ALLIANCE PIPELINE LIMITED PARTNERSHIP

Transcription

1 ALLIANCE PIPELINE LIMITED PARTNERSHIP Management's Discussion and Analysis

2 Results of Operations Three Months Ended March ($ millions, except where noted) Operational Results Average long-term firm volume (mmcf/d) 1, ,355.2 Average seasonal/short-term firm volume (mmcf/d) Average PITS/IT volume (mmcf/d) Total Average Transportation Volume (mmcf/d) 1, ,629.3 Financial Results Transportation revenue Service and other revenue Total Revenue General and administrative expenses Operations and maintenance expenses Property tax expenses Administration service agreement fee Total Operational Expenses Depreciation expense Interest expense Interest income and other (0.4) (1.4) Net Income EBITDA (1) Cash provided by operating activities Distributions paid (1) Refer to Non-GAAP Financial Measures. Certain 2017 balances have been adjusted for the impact of the adoption of ASC 606. Page 1

3 About this Document The following (MD&A) is as of April 26, 2018 and should be read in conjunction with our condensed interim consolidated financial statements for the three months ended March 31, 2018 and the audited consolidated financial statements for the year ended December 31, All amounts in this MD&A are in millions of Canadian dollars except per unit amounts. All financial information in this MD&A has been prepared in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP). This MD&A reviews the significant events and transactions that impacted our performance during the three months ended March 31, Throughout this MD&A, the terms, we, us, our, and Alliance Canada mean. Collectively, Alliance Canada and Alliance U.S. are referred to as the System. Abbreviations and acronyms that are not defined in this document are defined in the glossary of terms on page 14. The Alliance System Alliance Canada and Alliance U.S. provide a market based suite of services to transport rich natural gas from the WCSB and Bakken to the Chicago area. Alliance Canada s Services Offering combines tolling flexibility and predictability, together with enhanced natural gas transportation services that create economic value for shippers. Alliance Canada offers firm, seasonal/short-term firm, and PITS/IT services. In addition, the ATP provides a range of opportunities for other market participants to transact on the pipeline. Additional information about our business is available at and on SEDAR at Capacity Expansion Study In response to the high demand for our transportation services, Alliance Canada and Alliance U.S. have announced a binding open season for expansion capacity commitments. The open season is for an estimated 400 million cubic feet per day of additional firm service, commencing at an anticipated in-service date in the fourth quarter of The two-month open season began on March 28, 2018 and closes May 30, Implementation of an Owner-Operating Model On March 27, 2018, Alliance Pipeline Ltd., as the General Partner of Alliance Canada, announced a conversion to an owner-operator model which will manage the operations and administration of the Alliance System. The implementation of the new model is expected to be completed during the summer of The new model will continue to focus on safe and reliable operations, while enabling producers to maximize the value of their product. Page 2

