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Executives

Lee Evans – Manager, IR

Steven Becker – President

Robert Jacobucci – Principal Financial Officer and Controller

Analysts

Michael Cerasoli – Goldman Sachs

Gabe Moreen – Bank of America

Robert Chisholm – Center Coast Capital

Avi Feinberg – Morningstar

TC Pipelines, LP (TCLP) Q2 2011 Earnings Call July 27, 2011 12:00 PM ET

Operator

All participants please standby. Your conference is ready to begin. Good day, ladies and gentlemen. Welcome to the TC Pipelines, LP 2011 Second Quarter Results 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, Operator and good day every one. I’d like to welcome you to TC Pipelines Second quarter 2011 conference call. I am joined today by our President Steve Becker, our Principal Financial Officer, Rob Jacobucci and the partnerships newly appointed Vice President and General Manager Stuart Kampel.

We are pleased to provide you with an opportunity to discuss our second quarter results and other general developments regarding the partnership. Please note that a slide presentation will accompany a bit of remarks today. A copy of the presentation is available on our website at www.tcpipelineslp.com, where it can be found under the Investor center under the heading, Events and Presentations.

Before we begin, I’d 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 our assumptions made by information currently available to us. These statements reflect our current views with respect to future events and are subject to various risks, uncertainties and assumptions as discussed in detail in our 2010 10-K, as well as our subsequent filing with the Securities of Exchange Commission.

If one of more if these risks or uncertainties materialize or if the underlying assumption proven current, actual results may vary materially from those described in the forward looking statements. Steve will begin today with a review of TC Pipeline second 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. Following the prepared remarks, I will ask the conference coordinator to coordinate your questions.

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

Steven Becker

Thanks, Lee. Good day everyone and thank you for joining us. Before I begin my prepared remarks, I’d like to introduce Stuart Campbell, Stuart was recently appointed Vice President and General Manager of partnerships General Partner. Prior to this appointment, Stuart was serving as an officer of our general partner and was also responsible for TransCanada’s business developments efforts in Mexico.

Stuart will have accountability for all aspects of the partnership reporting to me to lead business development efforts as we look to grow the partnership. This new dedicated roll reflects the increased size of the partnership and its growing day-to-day management needs.

I’d like to begin today starting on slide number four. For those of you on the call that are new to TC Pipelines LP we have interest in six pipeline assets capable of moving 8.9 billion cubic feet per day of natural gas. We’re supported by a strong industry sponsor in TransCanada Corporation, our general partner.

They also operate North America’s largest natural gas pipeline network something we consider is one our key competitive advantages. They also have a 33% ownership in the partnership and operate our assets on our behalf as part of their overall pipeline network.

TC Pipelines as a strong balance sheet and ample amount of liquidity in our recent financings in the capital markets over the past quarter are a prime example of this strength. Finally, when taking our recent increase in our quarterly distribution into account, the partnerships current yield equates to 6.5% and is considered an attractive yield for partnership with a low-risk business model, but as a track record of stable and growing cash distributions.

As outlined in this morning’s news release and on slide number five, TC Pipelines reported a strong second quarter results following the acquisition of interest in GTN and Bison. Partnership cash flows increased $1.5 million to $48 million. During the quarter, we paid out $35 million in cash distributions to our unitholders and given our generated cash flows provided ample amount of coverage to ensure payout to our unitholders.

Net income increased 30% in the quarter 2011 to $36 million compared to second quarter of 2010 net income of $28 million. The second quarter 2011 net income is equivalent to $0.69 per common unit. Last week, we announced a $0.77 quarterly cash distribution for the second quarter. This is the partnership’s 49th consecutive quarterly distribution paid to unitholders and marks the 12th consecutive year that the partnership has increased distribution to its unitholders.

As strong track record that demonstrates our stable and growing cash distributions. The second quarter distribution is a 3% increase over the first quarter of 2011 distribution and the 6% increase over the same period last year. Increase in distribution comes from the partnership strong portfolio of assets that is now increased to fixed assets with the recent addition of interest in GTN and Bison Pipelines with a larger percentage of revenues derived from long-term contracts.

