E-Filed / Signed Original Via Messenger. February 28, 2017

Transcription

1 Alliance Pipeline Ltd. 800, Avenue SW Calgary, AB, Canada T2P 3H5 Telephone (403) Toll-free Fax (403) E-Filed / Signed Original Via Messenger February 28, 2017 Ms. Sheri Young Secretary of the Board National Energy Board Suite 210, th Avenue SW Calgary, Alberta T2R 0A8 Re: Alliance Pipeline Limited Partnership, by its General Partner, Alliance Pipeline Ltd. Quarterly Surveillance Report For the Year Ending December 31, 2016 Dear Ms. Young In accordance with Condition 12 of National Energy Board Order TG issued on June 24, 2015 in conjunction with the Board s RH Decision, 1 Alliance Pipeline Limited Partnership, by its General Partner, Alliance Pipeline Ltd., hereby files with the Board its Quarterly Surveillance Report and audited consolidated financial statements for the year ending December 31, Please contact the undersigned if you have any questions. Sincerely, Alliance Pipeline Limited Partnership, by its General Partner, Alliance Pipeline Ltd. [Original Signed] Brian Troicuk Director, Regulatory Affairs Alliance Pipeline Ltd. Phone: Fax: brian.troicuk@alliancepipeline.com Attachments cc: Alliance Pipeline Shipper Task Force 1 See NEB RH Reasons for Decision, Chapter 9.2.1, Page 77. Alliance Pipeline Ltd. is the General Partner of the Alliance Pipeline Limited Partnership.

2 Alliance Pipeline Limited Partnership TABLE OF CONTENTS Schedule Description 1 DEFINITIONS 2.1 INCOME SUMMARY 2.2 REVENUE BY SERVICE TYPE 3 AVERAGE RATE BASE 4 CAPACITY DETAIL 5.1 THROUGHPUT DETAIL Zone THROUGHPUT DETAIL Zone THROUGHPUT DETAIL ATP 5.4 THROUGHPUT DETAIL Canada U.S. Border 6.1 DEFERRAL ACCOUNT DETAIL 6.2 CATEGORIES OF COSTS INCLUDED IN THE RECOVERABLE COST VARIANCE (RCV) 6.3 RESERVE ACCOUNT DETAIL 7.1 SUMMARY RELATED COMPANY TRANSACTIONS Receipts 7.2 SUMMARY RELATED COMPANY TRANSACTIONS Payments 7.3 RELATED COMPANY TRANSACTIONS Receipts 7.4 RELATED COMPANY TRANSACTIONS Payments 8 BID DETAILS 9 PIPELINE INTEGRITY ANNUAL SPENDING

3 Schedule 1 Alliance Pipeline Limited Partnership DEFINITION OF TERMS Term ATP Delivery Zone FDS FDSS FFPS FFPSS FRS FRSS ITDS ITFPS ITRS Nameplate Capacity NSO OSO PITS RCV System Capacity TPAL Zone 1 Zone 2 Definition Alliance Trading Pool The portion of the Alliance Pipeline that extends from the ATP to the Canada U.S. border Firm Delivery Service Firm Delivery Seasonal Service Firm Full Path Service Firm Full Path Seasonal Service Firm Receipt Service Firm Receipt Seasonal Service Interruptible Transportation Delivery Service Interruptible Transportation Full Path Service Interruptible Transportation Receipt Service Design Capacity New Service Offerings Operations Safety Officer Priority Interruptible Transportation Service Recoverable Cost Variances Design Capacity plus any restrictions or exceedance. Term Park and Loan The portion of the Alliance Pipeline downstream of Blueberry Hill receipt point to the Canada U.S. border The portion of the Alliance Pipeline upstream of Blueberry Hill receipt point to the Canada U.S. border

4 Schedule 2.1 Alliance Pipeline Limited Partnership INCOME SUMMARY Year Ended December 31, 2016 ($000s) Line No. Particulars (a) NEB Accounts Dec YTD (b) ( c ) Revenues 1 Transportation Revenue ,835 2 Other Revenue (Note 1) ,506 3 Total Revenue 519,341 Operating Expenses 4 Operating & Maintenance ,576 5 Depreciation & Amortization 303/304 77,074 6 Taxes Other than Income ,606 7 Total Operating Expenses 276,256 8 Operating Income 243,085 Less: 9 Financial Charges and Other , Net Income 190, Return on Rate Base (Note 2) 10.5% 12 Return on Equity (Notes 2&3) 26.2% Note 1: Other revenue includes administrative services, non transportation services, and operational linepack sales. Note 2: Returns are determined on an after tax basis. Note 3: Return on Equity is based on a deemed debt/equity ratio of 60/40.

5 Schedule 2.2 Alliance Pipeline Limited Partnership REVENUE BY SERVICE TYPE Year Ended December 31, 2016 ($000s) Line No. Particulars (a) December YTD Actual (b) Notes (c) 1 FRS 108, FDS 50, FFPS 237, ITRS 11,225 5 ITDS 4,879 6 ITFPS 7 Ancillary Services 9, Total Transportation Revenue 421,597 4 Notes: 1 Includes seasonal services and PITS 2 Includes seasonal services and Rich Gas Credits 3 Includes ATP charges and TPAL 4 Does not include deferral accounts and pipeline abandonment surcharges

6 Schedule 3 Alliance Pipeline Limited Partnership AVERAGE RATE BASE As at December 31, 2016 ($000s) Line No. Particulars (a) 2016 Average (b) Plant in Service 1 Net Plant 1,251,660 Working Capital 2 Cash Working Capital 28,526 3 Materials and Supplies 6,356 4 Transmission Line Pack 1,352 5 Prepayments and Deposits 1,935 6 Inventory 12,436 7 Total Working Capital 50,605 8 Net Note Issuance Costs 2,959 9 Project Completion Accounts (2,692) 10 Total Average Rate Base 1,302,532 Note: Average Rate Base from January 1, 2016 to December 31, 2016.

7 Schedule 4 Alliance Pipeline Limited Partnership CAPACITY DETAIL For the Three Months Ended December 31, 2016 GJ Line No. System Nameplate Particulars Capacity capacity Variance Reasons for Variance Notes (a) (b) (c) (d) (e) (f) 1 Zone 1 1,284,571 1,295,745 (11,174) planned/unplanned outages 2 Zone 2 658, ,542 (24,594) planned/unplanned outages 1 3 ATP 1,943,520 1,979,287 (35,768) planned/unplanned outages 4 Canada U.S. Border 1,920,391 1,955,687 (35,297) planned/unplanned outages Note: 1 Capacity upstream of the Blueberry compressor station.

8 Schedule 5.1 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 Zone 1 Gas Flowed Nominations FFPS Nominations FRS Nominations ITRS Line No. Day GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) (e) (f) (g) (h) (I) (j) (k) (l) (m) 1 10/01/2016 1,213,948 28, ,458 19, ,013 9, ,000 1, /02/2016 1,270,738 29, ,737 21, ,860 9, ,000 1, /03/2016 1,263,613 29, ,737 21, ,857 9, ,000 1, /04/2016 1,325,646 31, ,863 21, ,506 9, ,539 3, /05/2016 1,370,690 32, ,615 21, ,202 9, ,913 3, /06/2016 1,248,862 29, ,407 18, ,053 9, ,004 2, /07/2016 1,197,304 28, ,076 18, ,592 9, ,004 2, /08/2016 1,207,033 28, ,221 17, ,570 8, ,004 2, /09/2016 1,171,603 27, ,221 17, ,570 8, ,000 2, /10/2016 1,182,881 27, ,221 17, ,570 8, ,000 2, /11/ ,622 22, ,572 14, ,501 8, ,000 2, /12/2016 4, /13/ /14/ /15/ /16/ /17/ /18/ /19/ , /20/ ,664 21, ,640 16, ,631 8, ,000 1, /21/2016 1,138,942 26, ,353 16, ,898 9, ,000 1, /22/2016 1,207,158 28, ,655 18, ,214 9, ,000 1, /23/2016 1,186,088 27, ,436 19, ,214 9, ,000 1, /24/2016 1,171,925 27, ,436 19, ,900 9, ,000 1, /25/2016 1,161,706 27, ,706 18, ,837 9, ,994 1, /26/2016 1,163,004 27, ,605 18, ,945 9, ,924 1, /27/2016 1,159,521 27, ,604 18, ,285 9, ,395 1, /28/2016 1,158,322 27, ,604 18, ,071 9, ,395 1, /29/2016 1,136,102 26, ,717 18, ,799 9, ,395 1, /30/2016 1,160,698 27, ,404 18, ,799 9, ,847 2, /31/2016 1,198,450 28, ,404 18, ,963 9, ,773 3, October Average 877,119 20, ,270 13, ,318 6, ,042 1, Note: 1 Planned outage due to the Regina bypass project.