4 Transportation Volumes Contracted Transportation Volumes to the Border Total average contracted transportation volumes to the border increased 8.4 mmcf/d to 1,637.7 mmcf/d for the three months ended March 31, 2018 compared to 1,629.3 mmcf/d for the same period in Average Long-Term Firm Volume Average long-term firm volumes decreased by 14.1 mmcf/d to 1,341.1 mmcf/d for the three months ended March 31, 2018 compared to 1,355.2 mmcf/d for the same period in This decrease was primarily due to lower long-term firm volumes contracted offset by an increase in shipper demand for short-term firm volume contracts. Average Seasonal/Short-Term Firm Volume Average seasonal/short-term firm volumes increased by 2.9 mmcf/d to mmcf/d for the three months ended March 31, 2018 compared to mmcf/d for the same period in This increase was primarily due to higher shipper demand for short-term and seasonal services contracts. Average PITS/IT Volume Average PITS/IT volumes increased 19.6 mmcf/d to 77.5 mmcf/d for the three months ended March 31, 2018 compared to 57.9 mmcf/d in the same period for This increase was primarily due to higher demand for PITS/IT services as a result of favourable market conditions driven by a higher Alberta Chicago basis. Transportation Revenue Transportation revenue increased $13.9 million to $140.7 million for the three months ended March 31, 2018 compared to $126.8 million for the same period in Transportation revenue, excluding ancillary revenue, includes the recognition of non-cash compressor fuel gas that is collected from shippers in-kind as part of the consideration received in exchange for transportation services. Transportation revenue is recognized in a manner consistent with the underlying shipper agreements and contains adjustments related to the recoverable cost variance and shipper settlements. Long-Term Firm Transportation Revenue Long-term firm transportation revenue decreased $1.1 million to $95.6 million for the three months ended March 31, 2018 compared to $96.7 million for the same period in The decrease was primarily due to a decrease in the index price used to value compressor fuel gas collected in-kind, partially offset by an increase in the fuel gas volumes collected in-kind from shippers. Toll Receipts Toll receipts increased $1.2 million to $89.4 million for the three months ended March 31, 2018 compared to $88.2 million for the same period in Toll receipts increased due to an increase in revenue from staged receipt contracts and relocation services provided to shippers, compared to the prior year. Page 3

5 Seasonal/Short-Term Firm Seasonal/short-term firm transportation revenue increased $10.7 million to $35.2 million for the three months ended March 31, 2018 compared to $24.5 million for the same period in This increase was due to higher pricing obtained from seasonal and daily services when compared to the prior year. Toll Receipts Toll receipts increased $11.7 million to $34.7 million for the three months ended March 31, 2018 compared to $23.0 million for the same period in This increase was due to higher pricing obtained from seasonal and daily receipt and delivery services when compared to the prior year. PITS/IT Services PITS/IT services increased $3.7 million to $9.2 million for the three months ended March 31, 2018 compared to $5.5 million for the same period in The increase was primarily due to higher demand for PITS/IT services, as well as strong market conditions which were reflected in the Alberta Chicago basis when compared to the prior year. Toll Receipts Toll receipts increased $3.7 million to $8.7 million for the three months ended March 31, 2018 compared to $5.0 million for the same period in This increase was due to higher demand for PITS/IT services as well as strong market conditions. Non-Cash Fuel Consideration For the three months ended March 31, 2018, the consideration recognized for the non-cash compressor fuel gas collected was $10.4 million, compared to a valuation of $11.8 million for the same period in The decrease was primarily due to a decrease in the index price used to value compressor fuel gas collected in-kind, partially offset by an increase in the fuel gas volumes collected in-kind from shippers. Three Months Ended March Long-term firm Seasonal/short-term firm PITS/IT Total non-cash fuel consideration balances have been adjusted for the impact of the adoption of ASC 606. See Note 11 to the condensed interim consolidated financial statements for the three months ended March 31, 2018 for details of the impact on the prior period condensed interim consolidated financial statements. Prior period information in the MD&A has been adjusted to reflect the impacts of the adoption of ASC 606. Ancillary Revenue Ancillary revenues increased $0.6 million to $0.7 million for the three months ended March 31, 2018 compared to $0.1 million for the same period in 2017 due to an increase in the shipper demand for park and loan services. Service and Other Revenue Service and other revenue decreased $1.5 million to $16.3 million for the three months ended March 31, 2018, compared to $17.8 million for the same period in The decrease in service and other revenue was related to reductions in service revenue from related parties and lower pricing on shipper cash out transactions, partially offset by revenues from the completion of a customer funded pipeline interconnection. Page 4

