Company Quick10K Filing
TC Pipelines
Price1.00 EPS-216,000,000
Shares-0 P/E-0
MCap-0 P/FCF-0
Net Debt1,913 EBIT217
TEV1,913 TEV/EBIT9
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-02-20
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-01
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-02-21
10-Q 2018-09-30 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-02
10-K 2017-12-31 Filed 2018-02-26
10-Q 2017-09-30 Filed 2017-11-06
10-Q 2017-06-30 Filed 2017-08-03
10-Q 2017-03-31 Filed 2017-05-04
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-09-30 Filed 2016-11-04
10-Q 2016-06-30 Filed 2016-08-04
10-Q 2016-03-31 Filed 2016-05-05
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-09-30 Filed 2014-10-24
10-Q 2014-06-30 Filed 2014-07-25
10-Q 2014-03-31 Filed 2014-04-29
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-10-29
10-Q 2013-06-30 Filed 2013-07-29
10-Q 2013-03-31 Filed 2013-04-29
10-K 2012-12-31 Filed 2013-02-28
10-Q 2012-09-30 Filed 2012-10-30
10-Q 2012-06-30 Filed 2012-07-30
10-Q 2012-03-31 Filed 2012-04-30
10-K 2011-12-31 Filed 2012-02-28
10-Q 2011-09-30 Filed 2011-11-01
10-Q 2011-08-02 Filed 2011-08-02
10-Q 2011-04-27 Filed 2011-04-27
10-K 2010-12-31 Filed 2011-02-25
10-Q 2010-10-29 Filed 2010-10-29
10-Q 2010-07-29 Filed 2010-07-29
10-Q 2010-04-30 Filed 2010-04-30
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-05-06
8-K 2020-04-21
8-K 2020-02-20
8-K 2020-02-04
8-K 2020-01-21
8-K 2019-11-14
8-K 2019-11-07
8-K 2019-10-31
8-K 2019-10-21
8-K 2019-10-17
8-K 2019-07-31
8-K 2019-07-29
8-K 2019-07-23
8-K 2019-07-16
8-K 2019-05-08
8-K 2019-04-23
8-K 2019-04-16
8-K 2019-02-21
8-K 2019-02-19
8-K 2019-01-31
8-K 2019-01-22
8-K 2018-12-31
8-K 2018-11-29
8-K 2018-11-27
8-K 2018-11-19
8-K 2018-11-09
8-K 2018-11-02
8-K 2018-10-26
8-K 2018-10-23
8-K 2018-10-17
8-K 2018-09-24
8-K 2018-08-02
8-K 2018-07-26
8-K 2018-07-19
8-K 2018-05-17
8-K 2018-05-01
8-K 2018-05-01
8-K 2018-04-27
8-K 2018-04-16
8-K 2018-03-19
8-K 2018-02-23
8-K 2018-02-22
8-K 2018-02-09
8-K 2018-01-23

TCP 10Q Quarterly Report

Part I
Part I - Financial Information
Item 1. Financial Statements
Note 1 Organization
Note 2 Significant Accounting Policies
Note 3 Accounting Pronouncements
Note 4 Goodwill
Note 5 Equity Investments
Note 6 Revenues
Note 7 Debt and Credit Facilities
Note 8 Partners' Equity
Note 9 Net Income per Common Unit
Note 10 Cash Distributions Paid To Common Units
Note 11 Change in Operating Working Capital
Note 12 Related Party Transactions
Note 13 Fair Value Measurements
Note 14 Accounts Receivable and Other
Note 15 Financial Charges and Other
Note 16 Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 ex-311x03312020.htm
EX-31.2 ex-312x03312020.htm
EX-32.1 ex-321x03312020.htm
EX-32.2 ex-322x03312020.htm
EX-99.1 a19214amendment2.htm
EX-99.2 a19214amendment3.htm
EX-99.3 a19215amendment2.htm
EX-99.4 a19215amendment3.htm
EX-99.5 a19215amendment4terminat.htm

TC Pipelines Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended March 31, 2020  
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:  001-35358 
TC PipeLines, LP
(Exact name of registrant as specified in its charter) 
Delaware
 
52-2135448
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
700 Louisiana Street, Suite 700
Houston, Texas
 
77002-2761
(Address of principal executive offices)
 
(Zip code)
 
877-290-2772
(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 ý                    No o
 Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common units representing limited partner interests
TCP
New York Stock Exchange
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ý                    No o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes                     No ý
 As of May 4, 2020, there were 71,306,396 of the registrant’s common units outstanding.







TC PIPELINES, LP
 
TABLE OF CONTENTS
 
 
 
Page No.
 
 
 
PART I
FINANCIAL INFORMATION
 
 
 
 
Item 1.
Consolidated Financial Statements (Unaudited)
 
Condensed Notes to Consolidated Financial Statements
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
 
 
 
PART II
OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 6.
Exhibits
 
Signatures
 
All amounts are stated in United States dollars unless otherwise indicated.

