INVESTMENTS IN UNCONSOLIDATED AFFILIATES

12 Months Ended

Dec. 31, 2012

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

NOTE 4    INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Great Lakes, Northern Border, GTN and Bison are regulated by 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, 2012
(unaudited) (millions of dollars)		2012	2011	2010	2012	2011
Great Lakes	46.45%	27	60	59	677	686
Northern Border(a)	50%	72	75	67	512	536
GTN(b)	25%	19	12	–	216	225
Bison(b)	25%	11	7	–	158	163
		129	154	126	1,563	1,610

(a)

Equity earnings 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)

25 percent interests in each of GTN and Bison were acquired in May 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.

The Partnership recorded no undistributed earnings from Great Lakes for the years ended December 31, 2012, 2011, and 2010.

At December 31, 2012 the partnership had a $458 million (2011 – $458 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 million and $5 million in the first quarter and fourth quarter of 2012, respectively. These amounts represent the Partnership's 46.45 percent share of a $9 million and $10 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)	2012	2011
Assets
Current assets	56	65
Plant, property and equipment, net	799	826
Other assets	–	1
	855	892
Liabilities and Partners' Equity
Current liabilities	30	30
Long-term debt, including current maturities	354	373
Partners' equity	471	489
	855	892

Year ended December 31 (millions of dollars)	2012	2011		2010
Transmission revenues	182	250		262
Operating expenses	(66)	(62	)	(59)
Depreciation	(31)	(32	)	(40)
Financial charges and other	(28)	(30	)	(31)
Michigan business tax	–	2		(5)
Net income	57	128		127

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.

Northern Border – On September 27, 2012, Northern Border filed a petition with FERC requesting approval of the Northern Border Settlement with its customers to modify its transportation rates. In January 2013, FERC gave final approval for the settlement which establishes maximum long-term transportation rates and charges on the Northern Border system effective January 1, 2013. Northern Border's reservations rates were reduced by approximately 11 percent.

The Partnership recorded no undistributed earnings from Northern Border for the years ended December 31, 2012, 2011 and 2010.

At December 31, 2012, the Partnership had a $119 million (2011 – $120 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.

The summarized financial information for Northern Border is as follows:

December 31 (millions of dollars)		2012	2011
Assets
Cash and cash equivalents		28	33
Other current assets		35	35
Plant, property and equipment, net		1,234	1,267
Other assets		31	31
		1,328	1,366
Liabilities and Partners' Equity
Current liabilities		53	48
Deferred credits and other		16	13
Long-term debt, including current maturities		473	473
Partners' equity
	Partners' capital	789	835
	Accumulated other comprehensive loss	(3)	(3)
		1,328	1,366

Year ended December 31 (millions of dollars)	2012	2011		2010
Transmission revenues	311	310		295
Operating expenses	(79)	(73	)	(74)
Depreciation	(63)	(62	)	(62)
Financial charges and other	(24)	(22	)	(23)
Net income	145	153		136

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 6 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.

In November 2011, FERC approved a Stipulation and Agreement of Settlement with shippers and regulators regarding GTN's rates and terms and conditions of service (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.

The Partnership recorded no undistributed earnings from GTN for the year ended December 31, 2012 and 2011.

The summarized financial information for GTN is as follows:

December 31 (millions of dollars)	2012	2011
Assets
Current assets	50	55
Plant, property and equipment, net	1,174	1,207
Other assets	1	1
	1,225	1,263
Liabilities and Members' Equity
Current liabilities	16	18
Deferred credits and other	20	20
Long-term debt, including current maturities	325	325
Members' capital	864	900
	1,225	1,263

Year ended December 31 (millions of dollars)	2012	2011(a)
Transmission revenues	198	133
Operating expenses	(48)	(37)
Depreciation	(54)	(36)
Financial charges and other	(18)	(15)
Net income	78	45

^(a)

25 percent interest in GTN was acquired in May 2011.

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 6 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 no undistributed earnings from Bison for the year ended December 31, 2012 (2011 – $1 million).

The summarized financial information for Bison is as follows:

December 31 (millions of dollars)	2012	2011
Assets
Current assets	7	10
Plant, property and equipment, net	649	658
	656	668
Liabilities and Members' Equity
Current liabilities	25	17
Members' capital	631	651
	656	668

Year ended December 31 (millions of dollars)	2012	2011(a)
Transmission revenues	80	52
Operating expenses	(16)	(11)
Depreciation	(19)	(13)
Net income	45	28

^(a)

25 percent interest in Bison was acquired in May 2011.