Later in the call, Rob will discuss in more detail of our financial results for the quarter. I’d now like to highlight a few of the partnership activities that occurred during the quarter. These are shown on slide six. In terms of specific activities during the quarter, we are pleased to be close on the acquisition of interest in GTN and Bison on May 3, 2011 which has enabled the partnership to record nearly two months’ worth of earnings for the quarter.

The second quarter was also a very busy period for the partnership in terms of financing activities and our results reflect the successful execution of these financing activities primarily in support of our latest acquisition.

The end result of our financing activities means that we are well positioned with the strong balance sheet and ample amount of liquidity for future growth opportunities. In connection with the acquisition the partnership raised $331 million in an equity offering in which we issued an additional 7.3 million units.

The issuance has also enabled us to improve the trading liquidity of our units by increasing the partnerships public flow by 25%. The partnership also issued 350 million in its first public debt offering after receiving an investment grade credit rating from both S&P and Moody’s. Our BBB stable and the BAA2 stable ratings reinforces the quality of the partnerships assets and cash flows.

The decision to raise money from the public debt market reflects the partnerships increased size as a publicly traded partnership will better position us for future opportunities given the size and depth of the public markets.

The proceeds raised from the public debt offering were used to repay the interim bridge loan and draw on the partnerships credit revolver. The remaining funds were used to repay 175 million of the 475 million term loan leaving 300 million outstanding that is due in December 2011.

Finally on the financing front, we’ve recently emended and increased our revolving credit facility from 250 million to 500 million. The term on the credit facility has been extended to July 2016. The increased size of our revolver will insure that we have sufficient coverage for remaining term loan that comes due at the end of the year. It will also provide us increase financial flexibility when pursuing organic growth and acquisition opportunities in the future and again it’s reflective of the increased size and scope of the partnership.

Turning now to slide seven to recap of the acquisition highlights of the 25% interest in each of GTN and Bison, both assets have contract profile that are great fit for us. Both pipelines have long term contracts which will provide predictable and sustainable cash flows and earnings.

These new assets also provide additional market and gas supply diversity for the partnership along with future growth opportunities, which could come in the form of lateral extension and pipeline expansions through compressor editions.

The acquisition has also increased the partnerships overall investment portfolio to six FERC regulated industries natural gas pipelines, which primarily generate all other revenues from fee based charges.

Combined our assets are capable of moving up to 8.9 bcf per day of natural gas and supply approximately 8% of the United States daily gas volumes. Our assets are well interconnected to the key markets that they serve and are considered critical infrastructure for the North American energy needs.

In addition, the partnership remains an attractive financing option for TransCanada as they complete their remaining 11 billion capital program, now that the long-term financing for the acquisition is being completed and leaves us in great shape for future growth opportunities.

To give you a sense of the diversification from adding GTN and Bison, we’ve shown on slide 8, the transformation of the estimated partnerships cash flow sources now that we’ve added these two new investments in to our portfolio. The pie chart shows the percentage break out for the partnerships 2011 estimated cash flows by asset compared to the cash flows generated by assets in 2010. In 2010, we generated 26% of our cash flows from Tuscarora and North Baja, our two long term contracted assets.

One of the key benefits resulting from the acquisition of interest in GTN and Bison was their long term contract structure which means that close to 40% of the partnerships cash flows are expected to be generated from assets that have long term contracts. The increase in overall contracted portfolio revenue should enable more predictability and diversification to the partnerships cash flow and earnings. In terms of specific volume flow and re-contracting statuses of our two other long haul pipeline assets are now shown on slide 9.

Once again Northern Border continues to perform very well. Average schedule volumes for the second quarter of 2011 were approximately 2.5 bcf per day, a slight increase in the same levels seen in the same period last year. Northern Border continues to experience strong demand for its transportation services, despite overall weak basis spreads across North America.

As we progress through the annual re–contracting season, Northern Border was able to substantially contract almost all of its capacity through October 2012. In terms of Great Lakes, average schedule volumes increased during the quarter to 2.2 bcf per day compared to 2.1 bcf per day for the same period in 2010. The rise in volumes was primarily a result of increased utilization of long-term contracts, higher demand for interruptible transportation services and increased backhaul volumes. Looking forward, Great Lakes remain sold out through October of this year.

