10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-33007

SPECTRA ENERGY CORP

(Exact Name of Registrant as Specified in its Charter)

Delaware	20-5413139
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

5400 Westheimer Court

Houston, Texas 77056

(Address of principal executive offices, including zip code)

713-627-5400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of Exchange Act.

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Number of shares of Common Stock, $0.001 par value, outstanding as of May 5, 2008: 632,956,414

SPECTRA ENERGY CORP

FORM 10-Q FOR THE QUARTER ENDED

March 31, 2008

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007	4
	Condensed Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007	7
	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2008 and 2007	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 4.	Submission of Matters to a Vote of Security Holders	32
Item 6.	Exhibits	33
	Signatures	34

2

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING

INFORMATION

This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions. These forward-looking statements are identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:

• state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an effect on rate structure, and affect the speed at and degree to which competition enters the natural gas industries;

• outcomes of litigation and regulatory investigations, proceedings or inquiries;

• weather and other natural phenomena, including the economic, operational and other effects of hurricanes and storms;

• the timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates;

• general economic conditions, including any potential effects arising from terrorist attacks and any consequential or other hostilities;

• changes in environmental, safety and other laws and regulations;

• results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings and general economic conditions;

• increases in the cost of goods and services required to complete capital projects;

• declines in the market prices of equity securities and resulting funding requirements for defined benefit pension plans;

• growth in opportunities, including the timing and success of efforts to develop domestic and international pipeline, storage, gathering, processing and other infrastructure projects and the effects of competition;

• the performance of natural gas transmission and storage, distribution, and gathering and processing facilities;

• the extent of success in connecting natural gas supplies to gathering, processing and transmission systems and in connecting to expanding gas markets;

• the effect of accounting pronouncements issued periodically by accounting standard-setting bodies;

• conditions of the capital markets during the periods covered by the forward-looking statements; and

• the ability to successfully complete merger, acquisition or divestiture plans; regulatory or other limitations imposed as a result of a merger, acquisition or divestiture; and the success of the business following a merger, acquisition or divestiture.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than Spectra Energy Corp has described. Spectra Energy Corp undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SPECTRA ENERGY CORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions, except per-share amounts)

	Three Months Ended March 31,
	2008		2007
Operating Revenues
Transportation, storage and processing of natural gas	$	598	$	542
Distribution of natural gas		730		658
Sales of natural gas liquids		219		150
Other		61		51
Total operating revenues		1,608		1,401
Operating Expenses
Natural gas and petroleum products purchased		621		562
Operating, maintenance and other		284		258
Depreciation and amortization		145		122
Property and other taxes		61		40
Total operating expenses		1,111		982
Gains on Sales of Other Assets and Other, net		—		1
Operating Income		497		420
Other Income and Expenses
Equity in earnings of unconsolidated affiliates		209		90
Other income and expenses, net		11		16
Total other income and expenses		220		106
Interest Expense		158		155
Minority Interest Expense		19		16
Earnings Before Income Taxes		540		355
Income Tax Expense		173		119
Net Income	$	367	$	236
Common Stock Data
Weighted-average shares outstanding
Basic		633		631
Diluted		635		634
Earnings per share – basic and diluted	$	0.58	$	0.37
Dividends per share	$	0.23	$	0.22

See Notes to Condensed Consolidated Financial Statements

4

SPECTRA ENERGY CORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)

	March 31, 2008		December 31, 2007
ASSETS
Current Assets
Cash and cash equivalents	$	252	$	94
Short-term investments		14		—
Receivables, net		994		907
Inventory		131		287
Other		139		91
Total current assets		1,530		1,379
Investments and Other Assets
Investments in and loans to unconsolidated affiliates		1,966		1,780
Goodwill		3,864		3,948
Other		641		631
Total investments and other assets		6,471		6,359
Property, Plant and Equipment
Cost		18,109		18,154
Less accumulated depreciation and amortization		3,941		3,854
Net property, plant and equipment		14,168		14,300
Regulatory Assets and Deferred Debits		943		932
Total Assets	$	23,112	$	22,970

See Notes to Condensed Consolidated Financial Statements

5

SPECTRA ENERGY CORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions, except per-share amounts)

	March 31, 2008		December 31, 2007
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	376	$	363
Notes payable and commercial paper		757		715
Taxes accrued		185		85
Interest accrued		148		146
Current maturities of long-term debt		474		338
Other		816		775
Total current liabilities		2,756		2,422
Long-term Debt		8,080		8,345
Deferred Credits and Other Liabilities
Deferred income taxes		2,897		2,883
Regulatory and other		1,626		1,657
Total deferred credits and other liabilities		4,523		4,540
Commitments and Contingencies
Minority Interests		808		806
Stockholders’ Equity
Preferred stock, $0.001 par, 22 million shares authorized, no shares outstanding at March 31, 2008 and December 31, 2007		—		—
Common stock, $0.001 par, 1 billion shares authorized, 633 million and 632 million shares outstanding at March 31, 2008 and December 31, 2007, respectively		1		1
Additional paid-in capital		4,674		4,658
Retained earnings		589		368
Accumulated other comprehensive income		1,681		1,830
Total stockholders’ equity		6,945		6,857
Total Liabilities and Stockholders’ Equity	$	23,112	$	22,970

See Notes to Condensed Consolidated Financial Statements

6

SPECTRA ENERGY CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

	Three Months Ended March 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	367		$	236
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		148			124
Deferred income taxes		38			74
Minority interest		19			16
Equity in earnings of unconsolidated affiliates		(209	)		(90	)
Distributions received from unconsolidated affiliates		123			8
Other		187			(122	)
Net cash provided by operating activities		673			246
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(245	)		(111	)
Investment in and loans to unconsolidated affiliates		(130	)		(64	)
Purchases of available-for-sale securities		(446	)		—
Proceeds from sales and maturities of available-for-sale securities		438			—
Other		11			1
Net cash used in investing activities		(372	)		(174	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt		310			—
Payments for the redemption of long-term debt		(341	)		(19	)
Net increase in notes payable and commercial paper		42			379
Distributions to minority interests		(14	)		(4	)
Contributions from minority interests		3			—
Dividends paid		(146	)		(139	)
Other		7			3
Net cash provided by (used in) financing activities		(139	)		220
Effect of exchange rate changes on cash		(4	)		5
Net increase in cash and cash equivalents		158			297
Cash and cash equivalents at beginning of period		94			299
Cash and cash equivalents at end of period	$	252		$	596

See Notes to Condensed Consolidated Financial Statements

7

SPECTRA ENERGY CORP

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In millions)

	Common Stock		Additional Paid-in Capital			Retained Earnings			Member’s Equity			Accumulated Other Comprehensive Income
												Foreign Currency Translation Adjustments			Net Gains (Losses) on Cash Flow Hedges			Other			Total
December 31, 2007	$	1	$	4,658		$	368		$	—		$	2,033		$	(8	)	$	(195	)	$	6,857
Net income		—		—			367			—			—			—			—			367
Foreign currency translation adjustments		—		—			—			—			(166	)		—			—			(166	)
Reclassification of cash flow hedges into earnings		—		—			—			—			—			(3	)		—			(3	)
Pension and benefits impact of SFAS 158		—		—			—			—			—			—			20			20
Dividends on common stock		—		—			(146	)		—			—			—			—			(146	)
Stock-based compensation		—		5			—			—			—			—			—			5
Other		—		11			—			—			—			—			—			11
March 31, 2008	$	1	$	4,674		$	589		$	—		$	1,867		$	(11	)	$	(175	)	$	6,945
December 31, 2006	$	—	$	—		$	—		$	4,598		$	1,156		$	(6	)	$	(109	)	$	5,639
Conversion to Spectra Energy Corp		1		4,597			—			(4,598	)		—			—			—			—
Net income		—		—			236			—			—			—			—			236
Foreign currency translation adjustments		—		—			—			—			28			—			—			28
Pension and benefits impact of SFAS 158		—		—			—			—			—			—			(8	)		(8	)
FIN 48 implementation		—		—			(26	)		—			—			—			—			(26	)
Transfer of net assets and liabilities from Duke Energy		—		1			—			—			—			—			(115	)		(114	)
Dividends on common stock		—		—			(139	)		—			—			—			—			(139	)
Stock-based compensation		—		(10	)		—			—			—			—			—			(10	)
March 31, 2007	$	1	$	4,588		$	71		$	—		$	1,184		$	(6	)	$	(232	)	$	5,606

See Notes to Condensed Consolidated Financial Statements

8

SPECTRA ENERGY CORP

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. General

Nature of Operations. Spectra Energy Corp, through its subsidiaries and equity affiliates (collectively, Spectra Energy), owns and operates a large and diversified portfolio of complementary natural gas-related energy assets. Spectra Energy operates in three key areas of the natural gas industry: transmission and storage, distribution, and gathering and processing. Spectra Energy provides transportation and storage of natural gas to customers in various regions of the Northeastern and Southeastern United States, the Maritime Provinces in Canada and the Pacific Northwest in the United States and Canada, and in the province of Ontario, Canada. Spectra Energy also provides natural gas sales and distribution services to retail customers in Ontario, and natural gas gathering and processing services to customers in Western Canada. In addition, Spectra Energy owns a 50% interest in DCP Midstream, LLC (DCP Midstream), one of the largest natural gas gatherers and processors in the United States.

Basis of Presentation. The Condensed Consolidated Financial Statements include the accounts of Spectra Energy Corp, its majority-owned subsidiaries where Spectra Energy has control and those variable interest entities, if any, where Spectra Energy is the primary beneficiary. These interim financial statements should be read in conjunction with the consolidated financial statements included in Spectra Energy’s Annual Report on Form 10-K for the year ended December 31, 2007, and reflect all normal recurring adjustments that are, in the opinion of management, necessary to fairly present Spectra Energy’s results of operations and financial position. Amounts reported in the Condensed Consolidated Statements of Operations are not necessarily indicative of amounts expected for the respective annual periods due to the effects of seasonal temperature variations on energy consumption primarily in the gas distribution operations of Spectra Energy, as well as changing commodity prices on certain of the processing operations and other factors.

Use of Estimates. To conform with generally accepted accounting principles (GAAP) in the United States, management makes estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements. Although these estimates are based on management’s best available knowledge at the time, actual results could differ.

Reclassifications. The components of Operating Revenues on the Condensed Consolidated Statement of Operations for the 2007 period have been reclassified to conform to the current reporting presentation.

Spin-off from Duke Energy Corporation. In conjunction with the spin-off of Spectra Energy from Duke Energy Corporation (Duke Energy) on January 2, 2007, Duke Energy transferred to Spectra Energy the assets and liabilities, including related tax effects, associated with Spectra Energy’s employee benefits and captive insurance positions, as well as miscellaneous corporate assets and liabilities. The net effect of these non-cash transfers during the first quarter of 2007 is reflected as an increase of $1 million to Additional Paid-in Capital and a decrease of $115 million to Accumulated Other Comprehensive Income in the Condensed Consolidated Statements of Stockholders’ Equity.

2. Business Segments

Spectra Energy manages its business in four reportable segments: U.S. Transmission, Distribution, Western Canada Transmission & Processing and Field Services. The remainder of Spectra Energy’s business operations is presented as “Other,” and consists of unallocated corporate costs, wholly owned captive insurance subsidiaries, employee benefit plan assets and liabilities, and other miscellaneous activities.

Spectra Energy’s chief operating decision maker regularly reviews financial information about each of these business units in deciding how to allocate resources and evaluate performance. All of the business units are considered reportable segments under Statement of Financial Accounting Standards (SFAS) No. 131, “Disclosures about Segments of an Enterprise and Related Information.” There is no aggregation within Spectra Energy’s defined business segments.

U.S. Transmission provides transportation and storage of natural gas for customers in various regions of the Eastern and Southeastern United States and the Maritime Provinces in Canada. The natural gas transmission and storage operations in the U.S. are primarily subject to the Federal Energy Regulatory Commission’s (FERC’s) rules and regulations.

Distribution provides retail natural gas distribution service in Ontario, as well as natural gas transportation and storage services to other utilities and energy market participants in Ontario, Quebec and the United States. These services are provided by Union Gas Limited (Union Gas), and are primarily subject to the rules and regulations of the Ontario Energy Board (OEB).

9

Western Canada Transmission & Processing provides transportation of natural gas, natural gas gathering and processing services, and natural gas liquids (NGLs) extraction, fractionation, transportation, storage and marketing to customers in Western Canada and the northern tier of the United States. This segment conducts business primarily through the BC Pipeline and Field Services operations, the Empress System and the Midstream business, which owns a 46% interest in the operations of the Spectra Energy Income Fund (Income Fund). BC Pipeline and Field Services’ operations are primarily subject to the rules and regulations of Canada’s National Energy Board (NEB). See Note 16 for a discussion of the acquisition by Spectra Energy in May 2008 of all of the outstanding units of the Income Fund.

Field Services gathers and processes natural gas and fractionates, markets and trades NGLs. It conducts operations through DCP Midstream, which is owned 50% by Spectra Energy and 50% by ConocoPhillips. Field Services gathers raw natural gas through gathering systems located in eight major natural gas producing regions: Permian Basin, Mid-Continent, Rocky Mountain, East Texas-North Louisiana, Barnett Shale, Gulf Coast, South Texas and Central Texas.

Spectra Energy’s reportable segments offer different products and services and are managed separately as business units. Management evaluates segment performance based on earnings before interest and taxes (EBIT) from continuing operations, after deducting minority interest expense related to those profits.

On a segment basis, EBIT excludes discontinued operations, represents all profits from continuing operations (both operating and non-operating) before deducting interest and taxes, and is net of the minority interest expense related to those profits. Cash, cash equivalents and short-term investments are managed centrally by Spectra Energy, so the associated realized and unrealized gains and losses from foreign currency transactions and interest and dividend income on those balances are excluded from the segments’ EBIT.

Transactions between reportable segments are accounted for on the same basis as with unaffiliated third parties.

Business Segment Data

	Unaffiliated Revenues		Intersegment Revenues			Total Revenues			Segment EBIT / Consolidated Earnings from Continuing Operations before Income Taxes
	(in millions)
Three Months Ended March 31, 2008
U.S. Transmission	$	402	$	1		$	403		$	226
Distribution		800		—			800			165
Western Canada Transmission & Processing		405		—			405			131
Field Services		—		—			—			192
Total reportable segments		1,607		1			1,608			714
Other		1		8			9			(20	)
Eliminations		—		(9	)		(9	)		—
Interest expense		—		—			—			(158	)
Interest income and other		—		—			—			4
Total consolidated	$	1,608	$	—		$	1,608		$	540
Three Months Ended March 31, 2007
U.S. Transmission	$	376	$	1		$	377		$	220
Distribution		713		—			713			144
Western Canada Transmission & Processing		311		—			311			74
Field Services		—		—			—			82
Total reportable segments		1,400		1			1,401			520
Other		1		6			7			(15	)
Eliminations		—		(7	)		(7	)		—
Interest expense		—		—			—			(155	)
Interest income and other		—		—			—			5
Total consolidated	$	1,401	$	—		$	1,401		$	355

10

3. Regulatory Matters

Union Gas. Union Gas has rates that are approved by the OEB. Final 2008 rates, reflecting the incentive regulation settlement agreement accepted by the OEB on January 17, 2008, were implemented April 1, 2008, retroactive to January 1, 2008.

In November 2006, Union Gas received a decision from the OEB on the regulation of rates for gas storage services in Ontario. The OEB determined that it would not regulate the rates for storage services to customers outside Union Gas’ franchise area or the rates for new storage services to customers within its franchise area. In June 2007, four parties petitioned the Lieutenant Governor in Council (LGIC) of Ontario to direct the OEB to review and change the November 2006 decision. The LGIC considered the petitions and confirmed the OEB’s decision in April 2008.

BC Pipeline and Field Services. The existing two-year BC Pipeline settlement agreement reached with customers and approved by the NEB expired on December 31, 2007. On December 18, 2007, the NEB approved 2008 interim transportation tolls until such time as the final 2008 transportation tolls are filed and approved. BC Pipeline is currently involved in negotiating a toll settlement with its shippers for a subsequent settlement period and, at a minimum, final tolls for 2008.

Maritimes & Northeast Pipeline, L.P. (M&N LP). In 2007, M&N LP operated under an NEB-approved toll settlement that expired December 31, 2007. A toll settlement agreement for the 2008 fiscal year was approved by the NEB on January 16, 2008.

4. Income Taxes

Income tax expense from continuing operations for the three months ended March 31, 2008 was $173 million, compared to $119 million reported in the same period in 2007, increasing primarily as a result of higher earnings in 2008. The effective tax rate decreased from 33.5% in the first quarter of 2007 to 32.0% for the first quarter of 2008.

Spectra Energy recognized no material changes in unrecognized tax benefits during the first quarter of 2008. Although uncertain, Spectra Energy believes it is reasonably possible that prior to March 31, 2009 the total amount of unrecognized tax benefits could decrease by approximately $12 million. The anticipated changes in unrecognized tax benefits relate to expected audit settlements focused primarily on classification of certain tax attributes, transfer pricing and expiration of statue of limitations.

5. Comprehensive Income

Comprehensive income includes net income and all other non-owner changes in equity. Components of comprehensive income are as follows:

	Three Months Ended March 31,
	2008			2007
	(in millions)
Net income	$	367		$	236
Other comprehensive income
Foreign currency translation adjustments		(166	)		28
Reclassification of cash flow hedges into earnings (a)		(3	)		—
Pension and benefits impact of SFAS 158 (b)		20			—
Other comprehensive income, net of tax		(149	)		28
Total comprehensive income	$	218		$	264

(a) Net of $1 million tax benefit for the three months ended March 31, 2008.

(b) Includes a $16 million net tax benefit for the three months ended March 31, 2008.

6. Earnings per Common Share

Basic earnings per common share (EPS) is computed by dividing earnings available for common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed by dividing earnings available for common stockholders by the diluted weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options, stock-based performance unit awards and phantom stock awards, were exercised, settled or converted into common stock.

11

The following table presents Spectra Energy’s basic and diluted EPS calculations:

	Three Months Ended March 31,
	2008		2007
	(in millions, except per-share amounts)
Net income	$	367	$	236
Weighted average common shares
Basic		633		631
Diluted		635		634
Earnings per common share – basic and diluted	$	0.58	$	0.37

Weighted-average shares used to calculate diluted EPS includes the effect of certain options and restricted stock awards. Certain other options and stock awards related to approximately nine million shares for the three months ended March 31, 2008 and six million shares for the three months ended March 31, 2007 were not included in the calculation of diluted EPS because either the option exercise prices were greater than the average market price of the common shares during these periods or performance measures related to the awards had not yet been met.

7. Inventory

Inventory consists of natural gas and NGLs held in storage for transmission and processing, and also includes materials and supplies. Natural gas inventories related to the Distribution segment in Canada are valued at costs approved by the OEB. The difference between the approved price and the actual cost of gas purchased is recorded in either accounts receivable or other current liabilities for future disposition with customers, subject to approval by the OEB. The remaining inventory is recorded at cost, primarily using average cost.

The components of inventory are as follows:

	March 31, 2008		December 31, 2007
	(in millions)
Natural gas	$	16	$	154
Natural gas liquids		22		25
Materials and supplies		93		108
Total inventory	$	131	$	287

8. Investments in and Loans to Unconsolidated Affiliates

Spectra Energy’s most significant investment in unconsolidated affiliates is the 50% investment in DCP Midstream, which is accounted for under the equity method of accounting. The following represents summary financial information for DCP Midstream, presented at 100%.

	Three Months Ended March 31,
	2008		2007
	(in millions)
Operating revenues	$	4,046	$	2,890
Operating expenses		3,634		2,686
Operating income		412		204
Net income		383		164

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9. Debt and Credit Facilities

Credit Facilities Summary

					Outstanding at March 31, 2008
	Expiration Date	Credit Facilities Capacity			Commercial Paper		Term Loan		Revolving Credit		Letters of Credit		Total
					(in millions)
Spectra Energy Capital, LLC	2012	$	1,500	(a)	$	757	$	—	$	—	$	3	$	760
Westcoast Energy, Inc.	2011		195	(b)		—		—		—		—		—
Union Gas Limited	2012		488	(c)		—		—		—		—		—
Spectra Energy Partners, LP	2012		500	(d)		—		133		109		—		242
Total		$	2,683		$	757	$	133	$	109	$	3	$	1,002

(a) Contains a covenant requiring the debt-to-total capitalization ratio to not exceed 65%.

(b) Denominated in Canadian dollars totaling 200 million and contains a covenant that requires the debt-to-total capitalization ratio to not exceed 75%.

