VARIABLE INTEREST ENTITIES

9 Months Ended

Sep. 30, 2019

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES

NOTE 16     VARIABLE INTEREST ENTITIES

In the normal course of business, the Partnership must re-evaluate its legal entities under the current consolidation guidance to determine if those that are considered to be VIEs are appropriately consolidated or if they should be accounted for differently under GAAP. A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains or losses of the entity. A VIE is appropriately consolidated if the Partnership is considered to be the primary beneficiary. The VIE’s primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

As a result of its analysis, the Partnership continues to consolidate all legal entities in which it has a variable interest and for which it is considered to be the primary beneficiary. VIEs where the Partnership is not the primary beneficiary, but has a variable interest in the entity, are accounted for as equity investments.

Consolidated VIEs

The Partnership’s consolidated VIEs consist of the intermediate partnerships that hold interests in the Partnership’s pipeline systems. After considering the purpose and design of the ILPs and the risks that they were designed to create and pass through to the Partnership, the Partnership has concluded that it is the primary beneficiary of these ILPs because of the significant amount of variability it absorbs from the ILPs’ economic performance.

The assets and liabilities held through these VIEs that are not available to creditors of the Partnership and whose investors have no recourse to the credit of the Partnership are held through GTN, Tuscarora, Northern Border, Great Lakes, PNGTS, Iroquois and North

Baja due to their third party debt. The following table presents the total assets and liabilities of these entities that are included in the Partnership’s consolidated balance sheets:

(unaudited)
(millions of dollars)	September 30, 2019	December 31, 2018
ASSETS (LIABILITIES) (a)
Cash and cash equivalents	17	16
Accounts receivable and other	35	39
Inventories	9	8
Other current assets	2	6
Equity investments	1,094	1,196
Property, plant and equipment, net	1,241	1,240
Other assets	1	1
Accounts payable and accrued liabilities	(26)	(33)
Accounts payable to affiliates, net	(86)	(40)
Accrued interest	(5)	(2)
Current portion of long-term debt	(123)	(36)
Long-term debt	(229)	(341)
Other liabilities	(29)	(27)
Deferred state income tax	(9)	(9)

(a) Bison, an asset held through our consolidated VIEs, is excluded at September 30, 2019 and at December 31, 2018 as the assets of this entity can be used for purposes other than the settlement of the VIE’s obligations.