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Executives

Lee Evans – Manager, IR

Steve Becker – President

Rob Jacobucci – Principal Financial Officer

Analysts

Stephen Maresca – Morgan Stanley

Michael Cerasoli – Goldman Sachs

Rob Chisholm – Center Coast Capital

Avi Feinberg – Morningstar

Christine Chow – Barclays Capital

David Lamonte – Canyon

TC Pipelines LP (TCLP) Q1 2011 Earnings Call April 27, 2011 12:00 PM ET

Operator

Good day, ladies and gentlemen. Welcome to the TC Pipelines LP 2011 First Quarter Results and GTN and Bison Acquisition Conference Call.

I would now like to turn the meeting over to Mr. Lee Evans, Manager, Investor Relations. Please go ahead, Mr. Evans.

Lee Evans

Thank you, Michelle, and good day. I’d like to take this opportunity to welcome everyone. We are pleased to provide the investment community, the media and interested parties with a chance to discuss TC PipeLines first quarter 2011 financial results and use the same – also the same opportunity to provide some detail around the partnership’s recently announced acquisition of an interested both GTN and Bison.

With me today is our President, Steve Becker; and our Principal Financial Officer, Rob Jacobucci. Please note that a slide presentation will accompany the remarks. A copy of the presentation is available on our website at www.tcpipelineslp.com, where it can be found in the Investor center under the heading Events and – that’s Events and Presentations.

Before we begin, I’d like to remind you that remarks today will include forward-looking statements that subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reports filed by TC Pipelines LP with the U.S. Securities and Exchange Commission, including the partnership’s annual report on Form 10-K for the year ended December 31, 2010, and the partnership’s quarterly report on Form 10-Q for the quarter ended March 31, 2011.

Steve will begin today with a review of TC Pipelines’ first quarter 2011 financial results. Following that, he will provide an update on the activities concerning the partnership during the quarter and its sponsor TransCanada Corporation. Rob will then proceed to review in detail our financial results for the quarter.

After the conclusion of the normally scheduled quarterly conference call remarks, Steve will then present additional information regarding GTN and Bison along with the anticipated impacts these assets will have on the partnership.

Following Steve’s prepared remarks on the acquisition announcement, we’ll be pleased to take your questions and will ask the conference call operator to coordinate. During the question-and-answer period, we’ll take questions from the investment community first, followed by the media.

With that, I’d now like to turn the call over to Steve.

Steve Becker

Thanks, Lee. Good day, everyone, and thank you for joining us. I’m excited to announce the acquisition of ownership interest in GTN and Bison for TC Pipelines. My presentation today will cover the first quarter 2011 financial highlights and then, I will discuss the acquisition announcement.

As outlined in yesterday’s news release and on slide number five in the package that we had outlined to you TC Pipelines reported a 31% or $12 million increase in its first quarter partnership cash flows of $48 million.

During the quarter, we paid out $35 million in cash distributions to our unitholders. The partnership’s cash flows generated in the quarter more than covered our cash distributions and provides us with some added flexibility as we put our financing in place for our recently announced acquisition.

Net income increased 26% in the first quarter 2011 to $42 million, compared to first quarter 2010 net income of $34 million. The first quarter 2011 net income is equivalent to $0.90 per common unit.

Earlier in the month, we announced a $0.75 quarterly cash distribution for the first quarter. This will be the partnership’s 48th consecutive quarterly distribution paid to our unitholders. Later in the call Rob will discuss in more detail our financial results for the quarter.

I’d now like to highlight a few partnership activities though that occurred during the quarter. On January 14, 2011 TransCanada announced that it had placed the Bison Pipeline into service. Bison is now flowing gas into our Northern Border pipeline.

As I’ve mentioned before, Bison shippers have contracted on Northern Border for 407 million cubic feet per day of capacity from Port of Morgan, Montana on the Canada-U.S. border to Ventura, Iowa to ensure they have an ability to bring the gas into Midwest markets.

During the first quarter, the average volumes on Bison were approximately 375 million cubic feet per day. With the Bison Pipeline now in service Northern Border has diversified its gas supply sources which support the long-term competitiveness of this key investment.