6 Operational Expenses Operational expenses decreased $7.1 million to $48.6 million for the three months ended March 31, 2018 compared to $55.7 million for the same period in General and Administrative Expenses General and administrative expenses decreased $1.4 million to $18.0 million for the three months ended March 31, 2018 compared to $19.4 million for the same period in This decrease was due to lower costs related to employee compensation compared to the prior year. Operations and Maintenance Expenses Operations and maintenance expenses decreased $5.0 million to $23.7 million for the three months ended March 31, 2018 compared to $28.7 million for the same period in This decrease was due to lower costs related to line pack management activities, settlement of shipper imbalances and lower non-cash fuel gas consumed. This decrease was partially offset by an increase in consulting fees related to the capacity expansion study. Property Taxes Property taxes decreased $0.6 million to $5.9 million for the three months ended March 31, 2018 compared to $6.5 million in the same period in This decrease was due to reductions in property taxes in Alberta and Saskatchewan. Administrative Service Agreement Fee Administrative service agreement fee expense was $1.0 million for the three months ended March 31, 2018, comparable to $1.1 million the same period in Depreciation Expense Depreciation expense was $16.8 million, a decrease of $1.0 million for the three months ended March 31, 2018, compared to $17.8 million for the same period in This decrease is due to reduced depreciation expense as some pipeline in-service assets were fully depreciated in Q Interest Expense Interest expense decreased $1.2 million to $13.3 million for the three months ended March 31, 2018, compared to $14.5 million for the same period in 2017 This decrease was due to the declining long-term debt balances as a result of scheduled principal payments on the senior secured notes. Interest Income and Other Interest income and other decreased $1.0 million to $0.4 million for the three months ended March 31, 2018 compared to $1.4 million for the same period in This decrease was due to insurance recoveries and MAV II note redemptions that occurred in the prior year. Similar events did not occur in the current period. Net Income Net income increased $20.7 million to $78.7 million for the three months ended March 31, 2018 compared to $58.0 million for the same period in The increase in net income was due to higher seasonal/short-term firm and PITS/IT services revenue, and lower operational expenses, interest expense and depreciation which were partially offset by lower interest income and other. Page 5

7 Earnings before Net Interest, Income Taxes, Depreciation and Amortization (EBITDA) (1) EBITDA increased $18.5 million to $108.5 million for the three months ended March 31, 2018 compared to $90.0 million for the same period in This increase was due to higher net income compared to the same period in the prior year. Cash Provided by Operating Activities Cash provided by operating activities decreased $0.8 million to $102.0 million for three months ended March 31, 2018, compared to $102.8 million for the same period in This decrease was due to lower working capital levels partly offset by higher net income. Distributions Paid Distributions paid increased $19.0 million to $59.0 million for the three months ended March 31, 2018 compared to $40.0 million for the same period in This increase was primarily due to improved operating performance and available liquidity. (1) Refer to Non-GAAP Financial Measures. Page 6

8 Selected Quarterly Financial Information Q Q Total revenues Net income EBITDA (1) Distributions paid Q Q Q Q Q Q (1) Refer to Non-GAAP Financial Measures. Certain 2017 balances have been adjusted for the impact of the adoption of ASC 606. The market based suite of services provided by Alliance Canada continues to offer shippers flexibility and a competitive cost structure, which provides Alliance Canada consistent and favourable performance and operational results. Increased production and take away constraints in the WCSB supports demand for transportation services due to Alliance Canada s close proximity to the Montney and Duvernay areas. In addition, market conditions led to strong pricing and our solid asset performance contributed to positive results over the quarters presented. During the periods presented in the table above, Alliance Canada s results were impacted by the following factors and trends: 2018 Revenues remained strong as a result of continuous demand for Alliance Canada s market based suite of services, with continued strong pricing for seasonal and PITS/IT services and 2016 Strong revenues as a result of continuous demand for Alliance Canada s market based suite of services, with strong pricing for seasonal and ancillary services, particularly in Q Net income was higher as a result of strong revenue and lower operations and maintenance expenses, general and administrative expenses and interest expenses. EBITDA reflects the strong operational performance and a reduction in operating costs that contributed to higher net income. Increased Partner distributions paid in Q1 2018, compared to Q1 2017, were due to improved operating performance and available liquidity. Net income reflects strong revenues, operational performance initiatives, and reduced interest costs due to declining long-term debt balances as a result of scheduled principal payments on the secured senior notes. EBITDA reflects the strong operational performance that contributed to higher net income and the consistent shipper support in the market based suite of services. Partner distributions paid are supported by Alliance Canada s solid asset performance, favourable market conditions for seasonal and ancillary services in 2017, and available liquidity. Page 7