9 Schedule 5.1 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 Zone 1 Gas Flowed Nominations FFPS Nominations FRS Nominations ITRS Line No. Day GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) (e) (f) (g) (h) (I) (j) (k) (l) (m) 33 11/01/2016 1,408,983 33, ,732 20, ,562 10, ,023 4, /02/2016 1,373,321 32, ,455 19, ,011 11, ,350 2, /03/2016 1,349,148 31, ,869 19, ,510 11, ,913 2, /04/2016 1,379,471 32, ,668 19, ,120 10, ,396 4, /05/2016 1,385,971 32, ,131 19, ,338 10, ,434 2, /06/2016 1,345,163 31, ,131 19, ,130 11, ,623 2, /07/2016 1,341,307 31, ,131 19, ,105 10, ,564 2, /08/2016 1,424,699 33, ,920 19, ,121 11, ,861 3, /09/2016 1,423,269 33, ,691 19, ,346 12, ,162 3, /10/2016 1,261,073 29, ,692 19, ,585 10, ,081 3, /11/2016 1,334,415 31, ,189 19, ,483 10, ,453 2, /12/2016 1,320,555 31, ,189 19, ,541 10, ,098 2, /13/2016 1,304,355 30, ,189 19, ,541 10, ,098 2, /14/2016 1,331,240 31, ,189 19, ,257 10, ,098 2, /15/2016 1,316,099 30, ,689 20, ,705 10, ,575 1, /16/2016 1,344,348 31, ,647 19, ,400 10, ,503 2, /17/2016 1,276,557 30, ,584 20, ,787 10, ,109 1, /18/2016 1,338,426 31, ,603 20, ,292 10, ,198 2, /19/2016 1,382,332 32, ,915 20, ,936 10, ,298 2, /20/2016 1,344,495 31, ,915 20, ,935 10, ,665 1, /21/2016 1,368,146 32, ,705 21, ,890 10, ,755 2, /22/2016 1,500,885 35, ,246 19, ,473 13, ,576 4, /23/2016 1,530,579 36, ,532 19, ,534 13, ,653 4, /24/2016 1,586,886 37, ,175 19, ,991 13, ,039 6, /25/2016 1,580,411 37, ,390 19, ,591 12, ,170 6, /26/2016 1,586,015 37, ,886 19, ,066 12, ,385 6, /27/2016 1,536,010 36, ,886 19, ,066 12, ,385 6, /28/2016 1,488,571 35, ,901 19, ,249 12, ,385 6, /29/2016 1,339,272 31, ,103 20, ,436 11, ,721 1, /30/2016 1,336,319 31, ,732 19, ,005 11, ,600 1, November Average 1,394,611 32,996 1, ,803 19, ,034 11, ,972 3,

10 Schedule 5.1 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 Zone 1 Gas Flowed Nominations FFPS Nominations FRS Nominations ITRS Line No. Day GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) (e) (f) (g) (h) (I) (j) (k) (l) (m) 64 12/01/2016 1,278,876 30, ,608 19, ,925 10, ,122 1, /02/2016 1,289,190 30, ,011 19, ,339 10, ,600 1, /03/2016 1,364,264 32, ,520 19, ,793 11, ,684 1, /04/2016 1,349,765 32, ,708 19, ,985 12, ,684 1, /05/2016 1,324,747 31, ,032 20, ,661 12, ,184 1, /06/2016 1,421,703 33, ,325 20, ,621 14, ,100 1, /07/2016 1,513,208 36, ,198 19, ,351 14, ,704 4, /08/2016 1,570,235 37, ,679 19, ,254 15, ,354 5, /09/2016 1,578,959 37, ,545 19, ,490 15, ,990 3, /10/2016 1,473,341 35, ,255 19, ,561 12, ,764 3, /11/2016 1,449,550 34, ,255 19, ,730 12, ,768 3, /12/2016 1,483,765 35, ,427 19, ,109 12, ,764 3, /13/2016 1,498,803 35, ,190 19, ,325 13, ,109 3, /14/2016 1,574,118 37, ,503 20, ,432 15, ,614 3, /15/2016 1,483,466 35, ,904 19, ,063 13, ,667 3, /16/2016 1,433,817 34, ,957 20, ,331 12, ,033 2, /17/2016 1,559,801 37, ,688 19, ,055 13, ,183 3, /18/2016 1,577,797 37, ,688 19, ,055 13, ,183 3, /19/2016 1,570,243 37, ,345 20, ,055 13, ,984 3, /20/2016 1,422,521 33, ,973 18, ,606 13, ,197 4, /21/2016 1,433,592 33, ,483 19, ,949 13, ,062 3, /22/2016 1,365,325 32, ,525 19, ,836 12, ,600 1, /23/2016 1,511,200 35, ,977 19, ,735 12, ,904 3, /24/2016 1,417,161 33, ,637 19, ,228 12, ,823 2, /25/2016 1,411,835 33, ,637 19, ,228 12, ,823 2, /26/2016 1,452,907 34, ,637 19, ,228 12, ,823 2, /27/2016 1,482,338 35, ,616 19, ,532 12, ,609 2, /28/2016 1,457,515 34, ,569 19, ,534 12, ,639 2, /29/2016 1,422,763 33, ,747 19, ,165 12, ,542 2, /30/2016 1,393,011 33, ,747 19, ,654 12, ,215 2, /31/2016 1,443,687 34, ,747 19, ,654 12, ,215 2, December Average 1,451,919 34,502 1, ,778 19, ,145 13, ,095 3,

11 Schedule 5.2 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 Zone 2 Gas Flowed Nominations FFPS Nominations FRS Nominations ITRS Line No. Day GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) (e) (f) (g) (h) (I) (j) (k) (l) (m) 1 10/01/ ,983 11, ,524 5, ,614 6, , /02/ ,779 8, ,914 3, ,614 6, , /03/ ,683 8, ,234 2, ,197 5, , /04/ ,436 8, ,795 2, ,050 6, , /05/ ,980 8, ,795 2, ,779 6, , /06/ ,939 13, ,938 5, ,277 6, ,000 1, /07/ ,320 13, ,909 6, ,120 6, ,000 1, /08/ ,484 13, ,039 6, ,071 6, ,000 1, /09/ ,950 13, ,039 6, ,071 6, ,000 1, /10/ ,517 13, ,039 6, ,071 6, ,000 1, /11/ ,494 14, ,039 7, ,071 6, ,000 1, /12/2016 2, /13/ /14/ /15/ /16/ /17/ /18/ /19/ , ,715 3, , /20/ ,665 13, ,957 8, ,627 6, /21/ ,216 13, ,957 7, ,105 5, /22/ ,383 12, ,006 6, ,394 6, /23/ ,706 13, ,006 6, ,394 6, /24/ ,335 12, ,006 6, ,394 6, /25/ ,065 13, ,965 6, ,850 6, , /26/ ,196 13, ,965 6, ,484 6, , /27/ ,712 13, ,965 6, ,484 6, , /28/ ,673 14, ,965 6, ,772 6, , /29/ ,324 12, ,965 6, ,553 6, , /30/ ,861 12, ,965 6, ,553 6, , /31/ ,124 11, ,965 6, ,553 6, , October Average 383,992 9, ,151 4, ,297 4, , Note: 1 Planned outage due to the Regina bypass project.

12 Schedule 5.2 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 Zone 2 Gas Flowed Nominations FFPS Nominations FRS Nominations ITRS Line No. Day GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) (e) (f) (g) (h) (I) (j) (k) (l) (m) 33 11/01/ ,214 11, ,715 4, ,586 6, , /02/ ,503 10, ,479 6, ,586 6, , /03/ ,873 10, ,728 5, ,586 6, , /04/ ,249 11, ,728 5, ,973 6, , /05/ ,535 12, ,728 5, ,100 5, , /06/ ,416 11, ,728 5, ,100 5, , /07/ ,525 11, ,728 5, ,100 5, , /08/ ,750 11, ,728 5, ,605 5, , /09/ ,339 11, ,728 5, ,806 5, , /10/ ,326 11, ,728 5, ,806 5, , /11/ ,178 11, ,728 5, ,000 5, , /12/ ,149 11, ,728 5, ,546 5, , /13/ ,295 11, ,728 5, ,546 5, , /14/ ,161 11, ,728 5, ,546 5, , /15/ ,383 10, ,728 4, ,964 5, , /16/ ,830 11, ,728 4, ,948 5, , /17/ ,753 10, ,728 4, ,429 5, , /18/ ,607 10, ,728 4, ,205 5, , /19/ ,193 10, ,728 4, ,116 5, , /20/ ,229 10, ,728 4, ,116 5, , /21/ ,263 10, ,728 4, ,116 5, , /22/ ,760 12, ,479 5, ,116 5, , /23/ ,375 11, ,728 5, ,116 5, , /24/ ,946 11, ,728 5, ,116 5, , /25/ ,235 11, ,728 5, ,880 5, , /26/ ,511 11, ,728 5, ,957 5, , /27/ ,517 11, ,728 5, ,572 6, , /28/ ,208 11, ,728 5, ,503 6, , /29/ ,529 11, ,769 5, ,776 6, , /30/ ,347 11, ,769 5, ,465 6, , November Average 471,340 11, ,647 5, ,143 5, ,

13 Schedule 5.2 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 Zone 2 Gas Flowed Nominations FFPS Nominations FRS Nominations ITRS Line No. Day GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) (e) (f) (g) (h) (I) (j) (k) (l) (m) 64 12/01/ ,608 12, ,476 5, ,684 6, , /02/ ,167 11, ,476 4, ,528 6, , /03/ ,773 11, ,378 4, ,948 6, , /04/ ,238 11, ,337 4, ,948 6, , /05/ ,622 11, ,337 4, ,948 6, , /06/ ,605 12, ,423 5, ,572 6, , /07/ ,868 12, ,321 5, ,958 6, , /08/ ,584 13, ,321 5, ,351 6, ,863 1, /09/ ,380 11, ,321 5, ,746 6, , /10/ ,049 11, ,337 5, ,471 6, , /11/ ,266 11, ,337 5, ,471 6, , /12/ ,473 10, ,337 5, ,471 6, , /13/ ,172 12, ,321 5, ,991 6, , /14/ ,247 12, ,258 5, ,604 6, ,460 1, /15/ ,095 11, ,258 4, ,491 6, , /16/ ,567 11, ,258 4, ,358 6, , /17/ ,696 11, ,321 5, ,491 6, , /18/ ,191 11, ,321 5, ,491 6, , /19/ ,042 11, ,321 5, ,491 6, , /20/ ,429 13, ,786 6, ,923 6, , /21/ ,291 13, ,786 6, ,205 6, ,767 1, /22/ ,782 12, ,827 6, ,268 6, , /23/ ,459 12, ,786 5, ,954 6, , /24/ ,741 12, ,786 5, ,151 6, , /25/ ,391 12, ,786 5, ,151 6, , /26/ ,433 12, ,786 5, ,151 6, , /27/ ,190 12, ,786 5, ,151 6, , /28/ ,372 12, ,786 5, ,151 6, , /29/ ,755 11, ,932 5, ,898 6, , /30/ ,351 12, ,891 5, ,404 6, , /31/ ,390 12, ,891 5, ,404 6, , December Average 501, , , ,

