EQUITY INVESTMENTS

9 Months Ended

Sep. 30, 2019

EQUITY INVESTMENTS

EQUITY INVESTMENTS

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 TC Energy. 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 16).

	Ownership		Equity Earnings				Equity Investments
	Interest at		Three months ended		Nine months ended
(unaudited)	September 30,		September 30,		September 30,		September 30,	December 31,
(millions of dollars)	2019		2019	2018	2019	2018	2019	2018
Northern Border	50.00	%	15	16	50	49	426	497
Great Lakes	46.45	%	8	9	37	45	482	489
Iroquois	49.34	%	8	9	28	35	186	210
			31	34	115	129	1,094	1,196

Distributions from Equity Investments

Distributions received from equity investments in the three and nine months ended September 30, 2019 were $59 million and $226 million, respectively (September 30, 2018 - $49 million and $150 million, respectively), of which $2.6 million and $57.8 million, respectively (September 30, 2018 - $2.6 million and $7.8 million, respectively), were considered return of capital and included in “Investing Activities” in the Partnership’s consolidated statement of cash flows. The return of capital was related to our investment in Northern Border and Iroquois (see further discussion below).

Northern Border

During the three and nine months ended September 30, 2019, the Partnership received distributions from Northern Border amounting to $21 million and $121 million, respectively (September 30, 2018 - $21 million and $60 million, respectively). The $121 million includes the Partnership’s 50 percent share of the Northern Border $100 million distribution in June 2019. The $100 million distribution was 100 percent financed by borrowing on Northern Border's $200 million revolving credit facility. The $50 million of cash the Partnership received did not represent a distribution of operating cash flow during the period and, therefore, it was reported as a return of investment in the Partnership’s consolidated statement of cash flows.

The Partnership did not have undistributed earnings from Northern Border for the three and nine months ended September 30, 2019 and 2018.

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

(unaudited)
(millions of dollars)	September 30, 2019	December 31, 2018
ASSETS
Cash and cash equivalents	38	10
Other current assets	34	36
Property, plant and equipment, net	1,000	1,037
Other assets	13	13
	1,085	1,096
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities	60	34
Deferred credits and other	37	35
Long-term debt, net (a)	365	264
Partners’ equity
Partners’ capital	624	764
Accumulated other comprehensive loss	(1)	(1)
	1,085	1,096

	Three months ended		Nine months ended
(unaudited)	September 30,		September 30,
(millions of dollars)	2019	2018	2019	2018
Transmission revenues	73	72	221	212
Operating expenses	(21)	(19)	(61)	(57)
Depreciation	(15)	(15)	(46)	(45)
Financial charges and other	(5)	(5)	(13)	(12)
Net income	32	33	101	98

(a) No current maturities as of September 30, 2019 and December 31, 2018. At September 30, 2019, Northern Border was in compliance with all its financial covenants.

Great Lakes

The Partnership made an equity contribution to Great Lakes of $5 million in the first quarter of 2019 (September 30, 2018 - $4 million). This amount represents the Partnership’s 46.45 percent share of an $11 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 nine months ended September 30, 2019 and 2018.

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

(unaudited)
(millions of dollars)	September 30, 2019	December 31, 2018
ASSETS
Current assets	59	75
Property, plant and equipment, net	685	689
	744	764
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities	29	26
Net long-term debt, including current maturities (a)	229	240
Other long term liabilities	5	4
Partners' equity	481	494
	744	764

	Three months ended		Nine months ended
(unaudited)	September 30,		September 30,
(millions of dollars)	2019	2018	2019	2018
Transmission revenues	51	49	174	183
Operating expenses	(23)	(17)	(58)	(50)
Depreciation	(8)	(8)	(24)	(24)
Financial charges and other	(3)	(5)	(12)	(13)
Net income	17	19	80	96

(a) Includes current maturities of $21 million as of September 30, 2019 and as of December 31, 2018. At September 30, 2019, Great Lakes was in compliance with all its financial covenants.

Iroquois

The Partnership made an equity contribution to Iroquois of $4 million in August 2019. This amount represents the Partnership’s 49.34 percent share of an $7 million cash call from Iroquois to cover costs of regulatory approvals related to their capital project.

During the three and nine months ended September 30, 2019, the Partnership received distributions from Iroquois amounting to $28 million and $56 million, respectively (September 30, 2018 - $14 million and $42 million, respectively), which includes the Partnership’s 49.34 percent share of the Iroquois unrestricted cash distribution amounting to approximately $2.6 million and $7.8 million, respectively (September 30, 2018 - $2.6 million and $7.8 million, respectively). The unrestricted cash did not represent a distribution of Iroquois’ cash from operations during the period and therefore it was reported as a return of investment in the Partnership’s consolidated statement of cash flows.

Iroquois declared its third quarter 2019 distribution of $28 million on November 1, 2019, of which the Partnership will receive its 49.34 percent share or $14 million on December 30, 2019. 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 nine months ended September 30, 2019 and 2018.

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

(unaudited)
(millions of dollars)	September 30, 2019	December 31, 2018
ASSETS
Cash and cash equivalents	38	80
Other current assets	33	32
Property, plant and equipment, net	570	581
Other assets	14	8
	655	701
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities	21	19
Long-term debt, net (a)	320	325
Other non-current liabilities	20	14
Partners' equity	294	343
	655	701

	Three months ended		Nine months ended
(unaudited)	September 30,		September 30,
(millions of dollars)	2019	2018	2019	2018
Transmission revenues	39	42	131	147
Operating expenses	(15)	(13)	(43)	(41)
Depreciation	(7)	(7)	(22)	(22)
Financial charges and other	(2)	(4)	(9)	(11)
Net income	15	18	57	73

(a) Includes current maturities of $5 million as of September 30, 2019 (December 31, 2018 - $146 million). At September 30, 2019, Iroquois was in compliance with all its financial covenants.