9 Liquidity and Capital Resources March 31 December Working capital Variable rate debt (1) Revolving credit facility Total variable rate debt outstanding Total fixed rate debt outstanding (1) Total debt outstanding Cash and trust accounts Undrawn portion of the revolving credit facility Total cash and undrawn portion of the revolving credit facility (1) Carrying value. Certain 2017 balances have been adjusted for the impact of the adoption of ASC 606 Liquidity and Capital Liquidity risk is managed to ensure access to sufficient funds required to meet obligations. Alliance Canada forecasts cash requirements to ensure funds are available to settle liabilities as they become due. The primary sources of liquidity are transportation toll receipts, undrawn revolving credit facility and funding from the Partners. We hold in our debt service reserve account an amount equal to at least six months of scheduled interest and principal payments, which is funded by letters of credit as part of the revolving credit facility. The undrawn revolving credit facility at March 31, 2018 and the total of cash and trust deposits are, in management s view, adequate to meet on-going liquidity and capital resource requirements. Capital Management Alliance Canada s objective in managing capital is to optimize our capital structure so we can ensure a healthy financial position to support our operations and growth opportunities. Capital is managed by funding our rate base to a maximum ratio of 70% debt to 30% equity. Senior debt consists of senior notes, including the current portion, and revolving credit facility drawings. Rate base does not have a standardized meaning under U.S. GAAP. Refer to Non-GAAP Financial Measures. We monitor our capital structure by periodically calculating the ratio of senior debt to rate base to ensure compliance with debt covenant requirements contained in financing agreements, which set a maximum borrowing amount for senior debt that will not exceed 70% of the rate base by more than U.S. $10.0 million. We are in compliance with all the terms and conditions of the covenants associated with our senior debt for the three months ended March 31, 2018 and expect to remain compliant throughout Page 8

10 Distributions to Partners Distribution decisions are approved by the Board of Directors of the General Partner, on the basis of cash flow, financial requirements and other conditions existing at the time. Distributions are subject to Alliance Canada satisfying certain financing conditions, including a minimum Debt Service Coverage Ratio requirement. A distribution of $36.1 million was declared and payable to our Partners and General Partner on April 27, We intend to continue making Partner distributions on a regular basis. Related Party Transactions Alliance Canada provides transportation services to a number of shippers that are related entities of the Partners of Alliance Canada. The terms of these contracts are the same as those agreed to with independent third parties. During the quarter Alliance Canada received billings from Enbridge affiliates to assess the commercial feasibility and prepare a preliminary cost estimate for the capacity expansion project. All amounts incurred to date are presented as operating and maintenance expenses. There have been no other material changes to the nature or the type of related party transactions in the quarter. Legal Matters Alliance Canada is subject to various legal actions which arise in the normal course of business. While the final outcome of such actions cannot be predicted with certainty, management believes that the resolution of such actions in relation to current legal matters will not have a material impact on Alliance Canada s financial position or results of operations. Environmental Regulation The Alberta Government s Carbon Competitiveness Incentive (CCI) regulation that became effective on January 1, 2018, replaced the Specified Gas Emitters Regulation (SGER). Carbon tax expenses throughout 2018 are expected to remain consistent with prior year costs. Risks and Uncertainties Alliance Canada is subject to certain risks and uncertainties. Readers should carefully consider, among other things, the risks described in this document, including the risks and uncertainties listed in the Forward-Looking Information section, and the Risks and Uncertainties section set forth in the MD&A for the year ended December 31, 2017, which are incorporated by reference herein. Credit Risk Alliance Canada is exposed to credit risk as the business is concentrated in the natural gas transportation industry and its revenue is dependent upon the ability of shippers to pay monthly demand charges. A majority of the shippers operate in the oil and gas exploration and development, energy marketing or transportation industries and may be exposed to long-term downturns in energy commodity prices, including the price for natural gas, or other credit events impacting these industries. Should a shipper be unable to fulfill their contractual obligations and if a suitable replacement shipper(s) were not readily available, Alliance Canada s ability to fund our financing and operating costs and distributions to Partners may be impacted. We limit, to an extent, our exposure to this credit risk by requiring shippers to provide letters of credit or other suitable security if shippers do not maintain specified credit ratings or a suitable financial position. We expect that, should a shipper be unable to fulfill its contractual obligations in the future, re-contracting of the repudiated contract is possible, although there may be a risk that the revenue may be lower than the original transportation contract. The risk of non-performance of our shippers is mitigated Page 9