14 Schedule 5.3 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 ATP Gas Flowed Nominations FDS Nominations ITDS Line No. Day GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) (e) (f) (g) (h) (I) (j) 1 10/01/ ,048 16, ,050 16, /02/ ,048 16, ,050 16, /03/ ,048 16, ,050 16, /04/ ,465 16, ,406 16, , /05/ ,201 16, ,503 15, , /06/ ,599 15, ,601 15, /07/ ,599 15, ,601 15, /08/ ,599 15, ,601 15, /09/ ,599 15, ,601 15, /10/ ,599 15, ,601 15, /11/ ,599 15, ,601 15, /12/ /13/ /14/ /15/ /16/ /17/ /18/ /19/ , /20/ ,599 15, ,601 15, /21/ ,599 15, ,601 15, /22/ ,599 15, ,601 15, /23/ ,599 15, ,601 15, /24/ ,599 15, ,601 15, /25/ ,147 20, ,601 15, ,548 4, /26/ ,538 18, ,601 15, ,939 2, /27/ ,305 16, ,601 15, , /28/ ,132 16, ,601 15, , /29/ ,314 16, ,601 15, , /30/ ,314 16, ,601 15, , /31/ ,314 16, ,601 15, , October Average 495,757 12, ,298 11, , Note: 1 Planned outage due to the Regina bypass project.

15 Schedule 5.3 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 ATP Gas Flowed Nominations FDS Nominations ITDS Line No. Day GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) (e) (f) (g) (h) (I) (j) 33 11/01/ ,752 18, ,618 18, , /02/ ,572 20, ,687 18, ,355 2, /03/ ,133 19, ,687 18, ,916 1, /04/ ,794 18, ,762 18, , /05/ ,072 18, ,073 18, /06/ ,072 18, ,073 18, /07/ ,072 18, ,073 18, /08/ ,108 19, ,794 18, , /09/ ,876 21, ,794 18, ,082 3, /10/ ,794 18, ,794 18, /11/ ,956 18, ,956 18, /12/ ,956 18, ,956 18, /13/ ,956 18, ,956 18, /14/ ,956 18, ,956 18, /15/ ,909 18, ,909 18, /16/ ,876 17, ,876 17, /17/ ,647 17, ,647 17, /18/ ,493 16, ,493 16, /19/ ,876 17, ,876 17, /20/ ,876 17, ,876 17, /21/ ,012 17, ,876 17, , /22/ ,901 22, ,761 18, ,140 3, /23/ ,133 22, ,433 19, ,700 3, /24/2016 1,000,587 24, ,211 18, ,376 5, /25/2016 1,000,587 24, ,211 18, ,376 5, /26/2016 1,000,587 24, ,211 18, ,376 5, /27/2016 1,000,587 24, ,211 18, ,376 5, /28/2016 1,000,587 24, ,211 18, ,376 5, /29/ ,563 18, ,563 18, /30/ ,615 18, ,615 18, November Average 811,130 19, ,539 18, ,641 1,480 52

16 Schedule 5.3 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 ATP Gas Flowed Nominations FDS Nominations ITDS Line No. Day GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) (e) (f) (g) (h) (I) (j) 64 12/01/2016 6, ,875 18, /02/ ,490 17, ,490 17, /03/ ,322 19, ,322 19, /04/ ,322 19, ,322 19, /05/ ,322 19, ,322 19, /06/ ,123 19, ,123 19, /07/ ,626 24, ,736 20, ,890 4, /08/2016 1,083,965 26, ,703 21, ,262 5, /09/ ,335 23, ,085 21, ,250 1, /10/ ,308 20, ,194 20, , /11/ ,308 20, ,194 20, , /12/ ,226 20, ,112 20, , /13/ ,376 22, ,448 20, ,928 2, /14/2016 1,091,054 26, ,448 20, ,606 6, /15/2016 1,009,895 24, ,793 21, ,102 3, /16/ ,448 20, ,448 20, /17/ ,852 24, ,166 21, ,686 2, /18/ ,852 24, ,166 21, ,686 2, /19/ ,852 24, ,166 21, ,686 2, /20/ ,283 21, ,116 21, ,287 1, /21/ ,905 21, ,116 21, , /22/ ,257 19, ,257 19, /23/ ,072 20, ,072 20, /24/ ,779 21, ,500 19, ,279 1, /25/ ,592 21, ,500 19, ,092 1, /26/ ,383 21, ,500 19, ,883 1, /27/ ,779 21, ,500 19, ,279 1, /28/ ,384 21, ,500 19, ,884 1, /29/ ,943 20, ,272 20, , /30/ ,279 20, ,302 19, , /31/ ,257 21, ,302 19, ,955 1, December Average 860,178 20, ,937 20, ,308 1,374 49

17 Schedule 5.4 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 Canada U.S. Border Gas Flowed Line No. Day GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) 1 10/01/2016 1,690,787 41, /02/2016 1,666,421 40, /03/2016 1,656,785 40, /04/2016 1,640,631 40, /05/2016 1,614,612 39, /06/2016 1,612,002 39, /07/2016 1,600,398 39, /08/2016 1,601,619 39, /09/2016 1,600,972 39, /10/2016 1,601,578 39, /11/2016 1,497,075 36, /12/ /13/ /14/ /15/ /16/ /17/ /18/ /19/ /20/2016 1,580,310 38, /21/2016 1,599,574 39, /22/2016 1,602,797 39, /23/2016 1,604,201 39, /24/2016 1,606,669 39, /25/2016 1,817,142 44, /26/2016 1,731,498 42, /27/2016 1,642,784 40, /28/2016 1,651,504 40, /29/2016 1,626,034 39, /30/2016 1,625,359 39, /31/2016 1,627,001 39, October Average 1,209,605 29,634 1,046 Note: 1 Planned outage due to the Regina bypass project.

18 Schedule 5.4 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 Canada U.S. Border Gas Flowed Line No. Day GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) 33 11/01/2016 1,757,318 42, /02/2016 1,855,990 44, /03/2016 1,807,549 43, /04/2016 1,767,455 42, /05/2016 1,765,127 42, /06/2016 1,764,985 42, /07/2016 1,755,224 42, /08/2016 1,831,031 44, /09/2016 1,935,618 46, /10/2016 1,791,114 43, /11/2016 1,769,999 42, /12/2016 1,770,850 42, /13/2016 1,771,152 42, /14/2016 1,765,692 42, /15/2016 1,767,155 42, /16/2016 1,761,970 42, /17/2016 1,730,238 41, /18/2016 1,703,312 41, /19/2016 1,757,180 42, /20/2016 1,756,763 42, /21/2016 1,798,529 43, /22/2016 1,971,052 47, /23/2016 1,938,446 46, /24/2016 2,021,855 48, /25/2016 2,015,368 48, /26/2016 2,020,288 48, /27/2016 2,012,361 48, /28/2016 2,026,867 48, /29/2016 1,790,281 43, /30/2016 1,790,093 43, November Average 1,832,362 44,128 1,558

19 Schedule 5.4 Alliance Pipeline Limited Partnership THROUGHPUT DETAIL For the Three Months Ended December 31, 2016 Canada U.S. Border Gas Flowed Line No. Day GJ E 3 m 3 Mmcf Notes (a) (b) (c) (d) 64 12/01/2016 1,743,397 42, /02/2016 1,707,969 41, /03/2016 1,798,578 43, /04/2016 1,795,640 43, /05/2016 1,792,070 43, /06/2016 1,854,977 44, /07/2016 2,015,163 48, /08/2016 2,092,386 50, /09/2016 1,986,923 47, /10/2016 1,841,633 44, /11/2016 1,847,705 44, /12/2016 1,846,819 44, /13/2016 1,915,219 46, /14/2016 2,114,626 51, /15/2016 2,020,075 48, /16/2016 1,839,291 44, /17/2016 1,997,852 48, /18/2016 2,004,718 48, /19/2016 2,006,745 48, /20/2016 1,911,465 46, /21/2016 1,898,701 45, /22/2016 1,828,877 44, /23/2016 1,869,038 45, /24/2016 1,904,607 45, /25/2016 1,888,994 45, /26/2016 1,898,998 45, /27/2016 1,905,840 45, /28/2016 1,898,257 45, /29/2016 1,847,168 44, /30/2016 1,843,845 44, /31/2016 1,867,058 45, December Average 1,896,279 45,764 1,616

20 Schedule 6.1 Alliance Pipeline Limited Partnership DEFERRAL ACCOUNT DETAIL As at December 31, 2016 ($000s) Line No. Particulars Actual (a) (b) RCV Revenue Deferral (1) 1 Receipt Zone 1 2 Receipt Zone 2 3 Delivery Zone 4 Total Revenue Deferral 5 RCV Cost Deferral (2) 6 Receipt Zone 1 (1,807) 7 Receipt Zone 2 (2,133) 8 Delivery Zone (1,089) 9 Total Cost Deferral (5,029) 10 Abandonment Surcharge Deferral 11 Receipt Zone 1 (516) 12 Receipt Zone Delivery Zone (342) 14 Total Abandonment Surcharge Deferral (519) 15 Total Deferral Accounts (5,548) Note: 1 There was no RCV surcharge in effect during the period January 1, 2016 to December 31, Balances include carrying charges.