The addition of U.S. Rockies gas now moving on Northern Border via the Bison Pipeline means that the traditional gas supply out of western Canada has now been displaced, which creates the potential for Great Lakes to attract some of these displaced volumes.

I also mentioned in our last quarterly call, the Princeton Lateral project relating to Northern Border, work on this project continues to move forward, pre-construction work has progressing and we are in the midst to finalizing engineering details and the implementation plan.

The Lateral will supply natural gas to a power generation facility which is expected to be in service in the fourth quarter of 2011 and this demonstrates the strong demand seen for Northern Border services.

In terms of specific volume flow and contracting statuses of our two long-haul pipeline assets. Once again Northern Border had another excellent quarter. Average scheduled volumes for the first quarter of 2011 were approximately 2.8 Bcf per day, compared to 2.2 Bcf per day for the same period last year.

Strong volumes in the quarter are attributed to the REX Pipeline now serving markets further east, as well as favorable net-backs that continue to be seen in Northern Border’s market. There’s been no material change to Northern Border’s contracting status, which continues to be substantially fully contracted through the first quarter of 2012. As we progress through the typical re-contracting cycle that occurs in the second quarter, we’ll have more details at our next scheduled conference call.

Turning to Great Lakes, average scheduled volumes increased during the quarter to 2.9 Bcf per day, compared to 2.1 Bcf per day for the same period in 20 10. The rise in volumes was primarily a result of increased utilization of long-term contracts, higher demand for interruptible transportation services, due primarily to colder first quarter weather and increased backhaul volumes.

Looking forward into 2011, Great Lakes has sold out all of its available capacity through October of 2011. Great Lakes was able to contract 314 out of 576000 dekatherms per day of long-haul capacity that expires on October 31, 2011, for another year with its largest shipper TransCanada Pipelines, Ltd. Negotiations continue for the remaining uncontracted capacity.

Both Northern Border and Great Lakes, despite not having long-term contracts continue to move significant volumes year-over-year demonstrating the strong demand for natural gas and the demand for their transportation services, which we expect to continue in the future.

Looking at slide eight for those who are following on the presentation. Looking more closely the projects, the slide is entitled connecting new western Canadian supply. Looking more closely at the projects within TransCanada’s capital program there are number of developments that may have a positive impact on TC Pipelines.

Late last year TransCanada began moving gas from the Montney Shale gas formation in Northeast British Columbia on its newly constructed ground bridge pipeline into the Alberta system. Project has firm transportation contracts that will reach 1.2 billion cubic feet per day by 2014.

TransCanada’s other shale gas pipeline project will connect Horn River gas. Construction has started on the Horn River pipeline project and it’s expected to be operational in the second quarter of 2012. The project has contract commitments that will reach 630 million cubic feet per day by 2014.

Combined with the Montney pipeline these two projects will bring roughly 1.9 billion cubic feet per day of new shale gas volumes into TransCanada’s Alberta system. A portion of this could ultimately be available for delivery out of the province.

In addition to the committed volumes received to date, TransCanada also has expressions of interest from producers for an additional 2.3 billion cubic feet per day of transportation services from these developing shale plays.

The continued interest from natural gas producers to develop shale plays within Western Canada Sedimentary Basin leads us to remain optimistic that volumes produced and exported out of the Basin will stabilize in the near-term and will start to increase overtime as the potential of the Horn River and Montney Shale Plays are developed and brought on stream.

In addition to these two shale gas pipelines, TransCanada continues to advance other pipeline developments in BC and Alberta to tie in unconventional shale gas. These new development requests would help to increase the gas supply entering into the Alberta system, which in turn increases the amount of gas that can be potentially delivered out of the province.

In closing, I’d like to emphasize that with strong fundamentals supporting our existing asset base, the promising long-term outlook for gas with growth in gas supplies from our new shale plays and the sound financial position. I’m confident the partnership is well-positioned to provide stable and growing cash distributions well into the future.

That concludes my prepared remarks regarding our quarter and I’d like to turn over the call to Rob, who will provide a more detailed discussion on our first quarter financial results.

