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TC Pipelines LP, (TCLP)

Q3 2010 Earnings Conference Call

October 28, 2010 12:00 pm ET

Executives

Steve Becker - President and Director

Terry Hook - Manager of IR

Rob Jacobucci - Principal Financial Officer and Controller

Analysts

Michael Cerasoli - Goldman Sachs

Gabe Moreen - Bank of America Merrill Lynch

John Tysseland – Citigroup

Bradley Olsen - Eagle Global Advisors

Operator

Ladies and gentlemen welcome to our TC Pipeline LC 2010 third quarter results conference call. I would now like to turn the meeting over to Mr. Terry Hook, manager of investor relations. Please go ahead Mr. Hook.

Terry Hook

Thank you operator and good day everyone. I’d like to welcome you to TC Pipeline’s third quarter 2010 conference call. With me today, Steve Becker, president, and Rob Jacobucci, our controller. As you know Steve was appointed president back on August 17th and succeeds Mark Semenan. Steve has been with TransCanada Corporations for 20 years and has served as the director of the general partner since January 2007. He currently holds the dual positions of president TC Pipeline LT and Vice president of business development natural pipelines for TransCanada Corporation. With over 30 years of experience Steve has held various positions in finance, natural gas marketing, strategy and business development.

Before we begin today I would like to remind you that certain statements made during this conference call will be forward looking regarding future events and future financial performance. All forward looking statements are based on our beliefs as well as on assumptions made by and information currently available to us. These statements reflect our current views with respect to future events and are subject to various risks, uncertainties and sanctions as discussed in detail in our 2009 10-K as well as subsequent filings with the Securities and Exchange Commission.

If one or more of these risks or uncertainties materialize or if the underlying assumption is proven correct, actual results may differ materially from those described in the forward looking statements.

Today Steve will review TC pipeline’s recent cash distribution announcement, achievements during the quarter, provide an update on the activities concerning the partnerships and its general partner TransCanada Corporation. Rob will then proceed to review in detail the third quarter financial results. Following the prepared remarks we’ll ask the conference operator to coordinate your questions. With that I’ll now turn the call over to Steve.

Steve Becker

Thanks Terry and good day everyone. I’m pleased to be able to speak with you today. I’d like to emphasize that I plan to continue with our existing strategy of focusing on growing TC Pipeline’s distributions and earnings in a disciplined and opportunistic manner. While serving as a director or being involved in TC Pipeline’s strategy and help set the current direction of the partnership. I’d also like to point out that TC Pipeline’s board of directors has recently appointed two new officers. Stewart Campbell, vice president business development and Stephanie Wilson, vice president commercial. Stewart will focus on growth and development opportunities while Stephanie will focus on the commercial governance of our existing assets for the partnership.

I’d now like to talk about TC Pipeline’s accomplishments for the third quarter of 2010. I was pleased to be able to announce last week our third quarter cash distribution increase of $0.02cents to $0.75 cents per common unit or $3 on an annualized basis. This cash distribution represents a 2.7% increase from the second quarter 2010 distribution. This is the 46th consecutive quarterly distribution paid by the partnership. I’ll come back to discussing the distribution increase later.

As outlined in yesterday’s news release, TC Pipeline supported a 14% or $5.7 million increase in third quarter partnership cash flows to $45.4 million. Net income increased $11.2 million in the third quarter in 2010 to $38.6 million which was equivalent to $0.82 cents per common unit.

Northern Border had an excellent quarter and continues to perform above our expectations. Volumes for the 3rd quarter of 2010 were approximately 2.6bc yesterday compared to 2bc yesterday for the same period last year. Strong contracting demands from shippers during the quarter demonstrated the value of Northern Border’s transportation services.

Turning to Great Lakes for the third quarter 2010 Great Lakes Volumes troops were increased to 2.2bc yesterday compared to 1.6bc yesterday in the same period. Rise in volumes was primarily a result of increased utilization of long term contracts. The hot summer caused larger drought from storage facilities to meet power demands.

Now I’m moving to Tuscarora and North Baja both assets continue to perform head or above our expectations from quarter to quarter. Each pipeline’s are situated in unique geographic locations and the long term contracts allow for the secure consistent earnings in cash flows. And it’s as such are generally unaffected by shifting natural gas supply and demand fundamentals.

