 
781

 
335

 
3,254

 
1,666

Comprehensive income/(loss) attributable to non-controlling interests
 
28

 
(25
)
 
304

 
31

Comprehensive Income Attributable to Controlling Interests
 
753

 
360

 
2,950

 
1,635

Preferred share dividends
 
41

 
40

 
122

 
120

Comprehensive Income Attributable to Common Shares
 
712

 
320

 
2,828

 
1,515

See accompanying notes to the Condensed consolidated financial statements.


TRANSCANADA [55
THIRD QUARTER 2018                                        

Condensed consolidated statement of cash flows
 
 
three months ended September 30
 
nine months ended September 30
(unaudited - millions of Canadian $)
 
2018

 
2017

 
2018

 
2017

 
 
 
 
 
 
 
 
 
Cash Generated from Operations
 
 
 
 
 
 
 
 
Net income
 
1,028

 
696

 
2,798

 
2,445

Depreciation and amortization
 
564

 
506

 
1,669

 
1,539

Deferred income taxes
 
90

 
182

 
225

 
653

Income from equity investments
 
(147
)
 
(156
)
 
(492
)
 
(527
)
Distributions received from operating activities of equity investments
 
296

 
296

 
761

 
743

Employee post-retirement benefits funding, net of expense
 
(22
)
 
(73
)
 
(22
)
 
(64
)
Loss/(gain) on sales of assets
 
—

 
9

 
—

 
(489
)
Equity allowance for funds used during construction
 
(104
)
 
(107
)
 
(261
)
 
(249
)
Unrealized (gains)/losses on financial instruments
 
(29
)
 
(77
)
 
120

 
14

Other
 
(93
)
 
(5
)
 
(152
)
 
(1
)
Increase in operating working capital
 
(284
)
 
(86
)
 
(130
)
 
(224
)
Net cash provided by operations
 
1,299

 
1,185

 
4,516

 
3,840

Investing Activities
 
 

 
 

 
 

 
 

Capital expenditures
 
(2,435
)
 
(2,031
)
 
(6,474
)
 
(5,383
)
Capital projects in development
 
(127
)
 
(37
)
 
(239
)
 
(135
)
Contributions to equity investments
 
(236
)
 
(475
)
 
(778
)
 
(1,140
)
Proceeds from sales of assets, net of transaction costs
 
—

 
—

 
—

 
4,147

Other distributions from equity investments
 
—

 
—

 
121

 
362

Deferred amounts and other
 
(16
)
 
165

 
78

 
(87
)
Net cash used in investing activities
 
(2,814
)
 
(2,378
)
 
(7,292
)
 
(2,236
)
Financing Activities
 
 

 
 

 
 

 
 

Notes payable issued, net
 
1,421

 
451

 
1,906

 
1,232

Long-term debt issued, net of issue costs
 
1,026

 
1,151

 
4,359

 
1,968

Long-term debt repaid
 
(1,232
)
 
(46
)
 
(3,266
)
 
(5,515
)
Junior subordinated notes issued, net of issue costs
 
—

 
(3
)
 
—

 
3,468

Dividends on common shares
 
(416
)
 
(354
)
 
(1,154
)
 
(982
)
Dividends on preferred shares
 
(40
)
 
(39
)
 
(118
)
 
(116
)
Distributions paid to non-controlling interests
 
(57
)
 
(66
)
 
(174
)
 
(215
)
Common shares issued, net of issue costs
 
354

 
6

 
1,139

 
42

Partnership units of TC PipeLines, LP issued, net of issue costs
 
—

 
43

 
49

 
162

Common units of Columbia Pipeline Partners LP acquired
 
—

 
—

 
—

 
(1,205
)
Net cash provided by/(used in) financing activities
 
1,056

 
1,143

 
2,741

 
(1,161
)
Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents
 
(10
)
 
(16
)
 
47

 
(35
)
(Decrease)/increase in Cash and Cash Equivalents
 
(469
)
 
(66
)
 
12

 
408

Cash and Cash Equivalents
 
 

 
 

 
 

 
 

Beginning of period
 
1,570

 
1,490

 
1,089

 
1,016

Cash and Cash Equivalents
 
 

 
 

 
 

 
 

End of period
 
1,101

 
1,424

 
1,101

 
1,424

See accompanying notes to the Condensed consolidated financial statements.

TRANSCANADA [56
THIRD QUARTER 2018                                        

Condensed consolidated balance sheet
 
 
September 30,

 
December 31,

(unaudited - millions of Canadian $)
 
2018

 
2017

 
 
 
 
 
ASSETS
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
1,101

 
1,089

Accounts receivable
 
2,170

 
2,522

Inventories
 
381

 
378

Assets held for sale
 
458

 
—

Other
 
1,003

 
691

 
 
5,113

 
4,680

Plant, Property and Equipment
net of accumulated depreciation of $25,206 and $23,734, respectively
 
63,212

 
57,277

Equity Investments
 
6,683

 
6,366

Regulatory Assets
 
1,391

 
1,376

Goodwill
 
13,504

 
13,084

Loan Receivable from Affiliate
 
1,244

 
919

Intangible and Other Assets
 
1,929

 
1,484

Restricted Investments
 
1,101

 
915

 
 
94,177

 
86,101

LIABILITIES
 
 

 
 

Current Liabilities
 
 

 
 

Notes payable
 
3,742

 
1,763

Accounts payable and other
 
4,301

 
4,057

Dividends payable
 
643

 
586

Accrued interest
 
604

 
605

Current portion of long-term debt
 
1,671

 
2,866

 
 
10,961

 
9,877

Regulatory Liabilities
 
4,603

 
4,321

Other Long-Term Liabilities
 
637

 
727

Deferred Income Tax Liabilities
 
5,824

 
5,403

Long-Term Debt
 
35,029

 
31,875

Junior Subordinated Notes
 
7,186

 
7,007

 
 
64,240

 
59,210

EQUITY
 
 

 
 

Common shares, no par value
 
22,951

 
21,167

Issued and outstanding:
September 30, 2018 - 914 million shares
 
 

 
 

 
December 31, 2017 - 881 million shares
 
 

 
 

Preferred shares
 
3,980

 
3,980

Additional paid-in capital
 
15

 
—

Retained earnings
 
2,318

 
1,623

Accumulated other comprehensive loss
 
(1,350
)
 
(1,731
)
Controlling Interests
 
27,914

 
25,039

Non-controlling interests
 
2,023

 
1,852

 
 
29,937

 
26,891

 
 
94,177

 
86,101

 
Contingencies and Guarantees (Note 13)
Variable Interest Entities (Note 14)
Subsequent Events (Note 15)
See accompanying notes to the Condensed consolidated financial statements.

TRANSCANADA [57
THIRD QUARTER 2018                                        

Condensed consolidated statement of equity
 
nine months ended September 30
(unaudited - millions of Canadian $)
2018

 
2017

 
 
 
 
Common Shares
 
 
 
Balance at beginning of period
21,167

 
20,099

Shares issued:
 
 
 
Under at-the-market equity program, net of issue costs
1,118

 
—

Under dividend reinvestment and share purchase plan
640

 
599

On exercise of stock options
26

 
46

Balance at end of period
22,951

 
20,744

Preferred Shares
 

 
 

Balance at beginning and end of period
3,980

 
3,980

Additional Paid-In Capital
 

 
 

Balance at beginning of period
—

 
—

Issuance of stock options, net of exercises
8

 
4

Dilution from TC PipeLines, LP units issued
7

 
18

Asset drop downs to TC PipeLines, LP
—

 
(202
)
Columbia Pipeline Partners LP acquisition
—

 
(171
)
Reclassification of additional paid-in capital deficit to retained earnings
—

 
351

Balance at end of period
15

 
—

Retained Earnings
 

 
 

Balance at beginning of period
1,623

 
1,138

Net income attributable to controlling interests
2,569

 
2,256

Common share dividends
(1,869
)
 
(1,633
)
Preferred share dividends
(100
)
 
(98
)
Adjustment related to income tax effects of asset drop downs to TC PipeLines, LP
95

 
—

Adjustment related to employee share-based payments
—

 
12

Reclassification of additional paid-in capital deficit to retained earnings
—

 
(351
)
Balance at end of period
2,318

 
1,324

Accumulated Other Comprehensive Loss
 

 
 

Balance at beginning of period
(1,731
)
 
(960
)
Other comprehensive income/(loss) attributable to controlling interests
381

 
(621
)
Balance at end of period
(1,350
)
 
(1,581
)
Equity Attributable to Controlling Interests
27,914

 
24,467

Equity Attributable to Non-Controlling Interests
 

 
 

Balance at beginning of period
1,852

 
1,726

Net income attributable to non-controlling interests
229

 
189

Other comprehensive income/(loss) attributable to non-controlling interests
75

 
(158
)
Issuance of TC PipeLines, LP units
 
 
 
Proceeds, net of issue costs
49

 
162

Decrease in TransCanada's ownership of TC PipeLines, LP
(9
)
 
(29
)
Distributions declared to non-controlling interests
(173
)
 
(212
)
Reclassification from common units of TC PipeLines, LP subject to rescission
—

 
106

Impact of Columbia Pipeline Partners LP acquisition
—

 
33

Balance at end of period
2,023

 
1,817

Total Equity
29,937

 
26,284

 
See accompanying notes to the Condensed consolidated financial statements.

TRANSCANADA [58
THIRD QUARTER 2018                                        

Notes to Condensed consolidated financial statements
(unaudited)
1. Basis of presentation
These Condensed consolidated financial statements of TransCanada Corporation (TransCanada or the Company) have been prepared by management in accordance with U.S. GAAP. The accounting policies applied are consistent with those outlined in TransCanada’s annual audited consolidated financial statements for the year ended December 31, 2017, except as described in Note 2, Accounting changes. Capitalized and abbreviated terms that are used but not otherwise defined herein are identified in the 2017 audited consolidated financial statements included in TransCanada’s 2017 Annual Report.
These Condensed consolidated financial statements reflect adjustments, all of which are normal recurring adjustments that are, in the opinion of management, necessary to reflect fairly the financial position and results of operations for the respective periods. These Condensed consolidated financial statements do not include all disclosures required in the annual financial statements and should be read in conjunction with the 2017 audited consolidated financial statements included in TransCanada’s 2017 Annual Report. Certain comparative figures have been reclassified to conform with the current period’s presentation.
Earnings for interim periods may not be indicative of results for the fiscal year in the Company’s natural gas pipelines segments due to the timing of regulatory decisions and seasonal fluctuations in short-term throughput volumes on U.S. pipelines. Earnings for interim periods may also not be indicative of results for the fiscal year in the Company’s Energy segment due to the impact of seasonal weather conditions on customer demand and market pricing in certain of the Company’s investments in electrical power generation plants and non-regulated gas storage facilities.
USE OF ESTIMATES AND JUDGEMENTS
In preparing these financial statements, TransCanada is required to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses since the determination of these items may be dependent on future events. The Company uses the most current information available and exercises careful judgement in making these estimates and assumptions. In the opinion of management, these Condensed consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the Company’s significant accounting policies included in the annual audited consolidated financial statements for the year ended December 31, 2017, except as described in Note 2, Accounting changes.
2. Accounting changes
CHANGES IN ACCOUNTING POLICIES FOR 2018
Revenue from contracts with customers
In 2014, the FASB issued new guidance on revenue from contracts with customers. The new guidance requires that an entity recognize revenue from these contracts in accordance with a prescribed model. This model is used to depict the transfer of promised goods or services to customers in amounts that reflect the total consideration to which it expects to be entitled during the term of the contract in exchange for those promised goods or services. Goods or services that are promised to a customer are referred to as the Company's "performance obligations." The total consideration to which the Company expects to be entitled can include fixed and variable amounts. The Company has variable revenue that is subject to factors outside the Company’s influence, such as market prices, actions of third parties and weather conditions. The Company considers this variable revenue to be "constrained" as it cannot be reliably estimated, and therefore recognizes variable revenue when the service is provided.