This remains unchanged from the contracting status we provided in the first quarter of this year. Total uncertainty for 2012 and beyond on TransCanada’s competing pipeline, the main line, as mentioned, many of the Great Lake shippers are waiting for clear visibility on what the totals will look like going into 2011-2012 winter season prior to making their firm commitments on Great Lakes.

TransCanada has been requested by the National Energy Board of Canada to file its 2012, 2013 total application by September 1, 2011. This event catalyst should help enable Great Lakes to move forward with contracting its available capacity later in the second half of this year, once there is more visibility on future gas transportation rates out of the Western Canada sedimentary basin.

In terms of our other new pipeline assets that receive supply from the Western Canada sedimentary basin, GTN experience lower transportation volumes during the quarter versus the same period last year, as a result of strong hydro availability that occurred from the large winter snowpack experienced in the west. Increased hydro availability resulted in a lower demand for natural gas for using power generation. For the quarter, GTN’s average scheduled volumes were 1.8 bcf a day as compared to 2 bcf a day in the second quarter 2010.

Despite this drop in scheduled volumes in GTN, and unlike Northern Border and Great Lakes, most of GTN’s volume flows are under firm contracts. So variability in flows have substantially less impact on GTN’s financial. While we expect a decrease in volumes once Ruby pipeline is operational, the impact to GTN’s revenue is expected to be minimal due to longer term contracts. For GTN’s uncontracted capacity, GTN is favorably positioned due to relative pricing advantage with Western Canada Sedimentary Basin versus the Rocky Mountain Basin gas.

Moving on to slide 10, TransCanada continues to progress its efforts to tie in new gas supply in the Western Canada Sedimentary Basin. As we continue to bring on new gas supplies, primarily from shale development, this increased gas may have a positive effect on TC Pipelines. Construction started in March 2011 on the Horn River pipeline project and is expected to be operational in the second quarter of 2012.

The Horn River and ground bridge pipelines combined with other unconventional gas developments will bring roughly 2.9 billion cubic feet per day of contractual volume commitments into TransCanada’s Alberta System by 2014, a portion of these volumes could ultimately be available for delivery out of the province.

Western Canada Sedimentary Basin production volumes for the second quarter of 2011 were essentially flat versus the second quarter in 2010. Looking forward, we forecast that for the remainder of the 2011 volumes should be at the same production level as last year, which is indicating that the production decline has flattened out and is expected to rise over time with the increase of the shale volumes, primarily from the Montney and Horn River shale plays as they are developed and brought on stream.

Further request to connect the significant amount of additional volumes into TransCanada’s Alberta System in the Northwest portion of the WCSB have also been received. These new development requests would help increase the gas supply entering into the Alberta system, which in turn increases the amount of gas that can be potentially delivered over the problems on our three long haul pipelines. Northern Border, Great Lakes and GTN continue to move significant volumes year-over-year demonstrating the strong demand for natural gas and the demand for the transportation services which we expect to continue in the future given the expected rise in gas production for the basin.

In turns of other business developments shown on slide 11, the FERC issued an order on May 24, 2011 initiating an investigation pursuant to section 5 of Natural Gas Act to determine wither Tuscarora’s existing rates for its services are unjust and unreasonable. The FERC initiated this proceeding following a complaint filed by the public utilities commission of Nevada and Tuscarora’s largest shipper and the energy.

Tuscarora plans to submit a cost and revenue study on August 8, 2011, as required by the order in a procedural schedule calls for discovery and testimony to be complete by the end of the year with a hearing before the FERC scheduled in January 2012 under the accelerated time table schedule. We expect to receive an initial decision on this proceeding by April 2012. At this point, we cannot speculate on the FERC’s determination.

In terms of organic growth, the Princeton lateral project relating to Northern Boarder continues with a construction team now being mobilized after a notice to proceed was received from the FERC earlier this month. 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 as demonstration in the demand pull type of service that Northern Border can provide.