Rob Jacobucci

Thanks, Steve. Good day, all. I know everyone is interested to hear more about our recent acquisition announcement so I’ll keep my comments brief as I review our strong first quarter results. Partnership cash flows increased $11.5 million to $48.3 million in first quarter 2011 compared to $36.8 million for the same period last year.

This was primarily due to the $9.4 million increase in cash contributions from Northern Border and $1.2 million increase from Great Lakes. The partnership paid distributions of $35.4 million in first quarter 2011 which was an increase of $1 million compared to the same period last year. This was due to the $0.02 per common unit increase in the quarterly distribution amount in third quarter 2010.

The partnership's net income increased by $8.6 million to $42.3 million in first quarter 2011 compared to $33.7 million during the same period in 2010, primarily due to higher equity income from Northern Border and Great Lakes. Equity income from Northern Border increased $6 million to $20.6 million in the first quarter 2011 compared to the same period last year.

The increase in equity income was primarily due to increased transmission revenues resulting from strong demand for Northern Border's transportation services. Equity income from Great Lakes increased $1.7 million to $18 million in first quarter 2011 compared to the same period last year.

The increase in equity income was primarily due to depreciation rate reductions from Great Lakes rate proceeding settlement partially offset by decreased transmission revenues. The combination of net income from other pipes which includes results from North Baja and Tuscarora and also general and administration costs for the overall partnership was $3.7 million in first quarter 2011.

This is a slight increase of $900,000 compared to $2.8 million in first quarter 2010. This increase was primarily a result of lower financial charges from Tuscarora due to lower average interest rates and lower average debt outstanding attributable to the financing of a portion of its senior notes back in December 2010.

Moving over to slide 11 for those following on the web liquidity and capital resources. Partnership cash flows continue to provide strong support for our cash distributions to unit holders. The partnership paid cash distributions of $35.4 million while generating cash flows of $48.3 million in first quarter 2011. At March 31st 2011 we had no borrowings outstanding on our revolving credit facility with $250 million available for future borrowings.

The average interest rate on the credit facility was 4.0% for the three months ended March 31st, 2011 which included the impact of interest rate hedging activity. The partnership also expects to renew its senior credit facility which matures on December 12th, 2011. We 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 like the one we announced yesterday.

That concludes my prepared remarks on the first quarter 2011 financial results. I will now turn the call back to Steve to discuss yesterday's acquisition announcement in further detail.

Steve Becker

Thanks, Rob. I would like to focus on – turn your attention to slide 13, acquisition overview and we'll continue from there. On slide 13 we've provided some additional details surrounding yesterday's acquisition announcement. First off, we are acquiring a 25% interest in gas transmission northwest pipeline system, which we refer to as GTN. Secondly, we've also agreed to acquire 25% interest in another asset, the Bison Pipeline.

We're very pleased with this development and look forward to the positive benefits the acquisition will provide our unit holders. The partnership has agreed on a combined purchase price of $605 million which is broke out into two separate agreements for each asset. Individually the purchase price for GTN is $405 million, which reflects 25% or $81 million of GTN debt and another $200 million for Bison.

The transaction is expected to close next month and is subject to certain closing conditions. The partnership intends to initially fund the acquisition through a $400 million bridge loan facility and the remainder with the draw from its $250 million senior revolving credit facility which Rob has mentioned earlier and this is completely undrawn as of March 31st, 2011 and has remained undrawn.

Longer term financing for the transaction is expected to include both debt and equity. We anticipate the long-term financing for this acquisition will continue to maintain the partnership's strong financial position and will position us for additional future growth opportunities.

We expect this acquisition to be positive to our unit holders and expect it to be immediately accretive to cash flows and earnings and this is a clear demonstration of TransCanada's continued strong sponsor support of the partnership.

In terms of acquisition highlights moving on to slide 14, a quick summary of the highlights surrounding the acquisition. GTN and Bison contract profiles are great fit for us. Both pipelines have long term contracts which provide predictable and sustainable cash flows in earnings. Both assets provide additional market and gas supply diversity for the partnership along with future growth opportunities which come in the form of lateral extensions and pipeline expansions through compressor additions.