2







DEFINITIONS
 The abbreviations, acronyms, and industry terminology used in this quarterly report are defined as follows:
 

2013 Term Loan Facility
TC PipeLines, LP’s term loan credit facility under a term loan agreement as amended, dated September 29, 2017
AFUDC
Allowance for funds used during construction
ANR
ANR Pipeline Company
ASC
Accounting Standards Codification
AOCI
Accumulated other comprehensive income
Bison
Bison Pipeline LLC
Class B Distribution
Annual distribution to TC Energy based on 30 percent of GTN’s annual distributions as follows: (i) 100 percent of distributions above $20 million through March 31, 2020; and (ii) 25 percent of distributions above $20 million thereafter
Class B Reduction
Approximately 35 percent reduction applied to the estimated annual Class B Distribution beginning in 2018, which is equivalent to the percentage by which distributions payable to the common units were reduced in 2018. The Class B Reduction will continue to apply for any particular calendar year until distributions payable in respect of common units for such calendar year equal or exceed $3.94 per common unit
COVID-19
Coronavirus 2019
DOT
U.S. Department of Transportation
EBITDA
Earnings Before Interest, Tax, Depreciation and Amortization
EPA
U.S. Environmental Protection Agency
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
GAAP
U.S. generally accepted accounting principles
General Partner
TC PipeLines GP, Inc.
Great Lakes
Great Lakes Gas Transmission Limited Partnership
GTN
Gas Transmission Northwest LLC
GTN XPress
GTN’s project to both increase the reliability of existing transportation service on GTN and to provide for 250,000 Dth/day of incremental transportation volumes, primarily through facility replacements and additions of existing brownfield compression sites.

IDRs
Incentive Distribution Rights
Iroquois
Iroquois Gas Transmission System, L.P.
LIBOR
London Interbank Offered Rate
MLP
Master Limited Partnership
North Baja
North Baja Pipeline, LLC
Northern Border
Northern Border Pipeline Company
Our pipeline systems
Our ownership interests in GTN, Northern Border, Bison, Great Lakes, North Baja, Tuscarora, PNGTS and Iroquois
Partnership
TC PipeLines, LP including its subsidiaries, as applicable
Partnership Agreement
Fourth Amended and Restated Agreement of Limited Partnership of the Partnership
PHMSA
The Pipeline and Hazardous Materials Safety Administration

3






PNGTS
Portland Natural Gas Transmission System
PXP
Portland XPress Project
SEC
Securities and Exchange Commission
Senior Credit Facility
TC PipeLines, LP’s senior facility under revolving credit agreement as amended and restated, dated September 29, 2017
TC Energy
TC Energy Corporation
Tuscarora
Tuscarora Gas Transmission Company
Tuscarora XPress
Tuscarora's Expansion project to transport additional 15,000 Dth/Day of natural gas supplies through additional compression capability at Tuscarora's existing facility
U.S.
United States of America
Westbrook XPress
Westbrook XPress Project of PNGTS that is part of a coordinated offering to transport incremental Western Canadian Sedimentary Basin natural gas supplies to the Northeast U.S. and Atlantic Canada markets through additional compression capability at an existing PNGTS facility
Wholly-owned subsidiaries
GTN, Bison, North Baja, and Tuscarora
WHO
World Health Organization
 
Unless the context clearly indicates otherwise, TC PipeLines, LP and its subsidiaries are collectively referred to in this quarterly report as “we,” “us,” “our” and “the Partnership.” We use “our pipeline systems” and “our pipelines” when referring to the Partnership’s ownership interests in Gas Transmission Northwest LLC (GTN), Northern Border Pipeline Company (Northern Border), Bison Pipeline LLC (Bison), Great Lakes Gas Transmission Limited Partnership (Great Lakes), North Baja Pipeline, LLC (North Baja), Tuscarora Gas Transmission Company (Tuscarora), Portland Natural Gas Transmission System (PNGTS) and Iroquois Gas Transmission System, LP (Iroquois).

4







PART I

FORWARD-LOOKING STATEMENTS AND CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report includes certain forward-looking statements. Forward-looking statements are identified by words and phrases such as: “anticipate,” “assume,“ “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “forecast,” “should,” “predict,” “could,” “will,” “may,” and other terms and expressions of similar meaning. The absence of these words, however, does not mean that the statements are not forward-looking. These statements are based on management’s beliefs and assumptions and on currently available information and include, but are not limited to, statements regarding anticipated financial performance, future capital expenditures, liquidity, market or competitive conditions, regulations, organic or strategic growth opportunities, contract renewals and ability to market open capacity, business prospects, outcome of regulatory proceedings and cash distributions to unitholders.
Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the results predicted. These risks and uncertainties include, among other things, factors like various risks and uncertainties associated with the current extraordinary market environment and impacts resulting from the Coronavirus 2019 (COVID-19) pandemic and market disruptions relating to global supply and demand for oil and natural gas.
Factors that could cause actual results and our financial condition to differ materially from those contemplated in forward-looking statements include, but are not limited to:
the ability of our pipeline systems to sell available capacity on favorable terms and renew expiring contracts which are affected by, among other factors:
demand for natural gas;
changes in relative cost structures and production levels of natural gas producing basins;
natural gas prices and regional differences;
weather conditions;
availability and location of natural gas supplies in Canada and the United States (U.S.) in relation to our pipeline systems;
competition from other pipeline systems;
natural gas storage levels;
rates and terms of service;
the refusal or inability of our customers, shippers or counterparties to perform their contractual obligations with us, whether justified or not and whether due to financial constraints ( such as reduced creditworthiness, liquidity issues or insolvency), market constraints, legal constraints (including governmental orders or guidance), the exercise of contractual or common law rights that allegedly excuse their performance (such as force majeure or similar claims) or other factors;
the outcome and frequency of rate proceedings or settlement negotiations on our pipeline systems;
other potential changes in the taxation of master limited partnership (MLP) investments by state or federal governments such as the elimination of pass-through taxation or tax deferred distributions;
increases in operational or compliance costs resulting from changes in laws and governmental regulations affecting our pipeline systems, particularly regulations issued by the Federal Energy Regulatory Commission (FERC), U.S. Environmental Protection Agency (EPA) and U.S. Department of Transportation (DOT);
our ongoing ability to grow distributions through acquisitions, accretive expansions or other growth opportunities, including the timing, structure and closure of further potential acquisitions;
potential conflicts of interest between TC PipeLines GP, Inc., our general partner (General Partner), TC Energy Corporation and us;
failure of the Partnership or our pipeline systems to comply with debt covenants, some of which are beyond our control;
the ability to maintain secure operation of our information technology including management of cybersecurity threats, acts of terrorism and related distractions;
the implementation of future accounting changes and ultimate outcome of commitments and contingent liabilities, if any;
the impact of any impairment charges;
changes in political environment;
operating hazards, casualty losses and other matters beyond our control;

