INVESTMENTS IN UNCONSOLIDATED AFFILIATES

12 Months Ended

Dec. 31, 2011

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

NOTE 3    INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Great Lakes, Northern Border, GTN and Bison are regulated by the FERC and are operated by TransCanada. We use the equity method of accounting for our interests in our equity investees.

		Equity Earnings from Unconsolidated Affiliates			Investment in Unconsolidated Affiliates
		Year Ended December 31			December 31
	Ownership Interest at December 31, 2011
(unaudited) (millions of dollars)		2011	2010	2009	2011	2010
Great Lakes	46.45%	59.5	58.7	59.1	685.5	690.0
Northern Border(a)	50%	75.5	67.3	40.3	536.1	504.8
GTN(b)	25%	11.5	–	–	225.1	–
Bison(b)	25%	7.0	–	–	162.8	–
		153.5	126.0	99.4	1,609.5	1,194.8

(a)

Equity income from Northern Border is net of the 12-year amortization of a $10 million transaction fee paid to the operator of Northern Border at the time of the Partnership's additional 20 percent acquisition in April 2006.

(b)

Represents equity earnings from May 3, 2011, date of acquisition, to December 31, 2011.

Great Lakes

The Partnership owns a 46.45 percent general partner interest in Great Lakes. TransCanada owns the other 53.55 percent partnership interest. TC GL Intermediate Limited Partnership, as one of the general partners, may be exposed to the commitments and contingencies of Great Lakes. The Partnership holds a 98.9899 percent limited partnership interest in TC GL Intermediate Limited Partnership.

Rates on the Great Lakes Pipeline are based on a July 2010 FERC approved settlement which became effective May 1, 2010 and applies to all current and future shippers on Great Lakes.

The Partnership recorded no undistributed earnings from Great Lakes for the years ended December 31, 2011, 2010, and 2009.

At December 31, 2011 the partnership had a $458.4 million (2010 – $458.4 million) difference between the carrying value of Great Lakes and the underlying equity in the net assets primarily resulting from the recognition and inclusion of goodwill in the Partnership's investment in Great Lakes relating to the Partnership's February 2007 acquisition of a 46.45 percent general partner interest in Great Lakes.

The Partnership made equity contributions to Great Lakes of $4.2 million and $4.6 million in the first quarter and fourth quarter of 2011, respectively. These amounts represent the Partnership's 46.45 percent share of a $9.0 million and $10.0 million cash call from Great Lakes to make scheduled debt repayments.

The summarized financial information for Great Lakes is as follows:

December 31 (millions of dollars)	2011	2010
Assets
Current assets	65.3	83.7
Plant, property and equipment, net	826.2	846.9
Other assets	0.6	0.6
	892.1	931.2
Liabilities and Partners' Equity
Current liabilities	30.0	34.9
Deferred credits	0.4	5.6
Long-term debt, including current maturities	373.0	392.0
Partners' capital	488.7	498.7
	892.1	931.2

Year ended December 31 (millions of dollars)	2011		2010		2009
Transmission revenues	250.0		262.4		289.7
Operating expenses	(61.8	)	(59.2	)	(66.5	)
Depreciation	(32.2	)	(40.5	)	(58.5	)
Financial charges and other	(29.9	)	(30.9	)	(31.9	)
Michigan business tax	1.9		(5.3	)	(5.4	)
Net income	128.0		126.5		127.4

Northern Border

The Partnership owns a 50 percent general partner interest in Northern Border. The other 50 percent partnership interest in Northern Border is held by ONEOK Partners, L.P., a publicly traded limited partnership.

TC PipeLines Intermediate Limited Partnership, as one of the general partners, may be exposed to the commitments and contingencies of Northern Border. The Partnership holds a 98.9899 percent limited partnership interest in TC PipeLines Intermediate Limited Partnership.

The Partnership recorded no undistributed earnings from Northern Border for the years ended December 31, 2011, 2010 and 2009.

At December 31, 2011, the Partnership had a $119.9 million (2010 – $120.8 million) difference between the carrying value of Northern Border and the underlying equity in the net assets primarily resulting from the recognition and inclusion of goodwill in the Partnership's investment in Northern Border relating to the Partnership's April 2006 acquisition of an additional 20 percent general partnership interest in Northern Border.