Finally on July 20, 2011, a failure occurred on the Bison Pipeline system in Wyoming, resulting in the release of natural gas. The natural gas did not ignite and there were no injuries or third party property damage. As we operated the pipeline, TransCanada and others are working to determine the cause of the event. Early indications are that the exterior of the pipeline suffered mechanical damage, but the source and the timing of the damage is unknown.

TransCanada is working with the pipeline and hazardous material safety administration on a plan to repair, inspect and restart the pipeline after determination is made that the pipeline can be operated safely. Repairs to the pipeline are underway and a restart plan has been submitted to the pipeline and hazardous material safety administration. At this time, we do not expect this incident to have a material financial impact on the partnership.

Despite this shutdown, volume flows on the Northern Border normally received from Bison will replace by volumes coming out of Western Canada, consequently there is no impact in Northern Border.

Closing, I’d like to emphasize that with strong fundamental supporting our existing asset base, a promising long-term outlook for gas with growth in gas suppliers for New Shale plays and an increase size for investment portfolio is backed 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. I’d now like to turn the call over to Rob, who will provide a more detailed discussion on our second quarter financial results.

Robert Jacobucci

Thanks, Steve and good day, all. My remarks follow the presentation materials starting on slide 13. Partnership cash flows increased $1.5 million to $47.7 million in the second quarter of 2011 compared to $46.2 million in the same period of 2010. This increase was primarily due to increases in cash distributions from Northern Border of $5 million and Great Lakes of $3.4 million, partially offset by higher cost at the partnership level of $5million relating to the acquisition of 25% interest in GTN and Bison, and higher financial charges.

The partnership paid distributions of $35.4 million in the second quarter of 2011, an increase of $1 million compared to the same period in 2010, due to an increase in the quarterly distribution of $0.02 per common unit, beginning in the third quarter of 2010.

Turning now to slide 14, net income increased $8.4 million to $36.1 million in the second quarter of 2011 compared to $27.7 million in the same period in 2010. This increase was primarily due to higher equity income from Great Lakes and Northern Border and earnings from our 25% interest in GT and Bison, which we acquired in May 2011.

These increases were partially offset by higher partnership costs related to the acquisitions. Equity income from Great Lakes was $17 million in the second quarter of 2011, an increase of $3.9 million compared to $13.1 million for the second quarter of 2010.

This increase was primarily due to the accumulative impact of a Michigan tax law change, eliminating Michigan business tax at the partnership level. As well the impact to earnings from depreciation rate reductions, arising from the Section 5 Rate Case settlement in May 2010.

Equity income from Northern Border was $16.2 million in the second quarter of 2011, an increase of $4 million compared to 12.2 million for the same period in 2010. This increase was primarily due to increase demand for transportation services in the second quarter of 2011. Cost at the partnership level were $11.4 million in the second quarter of 2011, an increase of $4.8 million compared to $6.6 million for the second quarter of 2010. This increase was primarily due to cost incurred relating to the acquisition of interests in GTN and Bison, along with higher financial charges in 2011 resulting from higher average debt outstanding.

I’d now like to discuss our liquidity and capital resources shown on slide 15. At June 30, 2011 there was $14 million outstanding on the $250 million revolver portion of the partnerships senior credit facility and $300 million outstanding under the term loan portion of the senior credit facility. The average interest rate on the senior credit facility was 3.5% for the three months ended June 30, 2011, which included the impact of the interest rate hedging activity.

On June 17, 2011, the partnership closed a $350 million public offering of ten year senior unsecured notes with an interest rate of 4.65%. Proceeds we used to repay funds borrowed under the partnerships bridge loan facility and to partially repay borrowings under our existing senior credit facility.

The senior notes matured June 15, 2021. On July 13, 2011, the partnership amended its senior credit facility, increasing the revolving credit facility to $500 million with a LIBOR based interest rate for some margin, and extended the maturity date of the senior revolving credit facility to July 2016. The partnerships remaining $300 million senior term loan matures in December 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 distribution to unit holders and positioning for further growth opportunities.

That’s concludes my prepared remarks. And I’ll now turn the call back to Lee.