11 by our credit approval process and on-going monitoring procedures. Currently there are no material accounts receivable that meet the definition of past due and/or impaired. Alliance Canada will continue to monitor both current and potential shippers based on our credit approval process. The credit risk arising from cash deposits is minimal as cash is held with major financial institutions. As at March 31, 2018, Alliance Canada has investments held in the Trust. Aside from these we do not hold any other short or long-term investments. Critical Accounting Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions. Management s estimates and assumptions affect the reported amounts of assets and liabilities at the date of the condensed interim consolidated financial statements, as well as the amounts of revenues and expenses recorded during the reporting period. Estimates and assumptions are based on historical experience, current conditions and various other factors and are believed to be reasonable under the circumstances. Due to changes in facts and circumstances and the inherent uncertainty involved in making estimates, actual results may differ significantly from current estimates. Refer to the Alliance Canada MD&A for the year ended December 31, 2017 for a detailed discussion on critical accounting estimates. New Accounting Policies Revenue from Contracts with Customers Effective January 1, 2018, Alliance Canada adopted ASC 606, Revenue from Contracts with Customers, issued by the Financial Accounting Standards Board using the full retrospective transition method. The primary impact of the adoption of ASC 606 on the Alliance Canada condensed interim consolidated financial statements is the change in measurement of the compressor fuel gas collected from shippers in exchange for transportation services. Prior to the adoption of ASC 606, compressor fuel gas collected was included in the transaction price of the transportation services at the volume of gas consumed. Under ASC 606, the amount of compressor fuel gas that is recognized in the transaction price is measured at the volume of compressor fuel gas collected. Per ASC 606, the classification of the difference between the volume of compressor fuel gas collected and the volume of compressor fuel gas consumed on the Consolidated Balance Sheets has changed. Prior to adoption of ASC 606, the difference was classified and measured as gas imbalance. Under the new guidance, the difference is recognized as part of inventory. Revenue from shipper imbalance transactions is recorded as other revenue and other revenue from related parties. Prior to January 1, 2018, revenue from shipper imbalance transactions was recorded as part of transportation revenue. Certain other insignificant items have been reclassified between revenue categories. See Note 11 of the condensed interim consolidated financial statements for the three months ended March 31, 2018 for details of the impact on the prior period condensed interim consolidated financial statements. Prior period information in the MD&A has been adjusted to reflect the impacts of the adoption of ASC 606. Future Accounting Policies Leases Alliance is currently evaluating the impact of the adoption of ASU Leases effective January 1, 2019, and has not yet determined the effect on the consolidated financial statements. Page 10