5






the overall increase in the allocated management and operational expenses to our pipeline systems for services performed by TC Energy Corporation;
ability of our pipeline systems to renew rights-of-way at a reasonable cost;
the level of our indebtedness (including the indebtedness of our pipeline systems), increases in interest rates, our level of operating cash flows and the availability of capital;
the impact of a potential slowdown in construction activities or a delay in the completion of our capital projects including increases in costs and availability of labor, equipment and materials;
the impact of downward changes in oil and natural gas prices, including any effects on the creditworthiness of our shippers or the availability of associated gas in low oil price environment; and
uncertainty surrounding the impact of global health crises that reduce commercial and economic activity, including the COVID-19 pandemic, on our business.
These are not the only factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statement. Other factors described elsewhere in this document, or factors that are unknown or unpredictable, could also have material adverse effects on future results. These and other risks are described in greater detail in Part II, Item 1A. “Risk Factors” of this report and in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019 (2019 Annual Report) as filed with the SEC on February 21, 2020. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. All forward-looking statements are made only as of the date made and except as required by applicable law, we undertake no obligation to update any forward-looking statements to reflect new information, subsequent events or other changes.

6






PART I — FINANCIAL INFORMATION
 
Item 1.        Financial Statements
 
TC PIPELINES, LP
CONSOLIDATED STATEMENTS OF INCOME
 
 
 
Three months ended
(unaudited)
 
March 31,
(millions of dollars, except per common unit amounts)
 
2020
 
2019
Transmission revenues
 
101

 
113

Equity earnings (Note 5)
 
55

 
54

Operation and maintenance expenses
 
(16
)
 
(16
)
Property taxes
 
(6
)
 
(7
)
General and administrative
 
(1
)
 
(2
)
Depreciation and amortization
 
(20
)
 
(20
)
Financial charges and other (Note 15)
 
(19
)
 
(22
)
Net income before taxes
 
94

 
100

Income taxes
 

 

Net income
 
94

 
100

Net income attributable to non-controlling interest
 
6

 
7

Net income attributable to controlling interests
 
88

 
93

Net income attributable to controlling interest allocation (Note 9)
 


 


Common units
 
86

 
91

General Partner
 
2

 
2

 
 
88

 
93

 
 
 
 
 
Net income per common unit (Note 9)  basic and diluted
 

$1.21

 

$1.28

Weighted average common units outstanding  basic and diluted (millions)
 
71.3

 
71.3

Common units outstanding, end of period (millions)
 
71.3

 
71.3

  
The accompanying notes are an integral part of these consolidated financial statements.

7






TC PIPELINES, LP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
 
Three months ended
(unaudited)
 
March 31,
(millions of dollars)
 
2020
 
2019
Net income
 
94

 
100

Other comprehensive income
 
 

 
 

Change in fair value of cash flow hedges (Note 13)
 
(13
)
 
(5
)
Reclassification to net income of gains and losses on cash flow hedges
 

 

Comprehensive income
 
81

 
95

Comprehensive income attributable to non-controlling interests
 
6

 
7

Comprehensive income attributable to controlling interests
 
75

 
88

 
The accompanying notes are an integral part of these consolidated financial statements.


8






TC PIPELINES, LP
CONSOLIDATED BALANCE SHEETS
 
(unaudited)
 
 
 
 
(millions of dollars)
 
March 31, 2020
 
December 31, 2019
ASSETS
 
 

 
 

Current Assets
 
 

 
 

Cash and cash equivalents
 
134

 
83

Accounts receivable and other (Note 14)
 
37

 
43

Distribution receivable from Iroquois
 

 
14

Inventories
 
11

 
10

Other
 
3

 
6

 
 
185

 
156

Equity investments (Note 5)
 
1,102

 
1,098

Property, plant and equipment
(Net of $1,201 accumulated depreciation; 2019 - $1,187)
 
1,540

 
1,528

Goodwill
 
71

 
71

TOTAL ASSETS
 
2,898

 
2,853

 
 
 
 
 
LIABILITIES AND PARTNERS’ EQUITY
 
 

 
 

Current Liabilities
 
 

 
 

Accounts payable and accrued liabilities
 
33

 
28

Accounts payable to affiliates (Note 12)
 
6

 
8

Accrued interest
 
20

 
11

Current portion of long-term debt (Note 7)
 
123

 
123

 
 
182

 
170

Long-term debt, net (Note 7)
 
1,887

 
1,880

Deferred state income taxes
 
7

 
7

Other liabilities
 
43

 
36

 
 
2,119

 
2,093

Partners’ Equity
 
 

 
 

Common units
 
584

 
544

Class B units (Note 8)
 
95

 
103

General partner
 
15

 
14

Accumulated other comprehensive income (loss) (AOCI)
 
(18
)
 
(5
)
Controlling interests
 
676

 
656

Non-controlling interests
 
103

 
104

 
 
779

 
760

TOTAL LIABILITIES AND PARTNERS’ EQUITY
 
2,898

 
2,853

 

Subsequent Events (Note 16)
 
The accompanying notes are an integral part of these consolidated financial statements.