(c) Denominated in Canadian dollars totaling 500 million and contains a covenant that requires the debt-to-total capitalization ratio to not exceed 75% and a provision which requires Union Gas to repay all borrowings under the facility for a period of two days during the second quarter of each year.

(d) Contains a covenant requiring the borrower to collateralize the term loan with qualifying investment-grade securities in an amount equal to or greater than the outstanding principal amount of the loan. The terms of the credit facility allow for liquidation of collateral to fund capital expenditures or certain acquisitions provided that an equal amount of term loan is converted to a revolving loan. Investments in marketable securities totaling $135 million at March 31, 2008 and $155 million at December 31, 2007 were pledged as collateral against the term loan. These investments are classified as Investments and Other Assets – Other on the Condensed Consolidated Balance Sheets.

Spectra Energy’s debt and credit agreements contain various financial and other covenants. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements. As of March 31, 2008, Spectra Energy was in compliance with those covenants. In addition, credit agreements allow for acceleration of payments or termination of the agreements due to nonpayment, or in certain cases, due to the acceleration of other significant indebtedness of the borrower or certain of its subsidiaries. None of the debt or credit agreements contain material adverse change clauses.

See also Note 16 for discussion of long-term debt issuances in April 2008.

10. Fair Value Measurements

Effective January 1, 2008, Spectra Energy adopted SFAS No. 157, “Fair Value Measurements,” for financial assets and liabilities. SFAS No. 157 defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS No. 157 requires entities to, among other things, maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

SFAS No. 157 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Spectra Energy’s market assumptions. In accordance with SFAS No. 157, these two types of inputs have created the following fair value hierarchy:

• Level 1 – Quoted unadjusted prices for identical instruments in active markets.

• Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

• Level 3 – Model derived valuations in which one or more significant inputs or significant value drivers are unobservable.

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The following table presents for each of the fair value hierarchy levels, Spectra Energy’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2008.

Description	Balance Sheet Caption	Total At March 31, 2008		Level 1		Level 2		Level 3
				(in millions)
Available-for-sale securities	Cash and cash equivalents	$	144	$	—	$	144	$	—
Short term investments	Short-term investments		14		14		—		—
Short-term derivative assets	Other current assets		51		—		—		51
Available-for-sale securities	Investments and other assets-other		190		55		135		—
Employee benefit assets	Investments and other assets-other		24		24		—		—
Long-term derivative assets	Investments and other assets-other		83		—		21		62
Total Assets		$	506	$	93	$	300	$	113
Short-term derivative liabilities	Other current liabilities	$	7	$	—	$	—	$	7
Long-term derivative liabilities	Deferred credits and other liabilities-regulatory and other		16		—		16		—
Total Liabilities		$	23	$	—	$	16	$	7

The table below reconciles assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

	Short-Term Derivative Asset		Short-Term Derivative Liability			Long-Term Derivative Asset		Long-Term Derivative Liability
	(in millions)
Fair value, December 31, 2007	$	—	$	—		$	47	$	(21	)
Total gains or losses (realized/unrealized):
Included in earnings		—		—			11		(11	)
Included in regulatory assets		50		—			—		—
Included in Other Comprehensive Income		—		(7	)		4		—
Normal purchases and sales election under SFAS No. 133		—		—			—		32
Purchases, issuances and settlements		1		—			—		—
Fair value, March 31, 2008	$	51	$	(7	)	$	62	$	—
Total gains (losses) for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets held at March 31, 2008	$	—	$	—		$	11	$	(11	)

Level 2 Valuation Techniques

Fair values of Spectra Energy’s available-for-sale securities, primarily fixed-income debt instruments that are actively traded in the secondary market, are determined based on market-based prices. These valuations may include inputs such as quoted market prices of the exact or similar instruments, broker or dealer quotations, or alternative pricing sources that may include models or matrix pricing tools, with reasonable levels of price transparency.

Level 3 Valuation Techniques

Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques where at least one significant model assumption or input is unobservable. Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation.

The fair values of Level 3 derivative instruments are estimated using proprietary valuation models that utilize both market observable and unobservable parameters. The long-term derivative asset and liability is valued using internal valuation models and

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techniques that include such inputs as forward natural gas and power prices, forward interest rates and foreign currency assumptions. The short-term derivative asset is valued based upon interest rates, natural gas options pricing for current and future months including volatility, foreign exchange fluctuations and swap values.

Gains and losses for the quarter ended March 31, 2008 associated with the long-term derivative asset and liability are reported in Other Income and Expenses, net on the Condensed Consolidated Statement of Operations and are of offsetting amounts, and as such, have no net impact on the Condensed Consolidated Statements of Operations.

During the period, there were no adjustments to assets and liabilities measured at fair value on a nonrecurring basis.

11. Commitments and Contingencies

Environmental

Spectra Energy is subject to international, federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time, imposing new obligations on Spectra Energy.

Remediation activities. Like others in the energy industry, Spectra Energy and its affiliates are responsible for environmental remediation at various contaminated sites. These include some properties that are part of ongoing Spectra Energy operations, sites formerly owned or used by Spectra Energy entities, and sites owned by third parties. Remediation typically involves management of contaminated soils and may involve groundwater remediation. Managed in conjunction with relevant international, federal, state/provincial and local agencies, activities vary with site conditions and locations, remedial requirements, complexity and sharing of responsibility. If remediation activities involve statutory joint and several liability provisions, strict liability, or cost recovery or contribution actions, Spectra Energy or its affiliates could potentially be held responsible for contamination caused by other parties. In some instances, Spectra Energy may share liability associated with contamination with other potentially responsible parties, and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. All of these sites generally are managed in the normal course of business or affiliate operations. Management believes that completion or resolution of these matters will not have a material adverse effect on Spectra Energy’s consolidated results of operations, financial position or cash flows.

Extended Environmental Activities, Accruals. Included in Deferred Credits and Other Liabilities—Regulatory and Other on the Condensed Consolidated Balance Sheets were accruals related to extended environmental-related activities totaling $20 million as of March 31, 2008 and $22 million as of December 31, 2007. These accruals represent provisions for costs associated with remediation activities at some current and former sites, as well as other environmental contingent liabilities. Management believes that completion or resolution of these matters will not have a material adverse effect on Spectra Energy’s consolidated results of operations, financial position or cash flows.

Litigation

Sonatrach/Sonatrading Arbitration. In an arbitration proceeding that commenced in January 2001 in London, England, Duke Energy LNG Sales Inc., now Spectra Energy LNG Sales, Inc. (Spectra Energy LNG), claimed that Sonatrach, the Algerian state-owned energy company, together with its subsidiary, Sonatrading, breached their shipping obligations under a liquefied natural gas (LNG) purchase agreement and related transportation agreements (the LNG Agreements) relating to Spectra Energy LNG’s purchase of LNG from Algeria and its transportation by LNG tanker to Lake Charles, Louisiana. Sonatrading and Sonatrach claimed that Spectra Energy LNG had repudiated the LNG Agreements by allegedly failing to diligently perform LNG marketing obligations. In 2003, the arbitration tribunal issued a Partial Award on liability issues and found that Sonatrach and Sonatrading breached their obligations to provide shipping. The tribunal also found that Spectra Energy LNG breached the LNG Purchase Agreement by failing to perform marketing obligations. The tribunal issued its award on damages on November 30, 2006. In the second quarter of 2007, the parties reached a settlement agreement on claims which accrued on or prior to May 24, 2002 and Spectra Energy LNG received $18 million, which was recorded as $11 million in Income from Discontinued Operations, Net of Tax in the Consolidated Statements of Operations. The parties continue settlement discussions that address Spectra Energy LNG’s claims for the period after May 24, 2002.

Duke Energy Retirement Cash Balance Plan. A class action lawsuit was filed in federal court in South Carolina against Duke Energy and the Duke Energy Retirement Cash Balance Plan. Various causes of action are alleged, including violations of the

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Employee Retirement Income Security Act of 1974 (ERISA) and the Age Discrimination in Employment Act. These allegations arise out of the conversion of the Duke Power Company Employees’ Retirement Plan into the Duke Power Company Retirement Cash Balance Plan. The plaintiffs seek to represent present and former participants in the Duke Energy Retirement Cash Balance Plan. This group is estimated to include approximately 36,000 persons. Duke Energy filed its answer in March 2006. A motion to certify a class action was filed by the plaintiffs and Duke Energy filed its response in opposition to this motion. This class certification motion is pending before the federal court along with dispositive motions that have been filed. A hearing on the motions was held in December 2007, and the Court took the matters under advisement. This case may proceed to trial on or after July 2008 based on the current Scheduling Order entered by the Court. A second class action lawsuit was filed in federal court in South Carolina, alleging similar claims and seeking to represent the same class of defendants. The second case has been voluntarily dismissed, without prejudice. In connection with the spin-off from Duke Energy in January 2007, Spectra Energy has agreed to share with Duke Energy any liabilities or damages associated with this matter that relate to Spectra Energy employees that may be members of the plaintiff class. It is not possible to predict with certainty whether Spectra Energy will incur any liability or to estimate the damages, if any, that might be incurred in connection with this matter.

Other Litigation and Legal Proceedings. Spectra Energy and its subsidiaries are involved in other legal, tax and regulatory proceedings in various forums arising in the ordinary course of business, including matters regarding contract, royalty, measurement and payment claims, some of which involve substantial monetary amounts. Spectra Energy has insurance coverage for certain of these losses should they be incurred. Management believes that the final disposition of these proceedings will not have a material adverse effect on Spectra Energy’s consolidated results of operations, financial position or cash flows.

Spectra Energy has exposure to certain legal matters that are described herein. Spectra Energy had no material reserves as of March 31, 2008 or December 31, 2007 related to litigation matters in accordance with management’s best estimate of probable loss as defined by SFAS No. 5, “Accounting for Contingencies.”

Legal costs related to the defense of loss contingencies are expensed as incurred.

Other Commitments and Contingencies

Spectra Energy Islander East Pipeline Company, LLC (Spectra Islander), a wholly owned subsidiary, is a 50% equity partner and operator for the Islander East pipeline project which is owned by Islander East Pipeline Company, L.L.C. (Islander East), a proposed pipeline that would connect natural gas supplies to markets on Long Island, New York. This project has received FERC and other approvals but has been denied a Section 401 Water Quality Certificate by the State of Connecticut and is the subject of an appeal before the 2^nd Circuit U.S. Court of Appeals (the 2^nd Circuit). Oral arguments on the appeal were heard in April 2007. In August 2007, a Connecticut U.S. District Court determined that the Secretary of Commerce’s 2004 decision to override the State’s denial to issue a Coastal Zone Management Act (CZM) approval was not supported by the record and remanded the matter back to the Secretary of Commerce. Islander East and the U.S. Office of Solicitor General (the Solicitor General) then filed appeals with the 2^nd Circuit U.S. Court of Appeals to overturn the lower court’s decision to remand and the State filed a motion to dismiss claiming the U.S. District Court’s remand order was non-appealable. In January 2008, the 2^nd Circuit granted the State’s motion to dismiss. In March 2008, Islander East and the Solicitor General filed separate petitions with the 2^nd Circuit seeking reconsideration of the U.S. District Court’s decision in the CZM case. On May 2, 2008, the 2nd Circuit denied Islander East’s appeal to overturn the State’s second denial to issue a Water Quality Certificate. Spectra Islander is reviewing that decision to determine if a petition for review by the entire 2^nd Circuit bench or a petition for certiorari with the U.S. Supreme Court is appropriate. Management continues to believe that there are sufficient factual and legal bases supporting Islander East’s position that the State’s denial of the water quality certificate was improper and that the U.S. District Court’s decision was in error. Management has deferred the project completion date from its previous plans to accommodate the petitions for review of the 2^nd Circuit’s dismissal of the CZM case and further appeals, if any, following management’s evaluation of the 2^nd Circuit’s May 2, 2008 decision. However, if the State’s position is ultimately upheld, Islander East may be unable to proceed with the project as it is currently configured. As of March 31, 2008, Islander East had incurred and capitalized cumulative development costs of $67 million. Algonquin, a wholly owned subsidiary, also has a companion project, the AGT Islander East Lease Project. As of March 31, 2008 Algonquin had incurred and capitalized cumulative development costs of $20 million associated with the AGT Islander East Lease Project. Management expects the development and material costs incurred to date could be utilized by other capital projects of Spectra Energy or a deferred project of Islander East.

See Note 12 for a discussion of guarantees and indemnifications.

12. Guarantees and Indemnifications

Spectra Energy and certain of its subsidiaries have various financial guarantees and indemnifications which are issued in the normal course of business. As discussed below, these contracts include financial guarantees, stand-by letters of credit, debt

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guarantees, surety bonds and indemnifications. Spectra Energy and its subsidiaries enter into these arrangements to facilitate a commercial transaction with a third party by enhancing the value of the transaction to the third party. To varying degrees, these guarantees involve elements of performance and credit risk, which are not included on the Condensed Consolidated Balance Sheets. The possibility of Spectra Energy having to honor its contingencies is largely dependent upon future operations of various subsidiaries, investees and other third parties, or the occurrence of certain future events.

Spectra Energy has issued performance guarantees to customers and other third parties that guarantee the payment and performance of other parties, including certain non-wholly owned entities. In connection with the spin-off of Spectra Energy to Duke Energy shareholders, certain guarantees that were previously issued by Spectra Energy have been assigned to, or replaced by, Duke Energy in 2006. For any remaining guarantees of other Duke Energy obligations, Duke Energy has indemnified Spectra Energy against any losses incurred under these guarantee arrangements.

The maximum potential amount of future payments Spectra Energy could have been required to make under these performance guarantees as of March 31, 2008 was approximately $868 million, of which approximately $468 million has been indemnified by Duke Energy, as discussed above. Approximately $34 million of the performance guarantees expire in the years 2008 through 2010, with the remaining performance guarantees expiring after 2010 or having no contractual expiration.

Additionally, Spectra Energy has issued joint and several guarantees to some of the Duke/Fluor Daniel (D/FD) project owners, guaranteeing the performance of D/FD under its engineering, procurement and construction contracts and other contractual commitments. Substantially all of these guarantees have no contractual expiration and no stated maximum amount of future payments that Spectra Energy could be required to make. Fluor Enterprises Inc., as 50% owner in D/FD, has issued similar joint and several guarantees to the same D/FD project owners. In accordance with the D/FD partnership agreement, each of the partners is responsible for 50% of any payments to be made under those guarantees.

Westcoast Energy Inc. (Westcoast), a wholly owned subsidiary, has issued performance guarantees to third parties guaranteeing the performance of unconsolidated entities, such as equity method investments, and of entities previously sold by Westcoast to third parties. Those guarantees require Westcoast to make payment to the guaranteed third party upon the failure of such unconsolidated or sold entity to make payment under some of its contractual obligations, such as debt, purchase contracts and leases. Certain guarantees that were previously issued by Westcoast for obligations of entities that remained a part of Duke Energy are considered guarantees of third-party performance; however, Duke Energy has indemnified Spectra Energy against any losses incurred under these guarantee arrangements.

The maximum potential amount of future payments Westcoast could have been required to make under those performance guarantees of non-wholly owned entities and third-party entities as of March 31, 2008 was $116 million, of which $30 million has been indemnified by Duke Energy, as discussed above. Of the total Westcoast amount, $19 million relates to guarantees associated with the debt at Maritimes & Northeast Limited Partnership, a non-wholly owned consolidated entity. Guarantees related to Westcoast have no contractual expiration.

Spectra Energy has entered into various indemnification agreements related to purchase and sale agreements and other types of contractual agreements with vendors and other third parties. These agreements typically cover environmental, tax, litigation and other matters, as well as breaches of representations, warranties and covenants. Typically, claims may be made by third parties for various periods of time, depending on the nature of the claim. Spectra Energy’s potential exposure under these indemnification agreements can range from a specified amount, such as the purchase price, to an unlimited dollar amount, depending on the nature of the claim and the particular transaction. Spectra Energy is unable to estimate the total potential amount of future payments under these indemnification agreements due to several factors, such as the unlimited exposure under certain guarantees.

At March 31, 2008, the amounts recorded for the guarantees and indemnifications described above, including the indemnifications by Duke Energy to Spectra Energy, are not material, both individually and in the aggregate.

13. Employee Benefit Plans

Retirement Plans. Effective with the separation from Duke Energy on January 2, 2007, Spectra Energy established a new qualified non-contributory defined benefit (DB) retirement plan for U.S. employees and new non-qualified plans for various executive retirement and savings plans. Spectra Energy’s Westcoast subsidiary maintains retirement plans that cover substantially all employees of Spectra Energy’s Canadian operations. In accordance with the separation agreement with Duke Energy, net qualified pension plan assets of $49 million and $52 million in liabilities associated with various executive retirement and savings plans were transferred to Spectra Energy in 2007.

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Spectra Energy’s policy is to fund amounts for U.S. retirement plans on an actuarial basis to provide assets sufficient to meet benefits to be paid to plan participants. Spectra Energy did not make contributions to its U.S. retirement plans in the three-month periods ended March 31, 2008 and 2007, and does not anticipate making any contribution to the U.S. plans during the remainder of 2008.

Spectra Energy’s policy is to fund its DB retirement plans in Canada on an actuarial basis and in accordance with Canadian pension standards legislation in order to accumulate assets sufficient to meet benefit payments. Contributions to the defined contribution (DC) retirement plan are determined in accordance with the terms of the plan. Spectra Energy made contributions to the Canadian qualified DB plans of $11 million and $10 million during the three-month periods ended March 31, 2008 and 2007, respectively. Spectra Energy anticipates that it will make total contributions of approximately $35 million to the Canadian DB plans in 2008. Spectra Energy also made contributions to the Canadian DC plan of $2 million and $1 million during the three-month periods ended March 31, 2008 and 2007, respectively. Spectra Energy anticipates that it will make total contributions of approximately $8 million to the Canadian DC plans in 2008.

Qualified Pension Plans – Components of Net Periodic Pension Costs

	U.S.						Canada
	Three Months Ended March 31,
	2008			2007			2008			2007
	(in millions)
Service cost benefit earned	$	2		$	3		$	4		$	4
Interest cost on projected benefit obligation		7			6			10			8
Expected return on plan assets		(9	)		(9	)		(12	)		(10	)
Amortization of loss		1			1			2			2
Net periodic pension cost	$	1		$	1		$	4		$	4
Non-Qualified Pension Benefits Plans – Components of Net Periodic Pension Costs
	U.S.						Canada
	Three Months Ended March 31,
	2008			2007			2008			2007
	(in millions)
Service cost benefit earned	$	—		$	—		$	1		$	—
Interest cost on projected benefit obligation		—			—			1			1
Amortization of loss		—			—			—			1
Net periodic pension cost	$	—		$	—		$	2		$	2

Other Post-Retirement Benefit Plans. Spectra Energy and most of its subsidiaries provide certain health care and life insurance benefits for retired employees on a contributory and non-contributory basis. In accordance with the separation agreement, $194 million in liabilities associated with other post-retirement benefits were transferred to Spectra Energy upon separation from Duke Energy.

Other Post-Retirement Benefit Plans – Components of Net Periodic Costs

	U.S.						Canada
	Three Months Ended March 31,
	2008			2007			2008		2007
	(in millions)
Service cost benefit	$	—		$	—		$	1	$	1
Interest cost on accumulated post-retirement benefit obligation		4			4			1		1
Expected return on plan assets		(1	)		(1	)		—		—
Amortization of net transition liability		1			1			—		—
Amortization of prior service credit		—			(1	)		—		—
Amortization of loss		—			1			—		—
Net periodic other post-retirement benefit cost	$	4		$	4		$	2	$	2

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14. Consolidating Financial Information

Spectra Energy Corp has fully and unconditionally guaranteed the payment of principal and interest under all series of notes outstanding under the Senior Indenture of Spectra Energy Capital, LLC (Spectra Capital), the wholly owned, consolidated subsidiary of Spectra Energy Corp. In accordance with Securities and Exchange Commission rules, the following condensed consolidating financial information is presented. The information shown for Spectra Energy Corp and Spectra Capital is presented utilizing the equity method of accounting for investments in subsidiaries, as required. The non-guarantor subsidiaries column represents all wholly owned subsidiaries of Spectra Capital. This information should be read in conjunction with Spectra Energy’s accompanying condensed consolidated financial statements and notes thereto.

