GOODWILL

12 Months Ended

Dec. 31, 2020

GOODWILL

GOODWILL

GOODWILL

Under U.S. GAAP, we evaluate our goodwill related to Tuscarora and North Baja for impairment at least annually or more frequently if indicators of impairment are evident.

In 2018, our analysis resulted in the estimated fair value of Tuscarora not exceeding its carrying value, including goodwill that primarily resulted from the 2019 Tuscarora Settlement as part of the 2018 FERC Actions. As a result, we recorded a goodwill impairment charge amounting to $59 million against Tuscarora’s goodwill balance of $82 million.

In 2019, based on our analysis of Tuscarora and North Baja’s current market conditions, we believed there was a greater than 50 percent likelihood that Tuscarora and North Baja’s estimated fair value exceeded their carrying value. As a result, at December 31, 2019, we did not identify an impairment on the $71 million of goodwill related to the Tuscarora ($23 million) and North Baja ($48 million) reporting units.

On a quarterly basis during 2020, we evaluated changes within our business and the external environment including considerations regarding whether such changes are permanent, to determine whether a triggering event had occurred. This analysis included the quarterly assessment of the impact of COVID-19 on our North Baja and Tuscarora reporting units. Through our quarterly analysis, no triggering events were identified.

The following factors were considered as part of our annual qualitative analysis specific to the Partnership's Tuscarora and North Baja reporting units:

•we evaluated the multiples and discount rate assumptions within the current economic environment and compared to the last quantitative model. The multiples and discount rates identified for the current year, used in our qualitative model, are reflective of the long-term outlook for Tuscarora and North Baja, in line with their underlying asset lives;

•at least 90 percent of Tuscarora's and North Baja's revenue is tied to long-term take-or-pay, fixed-price contracts which have a low correlation to short-term changes in demand;

•Tuscarora and North Baja have not experienced any material customer defaults to date and hold collateral, as appropriate, in support of their contracts;

•Tuscarora's expansion project, Tuscarora XPress and North Baja's expansion project, North Baja XPress, are materially on track, and we do not anticipate any significant changes in outlook or delay or inability to proceed due to financing requirements; and

•Tuscarora and North Baja's businesses are broadly considered essential in the United States given the important role their infrastructures play in delivering energy to the market areas they serve.

Based on our qualitative analysis of Tuscarora and North Baja’s current market conditions we believe there is a greater than 50 percent likelihood that Tuscarora and North Baja’s estimated fair value exceeded their carrying value. As a result, at December 31, 2020, we have not identified an impairment on the $71 million of goodwill related to the Tuscarora ($23 million) and North Baja ($48 million) acquisitions. Adverse changes to our key considerations could, however, result in future impairments on our goodwill.