9






TC PIPELINES, LP
CONSOLIDATED STATEMENT OF CASH FLOWS
 
 
 
Three months ended
(unaudited)
 
March 31,
(millions of dollars)
 
2020
 
2019
Cash Generated from Operations
 
 

 
 

Net income
 
94

 
100

Depreciation and amortization
 
20

 
20

Equity earnings from equity investments (Note 5)
 
(55
)
 
(54
)
Distributions received from operating activities of equity investments (Note 5)
 
65

 
56

Change in operating working capital (Note 11)
 
9

 
13

Other
 
(2
)
 

 
 
131

 
135

Investing Activities
 
 

 
 

Investment in Great Lakes (Note 5)
 
(5
)
 
(5
)
Distribution received from Iroquois as return of investment (Note 5)
 
5

 
2

Capital expenditures
 
(24
)
 
(16
)
Customer advances for construction
 

 
2

 
 
(24
)
 
(17
)
Financing Activities
 
 

 
 

Distributions paid to common units, including the General Partner (Note 10)
 
(47
)
 
(47
)
Distributions paid to Class B units (Note 8)
 
(8
)
 
(13
)
Distributions paid to non-controlling interests
 
(7
)
 
(7
)
Long-term debt issued, net of discount (Note 7)
 
6

 
18

Long-term debt repaid (Note 7)
 

 
(50
)
 
 
(56
)
 
(99
)
Increase in cash and cash equivalents
 
51

 
19

Cash and cash equivalents, beginning of period
 
83

 
33

Cash and cash equivalents, end of period
 
134

 
52

 
The accompanying notes are an integral part of these consolidated financial statements.


10






TC PIPELINES, LP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’ EQUITY
 
 
 
Limited Partners
 
 
 
 
 
 
Common Units
 
Class B Units
General Partner
Accumulated
Other
Comprehensive
Income (Loss) (a)
Non-
Controlling
Interest
Total
Equity
(unaudited)
 
millions
of units
 
millions
of dollars
 
millions
of units
 
millions of
dollars
millions of
dollars
millions of
dollars
millions of
dollars
millions of
dollars
Partners’ Equity at December 31, 2019
 
71.3

 
544

 
1.9

 
103

14

(5
)
104

760

Net income
 

 
86

 

 

2


6

94

Other comprehensive income (loss)
 

 

 

 


(13
)

(13
)
Distributions
 

 
(46
)
 

 
(8
)
(1
)

(7
)
(62
)
Partners’ Equity at March 31, 2020
 
71.3

 
584

 
1.9

 
95

15

(18
)
103

779


 
(a) 
Gain (loss) related to cash flow hedges reported in AOCI and expected to be reclassified to Net income in the next 12 months is estimated to be $(8) million. These estimates assume constant interest rates over time; however, the amounts reclassified will vary based on actual value of interest rates at the date of settlement.

 The accompanying notes are an integral part of these consolidated financial statements.

11







TC PIPELINES, LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1    ORGANIZATION
TC PipeLines, LP and its subsidiaries are collectively referred to herein as the Partnership. The Partnership was formed by TransCanada PipeLines Limited, a wholly owned subsidiary of TC Energy Corporation (TC Energy Corporation together with its subsidiaries collectively referred to herein as TC Energy), to acquire, own and participate in the management of energy infrastructure assets in North America.

NOTE 2    SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements and related notes have been prepared in accordance with United States generally accepted accounting principles (GAAP) and amounts are stated in U.S. dollars. The results of operations for the three months ended March 31, 2020 and 2019 are not necessarily indicative of the results that may be expected for the full fiscal year.
The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in our 2019 Annual Report. That report contains a more comprehensive summary of the Partnership’s significant accounting policies. In the opinion of management, the accompanying consolidated financial statements contain all of the appropriate adjustments, which are normally recurring adjustments unless otherwise noted, and considered necessary to present fairly the financial position of the Partnership, the results of operations and cash flows for the respective periods. Our significant accounting policies are consistent with those disclosed in our 2019 Annual Report, except those that became effective in 2020 as described in full under Note 3, "Accounting Pronouncements".
Basis of Presentation
The Partnership consolidates its interests in entities over which it is able to exercise control. To the extent there are interests owned by other parties, these interests are included as non-controlling interests. The Partnership uses the equity method of accounting for its investments in entities over which it is able to exercise significant influence.
U.S. federal and certain state income taxes are the responsibility of the limited partners and are not reflected in these consolidated financial statements. The tax effect of the Partnership's activities accrues to its limited partners. The Partnership’s taxable income or loss, which may vary substantially from the net income or loss reported in the consolidated statement of operations, is includable in the U.S. federal income tax returns of each partner.
In instances where the Partnership’s consolidated entities are subject to state income taxes, the asset-liability method is used to account for taxes. This method requires recognition of deferred tax assets and liabilities for future tax consequences attributable to the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are classified as non-current on our consolidated balance sheets.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates are reasonable, actual results could differ from these estimates.