Spectra Energy Corp

Condensed Consolidating Statement of Operations

Three Months Ended March 31, 2008

(In millions)

	Spectra Energy Corp			Spectra Capital		Non-Guarantor Subsidiaries		Eliminations			Spectra Energy Corp Consolidated
Total operating revenues	$	—		$	—	$	1,608	$	—		$	1,608
Total operating expenses		5			—		1,106		—			1,111
Operating income (loss)		(5	)		—		502		—			497
Equity in earnings of unconsolidated affiliates		—			—		209		—			209
Equity in earnings of subsidiaries		371			552		—		(923	)		—
Other income and expenses, net		(1	)		2		10		—			11
Interest expense		—			58		100		—			158
Minority interest expense		—			—		19		—			19
Earnings before income taxes		365			496		602		(923	)		540
Income tax expense (benefit)		(2	)		125		50		—			173
Net income	$	367		$	371	$	552	$	(923	)	$	367

Spectra Energy Corp

Condensed Consolidating Statement of Operations

Three Months Ended March 31, 2007

(In millions)

	Spectra Energy Corp			Spectra Capital			Non-Guarantor Subsidiaries		Eliminations			Spectra Energy Corp Consolidated
Total operating revenues	$	—		$	—		$	1,401	$	—		$	1,401
Total operating expenses		8			—			974		—			982
Gains on sales of other assets and other, net		—			—			1		—			1
Operating income (loss)		(8	)		—			428		—			420
Equity in earnings of unconsolidated affiliates		—			—			90		—			90
Equity in earnings of subsidiaries		239			279			—		(518	)		—
Other income and expenses, net		2			(1	)		15		—			16
Interest expense		—			52			103		—			155
Minority interest expense		—			—			16		—			16
Earnings before income taxes		233			226			414		(518	)		355
Income tax expense (benefit)		(3	)		(13	)		135		—			119
Net income	$	236		$	239		$	279	$	(518	)	$	236

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Spectra Energy Corp

Condensed Consolidating Balance Sheet

March 31, 2008

(In millions)

	Spectra Energy Corp			Spectra Capital		Non-Guarantor Subsidiaries			Eliminations			Spectra Energy Corp Consolidated
Cash and cash equivalents	$	—		$	—	$	252		$	—		$	252
Receivables (payables)—consolidated subsidiaries		(1	)		254		(246	)		(7	)		—
Receivables—other		1			7		986			—			994
Other current assets		14			—		270			—			284
Total current assets		14			261		1,262			(7	)		1,530
Investments in and loans to unconsolidated affiliates		—			—		1,966			—			1,966
Investments in consolidated subsidiaries		7,666			11,486		—			(19,152	)		—
Advances receivable (payable)—consolidated subsidiaries		(938	)		1,727		(789	)		—			—
Goodwill		—			—		3,864			—			3,864
Other assets		104			237		300			—			641
Property, plant and equipment, net		—			—		14,168			—			14,168
Regulatory assets and deferred debits		4			9		930			—			943
Total Assets	$	6,850		$	13,720	$	21,701		$	(19,159	)	$	23,112
Accounts payable (receivable)—consolidated subsidiaries	$	7		$	42	$	(42	)	$	(7	)	$	—
Accounts payable—other		2			63		311			—			376
Accrued taxes payable (receivable)		(290	)		337		138			—			185
Current maturities of long-term debt		—			148		326			—			474
Other current liabilities		7			1,191		523			—			1,721
Total current liabilities		(274	)		1,781		1,256			(7	)		2,756
Long-term debt		—			2,465		5,615			—			8,080
Deferred credits and other liabilities		179			1,808		2,536			—			4,523
Minority interests		—			—		808			—			808
Total stockholders’ equity		6,945			7,666		11,486			(19,152	)		6,945
Total Liabilities and Stockholders’ Equity	$	6,850		$	13,720	$	21,701		$	(19,159	)	$	23,112

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Spectra Energy Corp

Condensed Consolidating Balance Sheet

December 31, 2007

(In millions)

	Spectra Energy Corp			Spectra Capital		Non-Guarantor Subsidiaries			Eliminations			Spectra Energy Corp Consolidated
Cash and cash equivalents	$	—		$	—	$	94		$	—		$	94
Receivables (payables)—consolidated subsidiaries		(9	)		269		(255	)		(5	)		—
Receivables—other		2			8		897			—			907
Other current assets		8			1		369			—			378
Total current assets		1			278		1,105			(5	)		1,379
Investments in and loans to unconsolidated affiliates		—			3		1,777			—			1,780
Investments in consolidated subsidiaries		7,434			10,281		—			(17,715	)		—
Advances receivable (payable)—consolidated subsidiaries		(752	)		2,369		(1,617	)		—			—
Goodwill		—			—		3,948			—			3,948
Other assets		100			210		321			—			631
Property, plant and equipment, net		—			2		14,298			—			14,300
Regulatory assets and deferred debits		5			7		920			—			932
Total Assets	$	6,788		$	13,150	$	20,752		$	(17,720	)	$	22,970
Accounts payable (receivable)—consolidated subsidiaries	$	5		$	42	$	(42	)	$	(5	)	$	—
Accounts payable—other		7			107		249			—			363
Accrued taxes payable (receivable)		(278	)		233		130			—			85
Current maturities of long-term debt		—			—		338			—			338
Other current liabilities		26			544		1,066			—			1,636
Total current liabilities		(240	)		926		1,741			(5	)		2,422
Long-term debt		—			2,975		5,370			—			8,345
Deferred credits and other liabilities		171			1,815		2,554			—			4,540
Minority interests		—			—		806			—			806
Total stockholders’ equity		6,857			7,434		10,281			(17,715	)		6,857
Total Liabilities and Stockholders’ Equity	$	6,788		$	13,150	$	20,752		$	(17,720	)	$	22,970

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Spectra Energy Corp

Condensed Consolidating Statements of Cash Flows

Three Months Ended March 31, 2008

(In millions)

	Spectra Energy Corp			Spectra Capital			Non-Guarantor Subsidiaries			Eliminations		Spectra Energy Corp Consolidated
Net cash provided by (used in) operating activities	$	(31	)	$	(86	)	$	790		$	—	$	673
Net cash used in investing activities		—			—			(372	)		—		(372	)
Net cash provided by (used in) financing activities		31			86			(256	)		—		(139	)
Effect of exchange rate changes on cash		—			—			(4	)		—		(4	)
Net increase in cash and cash equivalents		—			—			158			—		158
Cash and cash equivalents at beginning of period		—			—			94			—		94
Cash and cash equivalents at end of period	$	—		$	—		$	252		$	—	$	252

Spectra Energy Corp

Condensed Consolidating Statements of Cash Flows

Three Months Ended March 31, 2007

(In millions)

	Spectra Energy Corp			Spectra Capital			Non-Guarantor Subsidiaries			Eliminations		Spectra Energy Corp Consolidated
Net cash provided by (used in) operating activities	$	(25	)	$	(71	)	$	342		$	—	$	246
Net cash used in investing activities		—			—			(174	)		—		(174	)
Net cash provided by financing activities		25			88			107			—		220
Effect of exchange rate changes on cash		—			—			5			—		5
Net increase in cash and cash equivalents		—			17			280			—		297
Cash and cash equivalents at beginning of period		—			(44	)		343			—		299
Cash and cash equivalents at end of period	$	—		$	(27	)	$	623		$	—	$	596

15. New Accounting Pronouncements

The following new accounting pronouncements were adopted during the three months ended March 31, 2008:

SFAS No. 157, “Fair Value Measurements.” In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13.” Also in February 2008, the FASB issued FSP No. 157-2, “Effective Date of FASB Statement No. 157,” which delays the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statement on a recurring basis (at least annually). The adoption of SFAS No. 157 and FSP No. FAS 157-1 by Spectra Energy effective January 1, 2008 did not have a material impact on Spectra Energy’s consolidated results of operations, financial position or cash flows. See Note 10 for further discussion. Spectra Energy has elected to defer the adoption of SFAS No. 157 for its goodwill impairment test and the measurement of asset retirement obligations until January 1, 2009 as permitted.

SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” In February 2007, the FASB issued SFAS No. 159, which permits entities to choose to measure certain financial instruments at fair value. Spectra Energy has determined it will not elect fair value measurements for financial assets and financial liabilities included in the scope of SFAS No. 159.

EITF 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards.” In June 2007, the FASB Emerging Issues Task Force (EITF) reached a consensus that a realized income tax benefit from dividends or dividend equivalents that are charged to retained earnings and are paid to employees for equity classified nonvested equity shares, nonvested equity share

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units, and outstanding equity share options should be recognized as an increase to additional paid-in capital. The amount recognized in additional paid-in capital for the realized income tax benefit from dividends on those awards should be included in the pool of excess tax benefits available to absorb tax deficiencies on share-based payment awards. EITF 06-11 was applied to the income tax benefits that result from dividends on equity-classified employee share-based payment awards that are declared after December 31, 2007. The effect of adopting EITF 06-11 was not material to Spectra Energy’s consolidated results of operations, financial position or cash flows as of and for three month period ended March 31, 2008 and is not expected to be material to future periods.

The following new accounting pronouncements have been issued, but have not yet been adopted as of March 31, 2008:

SFAS No. 141R, “Business Combinations.” In December 2007, the FASB issued SFAS No. 141R which replaces SFAS No. 141, “Business Combinations.” SFAS No. 141R requires the acquiring entity in a business combination to recognize all and only the assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and cannot be early adopted.

SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements.” In December 2007, the FASB issued SFAS No. 160 which requires all entities to report noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements. SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited.

When adopting the presentation and disclosure items, retrospective application to conform previously reported financial statements to the new presentation requirements is required. Changes to reflect the new measurement guidance for increases or decreases in ownership and other changes must be done prospectively. The new requirements for noncontrolling interests, results of operations and comprehensive income of subsidiaries change the presentation of operating results, related per-share information, and equity. SFAS No. 160 requires net income and comprehensive income to be displayed for both the controlling and the noncontrolling interests. Additional required disclosures and reconciliations include a separate schedule that shows the effects of any transactions with the noncontrolling interests on the equity attributable to the controlling interest.

Spectra Energy continues to examine the balances previously reflected as minority interests on the condensed consolidated balance sheet and of the amount of minority interest net income previously reflected within net income. Spectra Energy cannot currently estimate the full effect that this standard will have on its historical or future consolidated results of operations, financial position and cash flows.

SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133.” In March 2008, the FASB issued SFAS No. 161 which amends and expands the disclosure requirements for SFAS No. 133 with the intent to provide users of financial statements an enhanced understanding of how and why derivative instruments are used, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods within those fiscal years, beginning on or after November 15, 2008.

16. Subsequent Events

In April 2008, Spectra Energy completed the sale of Saltville Gas Storage Company L.L.C. and the P-25 pipeline to Spectra Energy Partners, LP (Spectra Energy Partners) for $107 million. Proceeds from the sale consisted of 4,207,641 Spectra Energy Partners common units, 85,870 general partner units and $5 million in cash. Spectra Energy’s ownership of Spectra Energy Partners increased from 83% to 84% as a result of the issuance of the new common and general partners units.

In April 2008, Spectra Capital issued $500 million of 6.20% notes due 2018. Net proceeds from the offering were used to fund capital expenditures and for general corporate purposes, including the repayment of commercial paper as it matures.

Also in April 2008, Union Gas issued 200 million Canadian dollars (approximately $198 million) of 5.35% notes due 2018. Net proceeds from the offering were used to refinance prior debt maturities and for general corporate purposes.

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On April 30, 2008, Spectra Energy received a special distribution of $250 million from DCP Midstream from debt financing proceeds received by DCP Midstream.

On May 1, 2008, a subsidiary of Spectra Energy acquired the 24.4 million units of the Income Fund that were held by holders other than Spectra Energy and its affiliates at a purchase price of 11.25 Canadian dollars per unit, for a total purchase price of approximately 274 million Canadian dollars ($271 million). The Income Fund is included in the Western Canada Transmission & Processing business segment. The transaction will be accounted for as a step acquisition, using the purchase method of accounting in accordance with SFAS No. 141, “Business Combinations.” The allocation of the purchase price to the assets acquired and liabilities assumed is not determinable as of the date of this report.

On May 6, 2008, Spectra Energy announced that its Board of Directors had approved a share repurchase program, authorizing Spectra Energy to purchase in the aggregate up to $600 million of shares of its outstanding common stock. Purchases under the program may be made from time to time in the open market or in other transactions such as an accelerated stock repurchase program. Timing of the repurchases will depend on market conditions.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

INTRODUCTION

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements.

Executive Overview

For the three months ended March 31, 2008 and 2007, Spectra Energy reported net income of $367 million and $236 million, respectively. The increase in net income was primarily due to higher earnings from the Distribution, Western Canada Transmission & Processing, and Field Services operations. The highlights for the three months ended March 31, 2008 include:

• U.S. Transmission’s earnings benefited from expansion projects and higher commodity prices for processing activities associated with pipeline operations;

• Distribution results reflect a stronger Canadian dollar, higher storage and transportation revenues and higher usage due to colder winter weather, partially offset by higher operating costs;

• Western Canada Transmission & Processing earnings increased primarily as a result of stronger NGL prices related to the Empress processing plant and a stronger Canadian dollar;

• Field Services earnings reflect increased commodity prices and higher volumes in 2008 and exclude the impact of the severe winter storms experienced in the first quarter of 2007; and

• Results for Other decreased primarily due to a 2007 benefit recognized as a result of the favorable resolution of a legal matter.

As Spectra Energy executes on its strategic objectives, expansion expenditures could average more than $1 billion per year over the next few years. Spectra Energy reported $375 million of capital and investment expenditures in the first quarter of 2008 of the approximately $2.4 billion that is projected for the full year, including maintenance capital.

Capital resources will include new long-term borrowings of approximately $1.5 billion in 2008. In April 2008, Spectra Capital issued $500 million of long-term debt and Union Gas issued 200 million Canadian dollars (approximately $198 million) of long-term debt. See Note 16 for further discussion.

On May 6, 2008, Spectra Energy announced that its Board of Directors had approved a share repurchase program, authorizing Spectra Energy to purchase in the aggregate up to $600 million of shares of its outstanding common stock. Purchases under the program may be made from time to time in the open market or in other transactions such as an accelerated stock repurchase program. Timing of the repurchases will depend on market conditions.

Also on May 6, 2008, Spectra Energy announced that management has recommended to its Board of Directors a dividend increase of $0.02 per common share per quarter, beginning with the third quarter of 2008. If approved, the new annual dividend would be $1.00 per share, representing a nearly 14% increase over the 2007 level of $0.88 per share.

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RESULTS OF OPERATIONS

	Three Months Ended March 31,
	2008		2007
	(in millions)
Operating revenues	$	1,608	$	1,401
Operating expenses		1,111		982
Gains on sales of other assets and other, net		—		1
Operating income		497		420
Other income and expenses, net		220		106
Interest expense		158		155
Minority interest expense		19		16
Earnings before income taxes		540		355
Income tax expense		173		119
Net income	$	367	$	236

Operating Revenues. The $207 million, or 15%, increase was driven primarily by:

• the effects of a stronger Canadian dollar on revenues at Western Canada Transmission & Processing and Distribution, and

• higher NGL prices associated with the Empress operations at Western Canada Transmission & Processing.

Operating Expenses. The $129 million, or 13%, increase was driven primarily by the effects of a stronger Canadian dollar in 2008 compared to 2007.

For a more detailed discussion of operating revenues and expenses, see the segment discussions that follow.

Operating Income. The $77 million, or 18%, increase was driven primarily by a stronger Canadian dollar and higher NGL prices associated with the Empress operations at Western Canada Transmission & Processing.

Other Income and Expenses, net. The $114 million increase represents higher equity in earnings from the Field Services segment, primarily reflecting commodity prices that were almost 70% higher in the first quarter of 2008 as compared to the first quarter of 2007.

Income Tax Expense. The $54 million increase relates primarily to higher earnings in the first quarter of 2008. The effective tax rate decreased from 33.5% in the first quarter of 2007 to 32.0% in the first quarter of 2008, primarily due to lower Canadian statutory tax rates in the 2008 period.

Segment Results

Management evaluates segment performance based on earnings before interest and taxes from continuing operations, after deducting minority interest expense related to those earnings (EBIT). On a segment basis, EBIT excludes discontinued operations, represents all profits from continuing operations (both operating and non-operating) before deducting interest and taxes, and is net of the minority interest expense related to those earnings. Cash, cash equivalents and short-term investments are managed centrally by Spectra Energy, so the gains and losses on foreign currency re-measurements, and interest and dividend income on those balances, are excluded from the segments’ EBIT. Management considers segment EBIT to be a good indicator of each segment’s operating performance from its continuing operations, as it represents the results of Spectra Energy’s ownership interest in operations without regard to financing methods or capital structures.

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Spectra Energy’s segment EBIT may not be comparable to similarly titled measures of other companies because other companies may not calculate EBIT in the same manner. Segment EBIT is summarized in the following table, and detailed discussions follow.

EBIT by Business Segment

	Three Months Ended March 31,
	2008			2007
	(in millions)
U.S. Transmission	$	226		$	220
Distribution		165			144
Western Canada Transmission & Processing		131			74
Field Services		192			82
Total reportable segment EBIT		714			520
Other		(20	)		(15	)
Total reportable segment and other EBIT		694			505
Interest expense		(158	)		(155	)
Interest income and other (a)		4			5
Consolidated earnings from continuing operations before income taxes	$	540		$	355

(a) Includes foreign currency transaction gains and losses, additional minority interest expense not allocated to the segment results and intersegment eliminations.

Minority interest expense as presented in the following segment-level discussions includes only minority interest expense related to EBIT of non-wholly owned entities. It does not include minority interest expense related to interest and taxes of those operations. The amounts discussed below include intercompany transactions that are eliminated in the Condensed Consolidated Financial Statements.

U.S. Transmission

	Three Months Ended March 31,
	2008		2007		Increase (Decrease)
	(in millions, except where noted)
Operating revenues	$	403	$	377	$	26
Operating expenses
Operating, maintenance and other		126		105		21
Depreciation and amortization		58		53		5
Gains on sales of other assets and other, net		—		1		(1	)
Operating income		219		220		(1	)
Other income and expenses, net		21		11		10
Minority interest expense		14		11		3
EBIT	$	226	$	220	$	6
Proportional pipeline throughput, Tbtu (a)		636		608		28

(a) Trillion British thermal units. Revenues are not significantly affected by pipeline throughput fluctuations, since revenues are primarily composed of demand charges.

Operating Revenues. The $26 million increase was driven primarily by:

• a $15 million increase from expansion projects placed in service in late 2007, and

• an $11 million increase in processing revenues associated with pipeline operations, primarily from higher NGL prices.

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Operating, Maintenance and Other. The $21 million increase was driven primarily by:

• a $16 million increase in project development costs as a result of the capitalization of previously expensed costs on northeast expansions in 2007. Of the $16 million, $6 million represents expensed project development costs in 2008, while 2007 included a $10 million net benefit in expenses due to the capitalization of costs during that period, and

• a $4 million increase from higher labor and outside services costs for pipeline and storage operations.

Other Income and Expenses, net. The $10 million increase was a result of higher equity income from unconsolidated affiliates attributable to the capitalization of interest on construction projects, primarily for the Southeast Supply Header project.

EBIT. The $6 million increase reflects higher earnings from expansion projects, higher commodity prices for gas processing associated with pipeline operations and capitalized interest from equity investee construction projects, partially offset by an increase in project development costs charged to operations.

Distribution

	Three Months Ended March 31,
	2008		2007		Increase (Decrease)
	(in millions, except where noted)
Operating revenues	$	800	$	713	$	87
Operating expenses
Natural gas purchased		492		454		38
Operating, maintenance and other		97		78		19
Depreciation and amortization		47		37		10
Operating income		164		144		20
Other income and expenses, net		1		—		1
EBIT	$	165	$	144	$	21
Number of customers (thousands)		1,293		1,273		20
Heating degree days (Fahrenheit)		3,651		3,591		60
Pipeline throughput, Tbtu		327		300		27

Operating Revenues. The $87 million increase was driven primarily by:

• a $114 million increase resulting from a stronger Canadian dollar in 2008 as compared to the same period in 2007,

• a $19 million increase due to growth in the number of customers,

• a $17 million increase in customer usage of natural gas associated with weather that was approximately 2% colder than the prior year period, and

• a $7 million increase in storage and transportation revenues primarily due to favorable market conditions and growth of the transmission system, partially offset by

• a $63 million decrease from lower natural gas prices passed through to customers without a mark-up.

Natural Gas Purchased. The $38 million increase was driven primarily by:

• a $70 million increase resulting from a stronger Canadian dollar,

• a $19 million increase due to growth in the number of customers, and

• a $13 million increase in customer usage of natural gas associated with colder winter weather than the prior year period, partially offset by

• a $63 million decrease related to lower natural gas prices passed through to customers without a mark-up.

