Condensed Consolidating Financial Information

Spectra Energy Corp has agreed to fully and unconditionally guarantee the payment of principal and interest under all series of notes outstanding under the Senior Indenture of Spectra Capital, a 100%-owned, consolidated subsidiary. In accordance with Securities and Exchange Commission (SEC) 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 consolidated subsidiaries of Spectra Capital. This information should be read in conjunction with our accompanying Condensed Consolidated Financial Statements and notes thereto.

Spectra Energy Corp

Condensed Consolidating Statements of Operations

(Unaudited)

(In millions)



	Spectra Energy Corp			Spectra Capital			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Three Months Ended September 30, 2016
Total operating revenues	$	—		$	—		$	1,076		$	(1	)	$	1,075
Total operating expenses	(5		)	1			759			(1		)	754
Operating income (loss)	5			(1		)	317			—			321
Earnings from equity investments	—			—			51			—			51
Equity in earnings of consolidated subsidiaries	193			272			—			(465		)	—
Other income and expenses, net	—			—			52			—			52
Interest expense	—			47			86			—			133
Earnings before income taxes	198			224			334			(465		)	291
Income tax expense (benefit)	3			31			(24		)	—			10
Net income	195			193			358			(465		)	281
Net income—noncontrolling interests	—			—			86			—			86
Net income—controlling interests	$	195		$	193		$	272		$	(465	)	$	195

Three Months Ended September 30, 2015
Total operating revenues	$	—		$	—		$	1,105		$	(2	)	$	1,103
Total operating expenses	2			(1		)	715			(2		)	714
Operating income (loss)	(2		)	1			390			—			389
Earnings from equity investments	—			—			48			—			48
Equity in earnings of consolidated subsidiaries	170			307			—			(477		)	—
Other income and expenses, net	—			(1		)	32			—			31
Interest expense	—			61			94			—			155
Earnings before income taxes	168			246			376			(477		)	313
Income tax expense (benefit)	(6		)	76			—			—			70
Net income	174			170			376			(477		)	243
Net income—noncontrolling interests	—			—			69			—			69
Net income—controlling interests	$	174		$	170		$	307		$	(477	)	$	174

Spectra Energy Corp

Condensed Consolidating Statements of Operations

(Unaudited)

(In millions)



	Spectra Energy Corp			Spectra Capital			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Nine Months Ended September 30, 2016
Total operating revenues	$	—		$	—		$	3,620		$	(2	)	$	3,618
Total operating expenses	—			3			2,431			(2		)	2,432
Operating income (loss)	—			(3		)	1,189			—			1,186
Earnings from equity investments	—			—			100			—			100
Equity in earnings of consolidated subsidiaries	564			925			—			(1,489		)	—
Other income and expenses, net	(2		)	—			125			—			123
Interest expense	—			170			267			—			437
Earnings before income taxes	562			752			1,147			(1,489		)	972
Income tax expense (benefit)	(16		)	188			(12		)	—			160
Net income	578			564			1,159			(1,489		)	812
Net income—noncontrolling interests	—			—			234			—			234
Net income—controlling interests	$	578		$	564		$	925		$	(1,489	)	$	578

Nine Months Ended September 30, 2015
Total operating revenues	$	—		$	—		$	3,921		$	(3	)	$	3,918
Total operating expenses	5			(2		)	2,582			(3		)	2,582
Operating income (loss)	(5		)	2			1,339			—			1,336
Loss from equity investments	—			—			(117		)	—			(117		)
Equity in earnings of consolidated subsidiaries	445			790			—			(1,235		)	—
Other income and expenses, net	—			(1		)	74			—			73
Interest expense	—			183			297			—			480
Earnings before income taxes	440			608			999			(1,235		)	812
Income tax expense (benefit)	(19		)	163			20			—			164
Net income	459			445			979			(1,235		)	648
Net income—noncontrolling interests	—			—			189			—			189
Net income—controlling interests	$	459		$	445		$	790		$	(1,235	)	$	459