TRANSCANADA [59
THIRD QUARTER 2018                                        

The new guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue recognition and related cash flows.
In the application of the new guidance, significant estimates and judgments are used to determine the following:
•
pattern of revenue recognition within a contract, based on whether the performance obligation is satisfied at a point in time versus over time
•
term of the contract
•
amount of variable consideration associated with a contract and timing of the associated revenue recognition.
The new guidance was effective January 1, 2018, was applied using the modified retrospective transition method, and did not result in any material differences in the amount and timing of revenue recognition. Refer to Note 4, Revenues, for further information related to the impact of adopting the new guidance and the Company's updated accounting policies related to revenue recognition from contracts with customers.
Financial instruments
In January 2016, the FASB issued new guidance on the accounting for equity investments and financial liabilities. The new guidance changes the income statement effect of equity investments and the recognition of changes in the fair value of financial liabilities when the fair value option is elected. The new guidance also requires the Company to assess valuation allowances for deferred tax assets related to available for sale debt securities in combination with their other deferred tax assets. This new guidance was effective January 1, 2018 and did not have a material impact on the Company's consolidated financial statements.
Income taxes
In October 2016, the FASB issued new guidance on the income tax effects of intra-entity transfers of assets other than inventory. The new guidance requires the recognition of deferred and current income taxes for intra-entity asset transfers when the transfer occurs. The new guidance was effective January 1, 2018, was applied using a modified retrospective approach, and did not have a material impact on the Company's consolidated financial statements.
Restricted cash
In November 2016, the FASB issued new guidance on restricted cash and cash equivalents on the statement of cash flows. The new guidance requires that the statement of cash flows explain the change during the period in the total cash and cash equivalents balance, and amounts generally described as restricted cash or restricted cash equivalents. Restricted cash and cash equivalents will be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts on the statement of cash flows. This new guidance was effective January 1, 2018, was applied retrospectively, and did not have an impact on the Company's consolidated financial statements.
Employee post-retirement benefits
In March 2017, the FASB issued new guidance that requires entities to disaggregate the current service cost component from the other components of net benefit cost and present it with other current compensation costs for related employees in the income statement. The new guidance also requires that the other components of net benefit cost be presented elsewhere in the income statement and excluded from income from operations if such a subtotal is presented. In addition, the new guidance makes changes to the components of net benefit cost that are eligible for capitalization. Entities must use a retrospective transition method to adopt the requirement for separate presentation in the income statement of the components of net benefit cost, and a prospective transition method to adopt the change to capitalization of benefit costs. This new guidance was effective January 1, 2018 and did not have a material impact on the Company's consolidated financial statements.

TRANSCANADA [60
THIRD QUARTER 2018                                        

Hedge accounting
In August 2017, the FASB issued new guidance making more financial and non-financial hedging strategies eligible for hedge accounting. The new guidance also amends the presentation requirements relating to the change in fair value of a derivative and requires additional disclosures including cumulative basis adjustments for fair value hedges and the effect of hedging on individual line items in the statement of income. This new guidance is effective January 1, 2019 with early adoption permitted. This new guidance, which the Company elected to adopt effective January 1, 2018, was applied prospectively and did not have a material impact on the Company's consolidated financial statements.
FUTURE ACCOUNTING CHANGES
Leases
In February 2016, the FASB issued new guidance on the accounting for leases. The new guidance amends the definition of a lease such that, in order for an arrangement to qualify as a lease, the lessor is required to have both (1) the right to obtain substantially all of the economic benefits from the use of the asset and (2) the right to direct the use of the asset. The new guidance also establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and corresponding lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The new guidance does not make extensive changes to lessor accounting.
In January 2018, the FASB issued an optional practical expedient, to be applied upon transition, to omit the evaluation of land easements not previously accounted for as leases that existed or expired prior to the entity's adoption of the new lease guidance. An entity that elects this practical expedient is required to apply the practical expedient consistently to all of its existing or expired land easements not previously accounted for as leases. The Company intends to apply this practical expedient upon transition to the new standard.
The new guidance is effective January 1, 2019, with early adoption permitted. The Company will adopt the new standard on its effective date. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. In July 2018, the FASB issued a transition option allowing entities to not apply the new guidance, including disclosure requirements, to the comparative periods they present in their financial statements in the year of adoption. The Company will apply this transition option and therefore will not be required to update financial information and disclosures for dates and periods prior to January 1, 2019.
The Company will elect the package of practical expedients which permits entities not to reassess prior conclusions about lease identification, lease classification and initial direct costs under the rules of the new standard. The Company continues to monitor and analyze other optional practical expedients as well as additional guidance and clarifications provided by the FASB.
The Company has developed an inventory of existing lease agreements, has substantially completed its analysis on them, but continues to refine its view of what qualifies as a lease and evaluate the financial impact on its consolidated financial statements. The Company has also selected a system solution and continues to progress through the testing stage of implementation. The Company continues to assess process changes necessary to compile the information to meet the recognition and disclosure requirements of the new guidance and to analyze new contracts that may contain leases.

TRANSCANADA [61
THIRD QUARTER 2018                                        

Measurement of credit losses on financial instruments
In June 2016, the FASB issued new guidance that significantly changes how entities measure credit losses for most financial assets and certain other financial instruments that are not measured at fair value through net income. The new guidance amends the impairment model of financial instruments basing it on expected losses rather than incurred losses. These expected credit losses will be recognized as an allowance rather than as a direct write down of the amortized cost basis. The new guidance is effective January 1, 2020 and will be applied using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this guidance and has not yet determined the effect on its consolidated financial statements.
Goodwill impairment
In January 2017, the FASB issued new guidance on simplifying the test for goodwill impairment by eliminating Step 2 of the impairment test, which is the requirement to calculate the implied fair value of goodwill to measure the impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. This new guidance is effective January 1, 2020 and will be applied prospectively, however, early adoption is permitted. The Company is currently evaluating the timing and impact of the adoption of this guidance.
Income taxes
In February 2018, the FASB issued new guidance that allows a reclassification from AOCI to retained earnings for stranded tax effects resulting from the U.S. Tax Reform. This new guidance is effective January 1, 2019, however, early adoption is permitted. This guidance can be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change is recognized. The Company is currently evaluating this guidance in conjunction with its analysis of the overall impact of U.S. Tax Reform.
Fair value measurement
In August 2018, the FASB issued new guidance that amends certain disclosure requirements for fair value measurements. This new guidance is effective January 1, 2020, however, early adoption of certain or all requirements is permitted. The Company is currently evaluating the timing and impact of adoption of this guidance and has not yet determined the effect on its consolidated financial statements.
Defined benefit plans
In August 2018, the FASB issued new guidance which amends and clarifies disclosure requirements related to defined benefit pension and other post retirement benefit plans. This new guidance is effective January 1, 2021, and will be applied on a retrospective basis. The Company is currently evaluating the timing and impact of the adoption of this guidance.
Implementation costs of cloud computing arrangements
In August 2018, the FASB issued new guidance requiring an entity in a hosting arrangement that is a service contract to follow the guidance for internal-use software to determine which implementation costs should be capitalized as an asset and which costs should be expensed. The guidance also requires the entity to amortize the capitalized implementation costs of a hosting arrangement over the term of the arrangement. This guidance is effective January 1, 2020, however, early adoption is permitted. This guidance can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently evaluating the timing and impact of adoption of this guidance and has not yet determined the effect on its consolidated financial statements.

TRANSCANADA [62
THIRD QUARTER 2018                                        

3. Segmented information
three months ended
September 30, 2018
 
Canadian Natural Gas Pipelines

 
U.S. Natural Gas Pipelines

 
Mexico Natural Gas Pipelines

 
Liquids Pipelines

 
 
 
 
 
 
(unaudited - millions of Canadian $)
 
 
 
 
 
Energy

 
Corporate1
Total

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
934

 
967

 
156

 
564

 
535

 
—

 
3,156

Intersegment revenues
 
—

 
40

 
—

 
—

 
3

 
(43
)
2 
—

 
 
934

 
1,007

 
156

 
564

 
538

 
(43
)
 
3,156

Income/(loss) from equity investments
 
3

 
62

 
8

 
22

 
112

 
(60
)
3 
147

Plant operating costs and other
 
(356
)
 
(313
)
 
(11
)
 
(160
)
 
(79
)
 
35

2 
(884
)
Commodity purchases resold
 
—

 
—

 
—

 
—

 
(318
)
 
—

 
(318
)
Property taxes
 
(59
)
 
(41
)
 
—

 
(24
)
 
(3
)
 
—

 
(127
)
Depreciation and amortization
 
(255
)
 
(170
)
 
(26
)
 
(86
)
 
(27
)
 
—

 
(564
)
Segmented Earnings/(Loss)
 
267

 
545

 
127

 
316

 
223

 
(68
)
 
1,410

Interest expense
 
(577
)
Allowance for funds used during construction
 
147

Interest income and other3
 
168

Income before income taxes
 
1,148

Income tax expense
 
(120
)
Net Income
 
1,028

Net income attributable to non-controlling interests
 
(59
)
Net Income Attributable to Controlling Interests
 
969

Preferred share dividends
 
(41
)
Net Income Attributable to Common Shares
 
928

1
Includes intersegment eliminations.
2
The Company records intersegment sales at contracted rates. For segmented reporting, these transactions are included as Intersegment revenues in the segment providing the service and Plant operating costs and other in the segment receiving the service. These transactions are eliminated on consolidation. Intersegment profit is recognized when the product or service has been provided to third parties or otherwise realized.
3
Income/(loss) from equity investments includes foreign exchange losses on the Company's inter-affiliate loan with Sur de Texas. The offsetting foreign exchange gains on the inter-affiliate loan are included in Interest income and other. The peso-denominated loan to the Sur de Texas joint venture represents the Company's proportionate share of debt financing for this joint venture.

TRANSCANADA [63
THIRD QUARTER 2018                                        

three months ended
September 30, 2017
 
Canadian Natural Gas Pipelines

 
U.S. Natural Gas Pipelines

 
Mexico Natural Gas Pipelines

 
Liquids Pipelines

 
 
 
 
 
 
(unaudited - millions of Canadian $)
 
 
 
 
 
Energy

 
Corporate1
Total

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
921

 
811

 
139

 
437

 
887

 
—

 
3,195

Intersegment revenues
 
—

 
10

 
—

 
—

 
—

 
(10
)
2 
—

 
 
921

 
821

 
139

 
437

 
887

 
(10
)
 
3,195

Income/(loss) from equity investments
 
4

 
53

 
(11
)
 
4

 
99

 
7

3 
156

Plant operating costs and other
 
(318
)
 
(351
)
 
(10
)
 
(145
)
 
(79
)
 
(26
)
2 
(929
)
Commodity purchases resold
 
—

 
—

 
—

 
—

 
(621
)
 
—

 
(621
)
Property taxes
 
(63
)
 
(41
)
 
—

 
(22
)
 
(1
)
 
—

 
(127
)
Depreciation and amortization
 
(228
)
 
(145
)
 
(23
)
 
(71
)
 
(39
)
 
—

 
(506
)
Loss on sales of assets
 
—

 
—

 
—

 
—

 
(9
)
 
—

 
(9
)
Segmented Earnings/(Loss)
 
316

 
337

 
95

 
203

 
237

 
(29
)
 
1,159

Interest expense
 
(504
)
Allowance for funds used during construction
 
145

Interest income and other3
 
84

Income before income taxes
 
884

Income tax expense
 
(188
)
Net Income
 
696

Net income attributable to non-controlling interests
 
(44
)
Net Income Attributable to Controlling Interests
 
652

Preferred share dividends
 
(40
)
Net Income Attributable to Common Shares
 
612

1
Includes intersegment eliminations.
2
The Company records intersegment sales at contracted rates. For segmented reporting, these transactions are included as Intersegment revenues in the segment providing the service and Plant operating costs and other in the segment receiving the service. These transactions are eliminated on consolidation. Intersegment profit is recognized when the product or service has been provided to third parties or otherwise realized.
3
Income/(loss) from equity investments includes foreign exchange gains on the Company's inter-affiliate loan with Sur de Texas. The offsetting foreign exchange losses on the inter-affiliate loan are included in Interest income and other. The peso-denominated loan to the Sur de Texas joint venture represents the Company's proportionate share of debt financing for this joint venture.