Operating, Maintenance and Other. The $19 million increase was driven primarily by a stronger Canadian dollar.

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Depreciation and Amortization. The $10 million increase was driven primarily by:

• a $7 million increase resulting from a stronger Canadian dollar, and

• a $3 million increase due to a higher asset base resulting primarily from completion of Phase I of the Dawn-Trafalgar expansion.

EBIT. The $21 million increase was primarily attributable to a stronger Canadian dollar, higher storage and transportation revenues and colder winter weather compared with the prior year period. These earnings contributions were partially offset by higher operating costs.

Western Canada Transmission & Processing

	Three Months Ended March 31,
	2008		2007		Increase (Decrease)
	(in millions, except where noted)
Operating revenues	$	405	$	311	$	94
Operating expenses
Natural gas and petroleum products purchased		130		109		21
Operating, maintenance and other		107		95		12
Depreciation and amortization		37		32		5
Operating income		131		75		56
Other income and expenses, net		3		4		(1	)
Minority interest expense		3		5		(2	)
EBIT	$	131	$	74	$	57
Pipeline throughput, Tbtu		162		161		1
Volumes processed, Tbtu		173		179		(6	)
Empress inlet volumes, Tbtu		217		192		25

Operating Revenues. The $94 million increase was driven primarily by:

• a $59 million increase resulting from a stronger Canadian dollar, and

• a $37 million increase due to higher NGL prices associated with the Empress operations.

Natural Gas and Petroleum Products Purchased. The $21 million increase was driven primarily by a stronger Canadian dollar.

Operating, Maintenance and Other. The $12 million increase was driven primarily by a stronger Canadian dollar.

EBIT. The $57 million increase was driven primarily by higher NGL prices that benefited the Empress operations and a stronger Canadian dollar.

Field Services

	Three Months Ended March 31,
	2008			2007		Increase (Decrease)
	(in millions, except where noted)
Operating expenses	$	(1	)	$	—	$	(1	)
Operating income		1			—		1
Equity in earnings of unconsolidated affiliates		191			82		109
EBIT	$	192		$	82	$	110
Natural gas gathered and processed/transported, Tbtu/d (a,b)		7.2			6.5		0.7
NGL production, MBbl/d (a,c)		380			347		33
Average natural gas price per MMBtu (d)	$	8.03		$	6.77	$	1.26
Average NGL price per gallon (e)	$	1.34		$	0.87	$	0.47

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(a) Reflects 100% of volumes

(b) Trillion British thermal units per day

(c) Thousand barrels per day

(d) Million British thermal units. Average price based on NYMEX Henry Hub.

(e) Does not reflect results of commodity hedges

EBIT. Higher equity in earnings of $109 million were primarily the result of the following variances, each representing Spectra Energy’s 50% ownership portion of the earnings drivers at DCP Midstream:

• a $112 million increase from commodity-sensitive processing arrangements due to increased commodity prices,

• an $18 million increase in gathering and processing margins primarily attributable to increased natural gas volumes, as a result of higher efficiencies, growth and the severe winter weather experienced in the first quarter of 2007, and

• an $8 million increase attributable to increased transportation, storage and processing fees, partially offset by

• a $24 million decrease in marketing margins, including an $18 million loss on hedges related to commodity non-trading activity that were executed by DCP Midstream Partners, and

• a $17 million decrease resulting from higher operating costs of $11 million primarily for higher repair and maintenance costs and higher depreciation expense of $8 million primarily related to asset acquisitions, partially offset by decreased general and administrative costs as a result of $3 million in 2007 costs associated with DCP Midstream’s initiative to create stand-alone corporate functions separate from its two partners.

Other

	Three Months Ended March 31,
	2008			2007			Increase (Decrease)
	(in millions)
Operating revenues	$	9		$	7		$	2
Operating expenses		28			26			2
Operating loss		(19	)		(19	)		—
Other income and expenses, net		(1	)		4			(5	)
EBIT	$	(20	)	$	(15	)	$	(5	)

EBIT. The $5 million increase in net costs reflects a benefit recognized from the favorable resolution of a legal matter in the first quarter 2007. The 2007 period also included $3 million of costs associated with the spin-off of Spectra Energy.

LIQUIDITY AND CAPITAL RESOURCES

Operating Cash Flows

Net cash provided by operating activities increased $427 million to $673 million for the three months ended March 31, 2008 compared to the same period in 2007. This change was driven primarily by:

• increased earnings,

• higher distributions of $115 million received from unconsolidated affiliates in 2008 compared to 2007, primarily from DCP Midstream, and

• a January 2007 payment of $100 million, which was accrued at December 31, 2006, to resolve certain litigation matters associated with discontinued LNG operations.

Net working capital was negative $1,226 million as of March 31, 2008, which included notes payable and commercial paper totaling $757 million and current maturities of long-term debt of $474 million. Spectra Energy will rely upon cash flows from operations and additional financing transactions to fund its liquidity and capital requirements for the next 12 months including issuances of short-term and long-term debt. See also Financing Cash Flows and Liquidity for discussions of effective shelf registrations, available credit facilities and new debt issuances.

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On April 30, 2008, Spectra Energy received a special distribution of $250 million from DCP Midstream from debt financing proceeds received by DCP Midstream.

Investing Cash Flows

Cash flows used in investing activities increased $198 million to $372 million in the first quarter of 2008 compared to the same period in 2007. This change was driven primarily by a $200 million increase in capital and investment expenditures in 2008 as a result of expansion projects underway at each of Spectra Energy’s segments.

	Three Months Ended March 31,
	2008		2007
	(in millions)
Capital and Investment Expenditures
U.S. Transmission	$	272	$	108
Distribution		63		41
Western Canada Transmission & Processing		32		22
Other		8		4
Total	$	375	$	175

Capital and investment expenditures for the three months ended March 31, 2008 consisted of $316 million for expansion projects and $59 million for maintenance and other projects.

Spectra Energy continues to project 2008 capital and investment expenditures of approximately $2.4 billion, consisting of approximately $1.7 billion for U.S. Transmission, $0.4 billion for Distribution and $0.3 billion for Western Canada Transmission & Processing. These expenditures exclude the Income Fund acquisition discussed below. Total projected 2008 capital and investment expenditures include approximately $1.9 billion of expansion capital expenditures and $0.5 billion for maintenance and upgrades of existing plants, pipelines and infrastructure to serve growth. Spectra Energy remains on track to place into service approximately $1.5 billion of capital expansion projects in 2008.

On May 1, 2008, a subsidiary of Spectra Energy acquired the 24.4 million units of the Income Fund that were held by holders other than Spectra Energy and its affiliates at a purchase price of approximately 274 million Canadian dollars ($271 million). See Note 16 for further discussion.

Financing Cash Flows and Liquidity

Net cash used in financing activities totaled $139 million in the first three months of 2008 compared to $220 million net cash provided by financing activities in the first quarter of 2007, driven primarily by lower short-term borrowings in the 2008 period.

Available Credit Facilities and Restrictive Debt Covenants. Commercial paper markets in the U.S. and Canada have recently experienced varying degrees of volatility, primarily due to market concerns about asset-backed commercial paper and sub-prime mortgage exposures. Spectra Energy’s commercial paper is not asset-backed or related to real estate financing, and as such, Spectra Energy has continued to successfully issue commercial paper as needed.

See Note 9 of Notes to Condensed Consolidated Financial Statements for a discussion of available credit facilities and related financial and other covenants.

Credit Ratings. The short-term and long-term debt of Spectra Energy and certain subsidiaries are rated by Standard & Poor’s (S&P), Moody’s Investors Service (Moody’s) and Dominion Bond Rating Service (DBRS).

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	Standard and Poor’s	Moody’s Investor Service	Dominion Bond Rating Service
Credit Ratings Summary as of May 5, 2008
Spectra Energy Capital, LLC (a)	BBB	Baa1	Not applicable
Texas Eastern Transmission, LP (a)	BBB+	A3	Not applicable
Westcoast Energy, Inc. (a)	BBB+	Not applicable	A (low)
Union Gas (a)	BBB+	Not applicable	A
Maritimes & Northeast Pipeline, LLC (b)	A	A2	A
Maritimes & Northeast Pipeline, LP (b)	A	A2	A

(a) Represents senior unsecured credit rating

(b) Represents senior secured credit rating

The above credit ratings are dependent upon, among other factors, the ability to generate sufficient cash to fund capital and investment expenditures, while maintaining the strength of their current balance sheets. These credit ratings could be negatively impacted if, as a result of market conditions or other factors, they are unable to maintain their current balance sheet strength or if earnings or cash flow outlooks deteriorate materially.

Dividends. Spectra Energy currently anticipates a dividend payout ratio of approximately 60% of estimated annual net income per share of common stock. The declaration and payment of dividends is subject to the sole discretion of Spectra Energy’s Board of Directors and will depend upon many factors, including the financial condition, earnings and capital requirements of our operating subsidiaries, covenants associated with certain debt obligations, legal requirements, regulatory constraints and other factors deemed relevant by the Board of Directors. A dividend of $0.23 per share was declared on April 4, 2008 and will be paid on June 16, 2008.

Other Financing Matters. On May 6, 2008, Spectra Energy announced that management has recommended to its Board of Directors a dividend increase of $0.02 per common share per quarter, beginning with the third quarter of 2008. If approved, the new annual dividend would be $1.00 per share.

Spectra Energy has an automatic shelf registration statement on file with the SEC to register the issuance of unspecified amounts of various equity and debt securities by Spectra Energy. In addition, as of March 31, 2008, subsidiaries of Spectra Energy had 810 million Canadian dollars (approximately $790 million) available under shelf registrations for issuances in the Canadian market. Of the 810 million Canadian dollars available under these shelf registrations, 500 million expires in May 2008 and 310 million expires in August 2008. The shelf registrations are expected to be replaced upon expiration.

In April 2008, Spectra Capital issued $500 million of 6.20% notes due 2018. Net proceeds from the offering were used to fund capital expenditures and for general corporate purposes, including the repayment of commercial paper as it matures. Also in April 2008, Union Gas issued 200 million Canadian dollars (approximately $198 million) of 5.35% notes due 2018. Net proceeds from this offering were used to refinance prior debt maturities and for general corporate purposes.

As previously discussed, Spectra Energy announced on May 6, 2008 that its Board of Directors had approved a share repurchase program, authorizing Spectra Energy to purchase in the aggregate up to $600 million of shares of its outstanding common stock.

OTHER ISSUES

New Accounting Pronouncements

See Note 15 of Notes to Condensed Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Spectra Energy’s exposure to market risk is described in Item 7A of its Annual Report on Form 10-K for the year ended December 31, 2007. Management believes the exposure to market risk has not changed materially at March 31, 2008.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by Spectra Energy in the reports it files or submits under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized, and reported, within the time periods specified by the Securities and Exchange Commission’s (SEC) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by Spectra Energy in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, Spectra Energy has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2008, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective.

Changes in Internal Control over Financial Reporting

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, Spectra Energy has evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2008 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

For information regarding material legal proceedings, see Note 11 of Notes to Condensed Consolidated Financial Statements.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Part I, “Item 1A. Risk Factors” in Spectra Energy’s Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect Spectra Energy’s financial condition or future results. There were no changes to those risk factors at March 31, 2008.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

32

Item 6. Exhibits.

(a) Exhibits

Exhibit Number
4.1	Thirteenth Supplemental Indenture, dated as of April 10, 2008, between Spectra Energy Capital, LLC, Spectra Energy Corp and The Bank of New York Trust Company, N.A. (filed as Exhibit 8.1 to Form 8-K on April 10, 2008).
*10.1	Support Agreement among Spectra Energy Midstream Holdco Management Partnership, Spectra Energy Income Fund and Spectra Energy Commercial Trust, dated March 4, 2008.
*10.2	Amendment No. 1, dated April 8, 2008, among Spectra Energy Corp, Spectra Energy Capital, LLC, JPMorgan Chase Bank, N.A., as Administrative Agent and the banks listed therein to the Credit Agreement dated May 21, 2007.
*31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

The total amount of securities of the registrant or its subsidiaries authorized under any instrument with respect to long-term debt not filed as an exhibit does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees, upon request of the Securities and Exchange Commission, to furnish copies of any or all of such instruments to it.

33

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SPECTRA ENERGY CORP
Date: May 9, 2008	/s/ Fred J. Fowler
	Fred J. Fowler
	President and Chief Executive Officer
Date: May 9, 2008	/s/ Gregory L. Ebel
	Gregory L. Ebel
	Group Executive and Chief Financial Officer

34

EX-10.1

Exhibit 10.1

Execution Copy

SPECTRA ENERGY MIDSTREAM HOLDCO MANAGEMENT PARTNERSHIP

and

SPECTRA ENERGY INCOME FUND

and

SPECTRA ENERGY COMMERCIAL TRUST

SUPPORT AGREEMENT

As of March 4, 2008

TABLE OF CONTENTS

ARTICLE 1 - INTERPRETATION			1
	1.01	Definitions	1
	1.02	Singular, Plural, etc.	7
	1.03	Deemed Currency	7
	1.04	Headings, etc.	7
	1.05	Date for any Action	7
	1.06	Governing Law	7
	1.07	Incorporation of Schedules	7
ARTICLE 2 - TRANSACTIONS, ETC.			8
	2.01	Transaction	8
	2.02	Location and Time of Closing	8
	2.03	Meeting	8
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES			10
	3.01	Representations and Warranties of the Parties	10
	3.02	Representations and Warranties of SEMHMP	10
	3.03	Representations and Warranties of the Fund Parties	10
ARTICLE 4 - CONDITIONS			11
	4.01	Conditions for the Benefit of SEMHMP	11
	4.02	Conditions for the Benefit of the Fund Parties	11
ARTICLE 5 - COVENANTS OF THE FUND PARTIES			12
	5.01	No Solicitation	12
	5.02	Expense Reimbursement by the Fund Parties	13
	5.03	Cooperation, etc.	14
	5.04	Redemption	14
	5.05	Alternative Structure	14
	5.06	Unitholder Distributions	15
ARTICLE 6 - COVENANTS OF SEMHMP			15
	6.01	Trustees’, Directors’ and Officers’ Indemnities and Insurance	15
ARTICLE 7 - MUTUAL COVENANTS			15
	7.01	Notice Provisions	15
	7.02	Additional Agreements and Filings	16
	7.03	Competition Act/Investment Canada Act/Canada Transportation Act	16
	7.04	Publicity	17
ARTICLE 8 - TERMINATION, AMENDMENT AND WAIVER			18
	8.01	Termination	18
	8.02	Effect of Termination	18
	8.03	Amendment	19
	8.04	Waiver	19
ARTICLE 9 - GENERAL PROVISIONS			19
	9.01	Notices	19
	9.02	Miscellaneous	20
	9.03	No Personal Liability of Trustees, etc.	21
	9.04	Assignment	21
	9.05	Expenses	21
	9.06	Survival	22

	9.07	Severability	22
	9.08	Third Party Beneficiaries	22
	9.09	Counterparts	22
	9.10	Constructions	22
	9.11	Actions by the Fund	22
SCHEDULE A			A-1
SCHEDULE B			B-1
SCHEDULE C			C-1

- ii -

SUPPORT AGREEMENT

THIS AGREEMENT is entered into as of the 4^th day of March, 2008 among SPECTRA ENERGY MIDSTREAM HOLDCO MANAGEMENT PARTNERSHIP (“SEMHMP”), a general partnership established under the laws of the Province of Alberta, the partners of which are Westcoast Energy Inc. (“WEI”) and Spectra Energy Holdings Co., a direct wholly-owned subsidiary of WEI, SPECTRA ENERGY INCOME FUND (the “Fund”), a trust established under the laws of the Province of Alberta, and SPECTRA ENERGY COMMERCIAL TRUST (the “Trust”), a trust established under the laws of the Province of Alberta.

R E C I T A L S:

WHEREAS SEMHMP, the Fund and the Trust wish to complete the transaction described in Schedule A (the “Transaction”); and

WHEREAS each of the Sponsor Trustees (as defined in the Trust Indenture (as hereinafter defined)) declared his or her conflict of interest in respect of the Transaction and did not participate in any deliberations of the board of trustees of the Trust (the trustees of the Trust other than the Sponsor Trustees being collectively referred to as the “Board of Trustees”) nor vote on any resolution (other than resolutions relating to the establishment of the Independent Committee (as hereinafter defined)) relating to the Transaction; and

WHEREAS the Board of Trustees has determined, upon a recommendation of the Independent Committee (as hereinafter defined), which consulted with its financial advisors and outside legal counsel, that the Transaction is fair to the Unitholders other than WEI and its Affiliates, that it is in the best interests of the Fund and the Unitholders other than WEI and its Affiliates to enter into this Agreement and, further, the Board of Trustees has resolved to recommend that the Unitholders vote in favour of the Special Resolution (as hereinafter defined) at the Meeting (as hereinafter defined), all on the terms and conditions contained herein; and

NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party, the Parties hereby covenant and agree as follows:

ARTICLE 1 - INTERPRETATION

1.01 Definitions

In addition to terms defined elsewhere in this Agreement, the following capitalized terms have the meanings set forth below unless there is something in the subject matter or context inconsistent therewith:

“Acquisition Proposal” means any proposal or offer from any Person other than SEMHMP or an Affiliate thereof (whether or not in writing and whether or not delivered to the Fund Parties or any Fund Subsidiary or the Unitholders generally) relating to any recapitalization, merger, amalgamation, acquisition or other business combination involving the Fund Parties or any Fund

Subsidiary or any proposal or offer from any Person to acquire in any manner, directly or indirectly, an equity interest in any voting securities of, or a substantial portion of the assets of, any of the Fund Parties or Fund Subsidiaries, including any public announcement of an intention to do any of the foregoing, from any Person other than SEMHMP or an Affiliate thereof other than the transactions contemplated by this Agreement.

“Affiliate” has the meaning ascribed to that term in the Securities Act (Alberta), provided that notwithstanding that meaning (and any definition of control contained therein), for the purpose of this Agreement, none of Spectra Energy Corp and any person directly or indirectly controlled by Spectra Energy Corp (other than the Fund Parties and the Fund Subsidiaries) (the “Spectra Entities”), shall be considered or construed to be an “Affiliate” of the Fund Parties and the Fund Subsidiaries (the “SEIF Entities”), notwithstanding (a) the holding by any Spectra Entity of any securities carry voting rights in a SEIF Entity, irrespective of the number held, or (b) the right of any Spectra Entity to appoint, elect, or nominate for election, individuals to the board of directors or trustees, or a body or board performing a similar function to a board of directors or trustees, of any SEIF Entity.

“Agreement”, “this Agreement”, “herein”, “hereto”, and “hereof” and similar expressions refer to this Support Agreement, including the Schedules hereto, as the same may be amended or supplemented from time to time, and not any particular provision hereof.

“Board of Trustees” has the meaning set forth in the recitals to this Agreement.

“Business” means the business of the Fund and the Trust carried on directly or indirectly by the Fund Subsidiaries as of the date hereof consisting primarily of the business of, and the direct and indirect ownership, management, operation and lease of assets and property in connection with, gathering, processing, transporting, extracting, buying, storing or selling petroleum, natural gas, natural gas liquids or other related products or other forms of energy and related businesses, as well as engaging in all activities ancillary or incidental to any of the foregoing.

“Business Day” means any day except a Saturday, Sunday or statutory holiday in Calgary, Alberta.

“Circular” means the notice of the Meeting and the accompanying information circular, as amended or supplemented from time to time, to be sent to the Unitholders and the holders of Exchangeable LP Units in connection with the Meeting.

“Closing” means the completion of the Transaction pursuant to the terms of this Agreement.

“Closing Time” means 10:00 am. (Calgary time) on the Transaction Closing Date, unless the Parties mutually agree on another time.

“Competition Act” means the Competition Act (Canada), as amended.

“Competition Commissioner” means the Commissioner of Competition appointed pursuant to the Competition Act.

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“Confidentiality Agreement” means the confidentiality agreement dated January 4, 2008 between Spectra Energy Corp and the Fund.

“Consents” means all consents, assignments, waivers, approvals or authorizations of, permits, or declarations, filings or notices to, or other approvals of (including the lapse, without objection, of a prescribed time under a statute or regulation that states that a transaction may be implemented if a prescribed time lapses following the giving of notice without an objection being made) Governmental Authorities or other third parties necessary for the consummation of the Transaction.

“Contract” means any contract, agreement, commitment, undertaking, licence, lease, note, bond, mortgage, indenture, loan or deed of trust, whether or not in writing.

“Exchangeable LP Units” means the exchangeable units issued by the Partnership, which units are exchangeable for Units.

“Fund” has the meaning set forth in the preamble to this Agreement.

