NOTE 8 NET INCOME PER COMMON UNIT

Net income per common unit is computed by dividing net income attributable to controlling interests, after deduction of net income attributable to PNGTS’ former parent, 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 2017 equals 30 percent of GTN’s distributable cash flow during the year ended December 31, 2017 less $20 million (December 31, 2016 —$20 million).

Net income per common unit was determined as follows:

	Three months ended September 30,						Nine months ended September 30,
(unaudited)
(millions of dollars, except per common unit amounts)	2017			2016 (a)			2017			2016 (a)

Net income attributable to controlling interests (a)	54			58			186			188
Net income attributable to PNGTS’ former parent (a) (b)	—			—			(2		)	(3		)

Net income attributable to General and Limited Partners	54			58			184			185
Incentive distributions allocated to the General Partner (c)	(3		)	(2		)	(9		)	(5		)
Net income attributable to the Class B units (d)	(8		)	(11		)	(8		)	(12		)

Net income attributable to the General Partner and common units	43			45			167			168
Net income attributable to General Partner’s effective two percent interest	(1		)	(2		)	(3		)	(4		)

Net income attributable to common units	42			43			164			164
Weighted average common units outstanding (millions) — basic and diluted	69.4			66.1		(e)	68.9			65.3		(e)
Net income per common unit — basic and diluted	$	0.61		$	0.65	(f)	$	2.38		$	2.51	(f)

(a)

Recast to consolidate PNGTS for all periods presented (Refer to Notes 2 and 6).

(b)

Net income allocable to General and Limited Partners excludes net income attributed to PNGTS’ former parent as it was allocated to TransCanada and was not allocable to either the general partner, common units or Class B units.

(c)

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.

(d)

During the three and nine months ended September 30, 2017, 30 percent of GTN’s total distributable cash flow was $28 million. As a result of exceeding the $20 million threshold, $8 million of net income attributable to controlling interests was allocated to the Class B units during the three and nine months ended September 30, 2017. During the six months ended June 30, 2016, the threshold was exceeded and during the nine months ended September 30, 2016, 30 percent of GTN’s total distributable cash flow was $32 million. As a result, $12 million of net income attributable to controlling interests was allocated to the Class B units at September 30, 2016, of which $1 million and $11 million were allocated during the three months ended June 30, 2016 and September 30, 2016, respectively (Refer to Note 7).

(e)

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

(f)

Net income per common unit prior to recast (Refer to Note 2).