Acquiring these two assets will have an added benefit of increasing the contracted revenue percentage of our overall portfolio and increase the number of assets that we own or have interest in from four to six which will further help to diversify our revenue and cash flow sources. Also the partnership is well positioned to continue to be an attractive financing option for TransCanada which could lead to even further growth opportunities down the road.

Turning to these specific details surrounding each asset, slide 15 shows the GTN pipeline system. The purchase price of $405 million translates to a 9.4 times multiple on trailing 2010 EBITDA basis of $43 million. Purchase price reflects the competitive impact of the Ruby pipeline which is expected to come on-line in the second half of this year. The pipeline GTN is a 1,353 mile perk regulated pipeline with 12 compressor stations and an average design capacity of $2.9 billion cubic feet per day.

Originally built in 1961 with expansions and extensions in 1993, 1995 and 2002 the pipeline originates near Kingsgate, British Columbia and moves through Idaho, Washington and Oregon where it terminates near New Oregon. Strategically positioned to access Western Canadian and Rocky Mountain gas GTN primarily serves the California and Pacific Northwest markets.

As a key source of gas for the markets GTN it’s underpinned with 1.5 bcf per day of long term contracts that mature between 2015 and 2028. GTN also has a desirable customer and market mix and volumes moved on its system primarily serves California and Nevada markets but roughly 33% of the volumes that the pipeline flow serves Pacific Northwest markets.

On slide 16 you can see the contract profile of GTN's current long term contracts. While some of GTN's capacity is subject to annual renewals more than half of its capacity is contracted under long term contracts. 2011 contracted volumes are higher than future years. The drop in contracts beyond 2011 reflects the turn back of $250 million cubic feet per day of contracts as a result of the in service of the Ruby pipeline which is expected to begin operations later this year.

This turn back in contracts starting in 2012 was considered as the partnership placed a value to purchase its interest in GTN. Despite this drop in contracts starting in 2012 GTN has a large portion of capacity contracted with key customers. GTN's customer mix is another desirable quality. Close to 69% of GTN's long term firm contracts consist of local distribution companies or LDCs. These are customers that are considered stable and secure as they generally need to contract pipeline capacity to ensure they can meet their peak load demands and generally preferred to maintain supply diversity.

Moving on to slide 17, we believe GTN is a competitive pipeline and will remain utilized even as competitive pipelines such as Ruby entered the supply mix at Malin. As I mentioned earlier, GTN’s long-term contracts for half its capacity and these contracts extend beyond the initial 10-year contracts that Ruby has. 10-year contracts are an industry norm for new infrastructure pipeline similar to Bison.

With both pipelines being underpinned by long-term contracts, we anticipate that volume flows will compete on the basis spreads of Alberta versus Opal hub prices. GTN is likely to continue to remain competitive as Alberta pricing is currently lower than prices in the Rockies. This is a strong incentive to producers who are looking for the best net-back for their gas. Local distribution companies also see lower delivered costs for their gas when buying it from western Canada which further highlights GTN's competitive position.

Lastly on this slide, one-third of GTN's volumes serve the Pacific Northwest states of Washington and Oregon through interconnections with northwest pipeline, along with local markets on the pipeline and power generation facilities located close to the pipeline. GTN is likely to be a key supplier of gas to these markets as Ruby competes with Rocky Mountain gas that would be redirected to Malin instead of Pacific Northwest markets.

We anticipate about 450 million cubic feet per day volume close to be displaced as a result of Ruby's in service. We believe that Northern Border and Great Lakes are well positioned to capture these displaced volumes.

I’d like to shift gears moving on to slide 18 and talk a bit more about our other asset, Bison Pipeline. We have agreed to purchase a 25% interest in Bison for a price of 200 million. The Bison Pipeline is a new 303-mile 30-inch diameter pipeline that will ship natural gas from the Powder River Basin in Wyoming to Montana in North Dakota where it interconnects with Northern Border.

Bison is a new pipeline with no past history of earnings. We've provided an estimate of roughly 16 million worth of full year EBITDA to be generated from 25% interest in Bison. This results in roughly a 12.5 times transaction multiple. The Bison pipeline is fully contracted at 407 million cubic feet per day for almost all of its capacity for 10 years.