I’d now like to discuss the competitive landscape of our long haul pipelines. Northern Border has a sound competitive position serving gas supplies from the Western Canada Sedimentary Basin. Strong transportation demand is due to completion of new pipeline infrastructure over the past year plowing gas eastward whereby contributing to a reduction in the level of competing gas supply in the market area and consequently making Northern Borders delivered price of gas more competitive in the market. Northern Borders sold all its available capacity for the third quarter. And looking forward Northern Border sold out a major portion of its available capacity through April 2011. For our North Bordering and Great Lakes pipeline system the trend is continuing towards sure return contracting even though demand for transportation services in 2010 has been very strong.

With legacy contracts rolling off and sufficient transportation into the market demand centers there is lots of an incentives for customers to lock up access to these transportation paths in long term contracts. A typical contract practice in the industry is either for an annual contract November to October the following year or through the winter season starting in November until March or through the summer period of April till October. Mostly the daily contracts are also the norm. With this the contracting positions that we currently have on our own haul pipes what we would typically expect at this time of the year. In light of this our pipeline should remain well positioned to capture volumes year over year.

The rates charged on our systems relative to the costs to build new infrastructure are lower and we believe these systems will remain a cost effective alternative for shippers to transport natural gas for consumption into markets that they serve. With this in mind we believe the demand for natural gas and demand for transportation services on Northern Border and Great Lakes will remain.

As well looking forward we believe TC pipelines is well positioned to continue to deliver stable in growing cash distributions to unit holders. Solid business fundamentals driving stronger volumes on our long haul pipes support our ability to increase the quarter distribution to unit holders. We believe our pipelines are critical North American infrastructure in the markets that they serve and will continue to represent solid investments for TC Pipelines.

I’d like to now take a few minutes to update you on some of our broader strategic developments and opportunities that the TransCanada sponsorship level that may have a positive impact on the volumes tube per cash flow earnings and growth prospects for the partnerships going forward. TransCanada continues to develop its large $21 billion capital program. Within its overall financing plan TC Pipelines may have a role to play if TransCanada chooses to sell an asset to TC Pipelines. This option continues to remain open to TransCanada.

Looking more closely at the projects within TransCanada capital program there are a number of projects that will have a positive impact on TC Pipelines. Of importance the TC Pipelines is a construction of the 30 inch rising pipeline of the US Rockies. And secondly the extension of TransCanada’s Alberta system into the two major North American Shell plays in North Eastern British Columbia, the Horn River and Moneteney Shelter. Both the construction on the Bison natural gas pipeline began in July 2010. It is expected to be operational in the fourth quarter of 2010. The Bison Pipeline will bring gas from the Patter River basin in Wyoming and interconnect with Northern Border. Bison shippers have executed ten year downstream contracts on the Northern border system for approximately 400 million cubic feet per day. From the Port of Morgan Montana to Ventura Isla. These contracts will not only strengthen Northern Border‘s contract portfolio but also help diversify it’s natural gas supply. It also provides another transportation solution for shippers exporting natural gas supply from the US Rocky Space Center.

TransCanada also continues to advance two significant pipelines in Canada in North Eastern British Columbia which are expected to connect into its Alberta system bringing approximately 1.6 billion cubic feet per day of new shell gas under development in the Monteneyan Horn River shell place. In addition to the 1.6 billion cubic feet per day of committed volume received to date Trans Canada has expressions of interest from producers for at least another billion cubic feet a day of transportation services from the East developing shell place. TransCanada also started construction on the ground bridge pipeline back in August 2010 and expects to be operational in the fourth quarter in 2010. When completed it will connect the Monteney shell gas formation into the Alberta system. This project is firm transportation contracts that will reach 1.1 billion feet per day by 2014.

TransCanada’s other North Eastern British Columbia shell gas pipeline will connect Horn River shell gas. The Horn river pay plan project has commitment for 4.5 billion cubic feet per day. The Horn River project is expected to be operation in the second quarter of 2012. When you look at these projects the Horn river and Monteney shell place are similar to the Haynesville play in terms of scale and geology. These shell developments are being led by large scale producers who are committing the capital to develop these reserves who also have a long term view on natural gas fundamentals.

Both northern border and great lakes are expected to play an integral role in this regard as these producers require major reliable pipelines to move this gas to market.

In addition to this shell gas pipelines TransCanada continues to advance other pipelines developments in BC in Alberta to tie in unconventional shell gas. These new development requests will help to increase the gas supply entering into the Alberta system and ultimately deliver out of the province. The continued interest from natural gas producers developed shell plays within the Western Canada Sedimentary Basin. We thus remain optimistic that the volumes produced and exported out of that basin will stabilize in the near term and will start to increase over time as a potential of the Horn River and Monteney shell place are developed and brought on the stream.