TRANSCANADA [64
THIRD QUARTER 2018                                        

nine months ended
September 30, 2018
 
Canadian Natural Gas Pipelines

 
U.S. Natural Gas Pipelines

 
Mexico Natural Gas Pipelines

 
Liquids Pipelines

 
 
 
 
 
 
(unaudited - millions of Canadian $)
 
 
 
 
 
Energy

 
Corporate1
Total

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
2,772

 
2,988

 
460

 
1,831

 
1,724

 
—

 
9,775

Intersegment revenues
 
—

 
121

 
—

 
—

 
50

 
(171
)
2 
—

 
 
2,772

 
3,109

 
460

 
1,831

 
1,774

 
(171
)
 
9,775

Income/(loss) from equity investments
 
9

 
188

 
20

 
50

 
277

 
(52
)
3 
492

Plant operating costs and other
 
(1,020
)
 
(925
)
 
(25
)
 
(506
)
 
(250
)
 
146

2 
(2,580
)
Commodity purchases resold
 
—

 
—

 
—

 
—

 
(1,239
)
 
—

 
(1,239
)
Property taxes
 
(200
)
 
(149
)
 
—

 
(74
)
 
(6
)
 
—

 
(429
)
Depreciation and amortization
 
(761
)
 
(489
)
 
(73
)
 
(254
)
 
(92
)
 
—

 
(1,669
)
Segmented Earnings/(Loss)
 
800

 
1,734

 
382

 
1,047

 
464

 
(77
)
 
4,350

Interest expense
 
(1,662
)
Allowance for funds used during construction
 
365

Interest income and other3
 
139

Income before income taxes
 
3,192

Income tax expense
 
(394
)
Net Income
 
2,798

Net income attributable to non-controlling interests
 
(229
)
Net Income Attributable to Controlling Interests
 
2,569

Preferred share dividends
 
(122
)
Net Income Attributable to Common Shares
 
2,447

1
Includes intersegment eliminations.
2
The Company records intersegment sales at contracted rates. For segmented reporting, these transactions are included as Intersegment revenues in the segment providing the service and Plant operating costs and other in the segment receiving the service. These transactions are eliminated on consolidation. Intersegment profit is recognized when the product or service has been provided to third parties or otherwise realized.
3
Income/(loss) from equity investments includes foreign exchange losses on the Company's inter-affiliate loan with Sur de Texas. The offsetting foreign exchange gains on the inter-affiliate loan are included in Interest income and other. The peso-denominated loan to the Sur de Texas joint venture represents the Company's proportionate share of debt financing for this joint venture.

TRANSCANADA [65
THIRD QUARTER 2018                                        

nine months ended
September 30, 2017
 
Canadian Natural Gas Pipelines

 
U.S. Natural Gas Pipelines

 
Mexico Natural Gas Pipelines

 
Liquids Pipelines

 
 
 
 
 
 
(unaudited - millions of Canadian $)
 
 
 
 
 
Energy

 
Corporate1
Total

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
2,725

 
2,684

 
432

 
1,410

 
2,581

 
—

 
9,832

Intersegment revenues
 
—

 
31

 
—

 
—

 
—

 
(31
)
2 
—

 
 
2,725

 
2,715

 
432

 
1,410

 
2,581

 
(31
)
 
9,832

Income/(loss) from equity investments
 
9

 
175

 
—

 
3

 
341

 
(1
)
3 
527

Plant operating costs and other
 
(958
)
 
(1,004
)
 
(29
)
 
(437
)
 
(464
)
 
(70
)
2 
(2,962
)
Commodity purchases resold
 
—

 
—

 
—

 
—

 
(1,711
)
 
—

 
(1,711
)
Property taxes
 
(201
)
 
(136
)
 
—

 
(67
)
 
(38
)
 
—

 
(442
)
Depreciation and amortization
 
(672
)
 
(451
)
 
(70
)
 
(228
)
 
(118
)
 
—

 
(1,539
)
Gain on sales of assets
 
—

 
—

 
—

 
—

 
489

 
—

 
489

Segmented Earnings/(Loss)
 
903

 
1,299

 
333

 
681

 
1,080

 
(102
)
 
4,194

Interest expense
 
(1,528
)
Allowance for funds used during construction
 
367

Interest income and other3
 
193

Income before income taxes
 
3,226

Income tax expense
 
(781
)
Net Income
 
2,445

Net income attributable to non-controlling interests
 
(189
)
Net Income Attributable to Controlling Interests
 
2,256

Preferred share dividends
 
(120
)
Net Income Attributable to Common Shares
 
2,136

1
Includes intersegment eliminations.
2
The Company records intersegment sales at contracted rates. For segmented reporting, these transactions are included as Intersegment revenues in the segment providing the service and Plant operating costs and other in the segment receiving the service. These transactions are eliminated on consolidation. Intersegment profit is recognized when the product or service has been provided to third parties or otherwise realized.
3
Income/(loss) from equity investments includes foreign exchange losses on the Company's inter-affiliate loan with Sur de Texas. The offsetting foreign exchange gains on the inter-affiliate loan are included in Interest income and other. The peso-denominated loan to the Sur de Texas joint venture represents the Company's proportionate share of debt financing for this joint venture.
TOTAL ASSETS 
(unaudited - millions of Canadian $)
 
September 30, 2018

 
December 31, 2017

 
 
 
 
 
Canadian Natural Gas Pipelines
 
17,900

 
16,904

U.S. Natural Gas Pipelines
 
41,045

 
35,898

Mexico Natural Gas Pipelines
 
6,403

 
5,716

Liquids Pipelines
 
16,277

 
15,438

Energy
 
8,559

 
8,503

Corporate
 
3,993

 
3,642

 
 
94,177

 
86,101

 

TRANSCANADA [66
THIRD QUARTER 2018                                        

4. Revenues
In 2014, the FASB issued new guidance on revenue from contracts with customers. The Company adopted the new guidance on January 1, 2018 using the modified retrospective transition method for all contracts that were in effect on the date of adoption. Results reported for 2018 reflect the application of the new guidance, while the 2017 comparative results were prepared and reported under previous revenue recognition guidance which is referred to herein as "legacy U.S. GAAP."
DISAGGREGATION OF REVENUES
The following tables summarize total Revenues for the three and nine months ended September 30, 2018:
three months ended September 30, 2018
(unaudited - millions of Canadian $)
Canadian
Natural
Gas
Pipelines

U.S.
Natural
Gas
Pipelines

Mexico
Natural
Gas
Pipelines

Liquids Pipelines

Energy

Total

 
 
 
 
 
 
 
Revenues from contracts with customers
 
 
 
 
 
 
  Capacity arrangements and transportation
934

788

155

511

—

2,388

  Power generation
—

—

—

—

450

450

  Natural gas storage and other
—

158

1

1

4

164

 
934

946

156

512

454

3,002

Other revenues1,2
—

21

—

52

81

154

 
934

967

156

564

535

3,156

1
Other revenues include income from the Company's marketing activities, financial instruments and lease arrangements within each operating segment. Income from lease arrangements includes certain long term PPAs, as well as certain liquids pipelines capacity and transportation arrangements. These arrangements are not in the scope of the new guidance, therefore, revenues related to these contracts are excluded from revenues from contracts with customers. Refer to Note 12, Risk management and financial instruments, for further information on income from financial instruments.
2
Other revenues from U.S. Natural Gas Pipelines include the amortization of the net regulatory liabilities resulting from U.S. Tax Reform. Refer to Note 7, Income taxes, for further information.
nine months ended September 30, 2018
(unaudited - millions of Canadian $)
Canadian
Natural
Gas
Pipelines

U.S.
Natural
Gas
Pipelines

Mexico
Natural
Gas
Pipelines

Liquids Pipelines

Energy

Total

 
 
 
 
 
 
 
Revenues from contracts with customers
 
 
 
 
 
 
  Capacity arrangements and transportation
2,772

2,457

457

1,558

—

7,244

  Power generation
—

—

—

—

1,455

1,455

  Natural gas storage and other
—

468

3

2

65

538

 
2,772

2,925

460

1,560

1,520

9,237

Other revenues1,2
—

63

—

271

204

538

 
2,772

2,988

460

1,831

1,724

9,775

1
Other revenues include income from the Company's marketing activities, financial instruments and lease arrangements within each operating segment. Income from lease arrangements includes certain long term PPAs, as well as certain liquids pipelines capacity and transportation arrangements. These arrangements are not in the scope of the new guidance, therefore, revenues related to these contracts are excluded from revenues from contracts with customers. Refer to Note 12, Risk management and financial instruments, for further information on income from financial instruments.
2
Other revenues from U.S. Natural Gas Pipelines include the amortization of the net regulatory liabilities resulting from U.S. Tax Reform. Refer to Note 7, Income taxes, for further information.
Revenues from contracts with customers are recognized net of any taxes collected from customers which are subsequently remitted to governmental authorities. The Company's contracts with customers include natural gas and liquids pipelines capacity arrangements and transportation contracts, power generation contracts, natural gas storage and other contracts.

TRANSCANADA [67
THIRD QUARTER 2018                                        

Canadian Natural Gas Pipelines
Capacity Arrangements and Transportation
Revenues from the Company's Canadian natural gas pipelines are generated from contractual arrangements for committed capacity and from the transportation of natural gas. Revenues earned from firm contracted capacity arrangements are recognized ratably over the term of the contract regardless of the amount of natural gas that is transported. Transportation revenues for interruptible or volumetric-based services are recognized when the service is performed.
Revenues from the Company's Canadian natural gas pipelines are subject to regulatory decisions by the NEB. The tolls charged on these pipelines are based on revenue requirements designed to recover the costs of providing natural gas capacity for transportation services, which includes a return of and return on capital, as approved by the NEB. The Company's Canadian natural gas pipelines are generally not subject to risks related to variances in revenues and most costs. These variances are generally subject to deferral treatment and are recovered or refunded in future tolls. Revenues recognized prior to an NEB decision on rates for that period reflect the NEB's last approved ROE assumptions. Adjustments to revenues are recorded when the NEB decision is received. Canadian natural gas pipelines' revenues are invoiced and received on a monthly basis. The Company does not take ownership of the natural gas that it transports for customers.
U.S. Natural Gas Pipelines
Capacity Arrangements and Transportation
Revenues from the Company's U.S. natural gas pipelines are generated from contractual arrangements for committed capacity and from the transportation of natural gas. Revenues earned from firm contracted capacity arrangements are generally recognized ratably over the term of the contract regardless of the amount of natural gas that is transported. Transportation revenues for interruptible or volumetric-based services are recognized when the service is performed. The Company has elected to utilize the practical expedient to recognize revenues from its U.S. natural gas pipelines as invoiced.
The Company's U.S. natural gas pipelines are subject to FERC regulations and, as a result, a portion of revenues collected may be subject to refund if invoiced during an interim period when a rate proceeding is ongoing. Allowances for these potential refunds are recognized using management's best estimate based on the facts and circumstances of the proceeding. Any allowances that are recognized during the proceeding process are refunded or retained at the time a regulatory decision becomes final. U.S. natural gas pipelines' revenues are invoiced and received on a monthly basis. The Company does not take ownership of the natural gas that it transports for customers.
Natural Gas Storage and Other
Revenues from the Company's regulated U.S. natural gas storage services are generated mainly from firm committed capacity storage contracts. The performance obligation in these contracts is the reservation of a specified amount of capacity for storage including specifications with regards to the amount of natural gas that can be injected or withdrawn on a daily basis. Revenues are recognized ratably over the contract period for firm committed capacity regardless of the amount of natural gas that is stored, and when gas is injected or withdrawn for interruptible or volumetric-based services. Natural gas storage services revenues are invoiced and received on a monthly basis. The Company does not take ownership of the natural gas that it stores for customers.
Revenues from the Company's midstream natural gas services, including gathering, treating, conditioning, processing, compression and liquids handling services, are generated from contractual arrangements and are recognized ratably over the term of the contract. The Company also owns mineral rights associated with certain natural gas storage facilities. These mineral rights can be leased or contributed to producers of natural gas in return for a royalty interest which is recognized when natural gas and associated liquids are produced. Midstream natural gas service revenues are invoiced and received on a monthly basis. The Company does not take ownership of the natural gas for which it provides midstream services.

