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TC PipeLines Benefiting From Additional 20% of Northern Border

Calgary-based TC PipeLines LP (the partnership) reported third-quarter 2006 net income of US$12 million or 65 cents/unit compared to $14.8 million or 81 cents/unit for the same period last year. The decrease is primarily due to lower earnings from Northern Border Pipeline Co. and Tuscarora Gas Transmission Co., partially offset by the net positive impact resulting from the additional 20% general partner interest in Northern Border Pipeline recently acquired (see Daily GPI, Feb. 16).

The decline in Northern Border Pipeline earnings is mainly due to a one-time increase in revenues in the third quarter of 2005 of $9.4 million due to the recognition of the sale of its bankruptcy claims against Enron and Enron North America.

Cash generated from investments in third-quarter 2006 was $17.9 million, an increase of $4.7 million, compared to $13.2 million for the same period last year. The increase was primarily due to the additional 20% general partner interest in Northern Border Pipeline acquired on April 6 which contributed to a $7.3 million increase in cash distributions from Northern Border Pipeline. TC PipeLines LP now holds a 50% general partner interest in Northern Border Pipeline.

“We recently announced an increase in cash distributions,” said TC PipeLines GP CEO Russ Girling. “The partnership's cash flows have been further strengthened and stabilized through the accretive acquisition of an additional 20% interest in Northern Border Pipeline earlier this year, and the settlement of tariff rates on both the Northern Border and Tuscarora pipeline systems.”

The partnership also announced it has signed agreements to purchase Sierra Pacific Resources' 50% interest in Tuscarora for $100 million and indirect assumption of $37 million in debt (see related story).

Equity income from Northern Border Pipeline was $16.6 million in the third quarter of 2006, an increase of $2.7 million, compared to $13.9 million for the same period last year. The increase was primarily due to the partnership's additional 20% general partner interest, which resulted in a $6.5 million increase in equity income from Northern Border Pipeline for the third quarter; however, Northern Border's net income for the third quarter of 2006 was $12.5 million lower when compared to the same period last year. The reduction is primarily due to decreased net operating revenues and increased operations and maintenance expenses.

Equity income from Tuscarora was $1.3 million in the third quarter, a decrease of $0.4 million, compared to $1.7 million for the same period last year. The decrease was primarily due to lower net revenues resulting from settlement rates effective June 1, 2006.

The approval process for Northern Border's rate case settlement is expected to be approved later this year, the company said. In September, Northern Border filed a stipulation and agreement documenting the settlement in its pending rate case (see Daily GPI, Sept. 19). The settlement was reached between Northern Border and its participant customers and is supported by the Federal Energy Regulatory Commission trial staff. The uncontested settlement was certified on Oct. 20 by the administrative law judge and provided to the FERC for approval.

TC PipeLines LP is a publicly traded limited partnership. It owns a 50% interest in Northern Border Pipeline Co., a Texas general partnership; and a 49% interest in Tuscarora Gas Transmission Co., a Nevada general partnership. TC PipeLines LP is managed by its general partner, TC PipeLines GP Inc., an indirect wholly owned subsidiary of TransCanada Corp. TC PipeLines also holds common units of the partnership.

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