NOTE 5 EQUITY INVESTMENTS

The Partnership has equity interests in Northern Border, Great Lakes and Iroquois. The pipeline systems owned by these entities are regulated by FERC. The pipeline systems of Northern Border and Great Lakes are operated by subsidiaries of TransCanada. The Iroquois pipeline system is operated by Iroquois Pipeline Operating Company, a wholly owned subsidiary of Iroquois. The Partnership uses the equity method of accounting for its interests in its equity investees. The Partnership’s equity investments are held through our ILPs that are considered to be variable interest entities (VIEs) (Refer to Note 17).

	Ownership		Equity Earnings				Equity Investments
	Interest at		Three months		Six Months
(unaudited)	June 30,		ended June 30,		ended June 30,		June 30,	December 31,
(millions of dollars)	2018		2018	2017	2018	2017	2018	2017

Northern Border (a)	50	%	15	15	32	34	505	512
Great Lakes	46.45	%	12	6	36	23	485	479
Iroquois(b)	49.34	%	9	3	27	3	221	222

			36	24	95	60	1,211	1,213

^(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 acquisition of an additional 20 percent interest in April 2006.

^(b)

Equity earnings from Iroquois is net of the 29-year amortization of a $10 million purchase price discrepancy assumed by the Partnership from TransCanada at the time of the 2017 Acquisition.

Distributions from Equity Investments

Distributions received from equity investments for the three and six months ended June 30, 2018 were $56 million and $101 million, respectively (2017 — $40 million and $68 million) of which $2.6 million and $5.2 million, respectively, (2017 - none) was considered a return of capital and is included in Investing Activities in the Partnership’s consolidated statement of cash flows. The return of capital was related to our investment in Iroquois (see further discussion below).

Northern Border

The Partnership did not have undistributed earnings from Northern Border for the three and six months ended June 30, 2018 and 2017.

The summarized financial information provided to us by Northern Border is as follows:

(unaudited)
(millions of dollars)	June 30, 2018		December 31, 2017

ASSETS
Cash and cash equivalents	11		14
Other current assets	34		36
Plant, property and equipment, net	1,056		1,063
Other assets	14		14

	1,115		1,127


LIABILITIES AND PARTNERS’ EQUITY
Current liabilities	37		38
Deferred credits and other	33		31
Long-term debt, net (a)	264		264
Partners’ capital	782		795
Accumulated other comprehensive loss	(1	)	(1	)

	1,115		1,127

^(a)

No current maturities as of June 30, 2018 and December 31, 2017.

	Three months ended				Six months ended
(unaudited)	June 30,				June 30,
(millions of dollars)	2018		2017		2018		2017

Transmission revenues	68		69		140		144
Operating expenses	(19	)	(18	)	(38	)	(36	)
Depreciation	(15	)	(15	)	(30	)	(30	)
Financial charges and other	(4	)	(5	)	(7	)	(9	)

Net income	30		31		65		69

Great Lakes

The Partnership made an equity contribution to Great Lakes of $4 million in the first quarter of 2018. 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 did not have undistributed earnings from Great Lakes for the three and six months ended June 30, 2018 and 2017.

The summarized financial information provided to us by Great Lakes is as follows:

(unaudited)
(millions of dollars)	June 30, 2018	December 31, 2017

ASSETS
Current assets	89	107
Plant, property and equipment, net	695	701

	784	808


LIABILITIES AND PARTNERS’ EQUITY
Current liabilities	49	75
Net long-term debt, including current maturities (a)	250	259
Other long term liabilities	—	1
Partners’ equity	485	473

	784	808

^(a)

Includes current maturities of $21 million as of June 30, 2018 (December 31, 2017 - $19 million).

	Three months ended				Six months ended
(unaudited)	June 30,				June 30,
(millions of dollars)	2018		2017		2018		2017

Transmission revenues	53		41		134		103
Operating expenses	(15	)	(17	)	(32	)	(30	)
Depreciation	(8	)	(7	)	(16	)	(14	)
Financial charges and other	(5	)	(5	)	(9	)	(10	)

Net income	25		12		77		49

Iroquois

On June 1, 2017, the Partnership, through its interest in TC PipeLines Intermediate Limited Partnership acquired a 49.34 percent interest in Iroquois. During the three and six months ended June 30, 2018, the Partnership received distributions from Iroquois amounting to $14 million and $28 million, respectively, which includes the Partnership’s 49.34 percent share of the Iroquois unrestricted cash distribution amounting to approximately $2.6 million and $5.2 million, respectively. The unrestricted cash does not represent a distribution of Iroquois’ cash from operations during the period and therefore it was reported as distributions received as return of investment in the Partnership’s consolidated statement of cash flows.

Iroquois declared its second quarter 2018 distribution of $29 million on July 25, 2018, of which the Partnership received its 49.34 percent share of $14 million on August 1, 2018. The distribution includes our 49.34 percent share of the Iroquois unrestricted cash distribution amounting to approximately $2.6 million. The Partnership did not have undistributed earnings from Iroquois for the three and six months ended June 30, 2018 and 2017.

The summarized financial information provided to us by Iroquois for the period from the June 1, 2017 acquisition date through June 30, 2018 is as follows:

(unaudited)
(millions of dollars)	June 30, 2018	December 31, 2017

ASSETS
Cash and cash equivalents	100	86
Other current assets	26	36
Plant, property and equipment, net	584	591
Other assets	10	8

	720	721


LIABILITIES AND PARTNERS’ EQUITY
Current liabilities	17	17
Net long-term debt, including current maturities (a)	327	329
Other non-current liabilities	13	9
Partners’ equity	363	366

	720	721

^(a)

Includes current maturities of $145 million as of June 30, 2018 (December 31, 2017 - $4 million).

(unaudited) (millions of dollars)	Three months ended June 30, 2018		One month ended June 30, 2017		Six months ended June 30, 2018		One month ended June 30, 2017

Transmission revenues	44		14		105		14
Operating expenses	(14	)	(5	)	(28	)	(5	)
Depreciation	(7	)	(2	)	(15	)	(2	)
Financial charges and other	(4	)	(1	)	(7	)	(1	)

Net income	19		6		55		6