NOTE 4 ACQUISITION

On July 1, 2013, the Partnership acquired additional 45 percent membership interests in each of GTN and Bison from subsidiaries of TransCanada. GTN and Bison are both regulated by FERC and operated by TransCanada. The total purchase price of the 2013 Acquisition, subject to certain post-closing adjustments, was $1,050 million plus closing adjustments for working capital of $17 million. The purchase price consisted of (i) $750 million for the GTN membership interest (less $146 million, which reflected 45 percent of GTN’s outstanding debt at the time of the 2013 Acquisition), (ii) $300 million for the membership interest in Bison and (iii) closing working capital adjustments.

The resulting $921 million (after closing adjustments) paid by the Partnership was financed through a combination of (i) a public offering of 8,855,000 common units at $43.85 per common unit resulting in net proceeds of $373 million (refer to note 7), (ii) borrowing of $500 million in term loans (refer to note 5), (iii) a capital contribution from the General Partner of $8 million which was required to maintain the General Partner’s effective two percent general partner interest in the Partnership (refer to note 7), and (iv) a draw on the Partnership’s existing $500 million Senior Credit Facility and cash on hand.

If Portland General Electric Company executes a firm transportation service agreement by December 31, 2014 containing agreed terms and relating to transportation on GTN’s proposed Carty Lateral, the Partnership will pay an additional $25 million.

The 2013 Acquisition was accounted for as a transaction between entities under common control, similar to a pooling of interests, whereby the assets and liabilities of GTN and Bison were recorded at TransCanada’s carrying value and the Partnership’s historical financial information was recast to consolidate GTN and Bison for all periods presented. The purchase price was recorded as follows:

(unaudited)
(millions of dollars)

Current assets		67
Property, plant and equipment, net		1,792
Other assets		1
Current liabilities		(20)
Other liabilities		(21)
Long-term debt		(325)
		1,494
Non-controlling interest		(448)
Carrying value of pre-existing 25% interest in each of GTN and Bison		(374)
Carrying value of acquired 45% interest in each of GTN and Bison		672
Excess purchase price over net assets acquired		249
Cash consideration		921

As the fair market value paid for the additional 45 percent interests in each of GTN and Bison was greater than the acquired net assets of GTN and Bison by $237 million and $12 million, respectively, the total excess purchase price paid of $249 million was recorded in Partners’ Equity. The retrospective consolidation of GTN and Bison increased net income attributable to common units by $26 million for the nine months ended September 30, 2013 and by $13 million and $41 million for the three and nine months ended September 30, 2012, these amounts are however, excluded from equity attributable to controlling interests.