TRANSCANADA [68
THIRD QUARTER 2018                                        

Mexico Natural Gas Pipelines
Capacity Arrangements and Transportation
Revenues from the Company's Mexico natural gas pipelines are primarily collected based on CRE-approved negotiated firm capacity contracts and are generally recognized ratably over the term of the contract. For certain firm capacity arrangements, the Company has elected to utilize the practical expedient to recognize revenues as invoiced. Transportation revenues related to interruptible or volumetric-based services are recognized when the service is performed. Other volumes shipped on these pipelines are subject to CRE-approved tariffs and revenues are recognized when the Company has performed the transportation services. Mexico natural gas pipelines' revenues are invoiced and received on a monthly basis. The Company does not take ownership of the natural gas that it transports for customers.
Liquids Pipelines
Capacity Arrangements and Transportation
Revenues from the Company's liquids pipelines are generated mainly from providing customers with firm capacity arrangements to transport crude oil. The performance obligation in these contracts is the reservation of a specified amount of capacity together with the transportation of crude oil on a monthly basis. Revenues earned from these arrangements are recognized ratably over the term of the contract regardless of the amount of crude oil that is transported. Revenues for interruptible or volumetric-based services are recognized when the service is performed. Liquids pipelines' revenues are invoiced and received on a monthly basis. The Company does not take ownership of the crude oil that it transports for customers.
Energy
Power Generation
Revenues from the Company's Energy business are primarily derived from long-term contractual commitments to provide power capacity to meet the demands of the market, and from the sale of electricity to both centralized markets and to customers. Power generation revenues also include revenues from the sale of steam to customers. Revenues and capacity payments are recognized as the services are provided and as electricity and steam is delivered. Power generation revenues are invoiced and received on a monthly basis.
Natural Gas Storage and Other
Non-regulated natural gas storage contracts include park, loan and term storage arrangements. Park and loan contracts allow for fixed injection or withdrawal volumes on specified dates for a specified price. Term storage contracts allow for a maximum amount of gas to be stored over a set period of time. Revenues from park and loan contracts are recognized and invoiced as the injection and withdrawal services are provided and revenues from term storage contracts are recognized ratably over the term of the contract. Term storage revenues are invoiced and received on a monthly basis. Revenues earned from the sale of proprietary natural gas are recognized in the month of delivery. Revenues from ancillary services are recognized as the service is provided. The Company does not take ownership of the natural gas that it stores for customers.
FINANCIAL STATEMENT IMPACT OF ADOPTING REVENUE FROM CONTRACTS WITH CUSTOMERS
The Company adopted the new guidance using the modified retrospective transition method. As a practical expedient under this transition method, the Company is not required to analyze completed contracts at the date of adoption. As a result, the Company made the following adjustments on January 1, 2018.
Capacity Arrangements and Transportation
For certain natural gas pipelines capacity contracts, amounts are invoiced to the customer in accordance with the terms of the contract, however, the related revenues are recognized when the Company satisfies its performance obligation to provide committed capacity ratably over the term of the contract. This difference in timing between revenue recognition and amounts invoiced creates a contract asset or contract liability under the new revenue recognition guidance. Under legacy U.S. GAAP, this difference was recorded as Accounts receivable. Under the new guidance, contract assets are

TRANSCANADA [69
THIRD QUARTER 2018                                        

included in Other current assets and Intangibles and other assets and contract liabilities are included in Accounts payable and other and Other long-term liabilities.
Impact of New Revenue Recognition Guidance on Date of Adoption
The following table illustrates the impact of the adoption of the new revenue recognition guidance on the Company's previously reported consolidated balance sheet line items:
 
As reported

Adjustment

 
(unaudited - millions of Canadian $)
December 31, 2017

January 1, 2018

 
 
 
 
Current Assets
 
 
 
Accounts receivable
2,522

(62
)
2,460

Other1
691

79

770

Current Liabilities
 
 
 
Accounts payable and other2
4,057

17

4,074

1
Adjustment relates to contract assets previously included in Accounts receivable.
2
Adjustment relates to contract liabilities previously included in Accounts receivable.
Pro-forma Financial Statements under Legacy U.S. GAAP
As required by the new revenue recognition guidance, the following tables illustrate the pro-forma impact on the affected line items on the Condensed consolidated balance sheet, as at September 30, 2018, using legacy U.S. GAAP:
 
September 30, 2018
 
As reported

 
Pro-forma using legacy U.S. GAAP

(unaudited - millions of Canadian $)
 
 
 
 
Current Assets
 
 
 
Accounts receivable
2,170

 
2,460

Other
1,003

 
713

CONTRACT BALANCES
 
(unaudited - millions of Canadian $)
September 30, 2018

 
January 1,
2018

 
 
 
 
 
 
 
Receivables from contracts with customers
1,208

 
1,736

 
Contract assets1
290

 
79

 
Long-term contract assets2
35

 
—

 
Contract liabilities3
41

 
17

 
Long-term contract liabilities4
27

 
—

1
Recorded as part of Other current assets on the Condensed consolidated balance sheet.
2
Recorded as part of Intangibles and other assets on the Condensed consolidated balance sheet.
3
Comprised of deferred revenue recorded in Accounts payable and other on the Condensed consolidated balance sheet. During the nine months ended September 30, 2018, $17 million of revenue was recognized that was included in the contract liability at the beginning of the period.
4
Comprised of deferred revenue recorded in Other long-term liabilities on the Condensed consolidated balance sheet.
Contract assets and long-term contract assets primarily relate to the Company’s right to revenues for services completed but not invoiced at the reporting date on long-term committed capacity natural gas pipelines contracts. The change in contract assets is primarily related to the transfer to Accounts receivable when these rights become unconditional and the customer is invoiced as well as the recognition of additional revenues that remains to be invoiced. Contract liabilities and long term contract liabilities primarily relate to force majeure fixed capacity payments received on long term capacity arrangements in Mexico.    

TRANSCANADA [70
THIRD QUARTER 2018                                        

FUTURE REVENUES FROM REMAINING PERFORMANCE OBLIGATIONS
As required by the new revenue recognition guidance, the following provides disclosure on future revenues allocated to remaining performance obligations representing contracted revenues that have not yet been recognized. Certain contracts that qualify for the use of one of the following practical expedients are excluded from the future revenues disclosures:
1)
The original expected duration of the contract is one year or less.
2)
The Company recognizes revenue from the contract that is equal to the amount invoiced, where the amount invoiced represents the value to the customer of the service performed to date. This is referred to as the "right to invoice" practical expedient.
3)
The variable revenue generated from the contract is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in a series. A single performance obligation in a series occurs when the promises under a contract are a series of distinct services that are substantially the same and have the same pattern of transfer to the customer over time.
The following provides a discussion of the transaction price allocated to future performance obligations as well as practical expedients used by the Company.
Capacity Arrangements and Transportation
As at September 30, 2018, future revenues from long-term capacity arrangements and transportation contracts extending through 2043 are approximately $28.0 billion, of which approximately $1.4 billion is expected to be recognized during the remainder of 2018.
Future revenues from long-term capacity arrangements and transportation contracts do not include constrained variable revenues or arrangements to which the right to invoice practical expedient has been applied. As a result, these amounts are not representative of potential total future revenues expected from these contracts.
Future revenues from the Company's Canadian natural gas pipelines' regulated firm capacity contracts include fixed revenues for the time periods that tolls under current rate settlements are in effect, which is approximately one to three years. Many of these contracts are long-term in nature and revenues from the remaining performance obligations that extend beyond the current rate settlement term are considered to be fully constrained since future tolls remain unknown. Revenues from these contracts will be recognized once the performance obligation to provide capacity has been satisfied and the regulator has approved the applicable tolls. In addition, the Company considers interruptible transportation service revenues to be variable revenues since volumes cannot be estimated. These variable revenues are recognized on a monthly basis when the Company satisfies the performance obligation and have been excluded from the future revenues disclosure as the Company applies the practical expedient related to variable revenues to these contracts. The future variable revenues earned under these contracts are allocated entirely to unsatisfied performance obligations at September 30, 2018.
The Company also applies the right to invoice practical expedient to all of its U.S. and certain of its Mexico regulated natural gas pipeline capacity arrangements and flow-through revenues. Revenues from regulated capacity arrangements are recognized based on current rates and flow-through revenues are earned from the recovery of operating expenses. These revenues are recognized on a monthly basis as the Company performs the services and are excluded from future revenues disclosures.
Revenues from liquids pipelines capacity arrangements have a variable component based on volumes transported. As a result, these variable revenues are excluded from the future revenues disclosures as the Company applies the practical expedient related to variable revenues to these contracts. The future variable revenues earned under these contracts is allocated entirely to unsatisfied performance obligations at September 30, 2018.

TRANSCANADA [71
THIRD QUARTER 2018                                        

Power Generation
The Company has long-term power generation contracts extending through 2032. Revenues from power generation have a variable component related to market prices that are subject to factors outside the Company’s influence. These revenues are considered to be fully constrained and are recognized on a monthly basis when the Company satisfies the performance obligation. The Company applies the practical expedient related to variable revenues to these contracts. As a result, future revenues from these contracts are excluded from the disclosures.
Natural Gas Storage and Other
As at September 30, 2018, future revenues from long-term natural gas storage and other contracts extending through 2033 are approximately $1.2 billion, of which approximately $127 million is expected to be recognized during the remainder of 2018. The Company applies the practical expedients related to contracts that are for a duration of one year or less and where it recognizes variable consideration, and therefore excludes the related revenues from the future revenues disclosure. As a result, this amount is lower than the potential total future revenues from these contracts.
5. Assets held for sale
Cartier Wind
On August 1, 2018, TransCanada entered into an agreement to sell its interests in the Cartier Wind power facilities in Québec to Innergex Renewable Energy Inc. At September 30, 2018, the related assets and liabilities were classified as held for sale in the Energy segment. Subsequently, on October 24, 2018, the Company closed the sale for gross proceeds of approximately $630 million before closing adjustments, resulting in an estimated gain of $170 million ($135 million after tax) to be recognized in fourth quarter 2018.
At September 30, 2018, the related assets and liabilities in the Energy segment were classified as held for sale as follows:
 
 
 
(unaudited - millions of Canadian $)
 
 
 
 
 
Assets held for sale
 
 
Plant, property and equipment
 
458

Total assets held for sale
 
458

Liabilities related to assets held for sale
 
 
Other long-term liabilities
 
14

Total liabilities related to assets held for sale1
 
14

1
Included in Accounts payable and other on the Condensed consolidated balance sheet.
6. Plant, Property and Equipment, Equity Investments and Goodwill
The Company reviews plant, property and equipment and equity investments for impairment whenever events or changes in circumstances indicate the carrying value of the asset may not be recoverable.
Goodwill is tested for impairment on an annual basis or more frequently if events or changes in circumstance indicate that it might be impaired. The Company can initially make this assessment based on qualitative factors. If the Company concludes that it is not more likely than not that the fair value of the reporting unit is less than its carrying value, then an impairment test is not performed.

TRANSCANADA [72
THIRD QUARTER 2018                                        

In March 2018, FERC proposed changes related to U.S. Tax Reform and income taxes for rate-making purposes in a master limited partnership (MLP) that may have an impact on the future earnings and cash flows of FERC-regulated pipelines. On July 18, 2018, FERC issued final rulings (Final Rule) with respect to these changes. The March and July 2018 FERC proposed changes and Final Rule are collectively referred to herein as the "2018 FERC Actions."
The Company continues to monitor developments following the Final Rule on the 2018 FERC Actions. TransCanada will incorporate results to date, future filings for individual pipelines, as well as FERC responses to others in the industry into its annual goodwill impairment tests as well as its normal review of plant, property and equipment and equity investments for recoverability.
As at September 30, 2018, the goodwill balances related to Great Lakes and Tuscarora are US$573 million and US$82 million (December 31, 2017 – US$573 million and US$82 million), respectively. At December 31, 2017, the estimated fair value of Great Lakes exceeded its carrying value by less than 10 per cent. There is a risk that the goodwill balances related to both of these assets could be negatively impacted by the FERC developments, once finalized, or by other changes in management's estimates of fair value resulting in a goodwill impairment charge.
7. Income taxes
U.S. Tax Reform
Pursuant to the enactment of U.S. Tax Reform, the Company recorded net regulatory liabilities and a corresponding reduction in net deferred income tax liabilities in the amount of $1,686 million at December 31, 2017 related to the Company's U.S. natural gas pipelines subject to RRA. Amounts recorded to adjust income taxes remain provisional as the Company's interpretation, assessment and presentation of the impact of U.S. Tax Reform may be further clarified with additional guidance from tax authorities. Should additional guidance be provided by tax authorities during the one-year measurement period permitted by the SEC, the Company will review the provisional amounts and adjust as appropriate.
Commencing January 1, 2018, the Company has amortized the net regulatory liabilities using the Reverse South Georgia methodology. Under this methodology, rate-regulated entities determine and immediately begin recording amortization based on their composite depreciation rates. Amortization of the net regulatory liabilities in the amount of $12 million and $36 million was recorded for the three and nine months ended September 30, 2018, respectively, and included in Revenues in the Condensed consolidated statement of income. Once the final impact of the 2018 FERC Actions is determined there may be prospective adjustments to the Company's net regulatory liabilities.
Effective Tax Rates
The effective income tax rates for the nine-month periods ended September 30, 2018 and 2017 were 12 per cent and 24 per cent, respectively. The lower effective tax rate in 2018 was primarily the result of the rate change resulting from U.S. Tax Reform and lower flow-through income taxes in Canadian rate-regulated pipelines.