Spectra Energy Corp

Condensed Consolidating Statements of Comprehensive Income

(Unaudited)

(In millions)



	Spectra Energy Corp		Spectra Capital		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Three Months Ended September 30, 2016
Net income	$	195	$	193	$	358		$	(465	)	$	281
Other comprehensive income (loss)	2		—		(77		)	—			(75		)
Total comprehensive income, net of tax	197		193		281			(465		)	206
Less: comprehensive income—noncontrolling interests	—		—		84			—			84
Comprehensive income—controlling interests	$	197	$	193	$	197		$	(465	)	$	122

Three Months Ended September 30, 2015
Net income	$	174	$	170	$	376		$	(477	)	$	243
Other comprehensive income (loss)	2		1		(346		)	—			(343		)
Total comprehensive income (loss), net of tax	176		171		30			(477		)	(100		)
Less: comprehensive income—noncontrolling interests	—		—		64			—			64
Comprehensive income (loss)—controlling interests	$	176	$	171	$	(34	)	$	(477	)	$	(164	)

Nine Months Ended September 30, 2016
Net income	$	578	$	564	$	1,159		$	(1,489	)	$	812
Other comprehensive income	4		—		283			—			287
Total comprehensive income, net of tax	582		564		1,442			(1,489		)	1,099
Less: comprehensive income—noncontrolling interests	—		—		239			—			239
Comprehensive income—controlling interests	$	582	$	564	$	1,203		$	(1,489	)	$	860

Nine Months Ended September 30, 2015
Net income	$	459	$	445	$	979		$	(1,235	)	$	648
Other comprehensive income (loss)	5		1		(741		)	—			(735		)
Total comprehensive income (loss), net of tax	464		446		238			(1,235		)	(87		)
Less: comprehensive income—noncontrolling interests	—		—		178			—			178
Comprehensive income (loss)—controlling interests	$	464	$	446	$	60		$	(1,235	)	$	(265	)

Spectra Energy Corp

Condensed Consolidating Balance Sheet

September 30, 2016

(Unaudited)

(In millions)



	Spectra Energy Corp		Spectra Capital		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents	$	—	$	1	$	463	$	—		$	464
Receivables—consolidated subsidiaries	19		—		—		(19		)	—
Notes receivable—current—consolidated subsidiaries	—		—		388		(388		)	—
Receivables—other	—		—		712		—			712
Other current assets	16		2		561		(5		)	574
Total current assets	35		3		2,124		(412		)	1,750
Investments in and loans to unconsolidated affiliates	—		—		2,742		—			2,742
Investments in consolidated subsidiaries	14,844		20,452		—		(35,296		)	—
Advances receivable—consolidated subsidiaries	—		5,064		1,549		(6,613		)	—
Notes receivable—consolidated subsidiaries	—		—		2,800		(2,800		)	—
Goodwill	—		—		4,203		—			4,203
Other assets	38		31		332		—			401
Net property, plant and equipment	—		—		25,337		—			25,337
Regulatory assets and deferred debits	4		12		1,488		—			1,504
Total Assets	$	14,921	$	25,562	$	40,575	$	(45,121	)	$	35,937

Accounts payable	$	2	$	3	$	731	$	—		$	736
Accounts payable—consolidated subsidiaries	—		19		—		(19		)	—
Commercial paper	—		460		1,177		—			1,637
Short-term borrowings—consolidated subsidiaries	—		388		—		(388		)	—
Taxes accrued	—		4		74		(5		)	73
Current maturities of long-term debt	—		—		467		—			467
Other current liabilities	78		45		651		—			774
Total current liabilities	80		919		3,100		(412		)	3,687
Long-term debt	—		2,903		10,191		—			13,094
Advances payable—consolidated subsidiaries	6,613		—		—		(6,613		)	—
Notes payable—consolidated subsidiaries	—		2,800		—		(2,800		)	—
Deferred credits and other liabilities	760		4,096		2,319		—			7,175
Preferred stock of subsidiaries	—		—		562		—			562
Equity
Controlling interests	7,468		14,844		20,452		(35,296		)	7,468
Noncontrolling interests	—		—		3,951		—			3,951
Total equity	7,468		14,844		24,403		(35,296		)	11,419
Total Liabilities and Equity	$	14,921	$	25,562	$	40,575	$	(45,121	)	$	35,937