“Fund Parties” means collectively, the Fund and the Trust.

“Fund Subsidiaries” means the Trust, the Partnership, Spectra Energy Facilities Holdings Partnership, Spectra Energy Midstream Corporation, Spectra Energy Midstream Partner Corporation, Spectra Energy Midstream Canada Partner Corporation, Spectra Energy Midstream, Spectra Energy Midstream Canada LP and PESH Facilities Holdings Partnership, and “Fund Subsidiary” means any one of them.

“Fund Trust Indenture” means the amended and restated declaration of trust in respect of the Fund dated as of December 20, 2005 as the same may be amended and restated from time to time.

“General Partner” means Spectra Energy Facilities Inc., a corporation existing under the laws of Canada.

“Governmental Authority” means (i) any international, multinational, national, federal, provincial state, municipal, local or other government, (ii) any subdivision, department, court, commission, ministry, office, board, bureau, agency, arbitrator, tribunal or authority of any government, or (iii) any quasi-governmental or private body exercising any regulatory, rule-making, expropriation, taxing or other governmental or quasi-governmental authority, including any stock exchange or other entity.

“including” means including without limitation, and “include” and “includes” have a corresponding meaning.

“Independent Committee” means the special committee of independent trustees of the board of trustees of the Trust formed by that board of trustees to review the Transaction.

“Independent Report” means the report of RBC Dominion Securities Inc., to be dated as of the date hereof, that will include the independent valuation of the Units by RBC Dominion

- 3 -

Securities Inc. as contemplated by MI 61-101 and the opinion of RBC Dominion Securities Inc. stating that, subject to the assumptions and qualifications set out therein, as of the date hereof, the consideration to be received by the Unitholders other than WEI and its Affiliates under the Transaction is fair, from a financial point of view, to the Unitholders other than WEI and its Affiliates.

“Investment Canada Act” means the Investment Canada Act (Canada), as amended.

“Laws” means all applicable laws, statutes, by-laws, rules, regulations, ordinances, Orders, codes, certificates, permits, grants, policies, notices and directions and judicial, arbitral, administrative, ministerial or departmental judgments, awards, legal doctrines, writs, injunctions, authorizations or other requirements of or agreement with any Governmental Authority, court or other authority having jurisdiction over the applicable Party or property (including common law or the interpretation thereof).

“Manager” means Spectra Energy Facilities Management LP, a limited partnership formed under the laws of the Province of Alberta.

“Material Adverse Change” means any change, effect, event, occurrence or state of facts that when taken together with all other changes, effects, events, occurrences, or state of facts, is, or would reasonably be expected to be, individually or in the aggregate, material and adverse to (x) the ability of the Fund Parties to perform their obligations under this Agreement or (y) the Business, affairs, taxation, capital, assets, properties, liabilities (including contingent liabilities), obligations (whether absolute, accrued, conditional or otherwise), results of operations or condition (financial or otherwise) of the Fund Parties and the Fund Subsidiaries, taken as a whole, other than (a) any such change, effect, event, occurrence or state of facts resulting from (i) the announcement of the execution of this Agreement or the transactions contemplated hereby, (ii) actions and omissions of the Fund Parties or the Fund Subsidiaries taken with the prior written consent of SEMHMP or as expressly required or permitted by the terms of this Agreement, (iii) any actions taken by SEMHMP, or (iv) changes in the US or Canadian economies or securities, debt or currency markets (including monetary conditions) in general, or general changes in the industries in which the Fund Parties and the Fund Subsidiaries operate, unless the effects of such changes are disproportionately adverse to the Fund Parties or the Fund Subsidiaries in comparison to the effect thereof on other entities operating in the industries in which the Fund Parties and the Fund Subsidiaries operate, (v) any change in laws, rules or regulations or interpretations thereof by courts or Governmental Authorities, unless the effects of such changes are disproportionately adverse to the Fund Parties or the Fund Subsidiaries in comparison to the effect thereof on other entities operating in the industries in which the Fund Parties and the Fund Subsidiaries operate, (vi) any outbreak of major hostilities or any act of terrorism, or (vii) any change in the trading volume or market price of the Units; or (b) any such change, effect, event, development, occurrence or state of facts initiated by or at the direction of WEI or its Affiliates, or arising as a result of the negligence or misconduct of WEI or its Affiliates or the failure by WEI or its Affiliates to take any action that is required to take pursuant to any agreement between WEI or its Affiliates, on the one hand, and the Fund, the Trust and the Partnership, on the other hand, including, without limitation, the Administration and Governance Agreement dated as of December 19, 2005 and the Management Agreement dated as of December 19, 2005.

- 4 -

“Material Fact” has the meaning ascribed to that term in the Securities Act (Alberta), as at the date hereof.

“Meeting” means the special meeting of the Unitholders and the holders of Special Voting Units, including any adjournment or postponement thereof pursuant to Section 2.03(1)(b) or approved by SEMHMP, to be called and held to consider the Transaction.

“MI 61-101” means Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions of the Securities Authorities.

“Misrepresentation” has the meaning ascribed to that term in the Securities Act (Alberta), as at the date hereof, and for greater certainty a document shall be considered to contain a Misrepresentation if it omits a necessary or required Material Fact.

“Order” means any judgment, injunction, award, decision, decree, ruling, verdict, writ or order of any nature of any Governmental Authority.

“Parties” means collectively, SEMHMP and the Fund Parties, and “Party” means any one of them.

“Partnership” means Spectra Energy Facilities LP, a limited partnership formed under the laws of the Province of Alberta.

“Person” means any individual, sole proprietorship, partnership, limited partnership, firm, entity, unincorporated association, unincorporated syndicate, unincorporated organization, trust, corporation, limited liability company, unlimited liability company, Governmental Authority, and a natural person in such person’s capacity as trustee, executor, administrator or other legal representative.

“Required Approvals” mean those required approvals and required authorizations and similar matters set forth in Schedule B.

“Securities Authorities” means the securities commissions or similar regulatory authorities in each of the provinces and territories of Canada and the TSX, as applicable.

“Securities Laws” means all applicable Canadian provincial and territorial securities laws, including the requirements of the TSX and the rules and regulations promulgated thereunder, all as now in force and as may be amended from time to time.

“Securityholders’ Approval” means:

(a) a resolution passed by the affirmative vote of Unitholders and holders of the Special Voting Units holding not less than 66 2/3% of the total number of votes represented by the Units and Special Voting Units represented at the Meeting and voted on such resolution; and

(b) a resolution passed by the affirmative vote of Unitholders in accordance with minority approval requirements under MI 61-101;

in each case, passed at the Meeting.

- 5 -

“SEMHMP” has the meaning set forth in the preamble to this Agreement.

“Special Resolution” means the special resolutions of the Unitholders approving the Transaction as set forth in Schedule C.

“Special Voting Units” means the issued and outstanding beneficial interests in the capital of the Fund designated as “special voting units”, which accompany the Exchangeable LP Units and which represent one vote for each Special Voting Unit.

“Subsidiary” has the meaning ascribed to that term in the Securities Act (Alberta).

“Superior Proposal” means any bona fide unsolicited written Acquisition Proposal (i) which, in the opinion of the Board of Trustees, acting reasonably, and in good faith and after receiving the advice of its financial advisors and its outside legal counsel, constitutes a commercially feasible transaction taking into account all legal, financial, regulatory and other aspects of such Acquisition Proposal and the party making the Acquisition Proposal; (ii) which is not subject to any financing condition and for which adequate financial arrangements have been made to ensure that the required funds or other consideration will be available to effect payment in full for the Units or otherwise complete such transaction; (iii) which is not subject to any due diligence and/or access condition; (iv) which did not result from a breach of Section 5.01 of this Agreement; (v) which could be carried out or completed without undue delay and within a time frame that is reasonable in the circumstances; (vi) which, if consummated, would result in the Unitholders receiving greater consideration per Unit than contemplated by the Transaction; and (vii) in respect of which the Board of Trustees determines in good faith (after receipt of advice from its financial advisors and its outside legal counsel) that failure to accept, approve or recommend such Acquisition Proposal would be inconsistent with the fiduciary duties of the Board of Trustees.

“Tax Act” means the Income Tax Act (Canada), as amended.

“Transaction” has the meaning set forth in the recitals and as further set forth in Schedule A.

“Transaction Closing Date” means the later of (i) May 1, 2008 and (ii) the date which is not more than 3 Business Days following the date on which the last of the conditions in Article 4 (other than those which are to be satisfied at the Closing or on the Transaction Closing Date and, for the purposes of Section 8.01, other than those that have not been satisfied as a result of a breach by the non-terminating Party) has or have been satisfied or waived by the Party in whose favour such condition exists, or such other date on which the Parties mutually agree.

“Trust” has the meaning set forth in the preamble to this Agreement.

“Trust Indenture” means the declaration of trust in respect of the Trust dated as of December 5, 2005, as the same may be amended and restated from time to time.

“Trustee” means the trustee of the Fund appointed and currently acting in such capacity pursuant to the Fund Trust Indenture.

- 6 -

“TSX” means the Toronto Stock Exchange.

“Units” means the issued and outstanding beneficial interests in the capital of the Fund designated as “units”.

“Unitholders” means the registered or beneficial holders of the issued and outstanding Units.

“WEI” has the meaning set forth in the preamble to this Agreement.

1.02 Singular, Plural, etc.

In this Agreement, words importing the singular number include the plural and vice versa and words importing gender include the masculine, feminine and neuter genders.

1.03 Deemed Currency

Unless otherwise expressly stated, all references to currency herein shall be deemed to be references to Canadian currency.

1.04 Headings, etc.

The division of this Agreement into Articles, Sections and Schedules, the provision of a table of contents hereto and the insertion of the recitals and headings, are for convenience of reference only and shall not affect the construction or interpretation of this Agreement and, unless otherwise stated, all references in this Agreement or Schedules to Articles, Sections and Schedules (or provisions thereof) refer to Articles, Sections and Schedules (or provisions thereof) of and to this Agreement or of the Schedules (or provisions thereof) in which such reference is made, as applicable.

1.05 Date for any Action

In the event that any date on which any action is required to be taken hereunder by any of the Parties is not a Business Day, such action shall be required to be taken on the next succeeding day which is a Business Day.

1.06 Governing Law

This Agreement shall be governed, including as to validity, interpretation and effect, by the laws of the Province of Alberta and the laws of Canada applicable therein, and shall be construed and treated in all respects as an Alberta contract. Each of the Parties hereby irrevocably attorns to the non-exclusive jurisdiction of the courts of the Province of Alberta in respect of all matters arising under and in relation to this Agreement and the Transaction.

1.07 Incorporation of Schedules

The Schedules attached hereto and described below shall, for all purposes hereof, form an integral part of this Agreement.

Schedule A	Transaction
Schedule B	Required Approvals
Schedule C	Special Resolution

- 7 -

ARTICLE 2 - TRANSACTIONS, ETC.

2.01 Transaction

Subject to the terms and conditions of this Agreement, on the Transaction Closing Date (or otherwise as noted therein) each of the Parties agrees to complete, to the extent applicable to it, (and, as applicable, each will cause their applicable Subsidiaries to so complete) the Transaction set forth in Schedule A for the consideration, as applicable, specified therein.

2.02 Location and Time of Closing

The Closing shall take place at the Closing Time on the Transaction Closing Date. The Closing shall occur at the Calgary office of McCarthy Tétrault LLP or such other location as the Parties may mutually agree.

2.03 Meeting

(1) Each of the Fund Parties covenants in favour of SEMHMP that the Fund Parties shall:

(a) establish one or more record dates (as approved by SEMHMP, acting reasonably) for, duly call, give notice of, convene and hold the Meeting as soon as practicable after the date hereof, but, in any case, the date set for the Meeting shall not be earlier than April 15, 2008 and shall not be later than May 15, 2008, for the purpose of considering the Special Resolution, and with the consent of SEMHMP, acting reasonably, for any other proper purpose as may be set out in the notice for such meeting, and do all such acts and things necessary to comply with the applicable Laws, including National Instrument 54-101 “Communications with Beneficial Owners of Securities of a Reporting Issuer”. For greater certainty, the foregoing shall include, but shall not be limited to, causing the Circular and other documentation required in connection with the Meeting to be promptly sent to each Unitholder and holder of Special Voting Units (as well as beneficial holders of Units and Special Voting Units) and filed as required by applicable Laws;

(b) except as required for quorum purposes pursuant to Section 10.4 of the Fund Trust Indenture or as required by Laws, not cause or propose the adjournment, postponement or cancellation of the Meeting for a period exceeding ten Business Days without SEMHMP’s prior written consent, not to be unreasonably withheld. Without limiting the generality of the foregoing, the obligations of the Fund and the Trust pursuant to this Section 2.03(1)(b) shall not be affected by: (A) the commencement, public proposal, public disclosure or communication of any Acquisition Proposal; or (B) the withdrawal, modification, qualification or change of the Board of Trustees’ (or any committee thereof) approval or recommendation to the Unitholders;

- 8 -

(c) use reasonable efforts to solicit proxies from the Unitholders in favour of the Special Resolution, including, using the services of dealers and/or proxy solicitation services the costs of which shall be the responsibility of SEMHMP; and

(d) prepare the Circular in compliance in all material respects with all applicable Laws, and, without limiting the generality of the foregoing, the Circular shall not contain any Misrepresentation (other than with respect to any information relating to and provided by SEMHMP in writing for the purpose of inclusion in the Circular) and shall provide Unitholders with information in sufficient detail to permit them to form a reasoned judgement concerning the matters to be placed before them at the Meeting and shall, for greater certainty, include a copy of the Independent Report.

(2) SEMHMP shall be entitled to review and comment on drafts of the Circular (including the final draft prior to completion) and all other documentation contemplated by this Section 2.03 (including the form of proxy) and the Fund Parties will reasonably consider all of the comments of SEMHMP, provided that all information relating to SEMHMP included in the Circular shall be in form and content satisfactory to SEMHMP, acting reasonably. The Fund and the Trust agree to permit SEMHMP to include a brief summary in the Circular stating why SEMHMP believes that the consideration, as specified in the Transaction, is appropriate and representative of fair value.

(3) SEMHMP will furnish to the Fund Parties all such information concerning SEMHMP as may be reasonably required under Law to be included in the Circular, and SEMHMP covenants that no such information furnished in writing by it for this purpose will contain any Misrepresentation.

(4) The Fund Parties and SEMHMP shall each promptly notify the other if at any time before the Closing Time it becomes aware (in the case of SEMHMP only with respect to any information furnished by SEMHMP) that the Circular contains a Misrepresentation, or that otherwise requires an amendment or supplement to the Circular, and the Parties shall co-operate in the preparation of any amendment or supplement to the Circular, as required, and the Fund Parties shall promptly mail, or cause to be promptly mailed any amendment or supplement to the Circular to Unitholders and to holders of Exchangeable LP Units and shall file same with the Securities Authorities and as otherwise required by applicable Laws.

(5) Subject to the terms and conditions hereof, the Trust shall vote all securities of the Partnership and General Partner it controls in favour of any resolutions required to be passed by the holders of securities of the Partnership and General Partner or any of them in order for the Transaction to be properly approved, and not dissent therefrom.

- 9 -

ARTICLE 3 - REPRESENTATIONS AND WARRANTIES

3.01 Representations and Warranties of the Parties

Each Party hereby represents and warrants to and in favour of each other Party as follows and acknowledges that each other Party is relying upon such representations and warranties in connection with the matters contemplated by this Agreement:

(1) It has been duly formed under applicable Law, is validly existing and has the requisite power and authority to own its properties and assets and conduct its business, as applicable, as currently owned and conducted.

(2) It has the requisite power and authority to execute, deliver and to enter into this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by it and the consummation by it of the Transaction have been duly authorized by its board of directors (or equivalent, as the case may be). This Agreement has been duly executed and delivered by it and constitutes a valid and binding obligation of it enforceable against it in accordance with its terms except to the extent that enforceability of obligations and the availability of certain remedies hereunder are limited by general principles of equity or by bankruptcy, insolvency, fraudulent transfer or other Laws relating to or affecting creditors’ rights generally.

3.02 Representations and Warranties of SEMHMP

SEMHMP hereby represents and warrants to and in favour of the Fund Parties, and acknowledge that each of the Fund Parties is relying upon such representation and warranty in connection with the matters contemplated by this Agreement, that it now has and will have at the Closing Time sufficient funds or adequate arrangements for financing in place to complete the Transaction.

3.03 Representations and Warranties of the Fund Parties

The Fund Parties hereby represent, warrant and covenant to and in favour of SEMHMP as follows, and acknowledge that SEMHMP is relying upon such representations, warranties and covenants in connection with the matters contemplated by this Agreement:

(1) The Independent Committee has received a verbal summary of the Independent Report including the formal valuation of Units prepared by RBC Dominion Securities Inc. as required pursuant to MI 61-101 and the opinion of RBC Dominion Securities Inc., to the effect that, based upon and subject to the assumptions and qualifications set out therein, as at the date hereof, the consideration to be received by Unitholders other than WEI and its Affiliates under the Transaction is fair, from a financial point of view, to such Unitholders, and such opinion has not been withdrawn or modified at the date of this Agreement. The Fund Parties covenant to deliver to SEMHMP the final written version of the Independent Report (including the same valuation range for the Units as contained in the draft Independent Report) as soon as practicable after the date hereof and in any event by no later than March 11, 2008.

- 10 -

(2) The Board of Trustees has determined that as of the date hereof the Transaction is fair to the Unitholders other than WEI and its Affiliates and is in the best interests of the Fund and the Unitholders other than WEI and its Affiliates and to enter into this Agreement.

(3) The Board of Trustees has unanimously passed a resolution to recommend, as of the date hereof, that Unitholders vote in favour of the Special Resolution approving the Transaction at the Meeting.

ARTICLE 4 - CONDITIONS

4.01 Conditions for the Benefit of SEMHMP

The obligation of SEMHMP to complete the Transaction is subject to the satisfaction of, or compliance with, at or prior to the Closing Time, each of the following conditions (each of which is acknowledged to be for the exclusive benefit of SEMHMP):

(1) The representations and warranties of the Fund Parties shall be true and correct as of the date of this Agreement and as of the Closing Time as if made at and as of such date; the covenants contained in this Agreement to be performed by the Fund Parties at or prior to the Closing Time shall have been performed in all material respects; and SEMHMP shall have received a certificate confirming all of the foregoing, signed for and on behalf of the Fund Parties by senior authorized officers of the Manager in its capacity as administrator of the Fund and Manager of the Trust.

(2) The Required Approvals identified in Schedule B shall have been obtained in each case on terms and conditions satisfactory to SEMHMP, acting reasonably.

(3) No prohibition at law shall exist (including but not limited to a cease trade order, injunction or other prohibition at law or under applicable legislation) which shall restrain, enjoin or otherwise prevent the Transaction or make the consummation of the Transaction illegal.

(4) No Laws shall have been enacted, introduced, proposed or tabled which have the effect of prohibiting or enjoining the Transaction or making consummation of the Transaction illegal. There shall not be any Law enacted, introduced, proposed or tabled relating to income or other taxes that would materially adversely affect any of SEMHMP, the Fund Parties, the Fund Subsidiaries or their respective Affiliates, successors or assigns, if the Transaction was completed.

(5) No Material Adverse Change shall have been suffered between the date of this Agreement and the Transaction Closing Date.

(6) The Securityholders’ Approval shall have been obtained at the Meeting.

4.02 Conditions for the Benefit of the Fund Parties

The obligation of the Fund Parties to complete the Transaction is subject to the satisfaction of, or compliance with, at or prior to the Closing Time, each of the following conditions (each of which is acknowledged to be for the exclusive benefit of each of the Fund Parties):

(1) The representations and warranties of SEMHMP shall be true and correct as of the date of this Agreement and as of the Closing Time in all material respects as if made at and as of such date; the covenants contained in this Agreement to be performed by SEMHMP at or prior to the Closing Time shall have been performed in all material respects; and the Fund Parties shall have received a certificate confirming all of the foregoing, signed for and on behalf of the Fund Parties by senior authorized officers of each of the Fund Parties.

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(2) The Required Approvals identified in Schedule B, shall have been obtained.

(3) No prohibition at law shall exist (including but not limited to a cease trade order, injunction or other prohibition at law or under applicable legislation) which shall restrain, enjoin or otherwise prevent the Transaction or make the consummation of the Transaction illegal on the part of the Fund Parties or any of the Fund Subsidiaries.

(4) The Securityholders’ Approval shall have been obtained at the Meeting.

(5) No Laws shall have been enacted, introduced, proposed or tabled which have the effect of prohibiting or enjoining the Transaction or making consummation of the Transaction illegal.