21 Schedule 6.2 Alliance Pipeline Limited Partnership RCV COST CATEGORIES Year Ended December 31, 2016 ($000s) Line No. Particulars Actual (a) (b) 1 Pipeline Integrity 5,028 2 Property and Business Tax 23,606 3 NEB Cost Recovery 3,777 4 Compressor Fuel Tax 1,262 5 Environmental Levies 2,803 6 Total 36,476

22 Schedule 7.1 Alliance Pipeline Limited Partnership RELATED COMPANY TRANSACTIONS Receipts Year Ended December 31, 2016 Includes Transactions Greater Than $100,000 ($000s) Line No. Particulars Nature of Service Actual (a) (b) (c) 1 Alliance Pipeline L.P. Shared Services 45,218 2 NRGreen Power Limited Partnership Shared Services 2,014 3 Alliance Pipeline L.P. Sales of Operational Linepack Gas 3,133 50,365

23 Schedule 7.2 Alliance Pipeline Limited Partnership RELATED COMPANY TRANSACTIONS Payments Year Ended December 31, 2016 Includes Transactions Greater Than $100,000 ($000s) Line No. Particulars Nature of Service Actual (a) (b) (c) 1 Alliance Pipeline L.P. Shared Services 3,008

24 Schedule 7.3 Alliance Pipeline Limited Partnership RELATED COMPANY TRANSACTIONS Receipts Year Ended December 31, 2016 Includes Transactions Greater Than $100,000 ($000s) Contracting Party: Alliance Pipeline L.P. Nature Of Service: Shared Services Description: Amount Administrative Services and Usage of Fixed Assets $ 45,218 Contracting Party: Alliance Pipeline L.P. Nature Of Service: Sales of Natural Gas Description: Amount Sales of natural gas for linepack management purposes $ 3,133 Contracting Party: NRGreen Power Limited Partnership Nature Of Service: Shared Services Description: Amount Manpower, Services, and Waste Heat Supply $ 2,014

25 Schedule 7.4 Alliance Pipeline Limited Partnership RELATED COMPANY TRANSACTIONS Payments Year Ended December 31, 2016 Includes Transactions Greater Than $100,000 ($000s) Contracting Party: Alliance Pipeline L.P. Nature Of Service: Shared Services Description: Amount Administrative Services $ 3,008

26 Schedule 8 Alliance Pipeline Limited Partnership BID DETAILS For the Three Months Ended December 31, 2016 (CAD/E3M3 unless noted) Line No. Canadian Services Term 5 Year Firm Service Rate MAX Floor Set MIN Floor Set Avg. Floor % Set Avg. Floor Set MAX Bid Received MIN Bid Received Avg. Bid Received Volume Weighted Avg. Bid # of Submitted Bids # of Awarded Bids Total Volume Awarded OCTOBER 2016 INTERRUPTIBLE SERVICES 1 ITRS Zone 1 Daily $ % 110% 116% $ $ $ $ $ ,476 2 ITRS Zone 2 Daily $ % 110% 116% $ $ $ $ $ ,653 3 ITDS Daily $ % 105% 114% $ $ $ $ $ ,040 4 ITFPS Zone 1 Service Not Offered 5 ITFPS Zone 2 Service Not Offered NOVEMBER 2016 INTERRUPTIBLE SERVICES 6 ITRS Zone 1 Daily $ % 110% 110% $ $ $ $ $ ,115 7 ITRS Zone 2 Daily $ % 110% 110% $ $ $ $ $ ,202 8 ITDS Daily $ % 105% 105% $ $ $ $ $ ,741 9 ITFPS Zone 1 Service Not Offered 10 ITFPS Zone 2 Service Not Offered DECEMBER 2016 INTERRUPTIBLE SERVICES 11 ITRS Zone 1 Daily $ % 110% 119% $ $ $ $ $ , ITRS Zone 2 Daily $ % 110% 119% $ $ $ $ $ , ITDS Daily $ % 110% 119% $ $ $ $ $ , ITFPS Zone 1 Service Not Offered 15 ITFPS Zone 2 Service Not Offered DAILY FIRM OPEN SEASONS (daily) 16 FRSS Zone 1 Daily $ % 100% 109% $ $ $ $ $ , FRSS Zone 2 Daily $ % 100% 109% $ $ $ $ $ , FDSS Daily $ % 100% 106% $ $ $ $ $ , FFPSS Zone 1 Service Not Offered 20 FFPSS Zone 2 Service Not Offered BALANCE OF MONTH FIRM OPEN SEASONS offered two times in Q4 (once for 29 days and once for 27 days) 21 FRSS Zone 1 Remainder of the month $ % 100% 108% $ $ $ $ $ , FRSS Zone 2 Remainder of the month $ % 100% 108% $ $ $ $ $ FDSS Remainder of the month $ % 100% 108% $ $ $ $ $ , FFPSS Zone 1 Service Not Offered 25 FFPSS Zone 2 Service Not Offered SEASONAL FIRM OPEN SEASONOFFERED Nov 2, FRSS Zone 1 Dec 1, 2016 Mar 31, 2016 $ % 115% 115% $ $ $ $ $ FRSS Zone 2 Dec 1, 2016 Mar 31, 2016 $ % 115% 115% $ $ $ $ $ FDSS Dec 1, 2016 Mar 31, 2016 $ % 115% 115% $ $ $ $ $ FFPSS Zone 1 Service Not Offered $ FFPSS Zone 2 Service Not Offered $ SEASONAL FIRM OPEN SEASON OFFERED Nov 30, FRSS Zone 1 Jan 1, 2017 Mar 31, 2017 $ % 125% 125% $ $ $ $ $ , FRSS Zone 2 Jan 1, 2017 Mar 31, 2017 $ % 125% 125% $ $ $ $ $ FDSS Jan 1, 2017 Mar 31, 2017 $ % 125% 125% $ $ $ $ $ , FFPSS Zone 1 Service Not Offered 35 FFPSS Zone 2 Service Not Offered

27 Schedule 9 Alliance Pipeline Limited Partnership PIPELINE INTEGRITY ANNUAL SPENDING Year Ended December 31, 2016 ($000s) Year Line No. Actual Annual Expenditures 2016 (a) (b) Operating Expenses 1 Program Management Surveillance, Condition Monitoring and Integrity Hazard Assessment 3,049 3 Mitigation and Remediation 1,229 4 Total Operating 4,986 Capital Expenditures 5 Program Management 6 Surveillance, Condition Monitoring and Integrity Hazard Assessment 7 Mitigation and Remediation 2,147 8 Other Expenditures 9 Total Capital 2,147 Note: Year 2016 represents the first year of five years of time series data on integrity spending.

28 February 2, 2017 Independent Auditor s Report To the Directors of the Managing General Partner of Alliance Pipeline Limited Partnership We have audited the accompanying consolidated financial statements of Alliance Pipeline Limited Partnership, which comprise the consolidated balance sheets as at December 31, 2016 and December 31, 2015 and the consolidated statements of income, changes in partners equity and cash flows for the years ended December 31, 2016, December 31, 2015 and December 31, 2014, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with principles generally accepted in the United States of America and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. PricewaterhouseCoopers LLP Avenue SW, Suite 3100, Calgary, Alberta, Canada T2P 5L3 T: , F: PwC refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

29 Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Alliance Pipeline Limited Partnership as at December 31, 2016 and December 31, 2015 and the results of its operations and its cash flows for the years ended December 31, 2016, December 31, 2015 and December 31, 2014 in accordance with principles generally accepted in the United States of America. Chartered Professional Accountants

30 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 Consolidated Statements of Income Years Ended December (thousands of Canadian dollars) Revenues Transportation revenue 342, , ,031 Transportation revenue from related parties 118,149 52,517 46,881 Service revenue from related parties (Note 11) 47,232 49,776 51,502 Other revenue 8,577 1,480 2,245 Other related party revenue 3, , , ,659 Expenses General and administrative 78,927 96, ,007 Operations and maintenance 93,108 84,374 98,051 Property taxes 23,493 24,485 24,115 Administrative service agreement fee (Note 11) 3, Depreciation (Note 6) 70, , , , , ,219 Operating income 250, , ,440 Interest income and other (Note 3) 10,010 2,703 1,855 Interest expense (62,311) (69,246) (75,133) Net income before extraordinary item 198, , ,162 Extraordinary gain (Note 4) - 3,199 - Net income 198, , ,162 Net income attributable to Limited Partners 196, , ,980 Net income attributable to General Partner 1,982 1,288 1,182 See accompanying notes to the financial statements Page 1