Northern Border's distribution policy adopted in 2006 defines minimum equity to total capitalization to be used by its Management Committee to establish the timing and amount of required equity contributions. In accordance with this policy, the Partnership made the required equity contributions of $49.8 million in the third quarter of 2011 and $5 million in the fourth quarter of 2011 to meet minimum equity to total capitalization requirements and to fund capital expenditures related to the Princeton Lateral Project respectively.

The summarized financial information for Northern Border is as follows:

December 31 (millions of dollars)		2011		2010
Assets
Cash and cash equivalents		32.8		10.2
Other current assets		35.6		37.1
Plant, property and equipment, net		1,266.6		1,294.8
Other assets		31.4		22.9
		1,366.4		1,365.0
Liabilities and Partners' Equity
Current liabilities		48.6		46.7
Deferred credits and other		12.8		9.7
Long-term debt, including current maturities		472.6		540.6
Partners' equity
	Partners' capital	835.1		770.9
	Accumulated other comprehensive loss	(2.7	)	(2.9	)
		1,366.4		1,365.0

Year ended December 31 (millions of dollars)	2011		2010		2009
Transmission revenues	310.1		295.1		249.2
Operating expenses	(73.2	)	(74.0	)	(70.8	)
Depreciation	(61.6	)	(61.5	)	(61.9	)
Financial charges and other	(22.6	)	(23.4	)	(34.4	)
Net income	152.7		136.2		82.1

GTN

On May 3, 2011, the Partnership acquired a 25 percent membership interest in GTN from a subsidiary of TransCanada. The acquisition was accounted for as a transaction between entities under common control, whereby the equity investment in GTN was recorded at TransCanada's carrying value. See Note 5 for additional disclosure regarding the Acquisitions.

TC PipeLines Intermediate Limited Partnership, as one of the general partners, may be exposed to the commitments and contingencies of GTN. The Partnership holds a 98.9899 percent limited partnership interest in TC PipeLines Intermediate Limited Partnership.

On August 12, 2011, GTN filed a petition with the FERC requesting approval of a Stipulation and Agreement of Settlement (GTN Settlement) with shippers and regulators regarding GTN's rates and terms and conditions of service. In November 2011, the FERC approved the GTN Settlement without modification, effective January 1, 2012. The GTN Settlement includes a moratorium on the filing of future rate proceedings until December 31, 2015. Following the expiration of the moratorium, GTN must file a rate case such that the new rates will be effective January 1, 2016. GTN's new rates were determined in a settlement reflecting GTN's rate base, revenue requirement and contract levels.

The Partnership recorded no undistributed earnings from GTN for the year ended December 31, 2011.

The summarized financial information for GTN from May 3, 2011, date of acquisition, to December 31, 2011 is as follows:

December 31 (millions of dollars)	2011
Assets
Current assets	54.6
Plant, property and equipment, net	1,207.2
Other assets	1.1
	1,262.9
Liabilities and Members' Equity
Current liabilities	17.7
Deferred credits and other	19.7
Long-term debt, including current maturities	325.0
Members' capital	900.5
	1,262.9

For the period May 3 to December 31, 2011 (millions of dollars)
Transmission revenues	133.2
Operating expenses	(36.7	)
Depreciation	(36.2	)
Financial charges and other	(15.0	)
Net income	45.3

Bison

On May 3, 2011, the Partnership acquired a 25 percent membership interest in Bison from a subsidiary of TransCanada. The acquisition was accounted for as a transaction between entities under common control, whereby the equity investment in Bison was recorded at TransCanada's carrying value. See Note 5 for additional disclosure regarding the Acquisitions.

TC PipeLines Intermediate Limited Partnership, as one of the general partners, may be exposed to the commitments and contingencies of Bison. The Partnership holds a 98.9899 percent limited partnership interest in TC PipeLines Intermediate Limited Partnership.

The Partnership recorded undistributed earnings from Bison of $1.5 million, from May 3, 2011, date of acquisition, to December 31, 2011.

The summarized financial information for Bison from May 3, 2011, date of acquisition, to December 31, 2011, is as follows:

December 31 (millions of dollars)	2011
Assets
Current assets	9.9
Plant, property and equipment, net	657.9
Other assets	–
	667.8
Liabilities and Members' Equity
Current liabilities	16.8
Members' capital	651.0
	667.8

For the period May 3 to December 31, 2011 (millions of dollars)
Transmission revenues	51.8
Operating expenses	(11.3	)
Depreciation	(12.4	)
Net income	28.1