TRANSCANADA [73
THIRD QUARTER 2018                                        

8. Long-term debt
LONG-TERM DEBT ISSUED
The Company issued long-term debt in the nine months ended September 30, 2018 as follows:
(unaudited - millions of Canadian $, unless noted otherwise)
 
 
 
 
 
 
 
 
 
Company
 
Issue date
 
Type
 
Maturity Date
 
Amount

 
Interest rate

 
 
 
 
 
 
 
 
 
 
 
TRANSCANADA PIPELINES LIMITED
 
 
 
 
 
 
 
 
 
 
July 2018
 
Medium Term Notes
 
July 2048
 
800

 
4.18
%
 
 
July 2018
 
Medium Term Notes
 
March 2028
 
200

 
3.39
%
 
 
May 2018
 
Senior Unsecured Notes
 
May 2028
 
US 1,000

 
4.25
%
 
 
May 2018
 
Senior Unsecured Notes
 
May 2038
 
US 500

 
4.75
%
 
 
May 2018
 
Senior Unsecured Notes
 
May 2048
 
US 1,000

 
4.875
%
LONG-TERM DEBT RETIRED
The Company retired long-term debt in the nine months ended September 30, 2018 as follows:
(unaudited - millions of Canadian $, unless noted otherwise)
 
 
 
 
 
 
 
 
Company
 
Retirement date
 
Type
 
Amount

 
Interest rate

 
 
 
 
 
 
 
 
 
COLUMBIA PIPELINE GROUP, INC.
 
 
 
 
 
 
 
 
June 2018
 
Senior Unsecured Notes
 
US 500

 
2.45
%
PORTLAND NATURAL GAS TRANSMISSION SYSTEM
 
 
 
 
 
 
 
 
May 2018
 
Senior Secured Notes
 
US 18

 
5.90
%
TRANSCANADA PIPELINES LIMITED
 
 
 
 
 
 
 
 
August 2018
 
Senior Unsecured Notes
 
US 850

 
6.50
%
 
 
March 2018
 
Debentures
 
150

 
9.45
%
 
 
January 2018
 
Senior Unsecured Notes
 
US 500

 
1.875
%
 
 
January 2018
 
Senior Unsecured Notes
 
US 250

 
Floating

GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP
 
 
 
 
 
 
March 2018
 
Senior Unsecured Notes
 
US 9

 
6.73
%
CAPITALIZED INTEREST
In the three and nine months ended September 30, 2018, TransCanada capitalized interest related to capital projects of $33 million and $89 million, respectively (2017 – $49 million and $150 million, respectively).
9. Common shares
TRANSCANADA CORPORATION ATM EQUITY PROGRAM
In the three months ended September 30, 2018, the Company issued 6.1 million common shares under the TransCanada ATM program at an average price of $57.75 per common share for proceeds of $351 million, net of related commissions and fees of approximately $3 million. In the nine months ended September 30, 2018, 20.0 million common shares have been issued at an average price of $56.13 per common share for proceeds of $1.1 billion, net of approximately $10 million of related commissions and fees.

TRANSCANADA [74
THIRD QUARTER 2018                                        

In June 2018, the Company replenished the capacity available under its existing Corporate ATM program. This allows for the issuance of additional common shares from treasury for an aggregate gross sales price of up to $1.0 billion, for a revised total of $2.0 billion or its U.S. dollar equivalent. The Corporate ATM program, as amended, is effective to July 23, 2019.
10. Other comprehensive (loss)/income and accumulated other comprehensive loss
Components of other comprehensive (loss)/income, including the portion attributable to non-controlling interests and related tax effects, are as follows: 
three months ended September 30, 2018
 
 
 
Income Tax

 
 
(unaudited - millions of Canadian $)
 
Before Tax Amount

 
Recovery/(Expense)

 
Net of Tax Amount

 
 
 
 
 
 
 
Foreign currency translation losses on net investment in foreign operations
 
(273
)
 
(9
)
 
(282
)
Change in fair value of net investment hedges
 
12

 
(3
)
 
9

Change in fair value of cash flow hedges
 
5

 
(1
)
 
4

Reclassification to net income of gains and losses on cash flow hedges
 
8

 
(2
)
 
6

Reclassification of actuarial gains and losses on pension and other post-retirement benefit plans
 
4

 
6

 
10

Other comprehensive income on equity investments
 
7

 
(1
)
 
6

Other comprehensive loss
 
(237
)
 
(10
)
 
(247
)
three months ended September 30, 2017
 
 
 
Income Tax

 
 
(unaudited - millions of Canadian $)
 
Before Tax Amount

 
Recovery/(Expense)

 
Net of Tax Amount

 
 
 
 
 
 
 
Foreign currency translation losses on net investment in foreign operations
 
(364
)
 
(6
)
 
(370
)
Change in fair value of net investment hedges
 
(1
)
 
—

 
(1
)
Change in fair value of cash flow hedges
 
1

 
—

 
1

Unrealized actuarial gains and losses on pension and other post-retirement benefit plans
 
5

 
(3
)
 
2

Reclassification of actuarial gains and losses on pension and other post-retirement benefit plans
 
6

 
(2
)
 
4

Other comprehensive income on equity investments
 
4

 
(1
)
 
3

Other comprehensive loss
 
(349
)
 
(12
)
 
(361
)
nine months ended September 30, 2018
 
 
 
Income Tax

 
 
(unaudited - millions of Canadian $)
 
Before Tax Amount

 
Recovery/(Expense)

 
Net of Tax Amount

 
 
 
 
 
 
 
Foreign currency translation gains on net investment in foreign operations
 
397

 
12

 
409

Change in fair value of net investment hedges
 
(8
)
 
2

 
(6
)
Change in fair value of cash flow hedges
 
8

 
1

 
9

Reclassification to net income of gains and losses on cash flow hedges
 
21

 
(5
)
 
16

Reclassification of actuarial gains and losses on pension and other post-retirement benefit plans
 
12

 
(2
)
 
10

Other comprehensive income on equity investments
 
20

 
(2
)
 
18

Other comprehensive income
 
450

 
6

 
456


TRANSCANADA [75
THIRD QUARTER 2018                                        

nine months ended September 30, 2017
 
 
 
Income Tax

 
 
(unaudited - millions of Canadian $)
 
Before Tax Amount

 
Recovery/(Expense)

 
Net of Tax Amount

 
 
 
 
 
 
 
Foreign currency translation losses on net investment in foreign operations
 
(717
)
 
(4
)
 
(721
)
Reclassification of foreign currency translation gains on net investment on disposal of foreign operations
 
(77
)
 
—

 
(77
)
Change in fair value of net investment hedges
 
(4
)
 
1

 
(3
)
Change in fair value of cash flow hedges
 
5

 
(1
)
 
4

Reclassification to net income of gains and losses on cash flow hedges
 
(2
)
 
1

 
(1
)
Unrealized actuarial gains and losses on pension and other post-retirement benefit plans
 
5

 
(3
)
 
2

Reclassification of actuarial gains and losses on pension and other post-retirement benefit plans
 
16

 
(5
)
 
11

Other comprehensive income on equity investments
 
8

 
(2
)
 
6

Other comprehensive loss
 
(766
)
 
(13
)
 
(779
)
The changes in AOCI by component are as follows:
three months ended September 30, 2018
 
Currency

 
 
 
Pension and

 
 
 
 
(unaudited - millions of Canadian $)
 
Translation Adjustments

 
Cash Flow Hedges

 
OPEB Plan Adjustments

 
Equity Investments

 
Total1

 
 
 
 
 
 
 
 
 
 
 
AOCI balance at July 1, 2018
 
(462
)
 
(26
)
 
(203
)
 
(443
)
 
(1,134
)
Other comprehensive (loss)/income before reclassifications2
 
(239
)
 
3

 
—

 
—

 
(236
)
Amounts reclassified from AOCI3
 
—

 
5

 
10

 
5

 
20

Net current period other comprehensive (loss)/income
 
(239
)
 
8

 
10

 
5

 
(216
)
AOCI balance at September 30, 2018
 
(701
)
 
(18
)
 
(193
)
 
(438
)
 
(1,350
)
1
All amounts are net of tax. Amounts in parentheses indicate losses recorded to OCI.
2
Other comprehensive (loss)/income before reclassifications on currency translation adjustments and cash flow hedges are net of non-controlling interest losses of $34 million and gains of $1 million, respectively.
3
Amounts reclassified from AOCI on cash flow hedges and equity investments are net of non-controlling interest gains of $1 million and $1 million, respectively.
nine months ended September 30, 2018
 
Currency

 
 
 
Pension and

 
 
 
 
(unaudited - millions of Canadian $)
 
Translation Adjustments

 
Cash Flow Hedges

 
OPEB Plan Adjustments

 
Equity Investments

 
Total1

 
 
 
 
 
 
 
 
 
 
 
AOCI balance at January 1, 2018
 
(1,043
)
 
(31
)
 
(203
)
 
(454
)
 
(1,731
)
Other comprehensive income before reclassifications2
 
342

 
1

 
—

 
—

 
343

Amounts reclassified from AOCI3,4
 
—

 
12

 
10

 
16

 
38

Net current period other comprehensive
income
 
342

 
13

 
10


16

 
381

AOCI balance at September 30, 2018
 
(701
)
 
(18
)
 
(193
)
 
(438
)
 
(1,350
)
1
All amounts are net of tax. Amounts in parentheses indicate losses recorded to OCI.
2
Other comprehensive income before reclassifications on currency translation adjustments and cash flow hedges are net of non-controlling interest gains of $61 million and $8 million, respectively.
3
Losses related to cash flow hedges reported in AOCI and expected to be reclassified to net income in the next 12 months are estimated to be $16 million ($11 million after tax) at September 30, 2018. These estimates assume constant commodity prices, interest rates and foreign exchange rates over time, however, the amounts reclassified will vary based on the actual value of these factors at the date of settlement.
4
Amounts reclassified from AOCI on cash flow hedges and equity investments are net of non-controlling interest gains of $4 million and $2 million, respectively.