31 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 Consolidated Statements of Cash Flows Years Ended December (thousands of Canadian dollars) Operating activities Net income 198, , ,162 Depreciation 70, , ,046 Amortization of financing costs Extraordinary gain (Note 4) - (3,199) - Changes in working capital items (Note 5) (17,578) 10,052 2, , , ,325 Investing activities Changes in trust accounts net of transportation deposits 4,020 (17,994) (4,315) Proceeds from investment (Note 13) 2, Changes in net restricted investments (106) Additions to property, plant and equipment (262) (11,459) (8,617) 5,984 (28,544) (12,932) Financing activities Capital contributions 5,800 1,300 2,200 Repayment of long-term debt (82,959) (88,466) (83,281) Distributions to partners (175,000) (137,300) (143,200) Debt issuance costs (106) - - (252,265) (224,466) (224,281) Net change in cash 5, ,112 Cash, beginning of period 3,838 3,151 2,039 Cash, end of period 9,649 3,838 3,151 Supplemental disclosure of cash flow information: Interest payments (62,515) (68,553) (74,030) Non-cash changes in property, plant and equipment (4,386) (1,064) (933) See accompanying notes to the financial statements Page 2

32 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 Consolidated Balance Sheets December (thousands of Canadian dollars) ASSETS Current assets Cash 9,649 3,838 Trust accounts 72,636 74,785 Accounts receivable 58,610 28,277 Accounts receivable from related parties (Note 11) 22,276 21,741 Inventory 8,892 6,524 Investments (Note 13) 9,723 - Other current assets 1,585 2, , ,113 Investments held in trust (Note 13) 20,104 9,111 Other long-term assets - 11,128 Long-term related party receivable 4,142 3,710 Property, plant and equipment (Note 6) 1,083,723 1,149,813 1,291,340 1,311,875 LIABILITIES Current liabilities Accounts payable and accrued liabilities (Note 7) 47,069 33,041 Accounts payable to related parties (Note 11) 1, Current portion of long-term debt (Note 10) 83,961 82,959 Restricted transportation deposit 5,822 3,951 Other current liabilities 2,001 1, , ,328 Regulatory liabilities (Note 9) 26,935 11,746 Other long-term liabilities (Note 8) 15,757 14,902 Long-term debt (Note 10) 778, ,302 Commitments and contingencies (Note 15) PARTNERS' EQUITY 329, ,597 See accompanying notes to the financial statements 1,291,340 1,311,875 On behalf of the Board of Alliance Pipeline Ltd., General Partner: Signed Stephen J. Neyland, Director Signed Theresa Jang, Director Page 3

33 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 Consolidated Statements of Changes in Partners Equity Years Ended December (thousands of Canadian dollars) Class A Units Class A - number of units 556, , ,207 Class A unit value - opening balance 226, , ,993 Net income 173, , ,317 Distributions to partners (153,014) (120,050) (125,209) Class A unit value - closing balance 246, , ,101 Class B Units Class B - number of units 73,558 73,558 73,558 Class B unit value - opening balance 41,120 42,103 44,998 Net income 22,919 14,894 13,664 Distributions to partners (20,236) (15,877) (16,559) Class B unit value - closing balance 43,803 41,120 42,103 Contributed Surplus Contributed surplus - opening balance 26,233 24,933 22,733 Partner contributions 5,800 1,300 2,200 Contributed surplus - closing balance 32,033 26,233 24,933 General Partner General Partner - opening balance 6,572 6,657 6,907 Net income 1,982 1,288 1,182 Distributions to partners (1,750) (1,373) (1,432) General Partner - closing balance 6,804 6,572 6,657 TOTAL PARTNERS' EQUITY 329, , ,794 See accompanying notes to the financial statements Page 4

34 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 Notes to Consolidated Financial Statements (In thousands of Canadian dollars, unless otherwise noted) NOTE 1 General Business Description Alliance Pipeline Limited Partnership (Alliance) was formed under the laws of the Province of Alberta on February 1, Alliance owns and operates the Canadian portion of a 3,849 kilometre (km) high-pressure natural gas transmission pipeline and related infrastructure. The U.S. portion is owned by Alliance Pipeline L.P. (Alliance U.S.). Alliance and Alliance U.S. have entered into contracts with shippers to transport natural gas from supply areas primarily in the Northwestern Alberta and the Northeastern British Columbia portions of the Western Canadian Sedimentary Basin and the Williston Basin in North Dakota to delivery points primarily near Chicago, Illinois. The pipeline connects in the Chicago area with five interstate natural gas pipelines and two local natural gas distribution systems, which provide shippers with access to natural gas markets in the Midwestern and Northeastern United States and Eastern Canada. Alliance s pipeline operations are regulated by the National Energy Board (NEB) under the National Energy Board Act. ALLIANCE PIPELINE LTD. Alliance is managed by Alliance Pipeline Ltd. (the General Partner). The General Partner was established on April 17, 1997, and continues to operate under the federal laws of Canada. The General Partner is allocated 1% of net income or loss, and undistributed income of Alliance with the remaining 99% being allocated equally between Enbridge Income Partners Holdings Inc. and Veresen Energy Infrastructure Inc. (collectively known as the Partners). The General Partner s sole activity is managing the business and affairs of Alliance. The rights, powers, duties and obligations of the General Partner of Alliance are set out in Alliance s Limited Partnership Agreement dated as of December 31, 1998, as amended. ALLIANCE PIPELINE ABANDONMENT TRUST The Alliance Pipeline Abandonment Trust (Trust) was established in the Province of Alberta on January 28, 2015 to set aside funds collected through pipeline abandonment surcharges. The use of amounts in the Trust is restricted to pay future abandonment costs and Alliance is the primary beneficiary. NOTE 2 Summary of Accounting Policies BASIS OF PRESENTATION The consolidated financial statements of Alliance have been prepared by management in accordance with United States generally accepted accounting principles (U.S. GAAP). All dollar amounts are stated in thousands of Canadian dollars, unless otherwise noted. The consolidated financial statements include the accounts of Alliance and the Trust. All significant intercompany accounts and transactions are eliminated upon consolidation. In management s opinion, the consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies. Certain prior year balances have been adjusted to conform with current year presentation. Page 5

35 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 USE OF ESTIMATES The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect both the amount and the timing of the recognition of Alliance s assets, liabilities, revenues and expenses and the related disclosures. Management regularly evaluates these estimates utilizing historical experience, consultation with experts and other methods management considers reasonable in the circumstances. Actual results may differ from these estimates. Revisions to accounting estimates are recognized in the period for which the estimate is revised and in any future periods affected. CHANGES IN ACCOUNTING ESTIMATES A study to review the service life estimates of pipeline in service assets and underlying assumptions for the estimated depreciation rates was completed in Based on the results of the study, the depreciation rate for the pipeline in service assets was revised from 4.0% to a composite rate of 2.4% effective January 1, The revision was accounted for prospectively as a change in accounting estimate, and as a result, depreciation expense was reduced by $43.0 million for the year ended December 31, REVENUE RECOGNITION Transportation Revenue Revenues earned from firm contracted capacity arrangements are recognized over the contract period. Fixed volumetric tolls under these contracts are recognized as revenue regardless of the amount of natural gas that is transported. Transportation revenues for the firm contracted capacity contracts, interruptible services and other surcharges are recognized as gas transportation services are provided. Other Revenue Revenues earned from construction contracts are deferred and recognized as revenue based on the terms specified within the respective contracts. Alliance sells operational linepack and the revenue is recognized in the period the sale occurs. Service Revenue from Related Parties Service revenue is recognized as the service is provided. REGULATED OPERATIONS In order to reflect the economic effects of the actions of the regulator, recognition of certain revenues and expenses may differ from that otherwise expected under U.S. GAAP applicable to non-regulated businesses. Regulatory assets represent amounts that are expected to be recovered from shippers in future periods through tolls. Regulatory liabilities represent amounts that are expected to be credited to shippers in future periods. Transportation revenue is adjusted to reflect differences between the period in which the rate-regulated surcharges are collected through toll receipts and the period the related costs are incurred. Page 6

36 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 CASH Cash consists of amounts held in demand deposit accounts with major financial institutions. The carrying value of cash approximates fair value due to the short-term nature of these assets. Trust Accounts The use of amounts in the operating and debt service trust accounts is restricted. The accounts are classified as trust accounts in the consolidated financial statements. Under the terms of Alliance s financing agreements, all funds received from shippers in settlement of transportation tolls or as a transportation security deposit, including interest earned on trust account balances, are restricted and segregated in trust accounts. At the completion of each fiscal quarter, management determines the amount of cash necessary to satisfy debt servicing and operating requirements and applies to have available funds, if any, in excess of this amount transferred to a non-trust account. Only funds in non-trust accounts may be distributed to the Partners. Transportation security deposit funds are not available for distribution. INVESTMENTS HELD IN TRUST Alliance Pipeline Abandonment Trust Alliance collects abandonment funds through future pipeline abandonment surcharges and sets aside those funds in the Trust until such time that the funds are required to settle abandonment related expenditures. The Trust is consolidated and presented on the consolidated financial statements as investments held in trust. The use of amounts in the Trust is restricted to pay future abandonment costs. As per the Trust agreement, Alliance is the primary beneficiary of the Trust and Alliance would be required to absorb any losses or shortfalls that may occur through additional future funding collected from shippers through the pipeline abandonment surcharges. INVENTORY Inventory consists of materials and supplies, and natural gas which is referred to as operational linepack. Inventory is carried at the lower of weighted average cost or net realizable value. Dispositions of inventory are recorded in operating expenses. Materials and supplies are periodically reviewed for physical deterioration and obsolescence. PROPERTY, PLANT AND EQUIPMENT Pipeline in Service Assets Pipeline in service assets are recorded at cost and are depreciated commencing from the in service date. Pipeline in service assets include the pipeline, base linepack, compressor stations, meter stations and other assets used to provide transmission services. Alliance applied Accounting Standard Codification 980 Regulated Operations (ASC 980) for all periods of operation up until June 30, Alliance recognized certain revenues, expenses, regulatory assets and liabilities to reflect the economic effects of the actions of the regulator. On June 30, 2015, the NEB approved the tolls and tariff provisions required to implement a market based at risk tariff effective December 1, As a result, Alliance was required to largely discontinue application of rate-regulated accounting guidelines as outlined by ASC 980. Page 7