Bison's contract profile is very desirable to us and fits well into our business model as it provides stable and predictable cash flows for our unit holders. Also enables the partnership to diversify its supply basins with access to a third major source of gas for its (inaudible) connection to the U.S. Rockies production.

Looking at slide 19, Bison could also capture volumes through cost-effective incremental compressor stations on the existing pipeline. The potential for these additional increased volumes in Bison can come from two areas. It has the potential to benefit from future interconnection expansions into the basin that would enable a pipeline to capture additional Rockies gas production.

Secondly, with close to 700 million cubic feet per day of gas supply currently under contract that expires at the end of 2013 in the Powder River Basin area on other pipelines within that region. Bison is well positioned to potentially attract some of these volumes. Not only will increased volumes benefit Bison but Northern Border is poised to gain from any additional volumes over the Rockies as shippers are going to want to ensure their pipeline capacity in northern border to bring the gas to market.

Turning to slide 20, we see our new investment portfolio to grow to six FERC-regulated interstate natural gas pipelines which primarily generate the revenues from fee-based charges. Our assets will be focused on west coast and Midwest markets which are capable of transporting 8.9 Bcf per day and provide a diversified portfolio of supply basin sources.

Our newly acquired assets are also already connected to our existing asset base. GTN is connected at the Oregon-California border with our 100% owned Tuscarora pipeline while Bison is connected to our Northern Border pipeline in north Dakota. This TransCanada is the operator of these assets and/or existing assets, this ensures that we have no integration risk associated with this acquisition.

Finally on my last slide number 21, we've provided a summary of the investment highlights in TC PipeLines. We have a long history of stable and growing distributions which has delivered value for our unit holders and we would expect this acquisition to help grow future cash distributions for our unit holders.

We were supported by a strong sponsor in TransCanada who operates North America's largest natural gas pipe line system and also operates our assets on our behalf. TransCanada has been a strong supporter in the partnership and this transaction endorses that support and commitment and their willingness to grow the partnership.

Looking forward, we see the partnership well positioned for growth and see these newly acquired assets as fundamental building blocks for future growth. That concludes my prepared remarks. We'll now turn the call back to Lee.

Lee Evans

Thanks, Steve. I would now like to open the call to your questions. Michelle, please go ahead.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question is from Stephen Maresca from Morgan Stanley.

Stephen Maresca – Morgan Stanley

My first question is on Bison and Northern Border and appreciate the positive impacts Bison is having. What's your outlook for Rockies gas production and then the impacts to Northern Border over the next 12 months?

Steve Becker

This is Steve Becker speaking. I think when we look at our outlet, Powder River Basin has a fairly flat outlook but I think what's more important from our point of view is that we have contracts for 407 million cubic feet per day. So the individuals who have those contracts will likely be trying to utilize the gas that they have that flow down those contracts and the net result would be the gas would flow on Bison and Northern Border to markets instead of going south to Cheyenne and on other pipelines. And that would be dictated by the commitments that the shippers had once that cost is sunk. It becomes much more economical to follow the contract path on a variable cost basis.

Stephen Maresca – Morgan Stanley

Okay. And then switching to the competitive entities of GTN, you mentioned the lower prices in Alberta then at Opal. So is the thought that gas will flow from Kingsgate down to Malin, and then how would it get over to Opal?

Steve Becker

Well, I think – I guess what we were looking at is that Opal is more a supply source, and Alberta is a supply source. So if you are looking at the interconnection at Malin, the inter connection is where Ruby will end, GTN ends, and they flow into the Tuscarora pipeline that serves primarily northern California and Reno [ph], and pacific gas and electric system that serves the northern California market. And it can actually serve all the way through to the southern California market.

So what we are seeing is, when you are looking at Malin as a market hub, there's two ways of looking at it in terms of if you are a buyer, you would look and say what's my cost after I have already sunk my contract of buying in Alberta compared to buying in Rockies gas at Opal. So different buyers will take the delivered cost and say which is the cheapest and that will be what their decision is.