Lee Evans

Thanks, Rob. I’d now like to open the call to your questions. Operator, please go ahead.

Question-and-Answer Session

Operator

Thank you. Questions will now be taken from the telephone lines. (Operator Instructions) The first question is from Michael Cerasoli with Goldman Sachs. Please go ahead.

Michael Cerasoli – Goldman Sachs

Thanks, good afternoon. You indicated contractual support helps safeguard GTN against Ruby. But – maybe you can talk a little bit more about the long-term outlook given the impact of Ruby, specifically on GTN, but also for that matter on Northern Border?

Steven Becker

This is Steve Becker, Michael. I think in terms of the contractual support that we have is that the GTN System is a very attractive market for Western Canadian gas. Western Canadian producers have a choice of pipelines. They can go down and the California market provides very attracts netbacks to them. The pipeline itself has shipped approximately 2 bcf a day over the last seven or eight years. And we have contracts for close to three quarters of that volume in place.

So I think that as Ruby comes in, the question then is how much of that additional amount is actually shift and that becomes a bit more gas on gas competition between Rockies producers and Western Canadian producers.

It also becomes a choice for the downstream suppliers to choose, which basin they choose to buy from. And when get through all the economics, we feel that there is some volume differences for GTN going forward, but that, there is also scenarios where that can be fairly minimal to GTN. And I think at this stage, as Ruby starts that time will just have to tell how that evolves.

There is a certain amount of seasonality involved in this as illustrated in the second quarter, where there’s a large snow pack, so there is a lot of hydro and that meant that the flows are down.

So it has to be judged over a longer timeframe and adjust season by season and that’ll be what we see. I think that when we don’t have contracts on pipelines like Northern Border that are just annual contracts, that becomes more, we have to look at the fundamentals supporting the projects.

And Northern Border has now Bison Gas, where there are long-term contracts and it has strong strengths from its positioning for producers of where would they like to ship their gas as they develop it in Western Canada, and Northern borders had a pretty strong track record over the number of years that it’s been in operation.

So I think from the partnerships point of view, we think that GTN is a very solid asset. It has some issues around Ruby, but there’s still a very core strong asset that’s involved and that Northern Border is one of the stronger pipe lines out of Western Canada, so that the partnership has two pretty strong assets. In that regard, Great Lakes is also very well positioned overall. Hopefully that answers your question Michael.

Michael Cerasoli – Goldman Sachs

Yeah, great. And then separately just on the potential for more asset drops and just curious to know if the successful note offering that you guys executed, that get you more interested in increasing the pace of the size et cetera or you kind of comfortable with your current strategy?

Steven Becker

Well. I think in trying to answer that on behalf of TC Pipelines, we have the opportunity that if TransCanada chooses to offer us an asset, we have the choice of deciding whether we would like to buy it or not. We actually don’t choose the choice of whether they decide to sell something to the partnership. That decision is made at TransCanada. So the – speed of the pace as is more dictated as the partnership is one of the financing options that TransCanada has and perhaps they could answer that a little bit more specifically on their call.

We just have the– we now have a lots of flexibility to be capable of buying more assets with our current financing position. As well, we are also trying to look at other third-party acquisitions as the time goes on.

Michael Cerasoli – Goldman Sachs

Okay. I guess what I was asking was, if they came to you with a larger opportunity, would you feel comfortable going after it, given the successful no placement?

Steven Becker

Yes. I think we have a fair modern flexibility right now to take on a potentially larger deal and that would certainly depend on the nature of the asset and the circumstances. But that’s – that’s directionally correct. Yes.

Michael Cerasoli – Goldman Sachs

Okay. Thank you for your time.

Steven Becker

Thank you.

Operator

Thank you. And the next question is from Gabe Moreen with Bank of America. Please go ahead.

Gabe Moreen – Bank of America

Hi everyone. A couple of questions I guess on Tuscarora I know you talked about timeline for the rate case there, any thoughts or just color on your posture as I would pertain to possible settlement or settlement discussions?