12







NOTE 3    ACCOUNTING PRONOUNCEMENTS 
Changes in Accounting Policies effective January 1, 2020
Measurement of credit losses on financial instruments
In June 2016, the Financial Accounting Standards Board (FASB) issued new guidance that changes how entities measure credit losses for most financial assets and certain other financial instruments that are not measured at fair value through net income (loss). The new guidance amends the impairment model of financial instruments basing it on expected losses rather than incurred losses. These expected credit losses will be recognized as an allowance rather than as a direct write down of the amortized cost basis. The new guidance became effective January 1, 2020 and was applied using a modified retrospective approach. The adoption of this new guidance did not have a material impact on the Partnership’s consolidated financial statements.
Consolidation
In October 2018, the FASB issued new guidance for determining whether fees paid to decision makers and service providers are variable interests for indirect interests held through related parties under common control. This new guidance became effective January 1, 2020, and was applied on a retrospective basis. The adoption of this new guidance did not have a material impact on the Partnership’s consolidated financial statements.

Reference rate reform
In March 2020, in response to the expected cessation of LIBOR,the FASB issued new optional guidance that eases the potential burden of accounting for reference rate reform. The new guidance provides optional expedients for contracts and hedging relationships that are affected by reference rate reform, if certain criteria are met. Each of the expedients can be applied as of January 1, 2020 through December 31, 2022. For eligible hedging relationships existing as of January 1, 2020 and prospectively, the Partnership has applied the optional expedient allowing an entity to assume that the hedged forecasted transaction in a cash flow hedge is probable of occurring. As reference rate reform is still an ongoing process, the Partnership will continue to evaluate the timing and potential impact of adoption of other optional expedients when deemed necessary.

NOTE 4    GOODWILL
Consistent with GAAP, we evaluate our goodwill related to Tuscarora and North Baja for impairment at least annually and if any indicators of impairment are evident.
In 2019, based on our analysis of Tuscarora and North Baja’s current market conditions, we believed there to be a greater than 50 percent likelihood that Tuscarora and North Baja’s estimated fair value exceeded their carrying value. As a result, at December 31, 2019, we did not identify an impairment on the $71 million of goodwill related to the Tuscarora ($23 million) and North Baja ($48 million) acquisitions.
During the first quarter of 2020 there were two major events that impacted financial markets and global economic activity. First, there was an outbreak of a novel strain of coronavirus, COVID-19, which spread around the world and was declared a global pandemic on March 11, 2020 by the World Health Organization (WHO). Second, shortly after the outbreak, the global oil market experienced a precipitous decline in the price of crude oil due to an oversupply of oil coupled with significant demand concerns due to the economic impacts of the COVID-19 pandemic. We believe the current state of the macroeconomic environment does not represent a permanent shift although it is difficult to predict the severity of the impact of these events or how long any disruptions are likely to continue. Additionally, the following factors were considered in our analysis specific to the Partnership's Tuscarora and North Baja reporting units:
the long-term natural gas price futures relevant to gas transported on Tuscarora and North Baja do not reflect material differences from what was forecast in 2019;
at least 90 percent of Tuscarora and North Baja's revenue is tied to long-term take-or-pay, fixed price contracts which have a low correlation to short-term changes in demand;
Tuscarora and North Baja have not experienced any customer defaults to date and have significant collateral in support of their contracts;

13






multiples and discount rate assumptions used in our quantitative model are reflective of our long-term outlook for Tuscarora and North Baja, in line with their underlying asset life, versus the shorter-term nature of the current situation; and
while we may experience a slowdown in some of our construction activities, the expansion projects associated with these assets are materially on track, and we do not anticipate any significant changes in outlook or delay or inability to proceed due to financing requirements.

As a result of these factors, at March 31, 2020, we believe there is a greater than 50 percent likelihood that both Tuscarora’s and North Baja’s estimated fair values continue to exceed their carrying values. Therefore, no impairment exists on our goodwill. However, adverse changes to our key considerations could result in future impairments on our goodwill.

NOTE 5    EQUITY INVESTMENTS
The Partnership has equity interests in Northern Border, Great Lakes and Iroquois. The pipeline systems owned by these entities are regulated by FERC. The Northern Border and Great Lakes pipeline systems are operated by subsidiaries of TC Energy. The Iroquois pipeline system is operated by Iroquois Pipeline Operating Company, a wholly owned subsidiary of Iroquois. The Partnership uses the equity method of accounting for its interests in its equity investees.
 
 
Ownership
 
Equity Earnings
 
Equity Investments
 
 
Interest at
 
Three months ended
 
 
 
 
(unaudited)
 
March 31,
 
March 31,
 
March 31,
 
December 31,
(millions of dollars)
 
2020
 
2020
 
2019
 
2020
 
2019
Northern Border
 
50.00%
 
22
 
21
 
416
 
422
Great Lakes
 
46.45%
 
20
 
20
 
501
 
491
Iroquois
 
49.34%
 
13
 
13
 
185
 
185
 
 
 
 
55
 
54
 
1,102
 
1,098


Distributions from Equity Investments
Distributions received from equity investments in the three months ended March 31, 2020 totaled $71 million (March 31, 2019 - $58 million), of which $5.2 million (March 31, 2019 - $2.6 million ), was considered return of capital and included in "Investing Activities" in the Partnership’s consolidated statement of cash flows. The return of capital was related to our investment in Iroquois (see further discussion below).
Northern Border
During the three months ended March 31, 2020, the Partnership received distributions from Northern Border amounting to $28 million (March 31, 2019 - $28 million).
The Partnership did not have undistributed earnings from Northern Border for the three months ended March 31, 2020 and 2019.
The summarized financial information provided to us by Northern Border is as follows:

14






(unaudited)
 
 
 
 
(millions of dollars)
 
March 31, 2020
 
December 31, 2019
ASSETS
 
 