For producers, they will look and say, now that I've sunk my costs and I have contracts, what's the best route from where I am. So you're comparing an Opal producer and what choices does he have, going on northwest pipe, on Kern River to Las Vegas, going east, or now at – where Ruby is connected to going west, and GTN would be where does it place in the western Canadian choices that producers would have for the whole western Canadian supply.

And in our case, to sort of bring it back to a summary is that the Alberta price at that supply hub has been currently priced lower than Opal. So that makes it more attractive for buyers at Malin. GTN is actually well positioned when you choose to ship Alberta gas in terms of which pipeline you choose and so it's very good for producers. So in that competitive environment within the contracts, we expect that GTN is very, very competitive.

Stephen Maresca – Morgan Stanley

Okay. Appreciate that. One final one. You guys have pretty strong distribution coverage for the quarter. You obviously had this drop-down that was coming. What was the thought on not raising the distribution?

Steve Becker

Well, I think that we expect the acquisition to be accretive to the available cash per unit and the distribution – the distributions declared per unit for the partnership are at the discretion of the board of directors and we'll be discussing that at our future meetings subject to closing – subsequent to the closing of the acquisition.

Stephen Maresca – Morgan Stanley

Okay. Thanks a lot for the color, Rob.

Rob Jacobucci

Thanks, Steve.

Operator

Thank you. (Operator Instructions) Our next question is from Michael Cerasoli from Goldman Sachs.

Michael Cerasoli – Goldman Sachs

Thanks. Good afternoon. In the presentation it says about 50% of GTN is contracted. I'm just curious to know if you could provide some details on how much capacity has actually been rolled over in the last few years and if you could give us some insight as to how the terms were on those renewals and specifically like duration of those contracts and rates?

Rob Jacobucci

I think if you looked at, in trying to answer your question, GTN normally has been running in the 1.8 to 2 Bcf a day range in the past few years. And if you went back to 10 to 12 years ago, it was actually shipping in the 2.9 Bcf a day range because it was fully contracted. What tends to happen as kind of an industry comment in terms of the renewal is when contracts expire after their initial term associated with the new build, generally it sort of starts to fall into this annual contracting cycle.

Then people normally contract November all the way through the following October, or just through the winter or just through the summer. So the pipeline has a history of contract expiries and or contracts relating to those expansions. So as those are rolled of people started to contract on an annual and monthly basis, so even though we have shown on our slide what the contract profile is of those longer term contracts, there's still a capability to sell capacity above that contract level on a monthly and the summer or winter or annual basis and so there's additional short-term volumes that we would be expecting because of the competitiveness of GTN that I just outlined in the question to Steven.

And so within that, I think that that's sort of where we sit with the contract profile, is as they expire they continue onward. The reasons we have contracts that goes to 2023 is those were part of the 1993 expansion and they were 30-year contracts. So that's why they are actually not the standard 10-year in the industry. In the (inaudible) case they were 30-year contracts and that's why those long-term contracts are pretty solid underpinning for this investment.

Michael Cerasoli – Goldman Sachs

Right. That's helpful. And then what was the process? Was this – I guess did TransCanada approach you guys with this proposal? I'm just trying to get at – why not increase your interest in, say, Great Lakes, as opposed to taking on GTN and Bison?

Rob Jacobucci

While, I think for TC PipeLines, TransCanada can decide to offer assets to TC PipeLines and we have the right to accept or reject their offer. We don't have a call on any assets and that decision on which assets to offer to TC PipeLines is TransCanada's choice. And so we're more, when we receive this offer, we did a very thorough assessment and we feel that we made the decision to make this acquisition.

Michael Cerasoli – Goldman Sachs

Okay. And then just finally, what are your thoughts on being able to execute another acquisition later this year, obviously, not in the next month or two I'm thinking really along the terms of 3Q, 4Q?

Rob Jacobucci

I think in the short run we need to kind of get through this transaction. In terms of what would happen in the future, we usually say we're very disciplined and opportunistic. And so a transaction in the future could be either a third-party transaction, and that will depend on the market, or TransCanada could choose to make another asset and offer it for sale and that's TransCanada's choice. And you may have to ask that question of TransCanada at their next call.