Spectra Energy Corp

Condensed Consolidating Balance Sheet

December 31, 2015

(Unaudited)

(In millions)



	Spectra Energy Corp		Spectra Capital		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents	$	—	$	1	$	212	$	—		$	213
Receivables—consolidated subsidiaries	15		6		13		(34		)	—
Notes receivable—current—consolidated subsidiaries	—		—		387		(387		)	—
Receivables—other	2		—		804		—			806
Other current assets	25		—		604		—			629
Total current assets	42		7		2,020		(421		)	1,648
Investments in and loans to unconsolidated affiliates	—		—		2,592		—			2,592
Investments in consolidated subsidiaries	13,919		19,161		—		(33,080		)	—
Advances receivable—consolidated subsidiaries	—		5,273		1,326		(6,599		)	—
Notes receivable—consolidated subsidiaries	—		—		2,800		(2,800		)	—
Goodwill	—		—		4,154		—			4,154
Other assets	41		27		242		—			310
Net property, plant and equipment	—		—		22,918		—			22,918
Regulatory assets and deferred debits	3		3		1,295		—			1,301
Total Assets	$	14,005	$	24,471	$	37,347	$	(42,900	)	$	32,923

Accounts payable	$	2	$	3	$	506	$	—		$	511
Accounts payable—consolidated subsidiaries	4		28		2		(34		)	—
Commercial paper	—		481		631		—			1,112
Short-term borrowings—consolidated subsidiaries	—		387		—		(387		)	—
Taxes accrued	5		—		73		—			78
Current maturities of long-term debt	—		—		652		—			652
Other current liabilities	102		48		889		—			1,039
Total current liabilities	113		947		2,753		(421		)	3,392
Long-term debt	—		2,891		10,001		—			12,892
Advances payable—consolidated subsidiaries	6,599		—		—		(6,599		)	—
Notes payable—consolidated subsidiaries	—		2,800		—		(2,800		)	—
Deferred credits and other liabilities	767		3,914		2,087		—			6,768
Preferred stock of subsidiaries	—		—		339		—			339
Equity
Controlling interests	6,526		13,919		19,161		(33,080		)	6,526
Noncontrolling interests	—		—		3,006		—			3,006
Total equity	6,526		13,919		22,167		(33,080		)	9,532
Total Liabilities and Equity	$	14,005	$	24,471	$	37,347	$	(42,900	)	$	32,923

Spectra Energy Corp

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2016

(Unaudited)

(In millions)



