INVESTMENTS IN UNCONSOLIDATED AFFILIATES

3 Months Ended

Mar. 31, 2012

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

NOTE 3                 INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Great Lakes, Northern Border, GTN and Bison are 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.

	Ownership Interest at March 31, 2012			Equity Earnings from Unconsolidated Affiliates					Investment in Unconsolidated Affiliates
(unaudited)				Three Months Ended March 31,				March 31,			December 31,
(millions of dollars)				2012		2011			2012		2011
Great Lakes		46.45	%		9		18			688		686
Northern Border(a)		50	%		20		21			531		536
GTN(b)		25	%		6		-			225		225
Bison(b)		25	%		3		-			162		163
					38		39			1,606		1,610

(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 additional 20 percent interest acquisition in April 2006.

(b) There were no equity earnings from GTN and Bison in the 2011 period as the 25 percent interests in each were acquired in May 2011.

Great Lakes

The Partnership made an equity contribution to Great Lakes of $4 million in the first quarter of 2012. 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 recorded no undistributed earnings from Great Lakes for the three months ended March 31, 2012 and 2011.

The summarized financial information for Great Lakes is as follows:

(unaudited)	March 31,		December 31,
(millions of dollars)	2012		2011
Assets
Current assets		65		65
Plant, property and equipment, net		819		826
Other assets		1		1
		885		892
Liabilities and Partners' Equity
Current liabilities		26		30
Deferred credits		1		-
Long-term debt, including current maturities		364		373
Partners' capital		494		489
		885		892

(unaudited)	Three months ended March 31,
(millions of dollars)	2012			2011
Transmission revenues		49			70
Operating expenses		(15	)		(14	)
Depreciation		(8	)		(8	)
Financial charges and other		(7	)		(7	)
Michigan business tax		-			(2	)
Net income		19			39

Northern Border

The Partnership recorded no undistributed earnings from Northern Border for the three months ended March 31, 2012 and 2011.

The summarized financial information for Northern Border is as follows:

(unaudited)	March 31,			December 31,
(millions of dollars)	2012			2011
Assets
Cash and cash equivalents		39			33
Other current assets		37			35
Plant, property and equipment, net		1,255			1,267
Other assets		30			31
		1,361			1,366
Liabilities and Partners' Equity
Current liabilities		51			48
Deferred credits and other		14			13
Long-term debt, including current maturities		473			473
Partners' equity
Partners' capital		826			835
Accumulated other comprehensive loss		(3	)		(3	)
		1,361			1,366

(unaudited)	Three months ended March 31,
(millions of dollars)	2012			2011
Transmission revenues		81			80
Operating expenses		(18	)		(17	)
Depreciation		(16	)		(15	)
Financial charges and other		(6	)		(6	)
Net income		41			42

GTN

On May 3, 2011, the Partnership acquired a 25 percent interest in GTN from a subsidiary of TransCanada. The acquisition was accounted for as a transaction between entities under common control, whereby the equity investment in GTN was recorded at TransCanada’s carrying value. See Note 4 for additional disclosure regarding the Acquisitions.

In November 2011, the FERC approved a Stipulation and Agreement of Settlement for GTN (GTN Settlement) with shippers and regulators regarding rates and terms and conditions of service without modification, effective January 1, 2012. The GTN Settlement includes a moratorium on the filing of future rate proceedings until December 31, 2015. Following the expiration of the moratorium, GTN must file a rate case such that the new rates will be effective January 1, 2016.

The Partnership recorded no undistributed earnings from GTN for the three months ended March 31, 2012.

The summarized financial information for GTN is as follows:

(unaudited)	March 31,		December 31,
(millions of dollars)	2012		2011
Assets
Current assets		66		55
Plant, property and equipment, net		1,197		1,207
Other assets		2		1
		1,265		1,263
Liabilities and Members' Equity
Current liabilities		18		18
Deferred credits and other		20		20
Long-term debt, including current maturities		325		325
Members' capital		902		900
		1,265		1,263

(unaudited)	Three months ended March 31,
(millions of dollars)		2012(a)
Transmission revenues			52
Operating expenses			(11	)
Depreciation			(13	)
Financial charges and other			(5	)
Net income			23

(a) Comparative information not shown as GTN was not acquired until May 2011.

Bison

On May 3, 2011, the Partnership acquired a 25 percent interest in Bison from a subsidiary of TransCanada. The acquisition was accounted for as a transaction between entities under common control, whereby the equity investment in Bison was recorded at TransCanada’s carrying value. See Note 4 for additional disclosure regarding the Acquisitions.

The Partnership recorded no undistributed earnings from Bison for the three months ended March 31, 2012.

The summarized financial information for Bison is as follows:

(unaudited)	March 31,		December 31,
(millions of dollars)	2012		2011
Assets
Current assets		7		10
Plant, property and equipment, net		656		658
		663		668
Liabilities and Members' Equity
Current liabilities		15		17
Members' capital		648		651
		663		668

(unaudited)	Three months ended March 31,
(millions of dollars)		2012(a)
Transmission revenues			20
Operating expenses			(3	)
Depreciation			(5	)
Net income			12

(a) Comparative information not shown as Bison was not acquired until May 2011.