37 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 Pipeline in service assets capitalized prior to July 1, 2015 also include components such as allowance for funds used during construction (AFUDC) and indirect overhead. Assets capitalized on or after July 1, 2015 include components such as interest on funds borrowed for the construction of an asset and direct overhead. Other Assets General plant assets consist of field offices and ancillary equipment. These assets are recognized at cost and are depreciated over the useful life of the assets. Administrative assets include head office furniture and equipment, information systems and leasehold improvements. These assets are recognized at cost and depreciated over the useful life of the asset or term of the lease. Land, capital spares and assets under construction are recognized at cost and are not subject to depreciation. Depreciation rates Asset Category Method Depreciation Rate Pipeline in service Straight line depreciation 2% - 5% General plant assets Straight line depreciation 10% - 20% Administrative assets Straight line depreciation 20% - 33% Capital spares Not depreciated Not depreciated Land Not depreciated Not depreciated Assets held for sale Not depreciated Not depreciated Assets under construction Not depreciated Not depreciated Additions and Disposals Additions to property, plant and equipment are recognized at cost. Expenditures included in the costs of property, plant and equipment are reviewed to determine if expenditures increase the output, lower the associated operating costs, or extend the useful life of the assets. Costs not meeting the criteria of the capitalization policy are expensed. When depreciable property is retired or disposed of, the impact is recognized in net income in the period the transaction occurred. ASSET RETIREMENT OBLIGATION The asset retirement obligation (ARO) associated with the retirement of a long-lived asset is recognized in the period when it can be reasonably determined. The statutory, contractual or legal obligation associated with the retirement and reclamation of a tangible long-lived asset is recognized at fair value. The fair value approximates the cost a third party would charge to retire the asset and is recognized at the present value of future cash flows. The ARO is depreciated on a basis consistent with depreciation and amortization of the underlying assets. A provision for ARO has not been recognized in these consolidated financial statements. The ARO amount is considered indeterminate because there is no data or information that can be derived from past practice, industry practice or management intentions to enable Alliance to reasonably estimate the timing and scope of the pipeline retirement. Page 8

38 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 LONG-LIVED ASSET IMPAIRMENT Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the total of the estimated undiscounted future cash flows is less than the carrying value of the assets, an impairment loss is recognized. The impairment loss is determined based on the excess carrying value of the assets over their fair value. Significant changes in market conditions resulting from events, such as changes in natural gas available to the Alliance Canada pipeline, the condition of an asset, or a significant change in contracted revenues, would generally require a review of the cash flows related to the long-lived assets. REIMBURSEMENTS FOR CONSTRUCTION ACTIVITIES Reimbursements received in relation to the construction of property, plant and equipment are applied against the carrying amount of the related property, plant and equipment, and deferred and amortized to income on the same basis as the property, plant and equipment. When a reimbursement relates to expenses, it is recognized in net income during the same period as the related costs or revenues. Reimbursements are recognized when Alliance complies with all reimbursement conditions, and there is reasonable assurance of compensation. FAIR VALUE MEASUREMENT Alliance is required to determine the fair value of all its financial instruments using valuation techniques based on the fair value hierarchy. The hierarchy is based on whether inputs are observable in an active market or unobservable. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to quoted prices in an active market and the lowest to unobservable data as outlined below: Level 1 This category includes assets and liabilities measured at fair value based on unadjusted quoted prices for identical assets and liabilities in active markets. An active market for an asset or liability is considered to be a market where transactions occur with sufficient frequency and volume to provide pricing information on an on-going basis. Level 2 This category includes valuations determined using directly or indirectly observable inputs other than quoted prices included within Level 1. Financial instruments in this category are valued using models or other industry standard valuation techniques derived from observable market data. Such valuation techniques include inputs such as quoted forward prices, time value, volatility factors and broker quotes that can be observed or corroborated in the market for the entire duration of the financial instrument. Level 3 Level 3 financial instruments are those with inputs for the asset or liability that are not based on observable market data (unobservable inputs). DEFERRED FINANCING COSTS Alliance capitalizes external costs of obtaining debt financing and includes them in long-term debt. The deferred charge is amortized over the life of the related debt using the effective interest method. Page 9

39 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 FOREIGN CURRENCY TRANSLATION Alliance transacts business in Canadian dollars and foreign currency. Transactions denominated in foreign currencies are translated into Canadian dollars using the exchange rate prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars using the rate of exchange in effect at the Consolidated Balance Sheets date. Exchange gains and losses resulting from translation are included in the Consolidated Statements of Income in the period in which they arise. TRANSACTIONS WITH RELATED PARTIES Alliance engaged in related party transactions that are in the normal course of business. Related party transactions were at exchange amounts agreed to by both parties. Transportation revenue transactions were the same as those offered to independent parties. INCOME TAXES Alliance is not a taxable entity for federal and provincial income tax purposes. Accordingly, no recognition is given to income taxes for financial reporting purposes. Tax on Alliance s net income is borne by the individual partners through the allocation of net income for tax purposes. Net income for consolidated financial statement purposes may differ significantly from net income for tax purposes for individual partners as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the net income for tax purposes allocation requirements under the Alliance partnership agreement. The net taxable temporary difference, which has not been recognized in these consolidated financial statements, is $38.9 million (December 31, $68.0 million). CHANGES IN ACCOUNTING POLICY Adoption of New Standards Effective January 1, 2016, Alliance adopted Accounting Standards Update (ASU) , Interest - Imputation of Interest (Subtopic ) Simplifying the Presentation of Debt Issuance Costs, requiring debt issuance costs relating to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The amortization of the debt issuance costs is included in interest expense. This policy change was applied retrospectively with no net change in the value of the debt liability. Effective January 1, 2016, Alliance adopted ASU , Inventory (Topic 330): Simplifying the Measurement of Inventory, requiring subsequent measurement of inventory at the lower of cost and net realizable value. This policy was adopted prospectively. Effective January 1, 2016, the Company prospectively adopted ASU Income Statement Extraordinary and Unusual Items which eliminates the concept of extraordinary items from U.S. GAAP. Entities are no longer required to separately classify and present extraordinary items in the Statements of Income. There was no material impact to Alliance s consolidated financial statements as a result of adopting this update. Page 10

40 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 Future Accounting Policy Changes Revenue from Contracts with Customers The FASB issued ASC 606, Revenue from Contracts with Customers, with an effective date for reporting periods beginning after January 1, 2018, with early adoption not permitted before January 1, This guidance supersedes the current revenue recognition requirements and most industry-specific guidance and requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. There are two methods in which the amendment can be applied: (1) retrospectively to each prior reporting period presented, or (2) retrospectively with the cumulative effect recognized at the date of initial application. Alliance is currently evaluating the impact of the adoption of this guidance and has not yet determined the effect on its financial statements. Statement of Cash Flows The FASB has updated ASC 230, Statement of Cash Flows, to revise the treatment of restricted cash. Effective for fiscal years beginning after December 15, 2017, interim periods within those fiscal years, and retrospectively, the Statement of Cash Flows is required to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Early adoption of this update is permitted. Effective January 1, 2017, Alliance will no longer present changes in trust accounts net of transportation deposits separately on its Consolidated Statements of Cash Flows. As a result, the cash balances on the statement will include cash and trust accounts. Leases ASU , Leases, was issued in February 2016 with the intent to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the Balance Sheets and disclosing additional key information about leasing arrangements. There is no material impact expected to the consolidated financial statements as a result of adopting this update. The accounting update is effective for fiscal years beginning after December 15, Financial Instruments ASU , Financial Instruments, was issued in January 2016 with the intent to address certain aspects of recognition, measurement, presentation, and disclosure of financial assets and liabilities. The amendments revise accounting related to the classification and measurement of investments in equity securities, the presentation of certain fair value changes for financial liabilities measured at fair value and the disclosure requirements associated with the fair value of financial instruments. The accounting update is effective for fiscal years beginning after December 15, There is no material impact expected to the consolidated financial statements as a result of adopting this update. Page 11

41 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 NOTE 3 Interest Income and Other Years Ended December Interest income 1,474 1, Insurance proceeds 416 1,264 - Foregone business reimbursement 7, Sale of assets ,113 Other - - (206) Total interest and other income 10,010 2,703 1,855 Foregone business reimbursement relates to amounts invoiced for lost revenue due to the outage for the Regina Bypass Project. NOTE 4 Extraordinary Gain On July 9, 2015, the NEB approved the tolls and tariff provisions required to implement a new market based at risk tariff proposal on December 1, As a result, Alliance was required to largely discontinue application of rate-regulated accounting guidelines as outlined by ASC 980 to the majority of its operations. Based on the NEB approval of the Services Offering tolls and tariff provisions, regulatory assets and regulatory liabilities were reviewed at June 30, 2015 and de-recognized, resulting in a net extraordinary gain of $3.2 million. NOTE 5 Supplemental Cash Flow Information Years Ended December Changes in non-cash working capital Accounts receivable (25,586) 9,065 (1,402) Accounts receivable from related parties (535) (5,106) 721 Other current and long-term assets 1, ,098 Accounts payable and accrued liabilities 4,896 (11,228) 7,867 Accounts payable to related parties (225) Inventory (1,440) - - Valuation changes to inventory and investments (927) - - Other current and long-term liabilities Long-term related party receivables (432) - - Regulatory assets and liabilities 4,302 16,486 (6,828) Total changes in non-cash working capital (17,578) 10,052 2,231 Page 12

