NET INCOME PER COMMON UNIT

6 Months Ended

Jun. 30, 2016

NET INCOME PER COMMON UNIT

NET INCOME PER COMMON UNIT

NOTE 8NET INCOME PER COMMON UNIT

Net income per common unit is computed by dividing net income attributable to controlling interests, after deduction of amounts attributable to the General Partner and Class B units, by the weighted average number of common units outstanding.

The amounts allocable to the General Partner equals an amount based upon the General Partner’s effective two percent general partner interest, plus an amount equal to incentive distributions. Incentive distributions are paid to the General Partner if quarterly cash distributions on the common units exceed levels specified in the Partnership Agreement.

The amount allocable to the Class B units in 2016 will equal an amount based upon 30 percent of GTN’s distributable cash flow during the year ending December 31, 2016 less $20 million (2015 – less $15 million).

Net income per common unit was determined as follows:

	Three months ended						Six months ended
(unaudited)	June 30,						June 30,
(millions of dollars, except per common unit amounts)	2016			2015			2016			2015
Net income attributable to controlling interests	54			44			127			101
Net income attributable to the General Partner	(1		)	(1		)	(2		)	(2		)
Incentive distributions allocated to the General Partner (a)	(2		)	(1		)	(3		)	(1		)
Net income attributable to the Class B units (b)	(1		)	—			(1		)	—
Net income allocated to common units	50			42			121			98
Weighted average common units outstanding (millions) — basic and diluted	65.5		(c)	63.8			64.9		(c)	63.7
Net income per common unit — basic and diluted	$	0.76		$	0.66		$	1.86		$	1.53

(a) Under the terms of the Partnership Agreement, for any quarterly period, the participation of the incentive distribution rights (IDRs) is limited to the available cash distributions declared. Accordingly, incentive distributions allocated to the General Partner are based on the Partnership’s available cash during the current reporting period, but declared and paid in the subsequent reporting period.

(b) As discussed in Note 7, the Class B units entitle TransCanada to a distribution which is an amount based on 30 percent of GTN’s distributions after achieving certain annual thresholds. The distribution will be payable in the first quarter with respect to the prior year’s distributions. Consistent with the application of Accounting Standards Codification (ASC) Topic 260 — “Earnings per share”, the Partnership allocated a portion of net income attributable to controlling interest to the Class B units upon 30 percent of GTN’s total distributable cash flows exceeding $20 million for the year ending December 31, 2016.  During the six months ended June 30, 2016, 30 percent of GTN’s total distributable cash flow was $21 million.  As a result of exceeding the $20 million threshold, $1 million of net income attributable to controlling interests was allocated to the Class B units (Refer to Note 7). During the same period in 2015, no allocation was made to the Class B units as the threshold level of $15 million for the nine month period ending December 31, 2015 had not been exceeded.

(c) Includes the common units subject to rescission. These units are treated as outstanding for financial reporting purposes (Refer to Note 7).