As well the recently lowered Alberta government royalties for shell gas wells, cold bed methane wells and horizontal oil and gas wells is continuing to stimulate drilling activity.

And final point addition I’d like to the WTSD shell gas potential I’d like to also highlight the growth of the Balkan shell plain. Northern borders pipeline route crosses Montana and North Dakota making it well positioned to capture gas volumes from this region where they’ve seen a large increase in oil and gas drilling activities. Should producers decide to tie in gas from these fields, they could provide Northern border another supply source that would strengthen the (inaudible).

As I close off today I would to emphasize that some balance sheet remain conservative and opportunistic as we look to grow our business in a disciplined and sustainable way over the longer term. That concludes my prepared remarks and I would like to now turn the call over to Rob Jacobucci who will provide a more detailed discussion on our third quarter results.

Rob Jacobucci

Thanks Steve and good day everyone. As Steve mentioned yesterday we received our third quarter results. Partnership cash flows increased $5.7 million to $45.4 million in third quarter in 2010 compared to $39.7 million for the same period last year. This was primarily due to the $8.1 million increase in cash distributions for Northern Border in third quarter 2010. This increase was partially offset by a decrease of $2.4 million in cash distributions from Great Lakes. And the partnership pay distributions of $34.4 million third quarter 2010. An increase in of $3.7 million compared to the same period last year due to an increase in the number of common units.

The partnerships net income increased by $11.2 million to $38.6 million in third quarter 2010 compared to the same period in 2009. This increase was primarily due to higher equity income from Northern Border and Great Lakes.

Equity income from Northern Border increased $10.5 million to $21 million in third quarter 2010 compared to the same period in 2009. The increase in equity income was primarily due to increased transmission revenues along with reduced operating expenses and reduced financial charges.

At the Northern Border level, net income increased by $20.9 million mainly due to increased demand for transportation services on Northern Border in third quarter of 2010 resulting from strong gas demand in the mid west, reduced deliveries of natural gas to mid west markets from other supply sources and decreased financial charges stemming from lower effective interest rates and lower average debt outstanding.

Equity income from Great Lakes increased $1.4 million to $14.6 million in third quarter of 2010 compared to the same period last year. The increase in equity income was primarily due to depreciation rate reductions from the Great Lakes rate proceeding settlement and lower operating expenses partially off set by decreased transmission revenues. That Great Lakes net income increased $3.2 million mainly due to lower depreciation in operating expenses partially off set by decreased revenues in the lower transportation values resulting from decreased demand for short term transportation and the impact of the settlement rates on long term revenues.

Net income from other plates which includes results from North Baja and Tuscarora decreased $1 million to $9.3 million in third quarter 2010 compared to the same period last year. This decrease was primarily due to higher operating expenses at North Baja related to the cost of contracting for capacity on the (inaudible) Baja North aid pipeline. In advance of bringing on additional supply expected from the Yuma Lateral in first quarter of 2011 as well as higher property taxes.

Cost at the partnership level decreased marginally by $300,000 to $6.3 million compared to third quarter 2009 due to lower average debt outstanding.

Turning now to our liquidity in capital resources. At September 30 2010, we have no amounts drawn from our revolving credit facility leaving $250 million available for future borrowing. The average interest rate on a credit facility was 4.2% for the 3 months ended September 30 2010 which includes the impact of interest rates edging activity. Senior notes in place in Tuscarora in the amount of $51 million will mature at the end of December 2010. The partnership intends to refinance this debt with either fixed rate or variable rate debt as the market conditions get tight.

Partnership cash flows continue to provide strong support for our cash distributions to unit holders. The partnerships paid cash distributions of $34.4 million while generating cash flows of $45.4 million in third quarter 2010. TC Pipelines will continue to maintain a prudent approach to cash flow management directing our free cash flow to maintaining appropriate debt levels, investing in ongoing operations, growing distributions to unit holders and positioning for further growth opportunities. That concludes my prepared remarks on the third quarter of 2010 financial results. I’ll now turn the call back to Kerry.

Terry Hook

Thanks Rob. Alright, now at this time we’d like to open the call to any questions you may have. Operator please go ahead.

Question-and-Answer Session

Operator

Thank you Mr. Hook. So now I’ll take questions from the telephone lines. (Operator instructions). Thank you for your patience. Our first question is from Michael Cerasoli of Goldman Sachs. Please go ahead.