Michael Cerasoli – Goldman Sachs

Okay. Thank you.

Operator

Thank you. (Operator Instructions) Our next question is from Rob Chisholm from Center Coast Capital. Please go ahead.

Rob Chisholm – Center Coast Capital

Good morning. Could you all expand upon the bridge financing that you're using for this acquisition? You mentioned that it was a combination of bridge and the revolver.

Rob Jacobucci

Yes. I think when we buy the assets for 605 million, GTN has debt within the asset and so when we look at the cash that we have to finance, it would subtract 81 million off the 605. There's other working capital considerations in small amount of future capital expenditures in Bison. And so the exact amount we will finance would be approximately 520 million in terms of cash.

And so from that we have a $400 million bridge loan and we have the ability to draw on our revolving credit line for that remaining amount, which is actually based on forward items of working capital adjustments and other things that would happen, that closing date and with some subsequent adjustments.

Rob Chisholm – Center Coast Capital

Is the bridge being provided by TransCanada?

Rob Jacobucci

No. With the bridge, it is provided with several lenders and I just – it's two lenders and they are SunTrust and Bank of America.

Rob Chisholm – Center Coast Capital

Okay. Thank you very much.

Rob Jacobucci

Thank you.

Operator

Thank you. (Operator Instructions) Our next question is from Avi Feinberg, Morningstar. Please go ahead.

Avi Feinberg – Morningstar

Hi. Good morning. Just to follow up on the financing question, when you look to place the long-term financing in place for this recent drop-down, do you think about it in terms of an equity or debt percentage that you would target? I just note that the balance sheet looks relatively strong right now. It seems like you could afford to use more debt if you wanted to, but I'm just curious how you think about that.

Rob Jacobucci

We'll be making some decisions on that in the future and a lot of that will depend on market conditions. So there's – I think the answer will depend on what market conditions are in the next few months and we'll make a decision based on that.

Avi Feinberg – Morningstar

Okay. And just a question on ground burch. I understand that the contracts are ramping up. Your provided that profile on the slide which I appreciate. I'm just interested, since that's come on-line, has Northern Border seen any incremental volumes there yet or is that really just, let's contract it, and you don't see the volumes yet?

Rob Jacobucci

The monthly volumes are sort of flowing into the Alberta hub and then from Alberta there's approximately, if you took the Western Canadian supply at 14 Bcf a day, it's been roughly flat, about that level this year. You would then end up taking off about five Bcf a day of demand inside Alberta, which would leave nine Bcf a day to go downstream on to varying pipelines. So at that particular point, shippers could make a choice between Northern Border, GTN, Spector towards Vancouver and Seattle, clients, Great Lakes, through the main line and over the main line.

So there's sort of six major routes that that 9 Bcf a day would compete for. Northern board has been running fairly full, so that allows on it annually contracting to likely be – more likely contracted because of that – it's attractiveness relative to its attraction on the nine Bcf a day that's exiting the province.

Avi Feinberg – Morningstar

Okay.

Rob Jacobucci

So there's not quite a direct connection. You're putting more into a bigger amount, making that nine a large amount. As we get more and more of the shale gas we expect that to grow to a bigger number. And as that keeps growing, then that is helping insure that on our annual contracting, both Northern Border and Great Lakes are more likely to be fully contracted, because there's more supply that is available for them to compete amongst all these different items. And the same would also apply for GTN with our acquisition.

Avi Feinberg – Morningstar

That’s helpful. I appreciate it.

Operator

Thank you.

Steve Becker

Thanks.

Operator

Our next question is from Christine Chow from Barclays Capital. Please go ahead.

Christine Chow – Barclays Capital

Hi everyone.

Steve Becker

Hi, Christine.

Christine Chow – Barclays Capital

I am trying to figure out how much cash the acquisition will contribute to partnership cash flows, so would you be able to provide some color on the maintenance CapEx for both assets?

Steve Becker

Well, at this point we don’t provide forward items. In terms of what would you expect, GTN has been running for a number of years, and would be very normal in terms of what its pipeline expenditures are. And Bison being a brand-new pipeline with no compression, it’s a very small number.

