INVESTMENTS IN UNCONSOLIDATED AFFILIATES

9 Months Ended

Sep. 30, 2013

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

NOTE 3 INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Great Lakes and Northern Border are regulated by FERC and are operated by TransCanada. The Partnership uses the equity method of accounting for its interests in its equity investees.

	Ownership	Equity Earnings/(Losses) fromUnconsolidated Affiliates				Investments inUnconsolidated Affiliates
	Interest at	Three months		Nine months
(unaudited)	September 30,	ended September 30,		ended September 30,		September 30,	December 31,
(millions of dollars)	2013	2013	2012	2013	2012	2013	2012
Great Lakes	46.45%	(2)	6	-	23	666	677
Northern Border (a)	50%	17	18	48	54	495	512
		15	24	48	77	1,161	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 interest acquisition in April 2006.

Great Lakes

On September 27, 2013, Great Lakes filed with FERC a settlement with its customers to modify its transportation rates beginning on November 1, 2013. The settlement establishes maximum recourse transportation rates on the Great Lakes system. Commencing November 2013, rates will increase, compared to current rates, by approximately 21 percent. The settlement includes a moratorium on filing rate cases or challenging the settlement rates between November 1, 2013 and March 31, 2015 and requires that Great Lakes file to have new rates in effect no later than January 1, 2018.

The Partnership made an equity contribution to Great Lakes of $4 million in the first quarter of 2013. This amount represents the Partnership’s 46.45 percent share of a $9 million cash call from Great Lakes to make a scheduled debt repayment.

The Partnership recorded no undistributed earnings from Great Lakes for the nine months ended September 30, 2013 and 2012.

The summarized financial information for Great Lakes is as follows:

(unaudited)
(millions of dollars)	September 30, 2013	December 31, 2012
ASSETS
Current assets	37	56
Plant, property and equipment, net	777	799
	814	855
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities	21	30
Long-term debt, including current maturities	345	354
Partners’ equity	448	471
	814	855

	Three months ended		Nine months ended
(unaudited)	September 30,		September 30,
(millions of dollars)	2013	2012	2013	2012
Transmission revenues	26	46	90	143
Operating expenses	(15)	(17)	(45)	(48)
Depreciation	(8)	(8)	(24)	(24)
Financial charges and other	(6)	(7)	(20)	(21)
Net income/(loss)	(3)	14	1	50

Northern Border

In January 2013, FERC gave final approval for the Northern Border Settlement which establishes maximum long-term transportation rates and charges on the Northern Border system effective January 1, 2013. Northern Border’s previous reservation rates were reduced by approximately 11 percent as a result of this settlement.

The Partnership recorded no undistributed earnings from Northern Border for the nine months ended September 30, 2013 and 2012.

The summarized financial information for Northern Border is as follows:

(unaudited)
(millions of dollars)	September 30, 2013	December 31, 2012
ASSETS
Cash and cash equivalents	29	28
Other current assets	33	35
Plant, property and equipment, net	1,205	1,234
Other assets	31	31
	1,298	1,328
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities	54	53
Deferred credits and other	19	16
Long-term debt, including current maturities	473	473
Partners’ equity
Partners’ capital	754	789
Accumulated other comprehensive loss	(2)	(3)
	1,298	1,328

	Three months ended		Nine months ended
(unaudited)	September 30,		September 30,
(millions of dollars)	2013	2012	2013	2012
Transmission revenues	72	78	213	232
Operating expenses	(18)	(21)	(56)	(57)
Depreciation	(15)	(16)	(44)	(48)
Financial charges and other	(6)	(5)	(17)	(18)
Net income	33	36	96	109