 
 

Cash and cash equivalents
 
25

 
21

Other current assets
 
38

 
37

Property, plant and equipment, net
 
979

 
989

Other assets
 
12

 
12

 
 
1,054

 
1,059

LIABILITIES AND PARTNERS’ EQUITY
 
 

 
 

Current liabilities
 
47

 
42

Deferred credits and other
 
40

 
39

Long-term debt, net (a)
 
364

 
364

Partners’ equity
 
 
 
 
Partners’ capital
 
604

 
615

Accumulated other comprehensive loss
 
(1
)
 
(1
)
 
 
1,054

 
1,059

 
 
Three months ended
(unaudited)
 
March 31,
(millions of dollars)
 
2020
 
2019
Transmission revenues
 
83

 
81

Operating expenses
 
(20
)
 
(20
)
Depreciation
 
(15
)
 
(15
)
Financial charges and other
 
(4
)
 
(4
)
Net income
 
44

 
42

(a)  No current maturities as of March 31, 2020 and December 31, 2019. At March 31, 2020, Northern Border was in compliance with all its financial covenants.
Great Lakes, a variable interest entity
The Partnership is considered to have a variable interest in Great Lakes, which is accounted for as equity investment since we are not its primary beneficiary. A variable interest entity is a legal entity that either does not have sufficient equity at risk to finance its activities without additional subordinated financial support, is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains or losses of the entity.
The Partnership made an equity contribution to Great Lakes of $5 million during the three months ended March 31, 2020 (March 31, 2019 - $5 million). This amount represents the Partnership’s 46.45 percent share of an $11 million cash call from Great Lakes to make a scheduled debt repayment.
During the three months ended March 31, 2020, the Partnership received distributions from Great Lakes amounting to $16 million (March 31, 2019 - $17 million).
The Partnership did not have undistributed earnings from Great Lakes for the three months ended March 31, 2020 and 2019.

The summarized financial information provided to us by Great Lakes is as follows:

15






(unaudited)
 
 
 
 
(millions of dollars)
 
March 31, 2020
 
December 31, 2019
ASSETS
 
 

 
 

Current assets
 
78

 
72

Property, plant and equipment, net
 
684

 
685

 
 
762

 
757

LIABILITIES AND PARTNERS’ EQUITY
 
 

 
 

Current liabilities
 
28

 
33

Net long-term debt, including current maturities (a)
 
208

 
219

Other long term liabilities
 
7

 
6

Partners’ equity
 
519

 
499

 
 
762

 
757

 
 
Three months ended
(unaudited)
 
March 31,
(millions of dollars)
 
2020
 
2019
Transmission revenues
 
72

 
72

Operating expenses
 
(16
)
 
(16
)
Depreciation
 
(8
)
 
(8
)
Financial charges and other
 
(4
)
 
(4
)
Net income
 
44

 
44

(a)  Includes current maturities of $31 million as of March 31, 2020 (December 31, 2019 - $21 million). At March 31, 2020, Great Lakes was in compliance with all its financial covenants.
Iroquois
During the three months ended March 31, 2020, the Partnership received distributions from Iroquois amounting to $27 million (March 31, 2019 - $13 million), which includes the Partnership’s 49.34 percent share of the Iroquois unrestricted cash distribution amounting to approximately $5.2 million (March 31, 2019 - $2.6 million). The unrestricted cash did not represent a distribution of Iroquois’ cash from operations during the period and therefore it was reported as a return of investment in the Partnership’s consolidated statement of cash flows.
The Partnership did not have undistributed earnings from Iroquois for the three months ended March 31, 2020 and 2019.
The summarized financial information provided to us by Iroquois is as follows:
(unaudited)
 
 
 
 
(millions of dollars)
 
March 31, 2020
 
December 31, 2019
ASSETS
 
 

 
 

Cash and cash equivalents
 
32

 
43

Other current assets
 
86

 
36

Property, plant and equipment, net
 
515

 
570

Other assets
 
17

 
16

 
 
650

 
665

LIABILITIES AND PARTNERS’ EQUITY
 
 

 
 

Current liabilities
 
21

 
34

Long-term debt, net (a)
 
317

 
317

Other non-current liabilities
 
19

 
20

Partners’ equity
 
293

 
294

 
 
650

 
665


16






 
 
Three months ended
(unaudited)
 
March 31,
(millions of dollars)
 
2020
 
2019
Transmission revenues
 
52

 
52

Operating expenses
 
(15
)
 
(15
)
Depreciation
 
(8
)
 
(7
)
Financial charges and other
 
(3
)
 
(3
)
Net income
 
26

 
27

(a)   Includes current maturities of $3 million as of March 31, 2020 (December 31, 2019 - $3 million). At March 31, 2020, Iroquois was in compliance with all of its financial covenants.