TRANSCANADA [76
THIRD QUARTER 2018                                        

Details about reclassifications out of AOCI into the Condensed consolidated statement of income are as follows: 
 
 
Amounts Reclassified From
AOCI
 
Affected line item
in the Condensed
consolidated statement of income
 
 
three months ended
September 30
 
nine months ended
September 30
 
(unaudited - millions of Canadian $)
 
2018

 
2017

 
2018

2017

 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
 
 
 
Commodities
 
(3
)
 
4

 
(4
)
15

 
Revenues (Energy)
Interest
 
(4
)
 
(4
)
 
(13
)
(13
)
 
Interest expense
 
 
(7
)
 
—

 
(17
)
2

 
Total before tax
 
 
2

 
—

 
5

(1
)
 
Income tax expense
 
 
(5
)
 
—

 
(12
)
1

 
Net of tax1,3
Pension and other post-retirement benefit plan adjustments
 
 
 
 

 




 
 
Amortization of actuarial gains and losses
 
(4
)
 
(4
)
 
(12
)
(12
)
 
Plant operating costs and other2
Settlement charge
 
—

 
(2
)
 
—

(2
)
 
Plant operating costs and other2
 
 
(4
)
 
(6
)
 
(12
)
(14
)
 
Total before tax
 
 
(6
)
 
2

 
2

5

 
Income tax expense
 
 
(10
)
 
(4
)
 
(10
)
(9
)
 
Net of tax1
Equity investments
 
 
 
 
 
 
 
 
 
  Equity income
 
(6
)
 
(4
)
 
(19
)
(8
)
 
Income from equity investments
 
 
1

 
1

 
3

2

 
Income tax expense
 
 
(5
)
 
(3
)
 
(16
)
(6
)
 
Net of tax1,3
Currency translation adjustments
 
 
 
 
 
 
 
 
 
Realization of foreign currency translation gain on disposal of foreign operations
 
—

 
—

 
—

77

 
Gain on sales of assets
 
 
—

 
—

 
—

—

 
Income tax expense
 
 
—

 
—

 
—

77

 
Net of tax1
1
All amounts in parentheses indicate expenses to the Condensed consolidated statement of income.
2
These AOCI components are included in the computation of net benefit cost. Refer to Note 11, Employee post-retirement benefits, for further information.
3
Amounts reclassified from AOCI on cash flow hedges and equity investments are net of non-controlling interest gains of $1 million and $1 million, respectively, for the three months ended September 30, 2018 (2017 – nil and nil) and $4 million and $2 million, respectively, for the nine months ended September 30, 2018 (2017 – nil and nil).

TRANSCANADA [77
THIRD QUARTER 2018                                        

11. Employee post-retirement benefits
The net benefit cost recognized for the Company’s pension benefit plans and other post-retirement benefit plans is as follows:
 
 
three months ended September 30
 
nine months ended September 30
 
 
Pension benefit plans
 
Other post-retirement benefit plans
 
Pension benefit plans
 
Other post-retirement benefit plans
(unaudited - millions of Canadian $)
 
2018

 
2017

 
2018

 
2017

 
2018

 
2017

 
2018

 
2017

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost1
 
30

 
25

 
1

 
1

 
91

 
81

 
3

 
3

Other components of net benefit cost1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest cost
 
33

 
30

 
3

 
3

 
100

 
92

 
10

 
10

Expected return on plan assets
 
(55
)
 
(45
)
 
(4
)
 
(5
)
 
(165
)
 
(134
)
 
(12
)
 
(16
)
Amortization of actuarial loss
 
4

 
3

 
—

 
1

 
11

 
11

 
1

 
1

Amortization of regulatory asset
 
5

 
26

 
—

 
—

 
14

 
33

 
—

 
1

Settlement charge
 
—

 
2

 
—

 
—

 
—

 
2

 
—

 
—

 
 
(13
)
 
16

 
(1
)
 
(1
)
 
(40
)
 
4

 
(1
)
 
(4
)
Net Benefit Cost
 
17

 
41

 
—

 
—

 
51

 
85

 
2

 
(1
)
 
1
Service cost and other components of net benefit cost are included in Plant operating costs and other in the Condensed consolidated statement of income.
12. Risk management and financial instruments 
RISK MANAGEMENT OVERVIEW
TransCanada has exposure to market risk and counterparty credit risk, and has strategies, policies and limits in place to manage the impact of these risks on earnings and cash flow.
COUNTERPARTY CREDIT RISK
TransCanada’s maximum counterparty credit exposure with respect to financial instruments at September 30, 2018, without taking into account security held, consisted of cash and cash equivalents, accounts receivable, available-for-sale assets, derivative assets and loans receivable. The Company regularly reviews its accounts receivable and records an allowance for doubtful accounts as necessary using the specific identification method. At September 30, 2018, there were no significant amounts past due or impaired, no significant credit risk concentration and no significant credit losses during the period.
LOAN RECEIVABLE FROM AFFILIATE
Related party transactions are conducted in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
The Company holds a 60 per cent equity interest in a joint venture with IEnova to build, own and operate the Sur de Texas pipeline. The Company accounts for its interest in the joint venture as an equity investment. In 2017, the Company entered into a MXN$21.3 billion unsecured revolving credit facility with the joint venture, which bears interest at a floating rate and matures in March 2022. Draws on the credit facility result in a loan receivable from the joint venture representing the Company's proportionate share of the debt financing requirements advanced to the joint venture.

TRANSCANADA [78
THIRD QUARTER 2018                                        

At September 30, 2018, the balance of the Company's loan receivable from the joint venture totaled MXN$18.0 billion or $1.2 billion (December 31, 2017 – MXN$14.4 billion or $919 million) and Interest income and other included $32 million and $88 million of interest income on this loan receivable for the three and nine months ended September 30, 2018 (2017 – $11 million and $14 million). Amounts recognized in Interest income and other are offset by a corresponding proportionate share of interest expense recorded in Income from equity investments.
NET INVESTMENT IN FOREIGN OPERATIONS
The Company hedges its net investment in foreign operations (on an after-tax basis) with U.S. dollar-denominated debt, cross-currency interest rate swaps and foreign exchange forward contracts and options.
The fair values and notional amounts for the derivatives designated as a net investment hedge were as follows:
 
 
September 30, 2018
 
December 31, 2017
(unaudited - millions of Canadian $, unless noted otherwise)

Fair value1,2


Notional amount

Fair value1,2


Notional amount
 
 
 
 
 
 
 
 
 
U.S. dollar cross-currency interest rate swaps (maturing 2018 to 2019)3

(42
)
 
US 300
 
(199
)
 
US 1,200
U.S. dollar foreign exchange options (maturing 2018 to 2019)

(2
)
 
US 2,000
 
5

 
US 500
 

(44
)
 
US 2,300
 
(194
)
 
US 1,700
1
Fair value equals carrying value.
2
No amounts have been excluded from the assessment of hedge effectiveness.
3
In the three and nine months ended September 30, 2018, Net income includes net realized gains of nil and $1 million, respectively (2017 – $1 million and $3 million, respectively) related to the interest component of cross-currency swap settlements which are reported within Interest expense.
The notional amounts and fair value of U.S. dollar-denominated debt designated as a net investment hedge were as follows:
(unaudited - millions of Canadian $, unless noted otherwise)
 
September 30, 2018
 
December 31, 2017
 
 
 
 
 
Notional amount
 
28,300 (US 21,900)
 
25,400 (US 20,200)
Fair value
 
30,200 (US 23,300)
 
28,900 (US 23,100)
FINANCIAL INSTRUMENTS
Non-derivative financial instruments
Fair value of non-derivative financial instruments
Available-for-sale assets are recorded at fair value which is calculated using quoted market prices where available. Certain non-derivative financial instruments included in Cash and cash equivalents, Accounts receivable, Intangible and other assets, Notes payable, Accounts payable and other, Accrued interest and Other long-term liabilities have carrying amounts that approximate their fair value due to the nature of the item or the short time to maturity. Each of these instruments are classified in Level II of the fair value hierarchy.
Credit risk has been taken into consideration when calculating the fair value of non-derivative instruments.

TRANSCANADA [79
THIRD QUARTER 2018                                        

Balance sheet presentation of non-derivative financial instruments
The following table details the fair value of the Company's non-derivative financial instruments, excluding those where carrying amounts approximate fair value, which are classified in Level II of the fair value hierarchy: 
 
 
September 30, 2018
 
December 31, 2017
(unaudited - millions of Canadian $)
 
Carrying
amount

 
Fair
value

 
Carrying
amount

 
Fair
value

 
 
 
 
 
 
 
 
 
Long-term debt including current portion1,2
 
(36,700
)
 
(39,956
)
 
(34,741
)
 
(40,180
)
Junior subordinated notes
 
(7,186
)
 
(7,014
)
 
(7,007
)
 
(7,233
)
 
 
(43,886
)
 
(46,970
)
 
(41,748
)
 
(47,413
)
1
Long-term debt is recorded at amortized cost except for US$700 million (December 31, 2017 – US$1.1 billion) that is attributed to hedged risk and recorded at fair value.
2
Net income for the three and nine months ended September 30, 2018 includes unrealized losses of $1 million and unrealized gains of $3 million, respectively, (2017 – gains of $1 million and $2 million, respectively) for fair value adjustments attributable to the hedged interest rate risk associated with interest rate swap fair value hedging relationships on US$700 million of long-term debt at September 30, 2018 (December 31, 2017 – US$1.1 billion). There were no other unrealized gains or losses from fair value adjustments to the non-derivative financial instruments.
Available for sale assets summary
The following tables summarize additional information about the Company's restricted investments that are classified as available-for-sale assets:
 
September 30, 2018
 
December 31, 2017
(unaudited - millions of Canadian $)
LMCI restricted investments

 
Other restricted investments1

 
LMCI restricted investments

 
Other restricted investments1

 
 
 
 
 
 
 
 
Fair values of fixed income securities2
 
 
 
 
 
 
 
Maturing within 1 year
—

 
19

 
—

 
23

Maturing within 1-5 years
—

 
113

 
—

 
107

Maturing within 5-10 years
84

 
—

 
14

 
—

Maturing after 10 years
894

 
—

 
790

 
—

 
978

 
132

 
804

 
130

1
Other restricted investments have been set aside to fund insurance claim losses to be paid by the Company's wholly-owned captive insurance subsidiary.
2
Available-for-sale assets are recorded at fair value and included in Other current assets and Restricted investments on the Condensed consolidated balance sheet.
 
 
September 30, 2018
 
September 30, 2017
(unaudited - millions of Canadian $)
 
LMCI restricted investments1

 
Other restricted investments2

 
LMCI restricted investments1

 
Other restricted investments2

 
 
 
 
 
 
 
 
 
Net unrealized (losses)/gains in the period
 
 
 
 
 
 
 
 
 three months ended
 
(34
)
 
—

 
(38
)
 
—

 nine months ended
 
(29
)
 
1

 
(23
)
 
—

Net realized losses in the period
 
 

 
 

 
 
 
 
 three months ended
 
—

 
—

 
—

 
—

 nine months ended
 
(3
)
 
—

 
(1
)
 
—

1
Gains and losses arising from changes in the fair value of LMCI restricted investments impact the subsequent amounts to be collected through tolls to cover future pipeline abandonment costs. As a result, the Company records these gains and losses as regulatory assets or liabilities.
2
Gains and losses on other restricted investments are included in Interest income and other.

TRANSCANADA [80
THIRD QUARTER 2018                                        

Derivative instruments
Fair value of derivative instruments
The fair value of foreign exchange and interest rate derivatives has been calculated using the income approach which uses period-end market rates and applies a discounted cash flow valuation model. The fair value of commodity derivatives has been calculated using quoted market prices where available. In the absence of quoted market prices, third-party broker quotes or other valuation techniques have been used. The fair value of options has been calculated using the Black-Scholes pricing model. Credit risk has been taken into consideration when calculating the fair value of derivative instruments.
In some cases, even though the derivatives are considered to be effective economic hedges, they do not meet the specific criteria for hedge accounting treatment or are not designated as a hedge and are accounted for at fair value with changes in fair value recorded in net income in the period of change. This may expose the Company to increased variability in reported earnings because the fair value of the derivative instruments can fluctuate significantly from period to period.
Balance sheet presentation of derivative instruments
The balance sheet classification of the fair value of derivative instruments is as follows:
at September 30, 2018
Cash Flow Hedges

 
Fair Value Hedges

 
Net Investment Hedges

 
Held for Trading

 
Total Fair Value of Derivative Instruments1

(unaudited - millions of Canadian $)
 
 
 
 
 
 
 
 
 
 
Other current assets
 
 
 
 
 
 
 
 
 
Commodities2
1

 
—

 
—

 
332

 
333

Foreign exchange
—

 
—

 
13

 
20

 
33

Interest rate
6

 
—

 
—

 
—

 
6

 
7

 
—

 
13

 
352

 
372

Intangible and other assets
 
 
 
 
 
 
 
 
 
Commodities2
—

 
—

 
—

 
66

 
66

Foreign exchange
—

 
—

 
—

 
—

 
—

Interest rate
17

 
—

 
—

 
—

 
17

 
17

 
—

 
—

 
66

 
83

Total Derivative Assets
24

 
—

 
13

 
418

 
455

Accounts payable and other
 
 
 
 
 
 
 
 
 
Commodities2
(4
)
 
—

 
—

 
(313
)
 
(317
)
Foreign exchange
—

 
—

 
(57
)
 
(39
)
 
(96
)
Interest rate
—

 
(5
)
 
—

 
—

 
(5
)
 
(4
)
 
(5
)
 
(57
)
 
(352
)
 
(418
)
Other long-term liabilities
 
 
 
 
 
 
 
 
 
Commodities2
(1
)
 
—

 
—

 
(40
)
 
(41
)
Foreign exchange
—

 
—

 
—

 
—

 
—

Interest rate
—

 
(2
)
 
—

 
—

 
(2
)
 
(1
)
 
(2
)
 
—

 
(40
)
 
(43
)
Total Derivative Liabilities
(5
)
 
(7
)
 
(57
)
 
(392
)
 
(461
)
Total Derivatives
19

 
(7
)
 
(44
)
 
26

 
(6
)
1
Fair value equals carrying value.
2
Includes purchases and sales of power, natural gas and liquids.