So we don’t really give that type of number out at this time and but as we expect GTN to be very similar to what happened in the past, and Bison should be fairly straightforward.

Christine Chow – Barclays Capital

Okay, great, thanks.

Steve Becker

Is there anything else, Christine?

Christine Chow – Barclays Capital

No, that’s it, thanks.

Steve Becker

Thank you.

Operator

Thank you. (Operator Instructions) Our next question is from David Lamonte from Canyon [ph]. Please go ahead.

David Lamonte – Canyon

Hey, Steve.

Steve Becker

Hello.

David Lamonte – Canyon

One question I had was, I recognize that the board makes the ultimate decision regarding distributions, but I am really curious as to your views. Based on your outlook that you provided with respect to Canadian Production, the relative attractiveness of Northern Border and Great Lakes specifically in terms of the net backs that they can provide producers today, and the fact that you guys do have 1.4 times coverage, how do you think about that, what do you think the level of coverage should be for TCLP at this point in time?

Steve Becker

Well, I think that ultimately, as I’ve said, the actual distribution levels are sort of at the discretion of the board, and they review a variety of factors. And so in trying to calculate a coverage ratio, you end up with what’s the amount that you are paying out, but what’s the whole combination of the cash flows in the fixed assets that we have.

And so that’s done both on a short term and a longer term basis. So, at this particular time, we are pretty focused on just getting to the transaction. As we said, we will be looking at those things in the upcoming months. There are several uncertainties that we believe we have analyzed, but they are still out there and as unless we get a little bit more clarity on a couple of those, that would be – the board may be in a better position to know a couple of the different items.

And so one is we’ve done an awful lot of work forecasting the impact of Ruby, and that still has not actually started so there is some uncertainty there and there is also some uncertainty on some of the tolls of the other pipelines that we compete with. So, in some of those things, I don’t think they were always known to that extent, but I think at this stage that’s just factors that come in.

And so, currently we are pretty focused on getting to the acquisition and closing this and we will get through our longer term financing program that we have outlined and at that stage we will be a little better positioned to discuss with the board what the different distribution opportunities are.

David Lamonte – Canyon

And Steve, how much does the issues currently ongoing with the Canadian mainline system per trap also kind of play into it just in terms of what shipper attitudes may ultimately be?

Steve Becker

Well, I think where it comes in relative to these assets is that, as I was outlining earlier, producers have about six major routes to ship their gas on it. When the toll on one of the major routes is unknown and there have been different negotiations that tends to put a little more uncertainty in the market.

And TransCanada has been in a variety of discussions with that, but at this stage there is no agreement, although that’s up to TransCanada actually to report what their actual status is. Where it impacts it a bit more directly is that Great Lakes is connected to TransCanada so the toll going from Alberta to the Minnesota border is impacted by that Great Lakes – by the TransCanada number.

As well, it ships gas into Eastern Canada on the TransCanada system. So, a little bit of the uncertainty around Great Lakes and contract renewal may have a bit of an impact that way. Relative back to the distribution question, that’s just one of the factors of uncertainty. And I think we always deal with uncertainty, but at this particular stage in terms of the distribution, it was chosen not to make a distribution increase at the time of actually announcing the acquisition and we review in that our normal course over the summer.

David Lamonte – Canyon

So is it fair to say, based on what your, I guess, the comments you are making here, right now, based on – there’s a lot of moving parts, and it’s really hard to determine what your long-term run rate cash flow is at TCLP, and you need a little more time to kind of see how some of these issues kind of shake out?

Steve Becker

I think it’s fair to say that, it’s also fair to just say in the board, of course, in making this there is a decision not to make a distribution increase on the exact day of the acquisition and that would be just a subsequent decision.

David Lamonte – Canyon

Okay. Thanks, Steve.

Steve Becker

Thank you.

Operator

Thank you. (Operator Instructions) There are no further questions registered at this time. I would like to turn the meeting back over to Mr. Evans.

Lee Evans

Thank you. Thanks, everyone for participating today. We appreciate your interest in TC PipeLines LP and look forward to talking to you soon. Bye for now.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.

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