(6) The indemnity agreements referred to in section 6.01 shall have been executed and delivered by WEI.

ARTICLE 5 - COVENANTS OF THE FUND PARTIES

5.01 No Solicitation

(1) The Fund Parties shall not, directly or indirectly, through any officer, trustee, director, employee, representative or agent of the Fund Parties or any of the Fund Subsidiaries, solicit or encourage (including by way of furnishing information, participating in any negotiations or entering into any form of agreement, arrangement or understanding) the initiation or submission of an Acquisition Proposal, provided nothing contained in this Section 5.01(1) shall prevent the Board of Trustees from taking such actions as the Board of Trustees determines are reasonably required in the exercise of its fiduciary duties to respond to an unsolicited bona fide written Acquisition Proposal that the Board of Trustees reasonably believes could lead to a Superior Proposal.

(2) The Fund Parties shall promptly notify SEMHMP of (i) any proposal or inquiry it receives that the Board of Trustees reasonably believes could lead to a bona fide Acquisition Proposal or (ii) any written request for non public information relating to the Fund Parties or any of the Fund Subsidiaries or for access to the properties, books or records of the Fund Parties or any Fund Subsidiary by any person or entity that informs any member of the Board of Trustees or the board of directors of such Fund Subsidiary that it is considering making, or has made, and which the Fund Parties reasonably believe could lead to, a bona fide Acquisition Proposal. Such notice by the Fund Parties shall be made, from time to time, orally and in writing and shall

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indicate (i) the material terms of such Acquisition Proposal (including a copy of any written proposal), and (ii) the identity of the person making any such Acquisition Proposal or inquiry no later than 24 hours following receipt of such Acquisition Proposal or inquiry. If the Fund Parties intend to furnish any person with any information with respect to any Acquisition Proposal in accordance with Section 5.01(1), the Fund Parties shall advise SEMHMP orally and in writing of such intention not less than one Business Day in advance of providing such information. The Fund Parties will not, except in the usual and ordinary course of business and pursuant to Section 5.01(1) in the case of an Acquisition Proposal that the Board of Trustees reasonably believes could lead to a Superior Proposal, provide any confidential information about the Fund Parties or the Fund Subsidiaries to any third party, including any party making an Acquisition Proposal. The Fund Parties will keep SEMHMP fully informed of the status and details of any such Acquisition Proposal or inquiry.

(3) Each of the Fund Parties covenants that it will not enter into any agreement to implement any Acquisition Proposal (a “Proposed Agreement”) without providing SEMHMP with a copy of such Proposed Agreement not less than five Business Days prior to its proposed execution by the Fund Parties and thereafter will not enter into such Proposed Agreement unless all amounts payable to SEMHMP pursuant to Section 5.02 shall have been paid concurrently therewith. The Fund Parties acknowledge and agree that each successive modification of any Acquisition Proposal shall constitute a new Acquisition Proposal for purposes of the requirement of this Section 5.01(3) and will initiate an additional five Business Day notice period.

5.02 Expense Reimbursement by the Fund Parties

(1) Notwithstanding any other provision relating to the payment of expenses (including any provisions of the letter agreement dated January 24, 2008 between Spectra Energy Corp and the Fund), if:

(a) SEMHMP shall have terminated this Agreement pursuant to and in accordance with Section 8.01(1)(c)(i) or Section 8.01(1)(d);

(b) the Fund Parties shall have terminated this Agreement pursuant to and in accordance with Section 8.01(1)(f); or

(c) either Party shall have terminated this Agreement pursuant to Section 8.01(1)(e) as a result of the failure of the Unitholders to approve the Special Resolution where an Acquisition Proposal has been publicly announced or is otherwise publicly disclosed or is publicly known prior to such termination and any Acquisition Proposal is ultimately consummated within 12 months of the date of termination of this Agreement,

then the Fund Parties shall reimburse SEMHMP for its direct out-of-pocket expenses incurred in connection with the Transaction to a maximum of $1.5 million in immediately available funds to an account designated by SEMHMP as follows: (x) in the case of termination of this Agreement pursuant to Section 5.02(1)(a) above, within two Business Days of such termination, (y) in the case of termination of this Agreement pursuant to Section 5.02(1)(b) above, concurrently with such termination and (z) in the case of termination of this Agreement pursuant to Section 5.02(1)(c) above, on the date of the consummation of any Acquisition Proposal.

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(2) For greater certainty, the Fund Parties shall not be obligated to make more than one payment under Section 5.02(1) if one or more of the events specified therein occurs.

(3) Each of the Parties covenants agrees and acknowledges that the agreements contained in Section 5.02(1) are an integral part of the transactions contemplated in this Agreement and that, without those agreements, the Parties would not enter into this Agreement. Each party further covenants agrees and acknowledges that all of the payment amounts set out in Section 5.02(1) are payments of liquidated damages which are a pre-estimate of the damages which SEMHMP will suffer or incur as a result of the event or events giving rise to such payment and the resulting termination of this Agreement, and are not penalties. The Fund Parties irrevocably waive any right that they may have to raise as a defence that any such liquidated damages are excessive or punitive. SEMHMP further covenants, agrees and acknowledges that payment of the amounts by the Fund Parties as determined under and subject to the terms and conditions of Section 5.02(1) is the sole and exclusive remedy of SEMHMP against the Fund Parties and the Fund Subsidiaries in such circumstances, subject to its right to pursue equitable remedies (but subject to Section 9.06).

5.03 Cooperation, etc.

(1) The Fund Parties and the Fund Subsidiaries shall not do anything or omit to do anything that (i) would adversely affect the Fund’s status as a “mutual fund trust” for purposes of the Tax Act at any time at or before the end of its taxation year in which the Transaction occurs or (ii) would cause the Fund to become subject to tax under section 122 of the Tax Act for any taxation year ending before 2011.

(2) The Fund Parties shall ensure that there is no change to the Trustee or to the Board of Trustees until the Transaction Closing Date.

5.04 Redemption

At the Closing, the Fund shall promptly redeem the applicable outstanding Units as further described in, and in accordance with, Schedule A and the amendments to the Fund Trust Indenture contemplated by Exhibit A to Schedule C.

5.05 Alternative Structure

In the event that SEMHMP reasonably concludes that it is necessary or desirable to proceed with a form of transaction other than in the form of the Transaction (an “Alternative Structure Transaction”), the Fund Parties agree to review and negotiate in good faith with SEMHMP with respect to amending this Agreement to implement such Alternative Structure Transaction to the extent any tax planning or tax structuring ancillary thereto does not cause prejudice (including by reducing the consideration to be received by the Unitholders pursuant to the Transaction or adversely affecting the income tax consequences of the Transaction to Unitholders) or result in any material additional costs (unless such costs are paid by SEMHMP) to the Fund Parties or the Unitholders provided that in no circumstances shall the Fund Parties or

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any Fund Subsidiary be required to support such Alternative Structure Transaction or otherwise take any action under this Section 5.05 if the Board of Trustees, in its opinion acting in good faith, after consulting with outside legal counsel, determines that supporting such Alternative Structure Transaction or taking such other action would be in breach of applicable Laws or would reasonably be likely to result in the Board of Trustees being in breach of its fiduciary obligations under applicable Laws.

5.06 Unitholder Distributions

The Fund shall pay (a) the Fund’s regular monthly cash distributions on the outstanding Units of $0.07 per Unit in respect of applicable regular record dates occurring prior to the Transaction Closing Date, and (b) a pro rata amount of the Fund’s regular monthly cash distribution on the outstanding Units of up to $0.07 per Unit for the period from the first day of the calendar month in which the Closing occurs up to but excluding the Transaction Closing Date). The Fund shall not make a designation under the Tax Act to any Unitholder whose Units are purchased or redeemed as part of the Transaction any net taxable capital gains attributable to a transaction completed after the Transaction Closing Date, and the Parties shall not complete after the Transaction Closing Date any transaction that would result in any adverse income tax consequence to a Unitholder whose Units are purchased or redeemed as part of the Transaction.

ARTICLE 6 - COVENANTS OF SEMHMP

6.01 Trustees’, Directors’ and Officers’ Indemnities and Insurance

From and after the Closing Time, SEMHMP shall cause WEI to indemnify the current members of the Board of Trustees in both their respective capacities as trustees of the Trust and as directors of the General Partner, and to purchase or cause to be purchased trustees’ and officers’ liability insurance providing coverage for the current members of the Board of Trustees in both their respective capacities as trustees of the Trust and as directors of the General Partner, substantially on the terms set forth in the form of the indemnity agreement exchanged between counsel for SEMHMP and counsel for the Independent Committee as of the date hereof and such indemnity agreement shall be executed at Closing with the members of the Board of Trustees.

ARTICLE 7 - MUTUAL COVENANTS

7.01 Notice Provisions

Each Party will give prompt notice to the other of the occurrence, or failure to occur, at any time from the date hereof until the earlier to occur of the termination of this Agreement and the Closing Time of any event or state of facts of which it is aware which occurrence or failure would, or would be reasonably likely to:

(a) cause any of the representations or warranties of such Party contained herein to be untrue or inaccurate in any material respect; or

(b) result in the failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such Party hereunder prior to the Closing Time.

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7.02 Additional Agreements and Filings

Subject to the terms and conditions herein provided each of the Parties agrees to use its reasonable commercial efforts to take, or cause to be taken, all reasonable actions and to do, or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective as promptly as practicable the Transaction and other matters contemplated by this Agreement and to cooperate with each other in connection with the foregoing, including using reasonable commercial efforts:

(a) to obtain all necessary Consents as are required to be obtained under applicable Law or any Consents that, in the opinion of SEMHMP and/or the Fund Parties, each acting reasonably, would be advisable to the effect the Transaction;

(b) to defend all lawsuits or other legal proceedings challenging this Agreement or the consummation of the Transaction contemplated hereby, in the case of a lawsuit or proceeding against the Fund Parties or any Fund Subsidiaries subject to the approval of SEMHMP, acting reasonably;

(c) to cause to be lifted or rescinded any injunction or restraining order or other Order adversely affecting the ability of the Parties to consummate the Transaction and to effect all necessary registrations and other filings and submissions of information requested by Governmental Authorities or required under any applicable Securities Laws, or any other Law relating to the transactions contemplated herein, in the case of an injunction or Order against the Fund, the Trust or any of the Fund Subsidiaries subject to the approval of SEMHMP, acting reasonably;

(d) to execute and deliver such documents as may reasonably be required or advisable to effect the Transaction; and

(e) to fulfil all conditions within its power and satisfy all provisions of this Agreement and the Transaction.

7.03 Competition Act/Investment Canada Act/Canada Transportation Act

(1) In addition, (i) each Party hereto agrees to make any merger notification filings or other submissions pursuant to the Competition Act as may be appropriate and advisable as promptly as reasonably practicable and to supply as promptly as reasonably practicable any additional information and documentary material that may be requested by the Competition Commissioner and to take all other commercially reasonable actions necessary (not including the negotiation of a competition law remedy), proper or advisable to cause the expiration, waiver or termination of any applicable waiting periods and to obtain any approval or notification required or sought to be obtained from the Competition Commissioner in order to complete the transactions contemplated by this Agreement as soon as reasonable practicable; (ii) to the extent required, SEMHMP agrees to submit an application for review under Part IV of the Investment Canada Act and any other submissions pursuant to the Investment Canada Act as may be appropriate or advisable as promptly as reasonably practicable, and to supply as promptly as reasonably practicable thereafter any additional information and documentary material that may be requested by the Director of Investments or the Minister of Industry or their designates and to

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take all other reasonable actions necessary, proper or advisable (including written undertakings to Her Majesty in right of Canada provided that they shall be on terms satisfactory to SEMHMP in its commercially reasonable discretion) and to obtain as soon as reasonably practicable a written notice from the Minister of Industry stating that he is satisfied that the investment is likely to be of net benefit to Canada and the Fund agrees to fully co-operate with SEMHMP in connection with all Investment Canada Act matters and to promptly respond to all requests for information with respect thereto (failing which SEMHMP shall not be in breach hereunder); and (iii) each Party hereto agrees to make any necessary filings or submissions pursuant to sections 53.1 and 53.2 of the Canada Transportation Act as may be appropriate and advisable as promptly as reasonably practicable and to supply as promptly as reasonably practicable any additional information and documentary material that may be requested by the Minister of Transport or its designates and to take all other reasonable actions necessary, proper or advisable (including written undertakings to Her Majesty in right of Canada provided that they shall be on terms satisfactory to SEMHMP in its commercially reasonable discretion) and to obtain as soon as reasonably practicable either (A) a written opinion from the Minister of Transport that the transactions contemplated by this Agreement do not raise issues with respect to the public interest as it relates to national transportation or (B) approval of the transactions by the Governor in Council, and the Fund Parties agree to fully co-operate with SEMHMP in connection with all Canada Transportation Act matters and to promptly respond to all requests for information with respect thereto (failing which SEMHMP shall not be in breach hereunder).

(2) All filing fees required in connection with the notification of the transactions contemplated by this Agreement or the application for or prosecution of any Consent in accordance with this Section shall be shared equally by SEMHMP and the Fund Parties. All other fees, expenses and disbursements (including the costs of preparation of any such filings and fees and expenses of legal counsel) incurred in connection with the matters referred to in this Section shall be borne by the Fund Parties (if incurred by or on behalf of the Fund Parties) and by SEMHMP (if incurred by or on behalf of SEMHMP).

7.04 Publicity

The Parties shall agree on the form and issue a press release with respect to this Agreement and the transactions contemplated herein as soon as practicable on the date hereof. From the date hereof until the earlier of the completion of the Transaction and the termination of this Agreement, the Fund Parties shall not make any further public announcement or statement with respect to this Agreement or the transactions contemplated herein unless SEMHMP shall have agreed thereto (which consent shall not be unreasonably withheld or delayed) or unless otherwise required by applicable Law or applicable stock exchange rule, based on the advice of counsel. If any of the Fund Parties is required by Law or applicable stock exchange rule to make a public announcement with respect to the transactions contemplated herein, such Fund Party will provide as much notice to SEMHMP as reasonably possible, including the proposed text of the announcement, and reasonably consider any comments that SEMHMP provides.

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ARTICLE 8 - TERMINATION, AMENDMENT AND WAIVER

8.01 Termination

(1) This Agreement may:

(a) be terminated by any Party hereto upon the prior written consent of all the other Parties;

(b) be terminated either by SEMHMP or the Fund Parties if, as a result of any change in Law, the completion of the Transaction becomes illegal or otherwise prohibited;

(c) be terminated by SEMHMP in its discretion if SEMHMP is not then in material breach of this Agreement and:

(i) the Fund Parties have breached their respective covenants under Section 5.01, or

(ii) a Material Adverse Change has occurred;

(d) be terminated by SEMHMP in its discretion if the Board of Trustees shall have: (i) withdrawn, amended, modified or qualified in a manner adverse to SEMHMP its recommendation to Unitholders to vote in favour of the Special Resolution, or failed to reaffirm same within five Business Days following the announcement of any Acquisition Proposal, or (ii) as contemplated in Article 5, accepted, approved, recommended or entered into, or proposed publicly to accept, approve, recommend or enter into, any agreement, understanding or arrangement in respect of any Acquisition Proposal;

(e) be terminated by any Party if the Special Resolution shall have failed to receive the Securityholders’ Approval at the Meeting;

(f) be terminated by the Fund Parties in order to accept, approve, recommend or enter into, or propose publicly, to accept, approve, recommend or enter into, any agreements, understanding or arrangement to implement any Acquisition Proposal, subject to compliance with Article 5; and

(g) be terminated by any Party if the Transaction Closing Date does not occur on or prior to 5:00 p.m. (Calgary time) on the date that is 120 days from the date of this Agreement (the “Expiration Time”), provided that the terminating Party shall not have proximately contributed to the failure of the Closing to occur by the Expiration Time.

8.02 Effect of Termination

In the event of the termination of this Agreement as provided in Section 8.01, this Agreement shall forthwith have no further force or effect and there shall be no obligation on the

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part of the Parties hereunder except as set forth in Section 5.02, Section 6.01, Article 9 and the Confidentiality Agreement, which terms and provisions shall survive the termination of this Agreement.

8.03 Amendment

This Agreement may be amended in writing by the Parties hereto at any time. This Agreement may not be amended except by an instrument in writing signed by each of the Parties hereto.

8.04 Waiver

Any Party may:

(a) extend the time for the performance of any of the obligations or other acts of another Party;

(b) waive compliance with another Party’s agreements or the fulfilment of any conditions in its favour contained herein; or

(c) waive inaccuracies in any of another Party’s representations or warranties contained herein or in any document delivered by the another Party;

provided, however, that any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party.

ARTICLE 9 - GENERAL PROVISIONS

9.01 Notices

Any notice, consent, waiver, direction or other communication required or permitted to be given under this Agreement by a Party shall be in writing and may be given by delivering same or sending same by facsimile transmission or by delivery addressed to the Party to which the notice is to be given at its address for service herein. Any notice, consent, waiver, direction or other communication aforesaid shall, if delivered, be deemed to have been given and received on the date on which it was delivered to the address provided herein (if a Business Day, if not, then the next succeeding Business Day, in each case in the place of receipt) and if sent by facsimile transmission be deemed to have been given and received at the time of receipt (if a Business Day, if not, then the next succeeding Business Day in each case in each case in the place of receipt) unless actually received on such a Business Day after 5:00 p.m. (local time in the place of receipt) at the point of receipt in which case it shall be deemed to have been given and received on the next Business Day.

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The address for service for each of the Parties hereto shall be as follows:

(a) if to the Fund Parties:

Spectra Energy Income Fund

Spectra Energy Commercial Trust

c/o Spectra Energy Facilities Management Inc.

2600, 425 – 1^st Street S.W.

Fifth Avenue Place, East Tower

Calgary, AB T2P 3L8

Attention: President

Facsimile: (403) 699-1550

with a copy to:

Burnet, Duckworth and Palmer LLP

1400, 350 – 7^th Avenue S.W.

Calgary, AB T2P 3N9

Attention: William S. Maslechko

Facsimile: (403) 260-0332

(b) if to SEMHMP:

Spectra Energy Midstream Holdco Management Partnership

c/o Westcoast Energy Inc.

2600, 425 – 1^st Street S.W.

Fifth Avenue Place, East Tower

Calgary, AB T2P 3L8

with a copy to:

McCarthy Tétrault LLP

3300, 421 – 7^th Avenue S.W.

Calgary, AB T2P 4K9

Attention: John S. Osler

Facsimile: (403) 260-3501

9.02 Miscellaneous

(1) The agreements and other documents herein referred to (which for greater certainty include the Schedules, the Confidentiality Agreement and the letter agreement dated January 24, 2008 between Spectra Energy Corp and the Fund) constitute the entire agreement among the Parties with respect to the subject matter hereof and thereof and supersede all other prior agreements, understandings, negotiations and discussions, whether oral or written, among the Parties.

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(2) This Agreement shall be binding upon and enure to the benefit of the Parties and their respective successors and permitted assigns.

(3) This Agreement does not give any Person (including any Unitholder) other than the Parties any right or recourse whatsoever.

9.03 No Personal Liability of Trustees, etc.

(1) The Parties acknowledge that the Trust is entering into this agreement solely in its capacity as agent on behalf of the Fund, and the obligations of the Fund hereunder shall not be personally binding upon the Trustee, the Trust or any member of the board of trustees of the Trust, or any of the holders of Units or Special Voting Units or any annuitant, subscriber or beneficiary under a registered plan for purposes of the Income Tax Act (Canada) or any other plan of which a Unitholder acts as a trustee or carrier (an “annuitant”), and that any recourse against the Fund, the Trustee, the Trust, any member of the board of trustees of the Trust including for greater certainty any member of the Independent Committee, any Unitholder or annuitant in any manner in respect of any indebtedness, obligation or liability of the Fund arising in connection herewith or from the matters to which this agreement relates, if any, including without limitation claims based on negligence or otherwise tortious behaviour, shall be limited to, and satisfied only out of, the Fund Property as defined in the Fund Trust Indenture.

(2) The Parties acknowledge that the members of the board of trustees of the Trust are entering into this agreement solely in their capacity as trustees on behalf of the Trust, and the obligations of the Trust hereunder shall not be personally binding upon any of the members of the board of trustees of the Trust, any of the holders of units of the Trust and that any recourse against the Trust and such trustees including for greater certainty any member of the Independent Committee, or any holder of units of the Trust in any manner in respect of any indebtedness, obligation or liability of the Trust arising hereunder or arising in connection herewith or from the matters to which this agreement relates, including without limitation claims based on negligence or otherwise tortious behaviour, shall be limited to, and satisfied only out of, the Trust Property (as defined in the Trust Indenture).