42 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 NOTE 6 Property, Plant and Equipment December Cost Pipeline in service assets 2,761,685 2,755,662 General plant and administrative assets 54,725 53,585 Assets under construction 1,284 4,404 Capital spares 10,995 12,087 Land 2,520 2,520 2,831,209 2,828,258 Accumulated Depreciation Pipeline in service assets 1,703,625 1,637,046 General plant and administrative assets 43,861 41,399 Total property, plant and equipment 1,083,723 1,149,813 Property, plant and equipment includes an equity component of AFUDC of $135.1 million (December 31, $135.1 million) as a capitalized asset, recorded at cost. The recorded value, after accumulated amortization, is $50.7 million (December 31, $53.8 million). NOTE 7 Accounts Payable and Accrued Liabilities December Accounts payable and accrued liabilities 5,474 2,972 Interest accruals Operating accruals 10,285 7,803 Capital accruals 10,328 3,456 Employee benefits payable 16,471 17,597 Deferred revenue 3,003 - Other Total accounts payable 47,069 33,041 NOTE 8 Other Long-Term Liabilities December Deferred lease incentive benefits 2,422 3,068 Employee benefits 10,109 8,831 Deferred revenue 3,226 3,003 Total other long-term liabilities 15,757 14,902 NOTE 9 Regulatory Liabilities December Recoverable cost variance 5, Pipeline abandonment surcharges 21,864 10,978 Total regulatory liabilities 26,935 11,746 Page 13

43 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 A recoverable cost variance reflects the differences between amounts invoiced in the tolls for specified recoverable costs, as outlined in the transportation tariff, and the related expenses recognized in the Consolidated Statements of Income. The pipeline abandonment surcharge relates to the difference between funds collected and future expenses related to the future abandonment of pipeline assets. NOTE 10 Long-Term Debt December Credit facility 2,000 2, % senior notes due , , % senior notes due , , % senior notes due , , % senior notes due , , % senior notes due , , , ,532 Deferred financing fees (2,647) (3,271) Less: current portion (83,961) (82,959) Total long-term debt 778, ,302 The interest on long-term debt for the year ended December 31, 2016 is $61.1 million (December 31, $67.1 million, December 31, $72.9 million). LONG-TERM DEBT COMMITMENTS AND FINANCIAL COVENANTS Scheduled principal repayments of long-term debt at December 31, 2016 are as follows: , , , , ,905 Thereafter 325, ,573 Alliance must maintain a debt service reserve equal to scheduled principal and interest payments in the succeeding six month period. At December 31, 2016 and December 31, 2015, this debt service reserve was satisfied by letters of credit. Alliance is in compliance with all debt covenants at December 31, Alliance s long-term debt, which consists of senior secured and unsecured notes, credit facility draws and debt service reserve letters of credit, is collateralized by a first priority perfected security interest in Alliance s transportation agreements with its shippers, NEB permit, certain other material contracts, trust accounts into which transportation revenue is deposited, and a floating charge debenture over Alliance s real property and tangible personal property. Alliance is required to meet certain financial conditions and adhere to certain covenants on an on-going basis. Page 14

44 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 Alliance has covenants governing its long-term debt. Key financial covenants include a maximum borrowing amount not to exceed at any time 70% of the rate base by more than U.S. $10.0 million. Rate base does not have a standardized meaning under U.S. GAAP. In general, the rate base consists of the value of property as used by the utility in providing service, in accordance with rules set by a regulatory agency. Prior to making any quarterly distributions, Alliance s debt service coverage ratio shall be at least 1.40 for the four preceding fiscal quarters and the four succeeding fiscal quarters, calculated as of the distribution date. The debt service coverage ratio is defined as the ratio of cash inflows minus operating costs to the scheduled debt service payable for a twelve month period. SENIOR NOTES The 4.928% senior unsecured note pays interest in arrears, on June 16 and December 16 of each year, and the principal repayment amount is due in All other senior notes pay interest and principal semi-annually on June 30 and December 31. CREDIT FACILITY The credit facility consists of a committed extendible revolving credit facility in the amount of $200.0 million with an expansion provision to facilitate timely increases of the facility to $300.0 million, if required. The borrowing capacity of the committed credit facility is reduced by $76.0 million in letters of credit that Alliance is required to maintain as a debt service reserve and drawings of $2.0 million leaving $122.0 million available as an operating line of credit. The allocation of the facility between the debt service reserve and operating line can change from year to year depending on Alliance s debt service reserve requirement, which changes over time. Effective November 2, 2016, the maturity date of the credit facility was extended to June 29, There are provisions to extend the facility but in no case can the length of the facility extend beyond four years. Extensions are subject to bank syndicate acceptance. Interest on the credit facility is accrued and payable based on bankers acceptance rates, plus applicable margins, for terms not exceeding six months. Upon each maturity, the interest rates are reset at the then prevailing interest rates. Amounts outstanding under the credit facility at December 31, 2016 bear interest at an average rate of 2.1% (December 31, %). NOTE 11 Transactions with Related Parties TRANSPORTATION REVENUE Alliance has transportation agreements with shippers who are also related entities of the Partners of Alliance. The terms of the transportation revenue transactions are the same as those offered to independent parties. OTHER INCOME Alliance periodically leases equipment to a related entity. All amounts earned as a result of these transactions are presented as other income. The total income earned for the year ended December 31, 2016 is $nil (December 31, 2015 $0.5 million, December 31, 2014 $1.3 million). Related party amounts are immaterial and presented as interest income and other. Page 15

45 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 ALLIANCE PIPELINE LTD. The General Partner provides management, administrative, operational and workforce related services to Alliance under the terms of the Limited Partnership Agreement. The costs of all compensation, benefits and employer expenses for these employees are charged directly by the General Partner. The General Partner does not record any profit margin for the services charged to Alliance. Alliance does not directly employ any of the individuals responsible for managing or operating the business, nor does Alliance have any directors. Alliance reimburses the General Partner for service costs incurred under the terms of the Limited Partnership Agreement. Invoiced services are settled on a monthly basis. All amounts exchanged under this agreement are presented as general and administrative and operations and maintenance expenses. ALLIANCE PIPELINE L.P. The Executive, Managerial, and Administrative Service Agreement (EMA) allows Alliance to provide or receive services to or from Alliance U.S., an entity related by virtue of a common ownership group, in exchange for reimbursement of incurred costs plus applicable mark-up. Certain amounts reimbursed under the EMA with Alliance U.S. also include a recovery of costs plus mark-up relating to the use of common administrative assets. Services provided to Alliance U.S. are invoiced in Canadian dollars on a monthly basis. Amounts exchanged under this agreement are presented as service revenue from related parties and administrative services fee. From time to time, in order to efficiently manage linepack on the pipeline, Alliance s operational linepack may be sold to Alliance U.S. The terms of these operational linepack sale transactions are the same as those that would be associated with sales made to independent third parties. For the year ended December 31, 2016, sales of operational linepack to Alliance U.S. were $3.1 million (December 31, 2015 $nil). All amounts are presented as other related party revenue. NRGREEN POWER LIMITED PARTNERSHIP Alliance provides management, administrative, operational and workforce related services to NRGreen Power Limited Partnership (NRGreen), an entity related by virtue of a common ownership group. Agreements between Alliance and NRGreen, with respect to waste heat supply, manpower services and compressor site access, have been executed in exchange for reimbursement of incurred costs. Services are invoiced to NRGreen on a quarterly basis in the month following the quarter-end. Amounts exchanged under this agreement are presented as service revenue from related parties. AUX SABLE CANADA L.P. Alliance provides Aux Sable Canada L.P., an entity related by virtue of a common ownership group, with administrative and facility support services. Services are invoiced to Aux Sable Canada L.P. on a monthly basis. The services provided for the year ended December 31, 2016 is $nil (December 31, 2015 $0.7 million, December 31, 2014 $1.2 million). Page 16

46 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 NOTE 12 Partners' Equity PARTNERS CAPITAL Alliance is authorized to issue an unlimited number of Class A and B units. The Class A and B units are voting and participate equally in profits, losses and capital distributions of Alliance. The Class A units and the Class B units are equal with respect to all rights, benefits, obligations and limitations provided under the Limited Partnership Agreement. The Class A and B units are held equally by the Partners. The General Partner does not hold any units. Any units issued by Alliance must be first offered to the Partners in proportion to their ownership interests. DISTRIBUTIONS The General Partner may, at any time, declare for distribution to the General Partner and the holders of the Class A units and the Class B units such portion of the net income of Alliance, including any undistributed income and net of contributions, as the General Partner determines in good faith to be in the best interest of Alliance, as follows: 1% to the General Partner; and 99% to the holders of Class A units and Class B units Distributions are only permitted to be made to the General Partner and/or the holders of the Class A and Class B units quarterly and upon trustee approval. Page 17

