INVESTMENTS IN UNCONSOLIDATED AFFILIATES

9 Months Ended

Sep. 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 September 30,				Nine months ended September 30,				September 30,		December 31,
(millions of dollars)			2011		2010		2011		2010		2011		2010
Great Lakes	46.45	%		14.3		14.6		49.3		44.0		687.1		690.0
Northern Border(a)	50	%		19.6		21.0		56.4		47.8		537.9		504.8
GTN(b)	25	%		4.7		-		7.1		-		253.0		-
Bison(b)	25	%		1.8		-		3.7		-		165.0		-
				40.4		35.6		116.5		91.8		1,643.0		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 September 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 made an additional equity contribution of $4.6 million to Great Lakes on October 28, 2011. This represents the Partnership’s 46.45 percent share of a $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 nine months ended September 30, 2011 and 2010.

The summarized financial information for Great Lakes is as follows:

(unaudited)	Three months ended  September 30,						Nine months ended  September 30,
(millions of dollars)	2011			2010			2011			2010
Transmission revenues		62.9			61.9			196.4			197.7
Operating expenses		(15.7	)		(13.3	)		(45.7	)		(43.1	)
Depreciation and amortization		(8.1	)		(8.0	)		(24.2	)		(32.4	)
Financial charges and other		(7.4	)		(7.7	)		(22.5	)		(23.3	)
Michigan business tax		(0.9	)		(1.4	)		2.1			(4.1	)
Net income		30.8			31.5			106.1			94.8

(unaudited)	September 30,		December 31,
(millions of dollars)	2011		2010
Assets
Current assets		74.3		83.7
Plant, property and equipment, net		827.5		846.9
Other assets		0.6		0.6
		902.4		931.2
Liabilities and Partners' Equity
Current liabilities		26.8		34.9
Deferred credits		0.4		5.6
Long-term debt, including current maturities		383.0		392.0
Partners' equity		492.2		498.7
		902.4		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 in the third quarter of 2011 and expects to make an equity contribution of approximately $5.5 million in the fourth quarter of 2011 to fund capital expenditures related to the Princeton Lateral Project.

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

The summarized financial information for Northern Border is as follows:

(unaudited)	Three months ended  September 30,						Nine months ended  September 30,
(millions of dollars)	2011			2010			2011			2010
Transmission revenues		77.7			81.0			230.2			215.9
Operating expenses		(17.3	)		(17.6	)		(53.2	)		(55.3	)
Depreciation and amortization		(15.3	)		(15.4	)		(46.0	)		(46.2	)
Financial charges and other		(5.6	)		(5.6	)		(17.0	)		(17.6	)
Net income		39.5			42.4			114.0			96.8

(unaudited)	September 30,		December 31,
(millions of dollars)	2011		2010
Assets
Current assets		71.7		47.3
Plant, property and equipment, net		1,270.0		1,294.8
Other assets		28.3		22.9
		1,370.0		1,365.0
Liabilities and Partners' Equity
Current liabilities		50.4		46.7
Deferred credits		11.5		9.7
Long-term debt, including current maturities		472.6		540.6
Partners' equity		835.5		768.0
		1,370.0		1,365.0

GTN

On May 3, 2011, the Partnership acquired a 25 percent membership interest in GTN from TransCanada American Investments Ltd., 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 values. See Note 4 for additional disclosure regarding the Acquisition.

The Partnership recorded undistributed earnings of $7.1 million from GTN from May 3, 2011, date of acquisition, to September 30, 2011.

On August 12, 2011, GTN filed a petition with the FERC for approval of a Stipulation and Agreement of Settlement (GTN Settlement) with shippers and regulators regarding GTN’s rates, terms and conditions of service effective January 1, 2012.  A decision is expected from FERC by the end of the year.  If approved, the settlement rates are expected to partially mitigate the loss of firm contracts in fourth quarter 2011, and also reflect the impact of a declining rate base since the last settlement.  Rates will be in effect through the end of 2015.

The summarized financial information for GTN from May 3, 2011, date of acquisition, to September 30, 2011 is as follows:

	Three months ended			For the period May 3
(unaudited)	September 30,			to September 30,
(millions of dollars)	2011			2011
Transmission revenues		50.4			83.4
Operating expenses		(13.6	)		(22.5	)
Depreciation and amortization		(9.2	)		(15.5	)
Financial charges and other		(4.3	)		(10.0	)
Net income		23.3			35.4

(unaudited)	September 30,
(millions of dollars)	2011
Assets
Current assets		163.5
Plant, property and equipment, net		810.4
Other assets		3.5
		977.4
Liabilities and Members' Capital
Current liabilities		17.4
Deferred credits		19.6
Long-term debt, including current maturities		325.0
Members' capital		615.4
		977.4

Bison

On May 3, 2011, the Partnership acquired a 25 percent membership interest in Bison from TC Continental Pipeline Holdings Inc., 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 values. See Note 4 for additional disclosure regarding the Acquisition.

The Partnership recorded undistributed earnings of $3.7 million from Bison from May 3, 2011, date of acquisition, to September 30, 2011.

The summarized financial information for Bison from May 3, 2011, date of acquisition, to September 30, 2011 is as follows:

	Three months ended			For the period May 3
(unaudited)	September 30,			to September 30,
(millions of dollars)	2011			2011
Transmission revenues		17.8			31.7
Operating expenses		(5.9	)		(9.1	)
Depreciation and amortization		(4.5	)		(7.5	)
Net income		7.4			15.1

(unaudited)	September 30,
(millions of dollars)	2011
Assets
Current assets		44.1
Plant, property and equipment, net		625.3
		669.4
Liabilities and Members' Capital
Current liabilities		25.5
Members' capital		643.9
		669.4