9.04 Assignment

Except as expressly permitted by the terms hereof, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties without the prior express written consent of all of the other Parties. Notwithstanding the foregoing provisions of this Section 9.04, SEMHMP may assign all (but not part) of its rights or obligations under this Agreement to any Affiliate of SEMHMP, provided that such permitted assignment shall not release SEMHMP from its obligations hereunder.

9.05 Expenses

Except as provided in Section 2.03(1)(c), Section 5.02, Section 6.01, Section 7.03, or in the letter agreement dated January 24, 2008, between Spectra Energy Corp and the Fund, all fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such fees, costs and expenses.

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9.06 Survival

Subject to Section 8.02, the representations and warranties of the Fund Parties and SEMHMP contained in this Agreement shall not survive Closing, and shall expire and be terminated at the Closing Time.

9.07 Severability

Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under Law. Any provision of this Agreement that is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

9.08 Third Party Beneficiaries

Except as otherwise provided under Article 6 and Section 9.04, the Parties intend that this Agreement will not benefit or create any right or cause of action in favour of any Person other than the Parties. Except for those Persons referred to in Article 6 and Section 9.04, no Person, other than the Parties, shall be entitled to rely on the provisions of this Agreement in any action, suit, proceeding, hearing or other forum. Except with respect to the matters in Article 6 which may not be amended in any manner adverse to the Persons referred to therein without their prior written consent, the Parties reserve their right to vary or rescind the rights at any time and in any way whatsoever, if any, granted by or under this Agreement to any Person who is not a Party without notice to or consent of that Person and without any claim for breach of fiduciary duty.

9.09 Counterparts

This Agreement may be executed in any number of counterparts (including counterparts by facsimile) and all such counterparts taken together shall be deemed to constitute one and the same instrument. For greater certainty, the Parties shall be entitled to rely upon delivery of an executed facsimile copy of the Agreement, and such facsimile copy shall be legally effective to create a valid and binding agreement among the Parties.

9.10 Constructions

The Parties have participated jointly in the negotiation and drafting of this Agreement. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

9.11 Actions by the Fund

With respect to any action (including any case where the agreement of, or election by, the Fund is required), notice, consent, approval or waiver that is required to be taken or given by the Fund or that may be taken or given by the Fund prior to or after the Transaction Closing Date with respect to, or in connection with, the subject matter hereof, such action, notice, consent, approval or waiver shall be taken or given by the Independent Committee of behalf of the Fund.

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IN WITNESS WHEREOF, SEMHMP, the Fund and the Trust have caused this Support Agreement to be executed as of the date first written above.

[Signature Page Follows]

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SPECTRA ENERGY MIDSTREAM HOLDCO MANAGEMENT PARTNERSHIP, by its Managing Partner WESTCOAST ENERGY INC.

Per:	/s/ Douglas Bloom
	Douglas Bloom
	President and Chairman

SPECTRA ENERGY INCOME FUND, by SPECTRA ENERGY FACILITIES MANAGEMENT INC. as general partner and on behalf of Spectra Energy Facilities Management LP, administrator of Spectra Energy Income Fund

Per:	/s/ Bruce Pydee
	Bruce Pydee
	Vice President and General Counsel

SPECTRA ENERGY COMMERCIAL TRUST, by SPECTRA ENERGY FACILITIES MANAGEMENT INC. as general partner and on behalf of Spectra Energy Facilities Management LP, manager of Spectra Energy Commercial Trust

Per:	/s/ Bruce Pydee
	Bruce Pydee
	Vice President and General Counsel

SCHEDULE A

TRANSACTION

On the Transaction Closing Date, the transaction steps to be completed are as follows:

1. SEMHMP shall subscribe for such number of Units as equals the number of Units in respect of which Unitholders elect or are deemed, pursuant to clause (ii) of the definition of “Redemption” set out in the Trust Indenture, to elect to have their Units redeemed by the Fund, and the subscription price will be the product obtained by multiplying $11.25 by the number of Units so subscribed for by SEMHMP.

2. SEMHMP shall purchase from Unitholders who validly elect to have their Units acquired by SEMHMP rather than redeemed by the Fund, such number of Units of such Unitholders as are the subject of such elections for cash consideration in the amount of $11.25 per Unit; and

3. Pursuant to the terms of the Fund Trust Indenture, as amended pursuant to the Special Resolution and in accordance with Exhibit A to Schedule C, and concurrently with step 2 above, the Fund shall redeem such number of Units in respect of which Unitholders other than SEMHMP have validly elected or deemed to have elected to have their Units redeemed by the Fund for a redemption price equal to $11.25 per Unit.

4. The Special Voting Units of the Fund shall be redeemed for nominal consideration.

The aggregate of the subscription price of all the Units subscribed for as described in step 1 above and the purchase price of Units purchased as described in step 2 above shall be $273,948,750.

SCHEDULE B

REQUIRED APPROVALS

1. The Minister of Industry shall have determined, or shall have been deemed to have determined, that he is satisfied the transactions contemplated by the Agreement are likely to be of “net benefit” to Canada pursuant to the Investment Canada Act.

2. The Competition Commissioner shall have issued an advance ruling certificate pursuant to section 102 of the Competition Act (Canada) in respect of the transactions contemplated by the Agreement; or (A) the Competition Commissioner shall have advised the Parties, in writing, that grounds do not exist at the time of the advice to initiate proceedings before the Competition Tribunal under the merger provisions of the Competition Act (Canada) in connection with the transactions contemplated by the Agreement, and (B) all waiting periods under the Competition Act (Canada) shall have expired or been terminated or waived.

3. Either (a) the Minister of Transport shall have formed the opinion that the transactions contemplated by the Agreement do not raise issues with respect to the public interest as it relates to transportation, and shall have given notice of that opinion to the Parties pursuant to section 53.1 of the Canada Transportation Act, or (b) the Governor in Council shall have approved the transactions pursuant to section 53.2 of the Canada Transportation Act.

SCHEDULE C

SPECIAL RESOLUTION

BE IT RESOLVED as a Special Resolution that:

1. the execution and delivery of the Support Agreement (the “Support Agreement”) between SEMHMP and the Fund Parties dated as of March 4, 2008 (as it may be or may have been amended in accordance with its terms), and the direct or indirect acquisition by SEMHMP of all of the trust units of the Fund and any associated amendments to the Fund Trust Indenture contemplated by the transaction described in the Support Agreement (the “Transaction”), and the Transaction, is hereby approved, ratified and confirmed in all respects;

2. the proposed amendments to the Fund Trust Indenture as set forth in Exhibit A to this Special Resolution are hereby approved and authorized. Any one trustee of the Trust or director or officer of the Administrator be and is authorized, without further notice to or approval of the unitholders of the Trust (“Unitholders”), to approve on behalf of the Fund such other amendments to the Fund Trust Indenture and amendments to or terminations of any other agreement or instrument affecting the Fund as may be necessary or desirable in his or her discretion in order to permit or give effect to the Transaction approved by this Special Resolution;

3. any one trustee of the Trust or director or officer of the Administrator be and is hereby authorized and directed to execute on behalf of the Fund, the Trust and each Fund Subsidiary and to deliver and to cause to be delivered all such documents, agreements and instruments and to do or cause to be done all such other acts and things as he or she shall determine to be necessary or desirable in order to carry out the intent of the foregoing resolutions and the matters authorized thereby, such determination to be conclusively evidenced by the execution and delivery of such documents, agreements or instruments or the doing of any such act or thing;

4. notwithstanding that this resolution has been passed, the Fund and the Trust are authorized, without further notice to or approval of the Unitholders of the Fund: (a) to amend the Support Agreement to the extent permitted by the Support Agreement; and/or (b) to terminate the Support Agreement and to not proceed with the Transaction (and the amendments contemplated above) to the extent permitted by the Support Agreement; and

5. all capitalized terms not otherwise defined in this Special Resolution have the meanings ascribed thereto in the Support Agreement.

EXHIBIT A TO SCHEDULE C

AMENDMENTS TO THE TRUST INDENTURE OF THE FUND

1. Section 1.1 shall be amended to include the following:

“Meeting Date” means the date of the Meeting, as the term “Meeting” is defined in the Support Agreement;

“Redemption” means the redemption by the Fund of Units held by Unitholders: (i) who have validly elected to have such Units redeemed by the Fund in accordance with the terms of the Transaction; or (ii) have made no election pursuant to the terms of the Transaction, in consideration of payment of the Unit Redemption Price per Unit as contemplated by the Transaction and for greater certainty does not include any Units held by SEMHMP on the Redemption Date;

“Redemption Date” means the Transaction Closing Date or such other date as agreed to in writing by the parties to the Support Agreement;

“SEMHMP” means Spectra Energy Midstream Holdco Management Partnership, a partnership formed pursuant to the laws of the Province of Alberta;

“Support Agreement” means the Support Agreement among SEMHMP, the Fund and the Trust dated March 4, 2008 (as it may be or may have been amended in accordance with its terms);

“Transaction Closing Date” has the meaning ascribed thereto in the Support Agreement;

“Transaction” means the transaction contemplated in the Support Agreement;

“Unit Redemption Price per Unit” means Cdn.$11.25 per Unit (as it may be amended in accordance with an amendment to the Support Agreement).

2. A new Section 6.9 shall be added, as follows:

Section 6.9 – Support Agreement

(a) The Fund shall complete the Redemption, without further act or formality, on the Redemption Date.

(b) For the purposes of this Section 6.9, Unitholders who do not validly elect to have their Units redeemed by the Fund or purchased by SEMHMP in accordance with the terms of the Transaction shall be deemed to have elected to have their Units redeemed by the Fund on the Redemption Date.

(c) The Fund shall cause to be forwarded a cheque by first class mail or a wire transfer in Canadian currency representing the aggregate Unit Redemption Price per Unit required to be paid to each holder of Units pursuant to Section 6.9(a) and subject to Section 6.9(d) against delivery of certificates representing the Units

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redeemed, together with such documentation as may be requested by the Trustee or the Transfer Agent. Payments made by the Fund of the applicable aggregate Unit Redemption Price per Unit are conclusively deemed to have been made upon the mailing of a cheque in a postage prepaid envelope addressed to the holder of Units unless such cheque is dishonoured upon presentment or upon transmission of a wire transfer, as applicable. Upon such payment, the Fund shall be discharged from all liability to the former holder of Units in respect of the Units so redeemed. Under no circumstances will interest be paid to any holder on any payment to be made hereunder, regardless of any delay in making such payment.

(d) The Fund and its agents shall be entitled to deduct and withhold from any consideration payable to any holder of Units as a consequence of the Redemption, such amounts as the Fund or any agent is required or permitted to deduct and withhold with respect to such payment under Applicable Laws. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the holder of Units in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority.

(e) Where the Fund redeems Units in connection with the Redemption on the Redemption Date, the Trustee may, in its sole discretion, designate to the holders of Units any income or capital gain realized by the Fund as a result of the Transaction and paid or made payable to the holders of Units upon the redemption of their Units.

(f) Notwithstanding Section 6.7, all Units that are redeemed under Section 6.9 shall be cancelled as of 12:01 a.m. on the Redemption Date and such Units shall no longer be outstanding and shall not be reissued.

(g) Following the Redemption Date, the Trustee shall undertake no activities except for those which the Trustee shall continue to be vested with and may exercise all or any of the powers conferred upon the Trustee under this Trust Indenture.

(h) The Trustee or any director or officer of the Administrator is authorized, without further notice to or approval of the holder of Units, to approve such other amendments to this Trust Indenture as are in his, her or its discretion necessary or desirable in order to permit the Redemption and as otherwise may be necessary or desirable in order to give effect to the Transaction and the Support Agreement.

3. A new Section 6.10 shall be added, as follows:

Section 6.10 – Direct Acquisition of Units from Electing Holders of Units under the Support Agreement

Notwithstanding anything to the contrary contained in this Trust Indenture, in connection with the closing of the Transaction, SEMHMP may acquire from registered holder of Units who, pursuant to a letter of transmittal in a form acceptable to SEMHMP and the Administrator, elect prior to the Meeting to have their Units acquired rather than redeemed for cash consideration as provided in the Support Agreement.

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EX-10.2

Exhibit 10.2

AMENDMENT NO. 1

AMENDMENT NO. 1 dated as of April 8, 2008 (this “Amendment No. 1”) among SPECTRA ENERGY CORP, a Delaware corporation (“Parent”), SPECTRA ENERGY CAPITAL, LLC, a Delaware limited liability company (the “Borrower”), the Lenders executing this Amendment No. 1 on the signature pages hereto and JPMORGAN CHASE BANK, N.A., in its capacity as administrative agent under the Credit Agreement referred to below (the “Agent”).

The Borrower, the Agent and the Lenders, are parties to a Credit Agreement dated as of May 21, 2007 (as modified and supplemented and in effect from time to time, the “Credit Agreement”), providing, subject to the terms and conditions thereof, for extensions of credit to be made by the Lenders to the Borrower. The Borrower, the Agent and the Lenders party hereto wish to amend the Credit Agreement in certain respects, and accordingly, the parties hereto hereby agree as follows:

Section 1. Definitions. Except as otherwise defined in this Amendment No. 1, terms defined in the Credit Agreement are used herein as defined therein.

Section 2. Amendments. Subject to the satisfaction of the conditions precedent specified in Section 4 of this Amendment No. 1, but effective as of the date hereof, the Credit Agreement shall be amended as follows:

2.01. References Generally. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to “this Agreement” (and indirect references such as “hereunder”, “hereby”, “herein” and “hereof”) shall be deemed to be references to the Credit Agreement as amended hereby.

2.02. Definitions.

(a) Section 1.01 of the Credit Agreement shall be amended by adding the following definitions in the appropriate alphabetical location:

““Amendment No. 1” means Amendment No. 1 dated effective as of the Amendment No. 1 Effective Date, among Parent, the Borrower, the Agent and the Lenders party thereto.”

““Amendment No. 1 Effective Date” means April 8, 2008.”

““Consolidated Subsidiaries” means Borrower and each Restricted Subsidiary of the Borrower.”

““Guaranteed Obligations” has the meaning specified in Section 9.01.”

““Parent Officer” means the president, a vice president, the chief financial officer, the treasurer, an assistant treasurer or the controller of Parent or such other representative of Parent as may be designated by any of the foregoing with the consent of the Agent.”

(b) Section 1.01 of the Credit Agreement shall be amended by restating the definitions “Consolidated Capitalization”, “Consolidated Indebtedness”, “Consolidated Net Tangible Assets”, “Consolidated Tangible Assets” and “Hybrid Securities” in their entirety to read as follows:

““Consolidated Capitalization” means, at any date, the sum of (a) Consolidated Indebtedness, (b) consolidated members equity as would appear on a consolidated balance sheet of Parent and the Consolidated Subsidiaries prepared in accordance with GAAP, (c) the aggregate liquidation preference of preferred member or other similar preferred or priority Equity Securities (other than preferred member or other similar preferred or priority Equity Securities subject to mandatory redemption or repurchase) of Parent and the Consolidated Subsidiaries upon involuntary liquidation, (d) without duplication of the amount, if any, of Hybrid Securities included in Consolidated Indebtedness by virtue of the proviso in the definition of such term, the aggregate outstanding amount of all Hybrid Securities of Parent and the Consolidated Subsidiaries and (e) minority interests as would appear on a consolidated balance sheet of Parent and the Consolidated Subsidiaries prepared in accordance with GAAP.”

““Consolidated Indebtedness” means, as of any date, all Indebtedness of Parent and the Consolidated Subsidiaries determined on a consolidated basis in accordance with GAAP plus, without duplication, all Indebtedness described in clause (e) of the definition thereof; provided, that solely for purposes of this definition Hybrid Securities shall constitute Indebtedness only to the extent, if any, that the amount thereof that appears on a consolidated balance sheet of Parent and the Consolidated Subsidiaries exceeds 15% of Consolidated Capitalization.”

““Consolidated Net Tangible Assets” means, as of any date, Consolidated Tangible Assets at such date minus all consolidated current liabilities of Parent and the Consolidated Subsidiaries at such date determined on a consolidated basis in accordance with GAAP.”

““Consolidated Tangible Assets” means, as of any date, the consolidated assets of Parent and the Consolidated Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP, and after deducting therefrom (a) the net book value of all assets that would be classified as intangibles under GAAP (including, without limitation, goodwill, organizational expenses, trademarks, trade names, copyrights, patents, licenses and any rights in any thereof) and (b) any prepaid expenses, deferred charges and unamortized debt discount and expense, each such item determined in accordance with GAAP.”

““Hybrid Securities” means any trust preferred securities, or deferrable interest subordinated debt with a maturity of at least 20 years, which provides for the optional or mandatory deferral of interest or distributions, issued by Parent or any Consolidated Subsidiary, or any business trusts, limited liability companies, limited partnerships or

similar entities (i) substantially all of the common equity, general partner or similar interests of which are owned (either directly or indirectly through one or more wholly owned Subsidiaries) at all times by Parent or any of the Consolidated Subsidiaries, (ii) that have been formed for the purpose of issuing hybrid securities or deferrable interest subordinated debt, and (iii) substantially all the assets of which consist of (A) subordinated debt of Parent or a Consolidated Subsidiary, and (B) payments made from time to time on the subordinated debt.”

2.03. Representations and Warranties. The introductory sentence of Section 4.01 and Sections 4.01(a), (b), (c), (e), (f), (g), (h), (i) and (j) of the Credit Agreement are hereby amended in their entirety to read as follows:

“SECTION 4.01. Parent and the Borrower represents and warrants that:”

“(a) Organization and Power. Each of Parent and the Borrower is duly organized, validly existing and in good standing under the laws of Delaware and has all requisite powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business in each jurisdiction where such qualification is required, except where the failure so to qualify would not have a Material Adverse Effect.”

“(b) Company and Governmental Authorization; No Contravention. (i) The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower’s limited liability company powers, have been duly authorized by all necessary limited liability company action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of formation or limited liability company agreement of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Restricted Subsidiaries. (ii) The execution, delivery and performance by Parent of this Agreement are within Parent’s corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or bylaws of Parent or of any agreement, judgment, injunction, order, decree or other instrument binding upon Parent or result in the creation or imposition of any Lien on any asset of Parent, the Borrower or any of its Material Restricted Subsidiaries.

“(c) Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and Parent and each Note, if and when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors rights generally and by general principles of equity.”

“(e) Regulation U. Parent and the Consolidated Subsidiaries are not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Borrowing or any Letter of Credit will be used, whether directly or indirectly, to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock in any such case that would cause a violation of such Regulation U. Not more than 25% of the value of the assets of Parent and the Consolidated Subsidiaries is represented by margin stock.”

“(f) Litigation. Except as disclosed in the Parent’s annual report on Form 10-K for the fiscal year ended December 31, 2007, there is no action, suit or proceeding (including, without limitation, any Environmental Action) pending against, or to the knowledge of Parent or the Borrower threatened against or affecting, Parent, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official that would be likely to be decided adversely to Parent, the Borrower or such Subsidiary and, as a result, have a Material Adverse Effect.”

“(g) Compliance with Laws. Parent, the Borrower and each Subsidiary is in compliance in all material respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) non-compliance would not have a Material Adverse Effect or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings.”

“(h) Taxes. Parent, the Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns that are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by Parent, the Borrower or any Subsidiary except (i) where nonpayment or failure to file would not have a Material Adverse Effect or (ii) where the same are contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of Parent, the Borrower and its Material Restricted Subsidiaries in respect of taxes or other governmental charges are, in the opinions of Parent and the Borrower, adequate.”

“(i) Investment Company Status. Neither Parent, the Borrower nor any of its Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.”

“(j) Disclosure. Neither the Information Memorandum (including the information incorporated therein by reference) nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of Parent or the Borrower, to the Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, Parent and the Borrower represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.”