47 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 NOTE 13 Financial Instruments FAIR VALUE OF FINANCIAL INSTRUMENTS The following table provides the fair value of financial instruments. Regulatory assets and liabilities are not considered financial instruments and therefore are not included. December 31, 2016 Carrying Value Fair Value Financial Assets Cash 9,649 9,649 Trust accounts 72,636 72,636 Trade accounts receivable 58,610 58,610 Accounts receivable from related parties 22,276 22,276 Investments 9,723 9,723 Investments held in trust 20,104 20,104 Long-term related party receivable 4,142 4,142 Financial Liabilities Accounts payable and accrued liabilities 47,069 47,069 Accounts payable to related parties 1,230 1,230 Restricted transportation deposit 83,961 83,961 Other current liabilities 2,001 2,001 Long-term debt 865, ,704 Other long-term liabilities 15,757 15,757 December 31, 2015 Carrying Value Fair Value Financial Assets Cash 3,838 3,838 Trust accounts 74,785 74,785 Trade accounts receivable 28,277 28,277 Accounts receivable from related parties 21,741 21,741 Investments 11,128 11,128 Investments held in trust 9,111 9,111 Long-term related party receivables 3,710 3,710 Financial Liabilities Accounts payable and accrued liabilities 33,041 33,041 Accounts payable to related parties Restricted transportation deposit 3,951 3,951 Other current liabilities 1,520 1,520 Long-term debt 948,532 1,088,704 Other long-term liabilities 14,902 14,902 Long-term debt includes the current portion of the liability for comparison to the fair value. The fair value of the long-term debt is based on the quoted market prices for similar instruments. At December 31, 2016, long-term debt qualifies as a Level 2 measurement. Page 18

48 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 Other financial assets and liabilities, including trade accounts receivable, and trade accounts payable, are short-term in nature, and as such, their carrying values approximate fair values. At December 31, 2016, cash qualifies as a Level 2 measurement. Previously, MAVII notes qualified as a Level 3 measurement. Following is a reconciliation of the Level 3 category financial instruments. Gains reflect changes in the fair value of Level 3 financial instruments and are presented as a component of interest and other income. Reconciliation of Level 3 Financial Instruments December Opening balance 11,128 10,894 Liquidation proceeds (2,332) - Gains recognized in net income Transfer to Level 2 (9,723) 234 Closing balance - 11,128 INVESTMENT IN MAVII NOTES On January 22, 2009, Alliance received a $12.4 million investment in MAVII notes in exchange for Alliance's investment in asset-backed commercial paper. The composition of the MAVII notes consists of various classes of notes, which carry separate ratings from DBRS and are presented below: Class A-1 notes 49% AA (low) Class A-2 notes 41% A Class B notes 7% No rating Class C notes 3% No rating While the legal maturity of these notes is July 15, 2056, the repayment date of the notes is expected to be January 23, To date, Alliance has estimated the fair value loss on the investment to be $0.4 million at December 31, 2016 (December 31, $1.3 million, December 31, $1.5 million). Fair Value of MAVII Notes At December 31, 2016, MAVII notes qualify as a Level 2 measurement, the carrying value approximates the fair value as the administrator of the MAVII notes publicly announced that Class A-1, Class A-2, and Class B notes are expected to be paid in full on January 23, Active market quotes were not available in measuring the fair value of the MAVII notes. INVESTMENTS HELD IN TRUST The Trust is managed by CIBC Trust Corporation and invests in Canadian federal and provincial government bonds in accordance with the Statement of Investment Policies and Practices approved by the NEB. Page 19

49 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 The Trust qualifies as a level 2 measurement and is measured at fair value based on quoted market prices for similar instruments. Changes in fair value are recognized in the Consolidated Statements of Income as a component of interest income and other. NOTE 14 Risk Management CREDIT RISK Alliance is exposed to credit risk, which is the risk that a shipper or counterparty will fail to perform an obligation or settle a liability resulting in a financial loss to Alliance. Alliance s business is concentrated in the natural gas transportation industry and is dependent upon the ability of its shippers to pay monthly revenue charges. A majority of the shippers operate in oil and gas exploration and development, energy marketing or transportation industries. They may be exposed to long-term downturns in energy commodity prices, including the price for natural gas, or other credit events impacting these industries. Alliance limits its exposure to credit risk by requiring shippers who fail to maintain specified credit ratings or a suitable financial position to provide acceptable security, generally equal to three months of transportation charges. Should shippers be unable to fulfill their contractual obligations with Alliance and if suitable replacement shippers are not available, distributions to Alliance s partners may be impacted. Transportation revenue was collected as due in Effective December 1, 2015, Alliance s shipper profile changed, potentially exposing Alliance to additional credit risk due to the introduction of these new shippers credit worthiness. Shipper related credit risk is mitigated by Alliance s credit approval process and on-going monitoring procedures. Transportation security may consist of cash deposits or letters of credit and/or other security acceptable to Alliance and its lenders. At December 31, 2016, Alliance holds letters of credit of $66.5 million (December 31, 2015 $69.8 million) and cash deposits and accrued interest of $5.8 million (December 31, 2015 $4.0 million). At December 31, 2016, and December 31, 2015, the shipper trade accounts receivable balance outstanding that meets the definition of past due or impaired is $nil. The accounts receivable balances relate to customers in the oil and gas industry and are subject to industry credit risks. Alliance s cash is held with major financial institutions, minimizing the risk of non-performance by counter parties. LIQUIDITY RISK Liquidity risk is the risk that Alliance will not be able to meet its financial obligations, including commitments and guarantees, as they become due. Alliance manages its liquidity risk by ensuring that it has access to sufficient funds to meet its obligations. Alliance forecasts cash requirements to ensure funding is available to settle financial liabilities when they become due. In the normal course of business, Alliance accesses cash, undrawn committed bank credit facilities, owner funding or cash from operations to pay current and long-term liabilities. Alliance is in compliance with all the terms and conditions of its committed credit facilities. Therefore, the entire credit facility is available and the banks are obligated to fund and have been funding Alliance under the terms of the facility. Annual cash inflows are collected based on firm contracted values per month, as well as seasonal and short-term firm and interruptible contracts, over the year. The cash outflows are less predictable and require the use of a revolving credit facility to manage short-term working capital fluctuations. Page 20

50 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 Alliance balances the operating, investing and financing of cash through on-going operations of its business. Alliance is required to manage all cash and borrowings on the credit facility to maintain an adequate ability to cover operational and business needs as determined by the debt service coverage ratio as defined in the amended and restated Common Agreement dated December 1, The debt service coverage ratio is defined as the ratio of cash inflows minus operating costs to the scheduled debt service payable for a twelve month period. The ratio is required to be 1.40 or above. At December 31, 2016 the debt service coverage ratio is 2.28 (December 31, ). A quantitative maturity analysis of non-derivative financial liabilities at December 31, 2016 to the contractual maturity dates is as follows: Up to 1 Year 1-3 Years 3-5 Years Over 5 years Total Accounts payable and accrued liabilities 47, ,069 Accounts payable to related parties 1, ,230 Current portion of long-term debt 83, ,961 Long-term debt (excluding deferred financing fees) - 288, , , ,612 Restricted transportation deposit 5, ,822 Other long-term liabilities - 14,183 1,574-15, , , , , ,804 Alliance considers its expected cash flows from financial assets, cash and accounts receivable in assessing and managing liquidity risk. Alliance s existing cash resources and accounts receivable are sufficient to cover current cash outflow requirements. SIGNIFICANT SHIPPERS Alliance has three shippers that each represent 24%, 19% and 14% of contracted revenue (December 31, %, 13%, and 12%, December 31, %, 14% and 13%). Total contracted revenue based on transportation agreements from these shippers amounted to $246.2 million for the year ended December 31, 2016 (December 31, $194.3 million, December 31, $195.3 million). FOREIGN EXCHANGE Alliance is exposed to foreign exchange risk, primarily on its U.S. dollar and Euro purchases of pipeline assets and maintenance services. To manage this risk, policies have been implemented which allow Alliance to minimize the exposure to volatility on foreign currency markets by entering into foreign currency derivatives, or by buying and holding foreign currency. Alliance undertakes hedging activities, as authorized and approved by the Board of Directors, under the risk management policy, for forecasted operating and approved capital expenditures. Alliance is not currently engaged in hedging activities. Page 21

51 Alliance Pipeline Limited Partnership For the year ended December 31, 2016 NOTE 15 Commitments and Contingencies OPERATING LEASES Alliance has lease commitments for office premises, vehicles and field and office equipment. The expected minimum lease payments for the years ending December 31 are as follows: , , , , ,437 34,808 Alliance expensed $4.7 million in operating leases for the year ended December 31, 2016 (December 31, $4.0 million, December 31, $4.7 million). SERVICE AGREEMENTS Alliance has a service agreement contract with a manufacturer of compressor equipment which expires in December The service agreement relates to the maintenance of Alliance s compressor equipment. Alliance has outstanding commitments of US $0.2 million ($0.2 million) per month and 0.02 million ($0.03 million) per month relating to this contract. These fees may escalate each year based on an indexed price formula contained within the contract. CONTINGENCIES Alliance is, or may be named as, a party to various legal claims associated with its normal course of business. As at the date of these consolidated financial statements, the resolution of these claims is not expected to have a material adverse impact on the operations or financial position and is not accrued in these consolidated financial statements. CROSS-COLLATERALIZATION The senior debt of Alliance and Alliance U.S. contain cross-default provisions, whereby an event of default by one entity constitutes an event of default by the other. Alliance and Alliance U.S. are in compliance with all applicable debt covenants at December 31, The following assets are pledged as collateral to Alliance s lenders and to the lenders of Alliance U.S.: All transportation contracts and all documents and security provided by the shipper pursuant to their transportation contracts; Other operative documents (including permits, government consents and any insurance policies); The trust accounts (except the note proceeds account will be pledged solely for the benefit of note holders); Aux Sable security documents; and Alliance s real property and tangible personal property. NOTE 16 Subsequent Events Subsequent events were evaluated until February 2, 2017 upon which date the consolidated financial statements became available to be issued. Page 22