Michael Cerasoli - Goldman Sachs

Good afternoon. Northern Border volumes are strong once again. I was wondering how much of this is driven by pure volume growth versus an economic decision on the part of shippers?

Steve Becker

This is Steve Becker and if I could answer that, I believe that Northern Borders volumes were higher for a variety of different reasons. In one case volumes were in comparing to 2009 the rest of the pipeline was now serving markets further east so that Northern Border volumes were returned to longer term in historical levels in its traditional market area. In the supply area the Alberta hub price had a wider differential compared to Henry hub pricing or the transport T and this wider differential over the transportation path created the opportunity for the northern border to achieve better results. So that pricing aspect would reflect a variety of weather in related areas and all across the country. So that’s what we would, that would be our explanations for the Northern Border volumes.

Michael Cerasoli - Goldman Sachs

Okay. So now we are back to more normalized volumes in the Northern Border. And I guess my follow up to that would be if Bison as they kind ramp out volumes there how does that impact your broader tolling agreements in Northern Border do you expect to get kind of immediately you want to put in place some longer term contracts or are you okay with the more than two year duration right now?

Steve Becker

Well, what will happen when Bison comes on if the shippers have executed long tenure agreements on Bison and they’ll have similar agreements on Northern Border for about 400 million cubic feet a day. So that will help increase our average profile but for most of the shippers from Western Canada we believe that there’ll be sort of shipping and contracting on an annual basis. As I had mentioned people can ship on either an annual basis through the winter or through the summer and right now we’ve had we sold virtually most of our capacity through the winter and we have a substantial amount sold to next summer until the end of October. And that’s very typical of contracting practice and that’s where we are standing at this time.

Michael Cerasoli - Goldman Sachs

Okay. Switching gears I’m just curious as we head into the end of the year how your acquisition strategy is evolving especially given the strength of MLP markets in general.

Steve Becker

Well I think what we’ve said is that we are very disciplined and yet we are opportunistic. And so within that we have a very disciplined team in terms of how we look at risk and we tend to look at assets from a long term how do they fit from a long term infrastructure point of view. So within that happening is that we often look at a variety of different transactions. But where they were able to actually close on the transaction or be able to execute it depends on a variety of situations. And so that’s what we are doing right now and it’s ongoing but we don’t have anything to currently report publicly.

Michael Cerasoli - Goldman Sachs

Yeah, that’s it from me. Thanks.

Steve Becker

Thanks Cerasoli.

Operator

The next question is from Gabe Moreen, Bank of America. Please go ahead.

Gabe Moreen - Bank of America Merrill Lynch

Hi, good morning everyone. If you can just maybe try to quantify some of that how much capacity is contracted lets say I mean sounds like basically everything is maybe sold out on Northern Border through the winter but now you can count on also percentage wise what you sold on through the summer and then both comparing the winter on winter period relative to the last winter and the summer alone. The last summer how your rates have been trending lets say on Northern Border.

Steve Becker

Okay well I think there is two questions there. So if I could answer the first one, it seems that the volume was pretty well sold out to the winter. The summer in terms of the percentage in terms of trying to give you a percentage is that with the supply on Northern Border and different delivery points there is a variety of different paths on the pipeline. So it’s definitely very difficult to give you a percentage because some of the major parts of a very large percentage sold and other paths still have available capacity. So a percentage is a little tougher not to give you but in essence Northern Border sold out substantially in the winter and a very amount through the summer. Its, we don’t always express it as an exact percentage so I don’t have a number to give you.

Gabe Moreen - Bank of America Merrill Lynch

If I could interject could you maybe do it on an apple to apples basis sort of excluding the Bison contract pitching in will that help frame the question better?

Steve Becker

Well I think what we are just saying is that if you are shipped from Northern Border you end from Alberta down to the Venturo’s point where it interconnects with (inaudible) naturals whereas the bulk of the volume people could also ship through the (inaudible) to the Chicago market and there is a variety of markets within that and so that’s where I don’t have an exact percentage I can give you other than if there is some capacity still available for sale through the summer but that’s a small amount. And so what we see right now is what we were traditionally seeing over the last number of years and we are quite comfortable with that. In terms of the pricing dynamics and the revenue end the numbers come from a whole variety of negotiations and negotiated rates within the contracts. And so with the Alberta hub differentials widening out we were able to obtain very reasonable results. But we don’t have a specific number we can give you at this time.

