INVESTMENTS IN UNCONSOLIDATED AFFILIATES

12 Months Ended

Dec. 31, 2013

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

NOTE 4    INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Great Lakes and Northern Border 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, 2013
(millions of dollars)		2013	2012	2011	2013	2012
Northern Border(a)	50%	64	72	75	523	512
Great Lakes	46.45%	3	27	60	672	677
		67	99	135	1,195	1,189

(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.

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 has a FERC-approved settlement agreement which established maximum long-term transportation rates and charges on the Northern Border system effective January 1, 2013. The Northern Border Settlement also includes a three-year moratorium on filing rate cases and requires Northern Border to file for new rates no later than January 1, 2018. 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, 2013, 2012 and 2011.

At December 31, 2013, the Partnership had a $118 million (2012 – $119 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 Partnership made an equity contribution to Northern Border of $31 million in the fourth quarter of 2013. This amount represents the Partnership's 50 percent share of a $62 million cash call from Northern Border to fund repayment of the Northern Border Credit Facility.

The summarized financial information for Northern Border is as follows:

December 31 (millions of dollars)		2013		2012
Assets
Cash and cash equivalents		27		28
Other current assets		34		35
Plant, property and equipment, net		1,197		1,234
Other assets		33		31
		1,291		1,328
Liabilities and Partners' Equity
Current liabilities		51		53
Deferred credits and other		19		16
Long-term debt, including current maturities		411		473
Partners' equity
	Partners' capital	812		789
	Accumulated other comprehensive loss	(2	)	(3	)
		1,291		1,328

Year ended December 31 (millions of dollars)	2013		2012		2011
Transmission revenues	286		311		310
Operating expenses	(75	)	(79	)	(73	)
Depreciation	(58	)	(63	)	(62	)
Financial charges and other	(23	)	(24	)	(22	)
Net income	130		145		153

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.

On November 14, 2013, FERC approved a settlement between Great Lakes and its customers to modify its transportation rates effective November 1, 2013. The settlement increases maximum recourse transportation rates by approximately 21 percent. The settlement includes a moratorium on filing rate cases or challenging the settlement rates until March 31, 2015 and requires that Great Lakes file to have new rates in effect no later than January 1, 2018.

The Partnership recorded no undistributed earnings from Great Lakes for the years ended December 31, 2013, 2012, and 2011.

At December 31, 2013, the Partnership had a $458 million (2012 – $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 and fourth quarter of 2013, 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)	2013	2012
Assets
Current assets	52	56
Plant, property and equipment, net	771	799
	823	855
Liabilities and Partners' Equity
Current liabilities	28	30
Long-term debt, including current maturities	335	354
Partners' equity	460	471
	823	855

Year ended December 31 (millions of dollars)	2013		2012		2011
Transmission revenues	124		182		250
Operating expenses	(60	)	(66	)	(62	)
Depreciation	(31	)	(31	)	(32	)
Financial charges and other	(27	)	(28	)	(30	)
Michigan business tax	–		–		2
Net income	6		57		128