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EQUITY INVESTMENTS
6 Months Ended
Jun. 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

Six months ended

(unaudited)

June 30, 

June 30, 

June 30, 

June 30, 

December 31, 

(millions of dollars)

    

2019

    

2019

    

2018

    

2019

    

2018

    

2019

    

2018

Northern Border

50

%  

14

 

15

35

 

32

431

497

Great Lakes

46.45

%  

9

12

29

36

484

489

Iroquois

49.34

%  

7

 

9

20

 

27

203

210

 

30

 

36

84

 

95

1,118

1,196

Distributions from Equity Investments

Distributions received from equity investments in the three and six months ended June 30, 2019 were $108 million and $167 million, respectively (June 30, 2018 - $56 million and $101 million, respectively), of which $52.6 million and $55.2 million, respectively (June 30, 2018 - $2.6 million and $5.2 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 six months ended June 30, 2019, the Partnership received distributions from Northern Border amounting to $72 million and $100 million, respectively (June 30, 2018 - $17 million and $39 million, respectively) which includes the Partnership’s 50 percent share of the Northern Border’s $100 million distribution on June 26, 2019. The $100 million was 100 percent financed by borrowing on its $200 million revolving credit facility. The $50 million 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 six months ended June 30, 2019 and 2018.

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

(unaudited)

(millions of dollars)

    

June 30, 2019

    

December 31, 2018

ASSETS

Cash and cash equivalents

 

26

 

10

Other current assets

 

33

 

36

Property, plant and equipment, net

 

1,008

 

1,037

Other assets

 

13

 

13

 

1,080

 

1,096

LIABILITIES AND PARTNERS’ EQUITY

Current liabilities

 

46

 

34

Deferred credits and other

 

37

 

35

Long-term debt, net (a)

 

365

 

264

Partners’ equity

Partners’ capital

 

633

 

764

Accumulated other comprehensive loss

 

(1)

 

(1)

 

1,080

 

1,096

Three months ended

Six months ended

(unaudited)

June 30, 

June 30, 

(millions of dollars)

    

2019

    

2018

    

2019

    

2018

Transmission revenues

 

67

 

68

 

148

 

140

Operating expenses

 

(20)

 

(19)

 

(40)

 

(38)

Depreciation

 

(16)

 

(15)

 

(31)

 

(30)

Financial charges and other

 

(4)

 

(4)

 

(8)

 

(7)

Net income

 

27

 

30

 

69

 

65

(a)No current maturities as of June 30, 2019 and December 31, 2018. At June 30, 2019, Northern Border is 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 (June 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 six months ended June 30, 2019 and 2018.

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

(unaudited)

 

(millions of dollars)

    

June 30, 2019

    

December 31, 2018

ASSETS

Current assets

 

56

 

75

Property, plant and equipment, net

 

687

 

689

 

743

 

764

LIABILITIES AND PARTNERS’ EQUITY

Current liabilities

 

26

 

26

Net long-term debt, including current maturities (a)

 

229

 

240

Other long term liabilities

4

4

Partners' equity

 

484

 

494

 

743

 

764

Three months ended

Six months ended

(unaudited)

June 30, 

June 30, 

(millions of dollars)

    

2019

    

2018

    

2019

    

2018

Transmission revenues

 

51

 

53

 

123

 

134

Operating expenses

 

(19)

 

(15)

 

(35)

 

(32)

Depreciation

 

(8)

(8)

 

(16)

 

(16)

Financial charges and other

 

(5)

 

(5)

 

(9)

 

(9)

Net income

 

19

 

25

 

63

 

77

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

Iroquois

During the three and six months ended June 30, 2019, the Partnership received distributions from Iroquois amounting to $14 million and $28 million, respectively (June 30, 2018 - $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 (June 30, 2018 - $2.6 million and $5.2 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 second quarter 2019 distribution of $28 million on July 24, 2019, of which the Partnership received its 49.34 percent share or $14 million on August 1, 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 six months ended June 30, 2019 and 2018.

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

(unaudited)

(millions of dollars)

    

June 30, 2019

    

December 31, 2018

ASSETS

 

  

 

  

Cash and cash equivalents

 

73

 

80

Other current assets

 

25

 

32

Property, plant and equipment, net

 

573

 

581

Other assets

 

14

 

8

 

685

 

701

LIABILITIES AND PARTNERS’ EQUITY

 

 

Current liabilities

 

15

 

19

Long-term debt, net (a)

 

319

 

325

Other non-current liabilities

 

21

 

14

Partners' equity

 

330

 

343

 

685

 

701

Three months ended

Six months ended

(unaudited)

June 30, 

June 30, 

(millions of dollars)

    

2019

    

2018

    

2019

    

2018

Transmission revenues

 

40

44

92

105

Operating expenses

 

(13)

(14)

(28)

(28)

Depreciation

 

(8)

(7)

(15)

(15)

Financial charges and other

 

(4)

(4)

(7)

(7)

Net income

 

15

19

42

55

(a)Includes current maturities of $4 million as of June 30, 2019 (December 31, 2018 - $146 million). At June 30, 2019, Iroquois is in compliance with all its financial covenants.