Gabe Moreen - Bank of America Merrill Lynch

Okay. And then I guess for purposes of modeling when the Bison contracts exactly kick in you know that 400 million we are hearing the pipeline completed December is that there? So I’m just wondering the impact is that going to show up pretty much in the first quarter or not really anything in the fourth quarter.

Steve Becker

Currently that’s what Trans Canada has indicated to its shippers that it would be in that time so it would be most of the results for us would be in the first quarter. And Northern Border would be shipping Canadian gas until the Bison volumes kick in so that’s what we would expect.

Gabe Moreen - Bank of America Merrill Lynch

Thanks very much.

Steve Becker

Thank you.

Operator

Thank you. Our next question is from John Tysseland of Citigroup. Please go ahead.

John Tysseland - Citigroup

Hi guys. Just wanted to get your opinion as to whether you believe that kind of the high tariff structure on the Canadian main line system is one of the structures that’s depressing the Alberta hub. And then also wanted to see if you could update us on efforts by Trans Canada restructured as terrace on the main line system and when that resolution might be expected.

Steve Becker

I can only speak for TC pipeline LT not Trans Canada so that for some of the questions that you have there will actually have to be perhaps to Trans Canada in their conference call. What I can say is that the Alberta hub pricing is based on a whole variety of factors both storage and competing pipelines. And when you look at the pricing over the last couple of years it has been very well much within the norms of what its been over the last 10 to 15 years so that its difficult to isolate the pricing to one particular factor and where it was during the summer was very much where we’ve seen it during most of in the last ten years. So that’s where we would see that for our pipelines Northern Border and Great Lakes that was gave us an opportunity to have people contract like they have sort of in a number of years previously. And that’s about all I can actually say from TC pipeline.

John Tysseland - Citigroup

I guess I can ask if this way when you look at total market share on west east volumes going on Northern Borders and Great Lakes versus Canadian main line system have you seen Great Lakes and Northern Border increase market share on some of those volumes?

Steve Becker

Well pipeline in some ways don’t always compete on market share usually the shippers decide to ship decide to ship on what has the best net back to them and how they would dispatch the gas. So the net back depends on the actual pool but also the demand in (inaudible) and the pricing in all the various markets. And so more recently the net back from Northern Border and the net back from Great Lakes has been very strong and that’s led us to be able to contract early before we had (inaudible) rates. And it’s a little more shifting all the time. So the market share is not usually a way that most of the shippers look at it. They are really just looking to get the best value for their gas. And we happen to have two pipelines that are very well located to their excellent Midwest markets. And so we’ve done fairly well in the last quarter and looking forward in the next year.

John Tysseland - Citigroup

When you look at that I guess over the next 12 months to years, obviously Bison coming online that helps anchor some of the Northern Border volumes. Does Great Lakes have kind of incremental volumes when contracts roll out there? If you could remind us when those contracts I guess the long term contracts roll off?

Steve Becker

There is a whole portfolio of contracts brewing off and the weighted average the mean in life of the contract on Great Lakes is 2.1 years. Great Lakes itself shipped to Minnesota with Compton and Michigan. And so some of the gas is shipped to the storage fields in Michigan and that’s usually what often happens in the summer. In the winter it’s a little more dependent in those particular markets and in weather further east. And so often shippers that’s what they’ll be utilizing it for and so when they come to renew we’ll most likely get people renewing on an annual basis or possibly a winter and summer basis. And so as these contracts expire we feel that the shippers who’ve shipped this gas will likely renew but likely just find that annual year over year basis.

John Tysseland - Citigroup

Great. Thank you.

Steve Becker

Thanks John.

Operator

Thank you. Once again should you have a question or a comment please press star one on your telephone keypad. Our next question is from Bradley Olson of Eagle Global Advisors. Please go ahead.

Bradley Olsen - Eagle Global Advisors

Hi guys.

Steve Becker

Hi Brad

Bradley Olsen - Eagle Global Advisors

Quick question about Northern Border and as far as its relationship to Bison. Since people who are shipping on Bison are essentially forced to ship on Northern border should we look at maybe the weighted average tariff per MTF of Rupert on Northern Border to increase and so to essentially going to be purchasing the firm transportation and if what’s likely to be I guess in or out the short term capacity?

Steve Becker

Well I think what you indicated Brad is that the shippers constantly match their contracts from their Bison pipeline so that they can actually get to a bigger market downstream Northern Border.

Bradley Olsen - Eagle Global Advisors

Right.