TRANSCANADA [81
THIRD QUARTER 2018                                        

at December 31, 2017
Cash Flow Hedges

 
Fair Value Hedges

 
Net Investment Hedges

 
Held for Trading

 
Total Fair Value of Derivative Instruments1

(unaudited - millions of Canadian $)
 
 
 
 
 
 
 
 
 
 
Other current assets
 
 
 
 
 
 
 
 
 
Commodities2
1

 
—

 
—

 
249

 
250

Foreign exchange
—

 
—

 
8

 
70

 
78

Interest rate
3

 
—

 
—

 
1

 
4

 
4

 
—

 
8

 
320

 
332

Intangible and other assets
 
 
 
 
 
 
 
 
 
Commodities2
—

 
—

 
—

 
69

 
69

Interest rate
4

 
—

 
—

 
—

 
4

 
4

 
—

 
—

 
69

 
73

Total Derivative Assets
8

 
—

 
8

 
389

 
405

Accounts payable and other
 
 
 
 
 
 
 
 
 
Commodities2
(6
)
 
—

 
—

 
(208
)
 
(214
)
Foreign exchange
—

 
—

 
(159
)
 
(10
)
 
(169
)
Interest rate
—

 
(4
)
 
—

 
—

 
(4
)
 
(6
)
 
(4
)
 
(159
)
 
(218
)
 
(387
)
Other long-term liabilities
 
 
 
 
 
 
 
 
 
Commodities2
(2
)
 
—

 
—

 
(26
)
 
(28
)
Foreign exchange
—

 
—

 
(43
)
 
—

 
(43
)
Interest rate
—

 
(1
)
 
—

 
—

 
(1
)
 
(2
)
 
(1
)
 
(43
)
 
(26
)
 
(72
)
Total Derivative Liabilities
(8
)
 
(5
)
 
(202
)
 
(244
)
 
(459
)
Total Derivatives
—

 
(5
)
 
(194
)
 
145

 
(54
)
1
Fair value equals carrying value.
2
Includes purchases and sales of power, natural gas and liquids.
The majority of derivative instruments held for trading have been entered into for risk management purposes and all are subject to the Company's risk management strategies, policies and limits. These include derivatives that have not been designated as hedges or do not qualify for hedge accounting treatment but have been entered into as economic hedges to manage the Company's exposures to market risk.
Derivatives in fair value hedging relationships
The following table details amounts recorded on the Condensed consolidated balance sheet in relation to cumulative adjustments for fair value hedges included in the carrying amount of the hedged liabilities:
 
Carrying amount
 
Fair value hedging adjustments1
(unaudited - millions of Canadian $)
September 30, 2018

 
December 31, 2017

 
September 30, 2018

 
December 31, 2017

 
 
 
 
 
 
 
 
Current portion of long-term debt
(387
)
 
(688
)
 
1

 
1

Long-term debt
(511
)
 
(685
)
 
6

 
4

 
(898
)
 
(1,373
)
 
7

 
5

1
At September 30, 2018 and December 31, 2017, adjustments for discontinued hedging relationships included in these balances were nil.

TRANSCANADA [82
THIRD QUARTER 2018                                        

Notional and Maturity Summary
The maturity and notional principal or quantity outstanding related to the Company's derivative instruments excluding hedges of the net investment in foreign operations is as follows:
at September 30, 2018
Power

 
Natural Gas

 
Liquids

 
Foreign Exchange

 
Interest Rate

(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases1
30,533

 
61

 
55

 
—

 
—

Sales1
22,711

 
70

 
74

 
—

 
—

Millions of U.S. dollars
—

 
—

 
—

 
3,898

 
1,200

Maturity dates
2018-2022

 
2018-2021

 
2018-2019

 
2018-2019

 
2018-2028

1
Volumes for power, natural gas and liquids derivatives are in GWh, Bcf and MMBbls, respectively.
at December 31, 2017
Power

 
Natural
Gas

 
Liquids

 
Foreign Exchange

 
Interest Rate

(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchases1
66,132

 
133

 
6

 
—

 
—

Sales1
42,836

 
135

 
7

 
—

 
—

Millions of U.S. dollars
—

 
—

 
—

 
2,931

 
2,300

Millions of Mexican pesos
—

 
—

 
—

 
100

 
—

Maturity dates
2018-2022

 
2018-2021

 
2018

 
2018

 
2018-2022

1
Volumes for power, natural gas and liquids derivatives are in GWh, Bcf and MMBbls, respectively.
Unrealized and realized (losses)/gains on derivative instruments
The following summary does not include hedges of the net investment in foreign operations.
 
 
three months ended September 30
 
nine months ended September 30
(unaudited - millions of Canadian $)
 
2018

 
2017

 
2018

 
2017

 
 
 
 
 
 
 
 
 
Derivative Instruments Held for Trading1
 
 
 
 
 
 
 
 
Amount of unrealized (losses)/gains in the period
 
 
 
 
 
 
 
 
Commodities2
 
(31
)
 
45

 
(41
)
 
(102
)
Foreign exchange
 
60

 
33

 
(79
)
 
89

Interest rate
 
—


(1
)

—


(1
)
Amount of realized gains/(losses) in the period
 
 
 
 
 
 
 
 
Commodities
 
81

 
(82
)
 
210

 
(167
)
Foreign exchange
 
(5
)
 
19

 
14

 
10

Interest rate
 
—

 
1

 
—

 
1

Derivative Instruments in Hedging Relationships
 
 
 
 
 
 
 
 
Amount of realized gains/(losses) in the period
 
 
 
 
 
 
 
 
Commodities
 
1

 
4

 
—

 
17

Foreign exchange
 
—

 
—

 
—

 
5

Interest rate
 
(2
)
 
—

 
(1
)
 
1

1
Realized and unrealized gains and losses on held-for-trading derivative instruments used to purchase and sell commodities are included on a net basis in Revenues. Realized and unrealized gains and losses on interest rate and foreign exchange held-for-trading derivative instruments are included on a net basis in Interest expense and Interest income and other, respectively.
2
In the three and nine months ended September 30, 2018 and 2017, there were no gains or losses included in Net Income relating to discontinued cash flow hedges where it was probable that the anticipated transaction would not occur.

TRANSCANADA [83
THIRD QUARTER 2018                                        

Derivatives in cash flow hedging relationships
The components of OCI related to the change in fair value of derivatives in cash flow hedging relationships including the portion attributable to non-controlling interests are as follows: 
 
 
three months ended September 30
 
nine months ended September 30
(unaudited - millions of Canadian $)
 
2018

 
2017

 
2018

 
2017

 
 
 
 
 
 
 
 
 
Change in fair value of derivative instruments recognized in OCI (effective portion)1
 
 
 
 
 
 
 
 
Commodities
 
3

 
2

 
(3
)
 
5

Interest rate
 
2

 
(1
)
 
11

 
—

 
 
5

 
1

 
8

 
5

1
Amounts presented are pre-tax. No amounts have been excluded from the assessment of hedge effectiveness. Amounts in parentheses indicate losses recorded to OCI and AOCI.
Effect of fair value and cash flow hedging relationships
The following tables detail amounts presented on the Condensed consolidated statement of income in which the effects of fair value or cash flow hedging relationships are recorded.
 
 
three months ended September 30
 
 
Revenues (Energy)
 
Interest Expense
(unaudited - millions of Canadian $)
 
2018

 
2017

 
2018

 
2017

 
 
 
 
 
 
 
 
 
Total Amount Presented in the Condensed Consolidated Statement of Income
 
535

 
887

 
(577
)
 
(504
)
Fair Value Hedges
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
Hedged items
 
—

 
—

 
(17
)
 
(18
)
Derivatives designated as hedging instruments
 
—

 
—

 
(2
)
 
(1
)
Cash Flow Hedges
 


 


 


 


Reclassification of gains/(losses) on derivative instruments from AOCI to
net income
 
 
 
 
 
 
 
 
Interest rate contracts1
 
—

 
—

 
5

 
4

Commodity contracts2
 
3

 
(4
)
 
—

 
—

1
Refer to Note 10, Other comprehensive (loss)/income and accumulated other comprehensive loss, for the components of OCI related to derivatives in cash flow hedging relationships including the portion attributable to non-controlling interests.
2
There are no amounts recognized in earnings that were excluded from effectiveness testing.

TRANSCANADA [84
THIRD QUARTER 2018                                        

 
 
nine months ended September 30
 
 
Revenues (Energy)
 
Interest Expense
(unaudited - millions of Canadian $)
 
2018

 
2017

 
2018

 
2017

 
 
 
 
 
 
 
 
 
Total Amount Presented in the Condensed Consolidated Statement of Income
 
1,724

 
2,581

 
(1,662
)
 
(1,528
)
Fair Value Hedges
 
 
 
 
 
 
 
 
Interest rate contracts
 
 
 
 
 
 
 
 
Hedged items
 
—

 
—

 
(59
)
 
(56
)
Derivatives designated as hedging instruments
 
—

 
—

 
(4
)
 
1

Cash Flow Hedges
 
 
 
 
 
 
 
 
Reclassification of gains/(losses) on derivative instruments from AOCI to
net income
 
 
 
 
 
 
 
 
Interest rate contracts1
 
—

 
—

 
17

 
13

Commodity contracts2
 
4

 
(15
)
 
—

 
—

1
Refer to Note 10, Other comprehensive (loss)/income and accumulated other comprehensive loss, for the components of OCI related to derivatives in cash flow hedging relationships including the portion attributable to non-controlling interests.
2
There are no amounts recognized in earnings that were excluded from effectiveness testing.
Offsetting of derivative instruments
The Company enters into derivative contracts with the right to offset in the normal course of business as well as in the event of default. TransCanada has no master netting agreements, however, similar contracts are entered into containing rights to offset. The Company has elected to present the fair value of derivative instruments with the right to offset on a gross basis in the balance sheet. The following table shows the impact on the presentation of the fair value of derivative instrument assets and liabilities on the Condensed consolidated balance sheet had the Company elected to present these contracts on a net basis:
at September 30, 2018
 
Gross derivative instruments

 
Amounts available for offset1

 
Net amounts

(unaudited - millions of Canadian $)
 
 
 
 
 
 
 
 
 
 
Derivative instrument assets
 
 
 
 
 
 
Commodities
 
399

 
(309
)
 
90

Foreign exchange
 
33

 
(24
)
 
9

Interest rate
 
23

 
—

 
23

 
 
455

 
(333
)
 
122

Derivative instrument liabilities
 
 

 
 

 
 

Commodities
 
(358
)
 
309

 
(49
)
Foreign exchange
 
(96
)
 
24

 
(72
)
Interest rate
 
(7
)
 
—

 
(7
)
 
 
(461
)
 
333

 
(128
)
1
Amounts available for offset do not include cash collateral pledged or received.