Steven Becker

We’ve been in discussion in the energy for most of the past six or seven months prior to the complaint being registered with FERC and we are still in the middle of ongoing discussions right now and as we go through the process that tends to provide more information as we do this cost of revenue study. So we’re hopeful that we could reach a settlement, but we’ll have to see how that proceeds through the different deadlines that are now set out in the section 5 timetable.

So that’s always something that I think the operator TransCanada is attempting to do in terms of on behalf of the partnership and we’ll have to just see where that sort of falls out. I think that it’s very difficult to predict when settlements are on a smaller asset with just one customer it gets into very specific issues within that specific pipeline.

Gabe Moreen – Bank of America

Okay, thanks. Then I just had a housekeeping question on northern border pipeline, it looks like there is a pretty significant maintenance CapEx tick up for the quarter and if Rob touch on that I just missed it. But just wondering what the driver was there?

Steven Becker

Again, this is Rob. Northern border as you can see those volumes have ramped up significantly. However, as a result they’re having to spend some dollars on their compressors just given how hard they’re running them. So that would be typical, if they’re going to continue operate at the volumes that they have been doing?

Lee Evans

So I think if I could maybe answer that Dave is that, within TransCanada, they have a pre-programmed aspect to look at certain things, such as a compressors. And so, we would view this as a more onetime type of maintenance, where there is some turbine blades rotated out on a natural form of maintenance. And that this is not sort of repeatable over the next few years, but would be quite some time until there is sort of a natural need to do that on a pre-programmed aspect. So it’s higher this quarter, but it’s not a longer term run rate of higher maintenance that’s involved.

Gabe Moreen – Bank of America

Okay, great. That’s good. And then I guess also just on the Great Lakes contracting timeline. You know, is there any sort of I guess deadline that your customers feel they need to sign-up for FT capacity before the winter season or I’ve some of them said that you’ll be willing to go, IT depending on where this mainline settlement takes out?

Steven Becker

There is no specific deadline that’s involved, but in the normal practice, the shippers normally would be contracting with suppliers and/or with downstream markets. And right now what their questions will be is that Great Lakes receives a substantial amount of its gas from TransCanada.

And so when they see the information that’s in the filing that’s expected on September 1st, it gives them that much more information, they then have to decide, what will actually be approved out of that particular filling, but it gives them a closer boundary on what the expectations of the rates are, as well if the Ruby pipeline actually starts operating in the next little while that’ll have one more month of history relating back to the previous answer our question on how much gas is filling down GTN as a result of Ruby if there is a little bit less gas going down GTN that means the gas is – in Alberta steel being produced and it has to go somewhere and there is a chance it could then go down great Lakes.

And so that one more month of actual information would help some of the shippers make their decision. So as they get closer to the year I think they would like to be able to have those facts and then make a decision and that sort of push this off the normal contracting pattern. In that way, we see that the assets are actually fairly well hedged in their own way that we might get higher volumes on GTN a little less on great Lakes or higher on Great Lakes and little less on GTN. So the partnership is sort of well positioned in either direction with the Ruby pipeline.

Just to bring it back is we expect that the information then filled on September 1 within enable a lot more of the contracting activities likely to happen during September. And we’ll have to just see how the market reacts when they see the actual application.

Gabe Moreen – Bank of America

Okay, great thanks Steve very helpful.

Operator

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

Robert Chisholm – Center Coast Capital

Good morning gentlemen.

Steven Becker

Good morning, Rob.

Robert Chisholm – Center Coast Capital

Quick question regarding kind of reconciling the second quarter cash flow of 47.7 million, you indicated that you had a $5 million expense relating to the closing of GTN and Bison, so we’d look at that as a one-time event?

Steven Becker

Yes, the main increase in there is that as a drop down there is an Independent Conflicts Committee of the Board of Directors who engage advisors, so there is an advisory fees as well as a legal and accounting fees. So that would be a one-time event, one-time cost.

Robert Chisholm – Center Coast Capital

Got you. And then relating to GTN and Bison there was no cash distributions collective from those assets due to the quarterly timing of those distributions?