Steve Becker

Both of those contracts were negotiated rates over the ten year periods. So with the negotiated rates in essence replacing the rates that will be paid annually by shippers with Canadian gas. So what we’ve actually accomplished is actually getting more certainty of the contract for the forward ten years and have a perhaps a higher likelihood since perhaps the Bison shippers are using the volume Northern Border has to attract a smaller volume of Canadian gas. And because of that we have the opportunity to either ship more volumes and as we ship more volumes we have a likely better chance to get a better negotiated range. So its all about in that way it makes us a touch we are a little more stable from the Bison contracts and it’s a little less capacity for Western Canadian ship and that may mean that we can be better position to attract that.

Bradley Olsen - Eagle Global Advisors

Would you mind telling that thing I guess on what the maybe in the difference in the average tariff for the gas coming out of the Patter river versus the volumes that you currently have which are all Canadian volumes?

Steve Becker

I can’t actually comment on that most of the contracts are confidential with the shippers so I can’t disclose that information.

Bradley Olsen - Eagle Global Advisors

Okay. And I guess given the fact that Bison is going to be taking up a portion of Northern border capacity you guys see maybe are you getting close to an inflection point you refer to your strength and negotiating position as Bison comes online. Do you guys think that you’ll be able to people to agree to longer terms than just that kind of year over year roll over’s now that the Northern Border capacity has become more scarce?

Steve Becker

Well I think when you actually come back to the contracting practices is that most of the shippers have a number of choices because there are six major pipelines that leave western Canada. And because they have capacity they would like to show that one year in advance but they don’t agree we need to get new pipeline infrastructure underpinned by ten year contracts. Because their commitments they would have often a number of the shippers are marketing arms of very large producers. Within that they don’t like to commit their capital that far forward. And so they are very comfortable with the one year type of renewal. And we then end up looking at how Northern Border and Great Lakes are positioned relatively to those six major long haul pipelines South of Western Canada and that’s why we feel that positioning is fairly strong and that we will get normal annual renewal but we won’t likely get a ten year contract from Alberta (inaudible).

Bradley Olsen - Eagle Global Advisors

Then just one more question. You referenced in your press release that the increase in the distribution was related to the increased confidence and how much volumes you have contracted on Northern Border and Great Lakes. Could you comment in as much details as you feel comfortable with just about how much contracting took place in this past quarter and whether just from your negotiations you have any feel for I understand there is a certain amount of people just kind of go to the annual roll over by default. But have you gotten any traction in terms of either long term contracts on either pipeline?

Steve Becker

I think when we if I can that’s several questions there and I’ll try and answer the best I can. The distribution increase is based on a longer term view of the assets within the partnership as well as its shorter term cash generation. And so looking forward we sort of have the events of Bison time in which gives us diversified supply ion one of our pipelines. But perhaps even more important is the fact that we have seen much better visibility in the rate of growth in the rate of gas supplies in Canada. Particularly the Canadian shell price. As I mentioned earlier the two major plays have a similar geology and scale to the Haynesville play they are just a little bit slower in terms of how they’ve been developing. And so I think when a lot of industry people leave they often talk about the five major shells and how they are in the US. Well we actually view the seven and there is the two big ones in Canada that are sometimes not included in people’s perspectives. So when you actually look at those plays and you look at the piece of development and the closeness to what’s what now tying in of gas supplies it gives us the confidence that we see more stable fundamentals underpinning these pipelines over the longer term. And therefore result that the distribution was very sustainable over the longer term. And that was one of a number of factors that led us to distribute the distribution. So that we are now at $3 per unit on an annualized basis.

Bradley Olsen - Eagle Global Advisors

So you mentioned Bison as factor and I guess would you say that this distribution increase includes any of the incremental cash flows that you expect receive from Bison or is there still some upper ones maybe they come when Bison comes online?

Steve Becker

I think you kind of connect the distribution to the absolute increase. And I think what I tried to answer in my previous question maybe be a little bit more specific is we looked at the distribution increase based n the fundamentals of the assets over a long time. And the Bison increase was one factor but an equally important perhaps even stronger factor was the growth of gas supply in Western Canada. That can possibly increasing but at least leveling off the levels of gas available for export the balancing markets.

Bradley Olsen - Eagle Global Advisors

Great. Thanks a lot.

Operator

Thank you. If there are no further questions registered at this time I’d like to turn the meeting over to Mr. Hook.

Hook

I’d like to thank all of you for taking the time today to listen in to our calls. We appreciate your interest in TC Pipeline. We look forward to talking to you soon. Bye for now.

Operator

Thank you. The conference has now ended. Please disconnect your lines. Thank you for your participation.

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