TRANSCANADA [85
THIRD QUARTER 2018                                        

at December 31, 2017
 
Gross derivative instruments

 
Amounts available for offset1

 
Net amounts

(unaudited - millions of Canadian $)
 
 
 
 
 
 
 
 
 
 
Derivative instrument assets
 
 
 
 
 
 
Commodities
 
319

 
(198
)
 
121

Foreign exchange
 
78

 
(56
)
 
22

Interest rate
 
8

 
(1
)
 
7

 
 
405

 
(255
)
 
150

Derivative instrument liabilities
 
 

 
 

 
 

Commodities
 
(242
)
 
198

 
(44
)
Foreign exchange
 
(212
)
 
56

 
(156
)
Interest rate
 
(5
)
 
1

 
(4
)
 
 
(459
)
 
255

 
(204
)
1
Amounts available for offset do not include cash collateral pledged or received.
With respect to the derivative instruments presented above, the Company provided cash collateral of $87 million and letters of credit of $17 million as at September 30, 2018 (December 31, 2017 – $165 million and $30 million) to its counterparties. At September 30, 2018, the Company held nil in cash collateral and $1 million in letters of credit (December 31, 2017 – nil and $3 million) from counterparties on asset exposures.
Credit-risk-related contingent features of derivative instruments
Derivative contracts entered into to manage market risk often contain financial assurance provisions that allow parties to the contracts to manage credit risk. These provisions may require collateral to be provided if a credit-risk-related contingent event occurs, such as a downgrade in the Company’s credit rating to non-investment grade. The Company may also need to provide collateral if the fair value of its derivative financial instruments exceeds pre-defined exposure limits.
Based on contracts in place and market prices at September 30, 2018, the aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position was $2 million (December 31, 2017 – $2 million), for which the Company did not provide collateral in the normal course of business at September 30, 2018 or December 31, 2017. If the credit-risk-related contingent features in these agreements were triggered on September 30, 2018, the Company would have been required to provide collateral of $2 million (December 31, 2017 – $2 million) to its counterparties. Collateral may also need to be provided should the fair value of derivative instruments exceed pre-defined contractual exposure limit thresholds.
The Company has sufficient liquidity in the form of cash and undrawn committed revolving credit facilities to meet these contingent obligations should they arise.

TRANSCANADA [86
THIRD QUARTER 2018                                        

FAIR VALUE HIERARCHY
The Company’s financial assets and liabilities recorded at fair value have been categorized into three categories based on a fair value hierarchy.
Levels
How fair value has been determined
Level I
Quoted prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. An active market is a market in which frequency and volume of transactions provides pricing information on an ongoing basis.
Level II
Valuation based on the extrapolation of inputs, other than quoted prices included within Level I, for which all significant inputs are observable directly or indirectly. 
Inputs include published exchange rates, interest rates, interest rate swap curves, yield curves and broker quotes from external data service providers. 
This category includes interest rate and foreign exchange derivative assets and liabilities where fair value is determined using the income approach and commodity derivatives where fair value is determined using the market approach.
Transfers between Level I and Level II would occur when there is a change in market circumstances.
Level III
Valuation of assets and liabilities are measured using a market approach based on extrapolation of inputs that are unobservable or where observable data does not support a significant portion of the derivative's fair value. This category mainly includes long-dated commodity transactions in certain markets where liquidity is low and the Company uses the most observable inputs available or, if not available, long-term broker quotes to estimate the fair value for these transactions. Valuation of options is based on the Black-Scholes pricing model.  
Assets and liabilities measured at fair value can fluctuate between Level II and Level III depending on the proportion of the value of the contract that extends beyond the time frame for which significant inputs are considered to be observable. As contracts near maturity and observable market data become available, they are transferred out of Level III and into Level II.
The fair value of the Company’s derivative assets and liabilities measured on a recurring basis, including both current and non-current portions are categorized as follows:
at September 30, 2018
 
Quoted prices in active markets


Significant other observable inputs


Significant unobservable inputs




(unaudited - millions of Canadian $)
 
(Level I)1


(Level II)1


(Level III)1


Total

 
 
 
 
 
 
 
 
 
Derivative instrument assets
 
 
 
 
 
 
 
 
Commodities
 
217

 
145

 
37

 
399

Foreign exchange
 
—

 
33

 
—

 
33

Interest rate
 
—

 
23

 
—

 
23

Derivative instrument liabilities
 
 

 
 

 
 

 
 

Commodities
 
(220
)
 
(87
)
 
(51
)
 
(358
)
Foreign exchange
 
—

 
(96
)
 
—

 
(96
)
Interest rate
 
—

 
(7
)
 
—

 
(7
)
 
 
(3
)
 
11

 
(14
)
 
(6
)
1
There were no transfers from Level I to Level II or from Level II to Level III for the nine months ended September 30, 2018.

TRANSCANADA [87
THIRD QUARTER 2018                                        

at December 31, 2017
 
Quoted prices in active markets (Level I)1

 
Significant other observable inputs (Level II)1

 
Significant unobservable inputs
(Level III)1

 
 
(unaudited - millions of Canadian $)
 
 
 
 
Total

 
 
 
 
 
 
 
 
 
Derivative instrument assets
 
 
 
 
 
 
 
 
Commodities
 
21

 
283

 
15

 
319

Foreign exchange
 
—

 
78

 
—

 
78

Interest rate
 
—

 
8

 
—

 
8

Derivative instrument liabilities
 
 
 
 
 
 
 
 
Commodities
 
(27
)
 
(193
)
 
(22
)
 
(242
)
Foreign exchange
 
—

 
(212
)
 
—

 
(212
)
Interest rate
 
—

 
(5
)
 
—

 
(5
)
 
 
(6
)
 
(41
)
 
(7
)
 
(54
)
1
There were no transfers from Level I to Level II or from Level II to Level III for the year ended December 31, 2017.
The following table presents the net change in fair value of derivative assets and liabilities classified as Level III of the fair value hierarchy:
 
 
 
three months ended September 30
 
nine months ended September 30
(unaudited - millions of Canadian $)
 
 
2018

 
2017

 
2018

 
2017

 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
 
40

 
9

 
(7
)
 
16

Total losses included in Net income
 
 
(24
)
 
(10
)
 
(6
)
 
(12
)
Settlements
 
 
(14
)
 
(1
)
 
9

 
4

Sales
 
 
—

 
—

 
—

 
(5
)
Transfers out of Level III
 
 
(16
)
 
—

 
(10
)
 
(5
)
Balance at end of period1
 
 
(14
)
 
(2
)
 
(14
)
 
(2
)
1
For the three and nine months ended September 30, 2018, Revenues include unrealized losses of $16 million and $2 million, respectively, attributed to derivatives in the Level III category that were still held at September 30, 2018 (2017 – unrealized losses of $10 million and $14 million, respectively).
A 10 per cent increase or decrease in commodity prices, with all other variables held constant, would result in a $27 million decrease or increase, respectively, in the fair value of outstanding derivative instruments included in Level III as at September 30, 2018. 

TRANSCANADA [88
THIRD QUARTER 2018                                        

13. Contingencies and guarantees
CONTINGENCIES
TransCanada and its subsidiaries are subject to various legal proceedings, arbitrations and actions arising in the normal course of business. While the final outcome of such legal proceedings and actions cannot be predicted with certainty, it is the opinion of management that the resolution of such proceedings and actions will not have a material impact on the Company’s consolidated financial position or results of operations.
GUARANTEES
TransCanada and its joint venture partner on the Sur de Texas pipeline, IEnova, have jointly guaranteed the obligations for construction services during the construction of the pipeline.
TransCanada and its joint venture partner on Bruce Power, BPC Generation Infrastructure Trust, have each severally guaranteed certain contingent financial obligations of Bruce Power related to a lease agreement and contractor and supplier services.
The Company and its partners in certain other jointly owned entities have either (i) jointly and severally, (ii) jointly or (iii) severally guaranteed the financial performance of these entities. Such agreements include guarantees and letters of credit which are primarily related to delivery of natural gas, construction services and the payment of liabilities. For certain of these entities, any payments made by TransCanada under these guarantees in excess of its ownership interest are to be reimbursed by its partners.
The carrying value of these guarantees has been included in Other long-term liabilities on the Condensed consolidated balance sheet. Information regarding the Company’s guarantees is as follows:
 
 
 
 
at September 30, 2018
 
at December 31, 2017
(unaudited - millions of Canadian $)
 
 
Term
 
Potential
exposure1

 
Carrying
value

 
Potential
exposure1

 
Carrying
value

 
 
 
 
 
 
 
 
 
 
 
Sur de Texas
 
ranging to 2020 
 
187

 
1

 
315

 
2

Bruce Power
 
ranging to 2019
 
88

 
—

 
88

 
1

Other jointly-owned entities
 
ranging to 2059
 
104

 
11

 
104

 
13

 
 
 
 
379

 
12

 
507

 
16

1
TransCanada’s share of the potential estimated current or contingent exposure.
14. Variable interest entities
A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity.
In the normal course of business, the Company consolidates VIEs in which it has a variable interest and for which it is considered to be the primary beneficiary. VIEs in which the Company has a variable interest but is not the primary beneficiary are considered non-consolidated VIEs and are accounted for as equity investments.
Consolidated VIEs
The Company's consolidated VIEs consist of legal entities where the Company is the primary beneficiary. As the primary beneficiary, the Company has the power, through voting or similar rights, to direct the activities of the VIE that most significantly impact economic performance including purchasing or selling significant assets; maintenance and operations of assets; incurring additional indebtedness; or determining the strategic operating direction of the entity. In addition, the Company has the obligation to absorb losses or the right to receive benefits from the consolidated VIE that could potentially be significant to the VIE.

TRANSCANADA [89
THIRD QUARTER 2018                                        

A significant portion of the Company’s assets are held through VIEs in which the Company holds a 100 per cent voting interest, the VIE meets the definition of a business and the VIE’s assets can be used for general corporate purposes. The Consolidated VIEs whose assets cannot be used for purposes other than the settlement of the VIE’s obligations are as follows:
 
 
September 30,

 
December 31,

(unaudited - millions of Canadian $)
 
2018

 
2017

 
 
 
 
 
ASSETS
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
62

 
41

Accounts receivable
 
59

 
63

Inventories
 
22

 
23

Other
 
13

 
11

 
 
156

 
138

Plant, Property and Equipment
 
3,576

 
3,535

Equity Investments
 
925

 
917

Goodwill
 
505

 
490

Intangible and Other Assets
 
17

 
3

 
 
5,179

 
5,083

LIABILITIES
 
 
 
 
Current Liabilities
 
 
 
 
Accounts payable and other
 
79

 
137

Dividends payable
 
—

 
1

Accrued interest
 
30

 
23

Current portion of long-term debt
 
74

 
88

 
 
183

 
249

Regulatory Liabilities
 
39

 
34

Other Long-Term Liabilities
 
2

 
3

Deferred Income Tax Liabilities
 
13

 
13

Long-Term Debt
 
3,152

 
3,244

 
 
3,389

 
3,543

Non-Consolidated VIEs
The Company’s non-consolidated VIEs consist of legal entities where the Company does not have the power to direct the activities that most significantly impact the economic performance of these entities or where this power is shared with third parties. The Company contributes capital to these VIEs and receives ownership interests that provide it with residual claims on assets after liabilities are paid.

TRANSCANADA [90
THIRD QUARTER 2018                                        

The carrying value of these VIEs and the maximum exposure to loss as a result of the Company's involvement with these VIEs are as follows:
 
 
September 30,

 
December 31,

(unaudited - millions of Canadian $)
 
2018

 
2017

 
 
 
 
 
Balance sheet
 
 
 
 
Equity investments
 
4,430

 
4,372

Off-balance sheet
 
 
 
 
Potential exposure to guarantees
 
171

 
171

Maximum exposure to loss
 
4,601

 
4,543

15. Subsequent Events
Long-term debt issuance
On October 12, 2018, TCPL issued US$1.0 billion of Senior Unsecured Notes, due in March 2049, bearing interest at a fixed rate of 5.10 per cent and US$400 million of Senior Unsecured Notes, due in May 2028, bearing interest at a fixed rate of 4.25 per cent.
Reimbursement of Coastal GasLink pipeline pre-development costs
In accordance with provisions in the agreements with the LNG Canada joint venture participants, to date, four parties have elected to reimburse TransCanada for their share of pre-development costs on the Coastal GasLink (CGL) pipeline project, totalling $399 million of cost reimbursement, with payments due by November 30, 2018. At September 30, 2018, pre-development costs for the CGL pipeline were included in Intangible and other assets on the Company's Condensed consolidated balance sheet.