NOTE 6    REVENUES 
Disaggregation of Revenues
For the three months ended March 31, 2020 and 2019, effectively all of the Partnership’s revenues were from capacity arrangements and transportation contracts with customers as discussed in more detail below.
Capacity Arrangements and Transportation Contracts
The Partnership’s performance obligations in its contracts with customers consist primarily of capacity arrangements and natural gas transportation contracts.
The Partnership’s revenues are generated from contractual arrangements for committed capacity and from transportation of natural gas which are treated as a bundled performance obligation. Revenues earned from firm contracted capacity arrangements are recognized ratably over the term of the contract regardless of the amount of natural gas that is transported. Transportation revenues for interruptible or volumetric-based services are recognized when the service is performed. The Partnership has elected to utilize the practical expedient of recognizing revenue as invoiced.
The Partnership's pipeline systems are subject to FERC regulations and, as a result, a portion of revenues collected may be subject to refund if invoiced during an interim period when a rate proceeding is ongoing. Allowances for these potential refunds are recognized using management's best estimate based on the facts and circumstances of the proceeding. Any allowances that are recognized during the proceeding process are refunded or retained, as applicable, at the time a regulatory decision becomes final. As of March 31, 2020, the Partnership does not have any outstanding refund obligations related to any rate proceedings. Revenues are invoiced and paid on a monthly basis. The Partnership’s pipeline systems do not take ownership of the natural gas that is transported for customers. Revenues from contracts

17






with customers are recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.
Contract Balances
All of the Partnership’s contract balances pertain to receivables from contracts with customers amounting to $34 million at March 31, 2020 (December 31, 2019 - $37 million) and are recorded as trade accounts receivable and reported as "Accounts receivable and other" in the Partnership’s consolidated balance sheet (Refer to Note 14, "Accounts Receivable and Other").
Additionally, our accounts receivable represent the Partnership’s unconditional right to consideration for services completed which includes billed and unbilled accounts.
Right to invoice practical expedient

In the application of the right to invoice practical expedient, the Partnership’s revenues from regulated capacity arrangements are recognized based on rates specified in the contract. Therefore, the amount invoiced, which includes the capacity contracted and variable volume of natural gas transported, corresponds directly to the value the customer received. These revenues are recognized on a monthly basis once the Partnership’s performance obligation to provide capacity has been satisfied.

18






NOTE 7    DEBT AND CREDIT FACILITIES
(unaudited)
(millions of dollars)
 
March 31, 2020
 
Weighted Average
Interest Rate for the
Three Months Ended
March 31, 2020
 
December 31, 2019
 
Weighted Average
Interest Rate for the
Year Ended 
December 31, 2019
 
TC PipeLines, LP
 
 
 
 
 
 
 
 
 
Senior Credit Facility due 2021
 
 
 
 
 
2013 Term Loan Facility due 2022
 
450
 
2.93%
 
450
 
3.52%
 
4.65% Unsecured Senior Notes due 2021
 
350
 
4.65%
(a) 
350
 
4.65%
(a) 
4.375% Unsecured Senior Notes due 2025
 
350
 
4.375%
(a) 
350
 
4.375%
(a) 
3.90 % Unsecured Senior Notes due 2027
 
500
 
3.90%
(a) 
500
 
3.90%
(a) 
 
 
 
 
 
 
 
 
 
 
GTN
 
 
 
 
 
 
 
 
 
5.29% Unsecured Senior Notes due 2020
 
100
 
5.29%
(a) 
100
 
5.29%
(a) 
5.69% Unsecured Senior Notes due 2035
 
150
 
5.69%
(a) 
150
 
5.69%
(a) 
 
 
 
 
 
 
 
 
 
 
PNGTS
 
 
 
 
 
 
 
 
 
Revolving Credit Facility due 2023
 
45
 
2.92%
 
39
 
3.47%
 
 
 
 
 
 
 
 
 
 
 
Tuscarora
 
 
 
 
 
 
 
 
 
Unsecured Term Loan due 2020
 
23
 
2.80%
 
23
 
3.39%
 
 
 
 
 
 
 
 
 
 
 
North Baja
 
 
 
 
 
 
 
 
 
Unsecured Term Loan due 2021
 
50
 
2.75%
 
50
 
3.34%
 
 
 
2,018
 
 
 
2,012
 
 
 
Less: unamortized debt issuance costs and debt discount
 
8
 
 
 
9
 
 
 
Less: current portion
 
123
 
 
 
123
 
 
 
 
 
1,887
 
 
 
1,880
 
 
 
(a)       Fixed interest rate
TC PipeLines, LP 
The Partnership’s senior facility under revolving credit agreement as amended and restated, dated September 29, 2017 (Senior Credit Facility) consists of a $500 million senior revolving credit facility with a banking syndicate, maturing November 10, 2021. In March 2019, the Partnership repaid all amounts outstanding under its Senior Credit Facility and there was no outstanding balance at March 31, 2020 and December 31, 2019.
As of March 31, 2020, the variable interest rate exposure related to the term loan facility under a term loan agreement, as amended, dated September 29, 2017 (2013 Term Loan Facility) was hedged using interest rate swaps at an average rate of 3.26 percent (December 31, 2019 - 3.26 percent). Prior to hedging activities, the London Interbank Offered Rate based (LIBOR) interest rate on the 2013 Term Loan Facility was 2.83 percent at March 31, 2020 (December 31, 2019 - 2.94 percent).
The Senior Credit Facility and the 2013 Term Loan Facility require the Partnership to maintain a debt to adjusted cash flow leverage ratio of no greater than 5.00 to 1.00 for each fiscal quarter, except for the fiscal quarter and the two following fiscal quarters in which one or more acquisitions have been executed, in which case the leverage ratio is to be no greater than 5.50 to 1.00. The leverage ratio was 3.41 to 1.00 as of March 31, 2020.
GTN
GTN’s $100 million 5.29% Unsecured Senior Notes due June 1, 2020 (Unsecured Senior Notes) contain a covenant that limits total debt to no greater than 70 percent of GTN’s total capitalization. GTN’s total debt to total capitalization ratio at March 31, 2020 was 38.7 percent.
GTN’s $100 million 5.29% Unsecured Senior Notes due June 1, 2020 are expected to be refinanced together with additional funding to be used to finance a portion of GTN XPress.

