INVESTMENTS IN UNCONSOLIDATED AFFILIATES

6 Months Ended

Jun. 30, 2011

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

NOTE 3                 INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Great Lakes, Northern Border, GTN and Bison are all regulated by the Federal Energy Regulatory Commission (FERC) and are operated by TransCanada. We use the equity method of accounting for our interests in our equity investees.

			Equity Earnings from Unconsolidated Affiliates								Investment in Unconsolidated Affiliates
(unaudited)			Three months ended June 30,				Six months ended June 30,				June 30,		December 31,
(millions of dollars)			2011		2010		2011		2010		2011		2010
Great Lakes	46.45	%		17.0		13.1		35.0		29.4		691.0		690.0
Northern Border(a)	50	%		16.2		12.2		36.8		26.8		489.3		504.8
GTN(b)	25	%		2.4		-		2.4		-		248.3		-
Bison(b)	25	%		1.9		-		1.9		-		163.2		-
				37.5		25.3		76.1		56.2		1,591.8		1,194.8

(a)The Partnership owns a 50 percent general partner interest in Northern Border. Equity income 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 additional 20 percent acquisition in April 2006.

(b) Represents equity earnings from May 3, 2011, date of acquisition, to June 30, 2011.

Great Lakes

The Partnership made an equity contribution to Great Lakes of $4.2 million in the first quarter of 2011. This amount represents the Partnership’s 46.45 percent share of a $9.0 million cash call from Great Lakes to make a scheduled debt repayment. The Partnership expects to make an additional equity contribution of $4.6 million to Great Lakes in the fourth quarter of 2011. This represents the Partnership’s 46.45 percent share of an expected $10.0 million cash call from Great Lakes to make a scheduled debt repayment.

The Partnership recorded no undistributed earnings from Great Lakes for the six months ended June 30, 2011 and 2010.

The summarized financial information for Great Lakes is as follows:

(unaudited)	Three months ended  June 30,						Six months ended  June 30,
(millions of dollars)	2011			2010			2011			2010
Transmission revenues		63.3			62.9			133.5			135.8
Operating expenses		(15.7	)		(15.6	)		(30.0	)		(29.8	)
Depreciation and amortization		(8.0	)		(10.1	)		(16.1	)		(24.4	)
Financial charges and other		(7.5	)		(7.7	)		(15.1	)		(15.6	)
Michigan business tax		4.6			(1.2	)		3.0			(2.7	)
Net income		36.7			28.3			75.3			63.3

(unaudited)	June 30,		December 31,
(millions of dollars)	2011		2010
Assets
Current assets		82.7		83.7
Plant, property and equipment, net		832.0		846.9
Other assets		0.6		0.6
		915.3		931.2
Liabilities and Partners' Equity
Current liabilities		31.4		34.9
Deferred credits		0.4		5.6
Long-term debt, including current maturities		383.0		392.0
Partners' equity		500.5		498.7
		915.3		931.2

Northern Border

Northern Border’s distribution policy adopted in 2006 defines minimum equity to total capitalization to be used by its Management Committee to establish the timing and amount of required equity contributions. In accordance with this policy, the Partnership made a required equity contribution of $49.8 million to meet minimum equity to total capitalization requirements on July 27, 2011 and expects to make an equity contribution of approximately $5.5 million in fourth quarter 2011 to fund capital expenditures related to the Princeton Lateral Project.

The Partnership recorded no undistributed earnings from Northern Border for the six months ended June 30, 2011 and 2010.

The summarized financial information for Northern Border is as follows:

(unaudited)	Three months ended  June 30,						Six months ended  June 30,
(millions of dollars)	2011			2010			2011			2010
Transmission revenues		72.3			65.8			152.5			134.9
Operating expenses		(18.4	)		(19.7	)		(35.9	)		(37.7	)
Depreciation and amortization		(15.4	)		(15.4	)		(30.7	)		(30.8	)
Financial charges and other		(5.7	)		(6.0	)		(11.4	)		(12.0	)
Net income		32.8			24.7			74.5			54.4

(unaudited)	June 30,		December 31,
(millions of dollars)	2011		2010
Assets
Current assets		39.4		47.3
Plant, property and equipment, net		1,276.5		1,294.8
Other assets		22.6		22.9
		1,338.5		1,365.0
Liabilities and Partners' Equity
Current liabilities		42.0		46.7
Deferred credits		10.9		9.7
Long-term debt, including current maturities		547.6		540.6
Partners' Equity		738.0		768.0
		1,338.5		1,365.0

GTN and Bison

On May 3, 2011, the Partnership acquired a 25 percent interest in GTN and a 25 percent interest in Bison from subsidiaries of TransCanada. The Acquisitions were accounted for as transactions between entities under common control, whereby the equity investments in GTN and Bison were recorded at TransCanada’s carrying values. See Note 4 for additional disclosure regarding the Acquisitions.

The Partnership recorded undistributed earnings of $2.4 million and $1.9 million from GTN and Bison, respectively, from May 3, 2011, date of acquisition, to June 30, 2011.