2.04. Covenants of the Borrower. Sections 5.01, 5.02, 5.03, 5.04, 5.05, 5.06, 5.08, 5.09(a), 5.11 and 5.12 of the Credit Agreement are hereby amended in their entirety to read as follows:

“SECTION 5.01. Information. The Borrower will deliver to the Agent:

(a) as soon as available and in any event within 120 days after the end of each fiscal year of Parent, a consolidated balance sheet of Parent and its consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, cash flows, capitalization and retained earnings for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner consistent with the requirements of the Securities and Exchange Commission by Deloitte & Touche or other independent public accountants of nationally recognized standing;

(b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of Parent, commencing with the fiscal quarter ended March 31, 2008, a consolidated balance sheet of Parent and its consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of Parent’s fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Parent’s previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, application of GAAP and consistency by an Approved Officer of the Borrower;

(c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of an Approved Officer of the Borrower and a Parent Officer (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Section 5.12 on the date of such financial statements and (ii) stating whether any Default or Event of Default exists on the date of such certificate and, if any Default or Event of Default then exists, setting forth the details thereof and the action that the Borrower is taking or proposes to take with respect thereto;

(d) within five days after any officer of the Borrower with responsibility relating thereto obtains knowledge of any Default or Event of Default, if such Default or Event of Default is then continuing, a certificate of an Approved Officer of the Borrower setting forth the details thereof and the action that the Borrower is taking or proposes to take with respect thereto;

(e) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) that Parent shall have filed with the Securities and Exchange Commission;

(f) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any “reportable event” (as defined in Section 4043 of ERISA) with respect to any Material Plan that might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Material Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Material Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose material liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Material Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Material Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Material Plan or makes any amendment to any Material Plan that has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and

(g) from time to time such additional information regarding the financial position or business of Parent and its consolidated Subsidiaries (including, if requested, information as to the Parent and the Consolidated Subsidiaries on a stand-alone basis) as the Agent, at the request of any Lender, may reasonably request.

Information required to be delivered pursuant to Sections 5.01(a), 5.01(b) and 5.01(e) shall be deemed to have been delivered on the date on which such information has been posted by Parent on the Securities and Exchange Commission website on the Internet at sec.gov/edaux/searches.htm, on the Borrower’s IntraLinks site at intralinks.com or on another website identified in a notice provided to the Lenders and accessible by the Lenders without charge.”

“SECTION 5.02. Payment of Taxes. Parent and the Borrower will pay and discharge, and the Borrower will cause each Subsidiary to pay and discharge, at or before maturity, all their tax liabilities, except where (i) nonpayment or failure to file would not have a Material Adverse Effect or (ii) the same may be contested in good faith by appropriate proceedings, and Parent and the Borrower will maintain, and the Borrower will cause each Material Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the accrual of any of the same.”

“SECTION 5.03. Maintenance of Property; Insurance.

(a) Parent and the Borrower will keep, and the Borrower will cause each Material Restricted Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.

(b) Parent and the Borrower will, and the Borrower will cause each of its Material Restricted Subsidiaries to, maintain (either in the name of Parent or the Borrower or in such Subsidiary’s own name) with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against by companies of established repute engaged in the same or a similar business; provided that self-insurance by Parent or the Borrower or any such Material Restricted Subsidiary shall not be deemed a violation of this covenant to the extent that such self-insurance is consistent with reasonable and prudent business practice; and will furnish to the Lenders, upon request from the Agent, information presented in reasonable detail as to the insurance so carried.”

“SECTION 5.04. Maintenance of Existence. Parent and the Borrower will preserve, renew and keep in full force and effect, and the Borrower will cause each Material Restricted Subsidiary to preserve, renew and keep in full force and effect their respective corporate or other legal existence and their respective rights, privileges and franchises material to the normal conduct of their respective businesses; provided that nothing in this Section 5.04 shall prohibit (i) any transaction permitted by Section 5.09 or (ii) the termination of any right, privilege or franchise of Parent, the Borrower or any Material Restricted Subsidiary or of the corporate or other legal existence of any Material Restricted Subsidiary or the change in form of organization of Parent, the Borrower or any Material Restricted Subsidiary if Parent or the Borrower in good faith determines that such termination or change is in the best interest of Parent or the Borrower, is not materially disadvantageous to the Lenders and, in the case of a change in the form of organization of Parent or the Borrower, the Agent has consented thereto (such consent not to be unreasonably withheld or delayed).”

“SECTION 5.05. Compliance with Laws. Parent and the Borrower will comply, and the Borrower will cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) noncompliance would not have a Material Adverse Effect or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings.”

“SECTION 5.06. Books and Records. Parent and the Borrower will keep, and the Borrower will cause each Material Restricted Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all financial transactions in relation to its business and activities in accordance with its customary practices; and Parent and the Borrower will permit, and the Borrower will cause each Material Restricted Subsidiary to permit, representatives of any Lender at such Lender’s expense (accompanied by a representative of the Borrower, if the Borrower so desires) to visit any of their respective properties, to examine any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all upon such reasonable notice, at such reasonable times and as often as may reasonably be desired provided that such visits shall not occur more than one time per year unless an Event of Default has occurred and is continuing.”

“SECTION 5.08. Negative Pledge. Parent and the Borrower will not, and the Borrower will not permit any Restricted Subsidiary to, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except:

(a) (i) Liens existing on the date of this Agreement granted by the Borrower or any Restricted Subsidiary and securing Indebtedness outstanding on the date of this Agreement and (ii) Liens described on Schedule 5.08 attached to Amendment No. 1, granted by Parent and securing Indebtedness outstanding on the Amendment No. 1 Effective Date;

(b) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into Parent, the Borrower or any Restricted Subsidiary and not created in contemplation of such event;

(c) any Lien existing on any asset prior to the acquisition thereof by Parent, the Borrower or any Restricted Subsidiary and not created in contemplation of such acquisition;

(d) any Lien on any asset securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset; provided that such Lien attaches to such asset concurrently with or within 365 days after the acquisition thereof;

(e) any Lien arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing clauses of this Section 5.08; provided that the principal amount of such Indebtedness is not increased and is not secured by any additional assets;

(f) Liens for taxes, assessments or other governmental charges or levies not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP;

(g) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law, created in the ordinary course of business and for amounts not past due for more than 60 days or which are being contested in good faith by appropriate proceedings that are sufficient to prevent imminent foreclosure of such Liens, are promptly instituted and diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP;

(h) Liens incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts;

(i) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and other restrictions, charges or encumbrances (whether or not recorded) affecting the use of real property;

(j) Liens with respect to judgments and attachments that do not result in an Event of Default;

(k) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under the terms of this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other obligations arising in the ordinary course of business;

(l) other Liens, including Liens imposed by Environmental Laws, arising in the ordinary course of business of Parent, the Borrower or such Restricted Subsidiary that (i) do not secure Indebtedness, (ii) do not secure obligations in an aggregate amount exceeding $100,000,000 at any time at which Investment Grade Status does not exist as to the Borrower, and (iii) do not in the aggregate materially detract from the value of the assets of Parent, the Borrower or such Restricted Subsidiary or materially impair the use thereof in the operation of its business;

(m) Liens required pursuant to the terms of this Agreement; and

(n) Liens not otherwise permitted by the foregoing clauses of this Section 5.08 securing obligations in an aggregate principal or face amount at any date not to exceed 15% of Consolidated Net Tangible Assets.”

“SECTION 5.09. Consolidations, Mergers and Sales of Assets.

(a) Neither Parent nor the Borrower will (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or substantially all of its assets to any Person; provided that the Borrower may merge with another Person if the Borrower is the entity surviving such merger (except in the case of a merger of the Borrower with Parent, in which case Parent may be the surviving entity) and, after giving effect thereto, no Event of Default or Default shall have occurred and be continuing.”

“SECTION 5.11. Transactions with Affiliates. Parent or the Borrower will not, and the Borrower will not permit any Restricted Subsidiary to, directly or indirectly, pay any funds to or for the account of, make any investment in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect, any transaction with, any Affiliate (other than the Borrower or a Restricted Subsidiary) unless such transaction is on terms and conditions reasonably fair to Parent, the Borrower or such Restricted Subsidiary in the good faith judgment of the Borrower or Parent; provided that the foregoing provisions of this Section 5.11 shall not prohibit Parent, the Borrower and each Restricted Subsidiary from (i) declaring or making any lawful distribution so long as, after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or result therefrom, (ii) issuing and maintaining letters

of credit, guaranties and sureties as contingent obligations on behalf of Affiliates, (iii) making any Permitted MLP Asset Transfer, (iv) the payment of funds and making of capital contributions, loans and other transfers of money to Affiliates or to other Persons on behalf of such Affiliates, including payments made under letters of credit, guaranties and surety bonds issued and maintained on behalf of Affiliates, provided that the aggregate amount for all such payments and transfers referred to in this clause (iv) does not exceed $500,000,000 at any time outstanding (calculated at such time after giving effect to any repayments to the Borrower by, or on behalf of, such Affiliates for any such payment of funds and making of capital contributions, loans and other transfers of money) or (v) any transaction permitted by Section 5.09(a) or by either of the parenthetical provisions in Section 5.09(b).”

“SECTION 5.12. Indebtedness/Capitalization Ratio. Neither Parent nor the Borrower will permit the ratio of Consolidated Indebtedness to Consolidated Capitalization to exceed 65% at the end of any fiscal quarter of Parent.”

2.05. Events of Default. Sections 6.01(b), 6.01(c), 6.01(d), 6.01(e) and 6.01(f) of the Credit Agreement are hereby amended in their entirety to read as follows:

“(b) any representation or warranty made by Parent or the Borrower herein or by Parent or the Borrower (or any of their respective officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made; or”

“(c) (i) Parent or the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(d), 5.04, 5.08, 5.09, 5.12, the second sentence of Section 5.10 or Article IX, or (ii) Parent or the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Agent at the request of any Lender; or”

“(d) (i) Parent, the Borrower or any of its Material Restricted Subsidiaries shall fail to pay any principal of or premium or interest on any Indebtedness that is outstanding in a principal or notional amount of at least $175,000,000 in the aggregate (but excluding Indebtedness outstanding hereunder) of Parent, the Borrower or such Material Restricted Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or (ii) any such Indebtedness shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or”

“(e) Parent, the Borrower or any of its Material Restricted Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Parent, the Borrower or any of its Material Restricted Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 90 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or Parent, the Borrower or any of its Material Restricted Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or”

“(f) judgments or orders for the payment of money in excess of $175,000,000 in the aggregate shall be rendered against Parent, the Borrower or any of its Material Restricted Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 45 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or”

2.06. Authorization and Action. Clause (c) of Section 7.01 of the Credit Agreement is hereby amended in its entirety to read as follows:

“(c) except as expressly set forth in this Agreement, the Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Parent, the Borrower or any of the Subsidiaries that is communicated to or obtained by it or any of its Affiliates in any capacity.”

2.07. Agent’s Reliance, Etc. Clause (d) of Section 7.02 of the Credit Agreement is hereby amended in its entirety to read as follows:

“(d) shall not have any duty to ascertain or to inquire as to the performance, observance or satisfaction of any of the terms, covenants or conditions of this Agreement on the part of Parent or the Borrower or the existence at any time of any Default or to inspect the property (including the books and records) of Parent or the Borrower;”

2.08. Notices. Clause (a) of Section 8.02 of the Credit Agreement is hereby amended by inserting the words “Parent or” immediately before each reference therein to the words “the Borrower”.

2.09. Right of Set-Off. Section 8.05 of the Credit Agreement is hereby amended in its entirety to read as follows:

“SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Affiliate to or for the credit or the account of Parent or the Borrower against any and all of the obligations of Parent or the Borrower now or hereafter existing under this Agreement and the Note held by such Lender, whether or not such Lender shall have made any demand under this Agreement or such Note. Each Lender agrees promptly to notify Parent or the Borrower, as applicable, after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its Affiliates under this Section 8.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its Affiliates may have.”

2.10. Binding Effect. Section 8.06 of the Credit Agreement is hereby amended in its entirety to read as follows:

“SECTION 8.06. Binding Effect. This Agreement shall become effective (other than Sections 2.01 and 2.03, which shall only become effective upon satisfaction of the conditions precedent set forth in Section 3.01) when it shall have been executed by the Borrower and the Agent and when the Agent shall have been notified by each Initial Lender that such Initial Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders (and any attempted assignment by the Borrower without such consent shall be null and void). This Agreement shall become binding upon Parent upon the Amendment No. 1 Effective Date, and thereafter Parent’s obligations hereunder shall inure to the benefit of Parent, the Borrower, the Agent and each Lender and their respective successors and assigns, except that neither Parent nor the Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders (and any attempted assignment by Parent or the Borrower without such consent shall be null and void).

2.11. Assignments and Participations. Clause (b) of Section 8.07 of the Credit Agreement is hereby amended by inserting the words “Parent or” immediately before each reference therein to the words “the Borrower”.

2.12. Guarantee. A new Article IX shall be added to the Credit Agreement as follows:

“ARTICLE IX

GUARANTEE

SECTION 9.01. The Guarantee. Parent hereby guarantees to each Lender and the Agent and their respective successors and assigns the prompt payment in full when due (whether by acceleration or otherwise) of all principal of and interest on the Advances made by the Lenders to the Borrower pursuant to this Agreement, all reimbursement obligations in respect of Letter of Credit Disbursements and all interest thereon payable by the Borrower pursuant to this Agreement and all other amounts from time to time owing to the Lenders or the Agent by the Borrower under this Agreement, strictly in accordance with the terms hereof (such obligations being herein collectively called the “Guaranteed Obligations”). Parent hereby further agrees that if the Borrower shall fail to pay in full when due (whether by acceleration or otherwise) any of the Guaranteed Obligations, Parent will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether by acceleration or otherwise) in accordance with the terms of such extension or renewal.

SECTION 9.02. Obligations Unconditional. The obligations of Parent under Section 9.01 are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Borrower under this Agreement or any other agreement or instrument referred to herein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section that the obligations of Parent hereunder shall be absolute and unconditional under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of Parent hereunder, which shall remain absolute and unconditional as described above:

(i) at any time or from time to time, without notice to Parent, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;

(ii) any of the acts mentioned in any of the provisions of this Agreement or any other agreement or instrument referred to herein shall be done or omitted;

(iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or any other agreement or instrument referred to herein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or

(iv) any lien or security interest granted to, or in favor of, the Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to be perfected.

With respect to its obligations under this Article, Parent hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Agent or any Lender exhaust any right, power or remedy or proceed against the Borrower under this Agreement or any other agreement or instrument referred to herein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations.

SECTION 9.03. Reinstatement. The obligations of Parent under this Article shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and Parent agrees that it will indemnify the Agent and each Lender on demand for all reasonable costs and expenses (including fees of counsel) incurred by the Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.

SECTION 9.04. Subrogation. Parent hereby agrees that until the payment and satisfaction in full of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in Section 9.01, whether by subrogation or otherwise, against the Borrower of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations.

SECTION 9.05. Remedies. Parent agrees that, as between Parent on the one hand and the Agent and the Lenders on the other, the obligations of the Borrower under this Agreement may be declared to be forthwith due and payable as provided in Article VI (and shall be deemed to have become automatically due and payable in the circumstances provided in Article VI) for purposes of Section 9.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by Parent for purposes of Section 9.01.

SECTION 9.06. Instrument for the Payment of Money. Parent hereby acknowledges that the guarantee in this Article constitutes an instrument for the payment of money, and consents and agrees that any Lender or the Agent, at its sole option, in the event of a dispute by Parent in the payment of any moneys due hereunder, shall have the right to bring motion action under New York CPLR Section 3213.

SECTION 9.07. Continuing Guarantee. The guarantee in this Article is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising.”

Section 3. Representations and Warranties. Each of the Borrower and Parent represents and warrants to the Lenders and the Agent that (a) the representations and warranties of such Person set forth in this Amendment No. 1 and in the Credit Agreement shall be true and correct on and as of the date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date), and as if each reference therein to “this Agreement” or “the Credit Agreement” (or words of similar import) included reference to this Amendment No. 1 and (b) no Default has occurred and is continuing.

Section 4. Conditions Precedent. The amendments set forth in Section 2 of this Amendment No. 1 shall become effective, as of the date hereof, upon satisfaction of each of the following conditions precedent:

(a) Parent’s Secretary’s Certificate. The Agent shall have received a certificate of the Secretary or Assistant Secretary of Parent dated as of the date hereof (i) certifying as to the incumbency and signature of the officer or officers of Parent executing this Amendment No. 1 and any certificate or other documents to be delivered pursuant hereto, together with evidence of the incumbency of such Secretary or Assistant Secretary, (ii) attaching a copy of the resolutions of the Board of Directors or equivalent governing body of Parent authorizing the execution, delivery and performance of this Amendment No. 1 and the Credit Agreement as amended hereby, (iii) attaching a copy of the Certificate of Incorporation of Parent certified by the Secretary of State of the State of Delaware, (iv) attaching a copy of the Bylaws of Parent and (v) attaching a copy of a certificate of good standing for Parent issued by the Secretary of State of the State of Delaware.

(b) Legal Opinion. The Agent shall have received a legal opinion with respect to the enforceability of this Amendment No. 1 and such other matters as reasonably requested by the Agent, dated the effective date of this Amendment No. 1, and addressed to the Agent and each Lender, from legal counsel to Parent, in form and substance reasonably satisfactory to the Agent.

(c) Execution and Delivery of this Amendment No. 1. The Agent shall have received one or more counterparts of this Amendment No. 1, executed and delivered by Parent, the Borrower and the Required Lenders.

Section 5. Miscellaneous. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect, and each of Parent and the Borrower (a) ratifies and confirms all provisions of the Credit Agreement as amended by this Amendment No. 1, (b) ratifies and confirms that all obligations of each of Parent and the Borrower under the Notes and the Credit Agreement as amended by this Amendment No. 1 are not released, reduced, or otherwise adversely affected by this Amendment No. 1, and (c) agrees to perform such acts and

duly authorize, execute, acknowledge and deliver such additional documents and certificates as Agent may reasonably request in connection with this Amendment No. 1. This Amendment No. 1 may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment No. 1 by telecopier or other electronic means shall be effective as delivery of a manually executed counterpart of this Amendment No. 1. This Amendment No. 1 shall be governed by, and construed in accordance with, the law of the State of New York. Each of Parent and the Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Amendment No. 1 and the Credit Agreement or the transactions contemplated hereby or thereby. Each of Parent and the Borrower irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. EACH OF PARENT, THE BORROWER, THE AGENT AND THE LENDERS PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AMENDMENT NO. 1, THE CREDIT AGREEMENT OR THE NOTES OR THE ACTIONS OF THE AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. The Borrower shall pay all reasonable fees and expenses paid or incurred by the Agent incident to this Amendment No. 1, including, without limitation, the reasonable fees and expenses of the Agent’s counsel in connection with the negotiation, preparation, delivery and execution of this Amendment No. 1 and any related documents. This Amendment No. 1 constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

[remainder of page intentionally left blank; signature pages follow]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to Credit Agreement to be duly executed and delivered as of the day and year first above written.

SPECTRA ENERGY CORP

By

Name:

Title:

SPECTRA ENERGY CAPITAL, LLC

By

Name:

Title:

LENDERS

JPMORGAN CHASE BANK, N.A.,

individually and as Administrative Agent

By

Name:

Title:

CITIBANK, N.A.

By:

Title:

BANK OF AMERICA, N.A.

By:

Title:

BARCLAYS BANK PLC

By:

Title:

WACHOVIA BANK, NATIONAL ASSOCIATION

By:

Title:

ABN AMRO BANK, N.V.

By:

Title:

CREDIT SUISSE, CAYMAN ISLANDS BRANCH

By:

Title:

DEUTSCHE BANK AG NEW YORK BRANCH

By:

Title:

THE ROYAL BANK OF SCOTLAND PLC

By:

Title:

UBS LOAN FINANCE LLC

By:

Title:

By:

Title:

LEHMAN BROTHERS COMMERCIAL BANK

By:

Title:

MERRILL LYNCH BANK USA

By:

Title:

MORGAN STANLEY BANK

By:

Title:

THE BANK OF NOVA SCOTIA

By:

Title:

BMO CAPITAL MARKETS FINANCING, INC.

By:

Title:

CIBC INC.

By:

Title:

KEYBANK NATIONAL ASSOCIATION

By:

Title:

SUNTRUST BANK

By:

Title:

TORONTO DOMINION (TEXAS) LLC

By:

Title:

BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH

By:

Title:

SCHEDULE 5.08

Liens

None

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Fred J. Fowler, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Spectra Energy Corp;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Acts Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2008	/s/ Fred J. Fowler
	Fred J. Fowler
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory L. Ebel, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Spectra Energy Corp;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Acts Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2008	/s/ Gregory L. Ebel
	Gregory L. Ebel
	Group Executive and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Spectra Energy Corp on Form 10-Q for the period ending March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fred J. Fowler, President and Chief Executive Officer of Spectra Energy Corp, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Spectra Energy Corp.

Date: May 9, 2008	/s/ Fred J. Fowler
	Fred J. Fowler
	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Spectra Energy Corp on Form 10-Q for the period ending March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory L. Ebel, Group Executive and Chief Financial Officer of Spectra Energy Corp, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Spectra Energy Corp.

Date: May 9, 2008	/s/ Gregory L. Ebel
	Gregory L. Ebel
	Group Executive and Chief Financial Officer