19






PNGTS
PNGTS’ Revolving Credit Facility requires PNGTS to maintain a leverage ratio not greater than 5.00 to 1.00. The leverage ratio was 0.86 to 1.00 as of March 31, 2020. During the three months ended March 31, 2020, PNGTS borrowed an additional $6 million on its Revolving Credit Facility to fund its expansion projects.
The LIBOR-based interest rate applicable to PNGTS’s Revolving Credit Facility was 2.83 percent at March 31, 2020 (December 31, 2019 - 2.99 percent).
Tuscarora
Tuscarora’s $23 million variable rate Unsecured Term Loan due August 1, 2020 (Unsecured Term Loan) contains a covenant that requires Tuscarora to maintain a debt service coverage ratio (cash available from operations divided by the sum of interest expense and principal payments) of greater than or equal to 3.00 to 1.00. As of March 31, 2020, the ratio was 8.63 to 1.00.
The LIBOR-based interest rate applicable to Tuscarora’s Unsecured Term Loan Facility was 2.71 percent at March 31, 2020 (December 31, 2019 - 2.82 percent).
Tuscarora's Unsecured Term Loan is due August 21, 2020 and is expected to be refinanced together with additional funding to be used to finance a portion of Tuscarora XPress.
North Baja
North Baja’s Term Loan Facility contains a covenant that limits total debt to no greater than 70 percent of North Baja’s total capitalization. North Baja’s total debt to total capitalization ratio at March 31, 2020 was 39.99 percent.
The LIBOR-based interest rate applicable to North Baja’s Term Loan Facility was 2.66 percent at March 31, 2020 (December 31, 2019 - 2.77 percent).
Partnership (TC PipeLines, LP and its subsidiaries)
At March 31, 2020, the Partnership was in compliance with all terms and conditions including its financial covenants and its other covenants including restrictions on entering into mergers, consolidations and sales of assets, granting of liens, material amendments to the Fourth Amended and Restated Agreement of Limited Partnership, as amended to date (Partnership Agreement), incurring additional debt and distributions to unitholders.
The principal repayments required of the Partnership on its debt are as follows:
(unaudited)
 
(millions of dollars)
 Principal Payments
2020
123

2021
400

2022
450

2023
45

2024

Thereafter
1,000

 
2,018



NOTE 8    PARTNERS’ EQUITY 
Class B units issued to TC Energy
The Class B units entitle TC Energy to an annual distribution based on 30 percent of GTN’s annual distributions as follows: (i) 100 percent of distributions above $20 million through March 31, 2020 and (ii) 25 percent of distributions above $20 million thereafter, which equates to 43.75 percent of distributions above $20 million for the year ending December 31, 2020 (Class B Distribution). Additionally, the Class B Distribution will be further reduced by 35 percent, which is equivalent to the percentage by which distributions payable to the common units were reduced in 2018 (Class B Reduction). The Class B Reduction was implemented during the first quarter of 2018 following the Partnership’s common unit distribution reduction of 35 percent. The Class B Reduction will continue to apply to any particular calendar year until distributions payable in respect of common units for such calendar year equal or exceed $3.94 per common unit.

20






For the year ending December 31, 2020, the Class B units’ equity account will be increased by the Class B Distribution, less the Class B Reduction, until such amount is declared for distribution and paid in the first quarter of 2021. During the three months ended March 31, 2020, the 2020 annual Class B Distribution threshold was not exceeded.
For the year ended December 31, 2019, the Class B Distribution was $8 million and was declared and paid in the first quarter of 2020.

NOTE 9    NET INCOME PER COMMON UNIT
Net income per common unit is computed by dividing net income attributable to controlling interests, after deduction of amounts attributable to the General Partner and Class B units, by the weighted average number of common units outstanding.
The amount allocable to the General Partner equals an amount based upon the General Partner’s two percent general partner interest, plus an amount equal to incentive distributions. Incentive distributions are paid to the General Partner if quarterly cash distributions on the common units exceed levels specified in the Partnership Agreement.
The amount allocable to the Class B units in 2020 will equal 30 percent of GTN’s distributable cash flow during the year ending December 31, 2020 less $20 million, the residual of which is further multiplied by 43.75 percent. This amount is further reduced by the estimated Class B Reduction for 2020, an approximately 35 percent reduction applied to the estimated annual Class B Distribution (December 31, 2019 - $20 million less Class B Reduction). During the three months ended March 31, 2020 and 2019, no amounts were allocated to the Class B units as the annual threshold was not exceeded.
Net income per common unit was determined as follows:
(unaudited)
 
Three months ended March 31,
(millions of dollars, except per common unit amounts)
 
2020
 
2019
Net income attributable to controlling interests
 
88

 
93

Net income attributable to the General Partner
 
(2
)
 
(2
)
Net income attributable to common units
 
86

 
91

Weighted average common units outstanding (millions) — basic and diluted
 
71.3

 
71.3

Net income per common unit — basic and diluted
 

$1.21

 

$1.28



NOTE 10    CASH DISTRIBUTIONS PAID TO COMMON UNITS
During the three months ended March 31, 2020 and 2019, the Partnership distributed $0.65 per common unit for a total distribution of $47 million each quarter. The total distribution paid includes our General Partner's share for its two percent general partner interest totaling $1 million. The General Partner did not receive any distributions in respect of its IDRs during the three months ended March 31, 2020 and 2019.

NOTE 11    CHANGE IN OPERATING WORKING CAPITAL
(unaudited)
 
Three months ended March 31,
(millions of dollars)
 
2020
 
2019