JUNIOR SUBORDINATED NOTES



		2016			2015
Outstanding loan amount	Maturity Date	Outstanding at December 31	Effective Interest Rate		Outstanding at December 31	Effective Interest Rate
(millions of Canadian $, unless otherwise noted)	Maturity Date	Outstanding at December 31	Effective Interest Rate		Outstanding at December 31	Effective Interest Rate

TRANSCANADA PIPELINES LIMITED
U.S. (2016 and 2015 – US$1,000)¹	2067	1,342	6.4	%	1,382	6.4	%
U.S. (2016 and 2015 – US$742)^{1, 2}	2075	996	5.5	%	1,027	5.3	%
U.S. (2016 – US$1,186)^{1, 2}	2076	1,593	6.2	%	—	—
		3,931			2,409


1	The Junior subordinated notes are subordinated in right of payment to existing and future senior indebtedness or other obligations of TCPL.

The Junior subordinated notes were issued to TransCanada Trust (the Trust), a financing trust subsidiary wholly-owned by TCPL. While the obligations of the Trust are fully and unconditionally guaranteed by TCPL on a subordinated basis, the Trust is not consolidated in TransCanada's financial statements since TCPL does not have a variable interest in the Trust and the only substantive assets of the Trust are junior subordinated notes of TCPL.

In August 2016, TransCanada Trust (the Trust) issued US$1.2 billion of Trust Notes – Series 2016-A (Trust Notes) to third party investors at a fixed interest rate of 5.875 per cent for the first ten years, converting to a floating rate thereafter. All of the issuance proceeds of the Trust were loaned to TCPL for US$1.2 billion of junior subordinated notes of TCPL at an initial fixed rate of 6.125 per cent, including a 0.25 per cent administration charge. The rate will reset commencing August 2026 until August 2046 to the three month LIBOR plus 4.89 per cent per annum; from August 2046 to August 2076 the interest rate will reset to the three month LIBOR plus 5.64 per cent per annum. The junior subordinated notes are callable at TCPL's option at any time on or after August 15, 2026 at 100 per cent of the principal amount plus accrued and unpaid interest to the date of redemption.

In May 2015, the Trust issued US$750 million Trust Notes – Series 2015-A (Trust Notes) to third party investors at a fixed interest rate of 5.625 per cent for the first ten years, converting to a floating rate thereafter. All of the issuance proceeds of the Trust were loaned to TCPL for US$750 million of junior subordinated notes of TCPL at an initial fixed rate of 5.875 per cent, including a 0.25 per cent administration charge. The rate will reset commencing May 2025 until May 2045 to the three month LIBOR plus 3.778 per cent per annum; from May 2045 to May 2075 the interest rate will reset to the three month LIBOR plus 4.528 per cent per annum. The junior subordinated notes of TCPL are callable at TCPL's option at any time on or after May 20, 2025 at 100 per cent of the principal amount plus accrued and unpaid interest to the date of redemption.

Pursuant to the terms of the Trust Notes and related agreements, in certain circumstances (1) TCPL may issue deferral preferred shares to holders of the Trust Notes in lieu of interest; and (2) TransCanada and TCPL would be prohibited from declaring or paying dividends on or redeeming their outstanding preferred shares (or, if none are outstanding, their respective common shares) until all deferral preferred shares are redeemed by TCPL. The Trust Notes may also be automatically exchanged for preferred shares of TCPL upon certain kinds of bankruptcy and insolvency events. All of these preferred shares would rank equally with other outstanding first preferred shares of TCPL.

Junior subordinated notes of US$1.0 billion mature in May 2067 and bear interest at a fixed rate of 6.35 per cent per annum until May 15, 2017, when interest will convert to a floating rate that is reset quarterly to the three month LIBOR plus 2.21 per cent. TCPL has the option to defer payment of interest for periods of up to ten years without giving rise to a default or permitting acceleration of payment under the terms of the junior subordinated notes, however, both TransCanada and TCPL would be prohibited from paying dividends during any such deferral period. The junior subordinated notes are callable at TCPL's option at any time on or after May 15, 2017 at 100 per cent of the principal amount plus accrued and unpaid interest to the date of redemption. The junior subordinated notes are callable earlier, in whole or in part, upon the occurrence of certain events and at the Company's option at an amount equal to the greater of 100 per cent of the principal amount plus accrued and unpaid interest to the date of redemption and an amount determined by a specified formula in accordance with their terms.