Steven Becker

No, that would be consistent with our expectations. From our other equity investments GTN – Great Lakes and Northern border, they follow the same timing whereby the earnings in one quarter are distributed in the subsequent quarter. So that would be consistent for GTN and Bison.

Robert Chisholm – Center Coast Capital

So this – moral of the story is that second quarter cash generation of $47.7 million is not indicative of what it should be going forward?

Steven Becker

We would expect to start receiving distributions from GTN and Bison and therefore, yeah, that’s right, that number would go up.

Robert Chisholm – Center Coast Capital

And then last question, regarding seasonality on Bison and GTN. I know Bison is pretty much firm, but what sort of seasonality should we expect on the GTN and Bison acquisitions?

Steven Becker

This is Steve Becker, Rob. We don’t expect any seasonality on Bison because it runs pretty well at the contracted volume so that are paid by the actual shippers. So the Bison volumes may go up or down slightly because of the choice of the shippers, but for the partnership will be paid for the 407 million cubic feet a day.

In terms of GTN, I think that the GTN market about a third of the volumes goes to the Pacific Northwest and two-thirds go to California and Tuscarora. And a number of contracts are held by downstream local distribution companies and other downstream shippers.

So our volumes that we report are basically based on their flow patterns and so and they have – when we have about 1.5 bcf a day of contracts, we may not actually flow at that volume rate and it will depend on sort of the weather and the seasonality on that West Coast market. There is about remaining 500 million cubic feet per day, some was contracted and some of those contracts will be coming up for renewal. And so those often get contracted on an annual basis.

So I think our answer to your question then is as we look at the seasonality, the normal West Coast market is often impacted by hydro runs particularly in June that really dramatically change the dramatic volumes and that creates a wide swing from year-to-year. Some of the others are more fair conditioning and the normal types of loads.

I think the challenge from the partnership’s point of view and people look at the volumes is volumes related to what we actually get paid. There is not quite a direct to correlation because it’s more what’s the nature of the shipping by those downstream customers.

And so I think when you’re looking to try and utilize the different volumes that the contract – the base contracts are more critical for us and then we’re just concerned with the 500 million a day, we have traditionally being shipping and how does that play out in terms of annual contracts, particularly looking at it from a Western Canadian shippers point of view of what is different choices are. So, that sort of the variables that impact the forward-looking results for GTN.

Robert Chisholm – Center Coast Capital

All right. Thank you.

Steven Becker

Thanks Rob.

Operator

Thank you (operator instruction). The next question is from Avi Feinberg with Morningstar. Please go ahead.

Avi Feinberg – Morningstar

Good morning everyone.

Steven Becker

Good morning Avi.

Lee Evans

Morning.

Avi Feinberg – Morningstar

Just one quick question for me, wondering just looking forward to third quarter, given some of the recent hot weather, I know that both Great Lakes and Northern Border are fully contracted still at this point. So, I’m just wondering, if there any potential impact there from interruptible flow reserve or should we expect any cash flow impact there.

Steven Becker

Well Avi this Steven Becker. I think in terms of Northern Border, at this particular time, we don’t expect really very much more, because it’s running at such full rate. And Great Lakes, there always the opportunity for some small increments there, but I’d suggest that they’re really not very large when you actually look over a quarter.

So, they’re not in – when you try to sort of estimate what they will be on the overall Great Lakes revenues and in our 46% share, you’re looking in sort of the several millions of dollars, if it was that high. When we actually look over the third quarter that’s where the higher air-conditioning run is also dictated by how full the storage facilities are in Michigan.

And that would where it be a storage refill pace also would help dictate whether there is added volumes at that particular area. So I guess in terms of a run rate or a number it’s difficult to say but it’s probably at the best $4 to $5 million in at the best for the partnership in the best case and more likely sort of lessen that.

Operator

Thank you. (Operator Instructions) We have no further questions registered this time. I’d now like to turn the meeting back over to Mr. Evans.

Lee Evans

Thank you everyone and thank you operator. We appreciate your participation here this afternoon and your interest in TC Pipelines, LP and we look forward to talking to you again 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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Source: TC Pipelines Management Discusses Q2 2011 Results - Earnings Call Transcript
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