	Spectra Energy Corp			Spectra Capital			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	578		$	564		$	1,159		$	(1,489	)	$	812
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	—			—			599			—			599
Earnings from equity investments	—			—			(100		)	—			(100		)
Equity in earnings of consolidated subsidiaries	(564		)	(925		)	—			1,489			—
Distributions from equity investments	—			—			88			—			88
Other	(9		)	194			15			—			200
Net cash provided by (used in) operating activities	5			(167		)	1,761			—			1,599
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			—			(2,407		)	—			(2,407		)
Investments in and loans to unconsolidated affiliates	—			—			(181		)	—			(181		)
Purchase of intangible, net	—			—			(80		)	—			(80		)
Disposition	—			—			204			—			204
Purchases of held-to-maturity securities	—			—			(479		)	—			(479		)
Proceeds from sales and maturities of held-to-maturity securities	—			—			475			—			475
Purchases of available-for-sale securities	—			—			(565		)	—			(565		)
Proceeds from sales and maturities of available-for-sale securities	—			—			559			—			559
Distributions from equity investments	—			—			45			—			45
Distribution to equity investment	—			—			(148		)	—			(148		)
Advances from (to) affiliates	(57		)	196			—			(139		)	—
Other changes in restricted funds	—			—			(19		)	—			(19		)
Other	—			—			1			—			1
Net cash provided by (used in) investing activities	(57		)	196			(2,595		)	(139		)	(2,595		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			—			382			—			382
Payments for the redemption of long-term debt	—			—			(619		)	—			(619		)
Net increase (decrease) in commercial paper	—			(21		)	523			—			502
Distributions to noncontrolling interests	—			—			(176		)	—			(176		)
Contributions from noncontrolling interests	—			—			437			—			437
Proceeds from the issuances of Spectra Energy common stock	878			—			—			—			878
Proceeds from the issuances of SEP common units	—			—			473			—			473
Proceeds from the issuance of Westcoast preferred stock	—			—			229			—			229
Dividends paid on common stock	(842		)	—			—			—			(842		)
Distributions and advances from (to) affiliates	14			(8		)	(145		)	139			—
Other	2			—			(22		)	—			(20		)
Net cash provided by (used in) financing activities	52			(29		)	1,082			139			1,244
Effect of exchange rate changes on cash	—			—			3			—			3
Net increase in cash and cash equivalents	—			—			251			—			251
Cash and cash equivalents at beginning of period	—			1			212			—			213
Cash and cash equivalents at end of period	$	—		$	1		$	463		$	—		$	464

Spectra Energy Corp

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2015

(Unaudited)

(In millions)



	Spectra Energy Corp			Spectra Capital			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	459		$	445		$	979		$	(1,235	)	$	648
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	—			—			584			—			584
Loss from equity investments	—			—			117			—			117
Equity in earnings of consolidated subsidiaries	(445		)	(790		)	—			1,235			—
Distributions from equity investments	—			—			145			—			145
Other	44			109			176			—			329
Net cash provided by (used in) operating activities	58			(236		)	2,001			—			1,823
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			—			(1,817		)	—			(1,817		)
Investments in and loans to unconsolidated affiliates	—			—			(91		)	—			(91		)
Purchases of held-to-maturity securities	—			—			(463		)	—			(463		)
Proceeds from sales and maturities of held-to-maturity securities	—			—			457			—			457
Proceeds from sales and maturities of available-for-sale securities	—			—			1			—			1
Distributions from equity investments	—			—			441			—			441
Advances from (to) affiliates	(82		)	62			—			20			—
Other changes in restricted funds	—			—			(24		)	—			(24		)
Other	—			—			(7		)	—			(7		)
Net cash provided by (used in) investing activities	(82		)	62			(1,503		)	20			(1,503		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—			—			1,332			—			1,332
Payments for the redemption of long-term debt	—			—			(153		)	—			(153		)
Net increase (decrease) in commercial paper	—			170			(1,154		)	—			(984		)
Distributions to noncontrolling interests	—			—			(140		)	—			(140		)
Contributions from noncontrolling interests	—			—			164			—			164
Proceeds from the issuances of SEP common units	—			—			351			—			351
Dividends paid on common stock	(747		)	—			—			—			(747		)
Distributions and advances from (to) affiliates	774			4			(758		)	(20		)	—
Other	(3		)	—			(11		)	—			(14		)
Net cash provided by (used in) financing activities	24			174			(369		)	(20		)	(191		)
Effect of exchange rate changes on cash	—			—			(6		)	—			(6		)
Net increase in cash and cash equivalents	—			—			123			—			123
Cash and cash equivalents at beginning of period	—			1			214			—			215
Cash and cash equivalents at end of period	$	—		$	1		$	337		$	—		$	338