12 Non-GAAP Financial Measures Certain non-gaap financial measures referred to in this MD&A are not measures recognized by U.S. GAAP and therefore may not be comparable to similar measures presented by other entities. The following non-gaap financial measures are provided to assist readers of the MD&A and condensed interim consolidated financial statements with their understanding of Alliance Canada, including their knowledge of its ability to generate cash and fund operations. Management considers these non-gaap financial measures to be important indicators in understanding its performance. Readers are cautioned that non-gaap measures should not be construed as alternatives to other measures of financial performance calculated in accordance with U.S. GAAP. Rate Base: Rate base generally consists of the value of property, as used by the utility, in providing services, in accordance with rules set by a regulatory agency. Capital is managed by funding our rate base to a maximum ratio of 70% debt to 30% equity. Senior debt consists of senior notes, including the current portion, and revolving credit facility drawings. Alliance Canada utilizes this measure to monitor our capital structure by calculating the ratio of senior debt to rate base to ensure compliance with debt covenant requirements contained in our financing agreements. EBITDA: EBITDA is a non-gaap measure and is reconciled from the components of net income. We report this measure as a supplementary indicator of our operating performance to better reflect Alliance Canada s operating cash flow. Non-GAAP Reconciliations Net Income to EBITDA Three Months Ended March Net income Interest expense Interest income (0.3) (0.3) Depreciation expense EBITDA Certain 2017 balances have been adjusted for the impact of the adoption of ASC 606. Page 11

13 Disclosure Controls and Procedures Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management on a timely basis, so that appropriate decisions can be made regarding public disclosure. Senior management includes the co-presidents and the Senior Vice President and CFO. As of the end of the period covered by this report, Alliance Canada s senior management evaluated the effectiveness of the design and operation of its disclosure controls and procedures, under the supervision of, and with the participation of the co-presidents and CFO. The inherent limitations in all control systems are such that they can provide only reasonable, not absolute, assurance that all control issues and instances of fraud or error, if any, within Alliance Canada have been detected. Based on senior management s evaluation, the co-presidents and CFO have concluded, subject to the inherent limitations noted above, that Alliance Canada s disclosure controls and procedures, as defined in National Instrument , Certification of Disclosure in Issuers Annual and Interim Filings, are effective at a reasonable assurance level to ensure that material information relating to Alliance Canada is made known to management on a timely basis and is included in this report. Internal Control over Financial Reporting Alliance Canada s management, with the participation of its co-presidents and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of the CFO, Alliance Canada s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. No changes were made to our financial internal controls during three months ended March 31, 2018 that have materially impacted, or are reasonably likely to materially impact, our financial reporting. The design and effectiveness of internal controls over financial reporting was assessed as at March 31, 2018 and based on this evaluation, the co-presidents and CFO have concluded that, subject to the inherent limitations noted above, internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Page 12

14 Forward-Looking Information Some information in this MD&A is forward-looking. All information about activities, events or developments that we think may occur in the future is forward-looking information. Forward-looking information typically consists of statements containing words such as may, estimate, anticipate, believe, expect, plan, intend, target, project, proposed, forecast or similar words. Forward-looking information in this MD&A includes statements about: our anticipated business projects including the timing, scope, and ability to achieve our expected results; our future financial and operating performance; the System s ability to accommodate new receipt volumes with variable gas compositions; whether available credit facilities can sufficiently fund our operations and planned capital expenditures; and our ability to remain compliant with the terms and conditions of our senior debt. The risks and uncertainties that may impact the operations and development of our business include the following: our ability to successfully implement our corporate strategy; changes in natural gas production and the NGLs content of natural gas from exploration and production areas we serve, such as the Montney and Duvernay shale plays of Northeast British Columbia and Northwest Alberta and the Bakken shale play in North Dakota; operational issues at Aux Sable near Chicago, Illinois, where the rich gas we transport is processed and NGLs are extracted; interruption of operations due to natural disasters, sabotage (including cyber-attacks) or other causes; changes in sales prices for natural gas and NGLs in the delivery markets we serve; continued receipt of regulatory approvals allowing us to provide services under our tariffs and tolls; the availability and price of capital; customer credit risk and continued existence of contracted customers; changes in regulatory, environmental, and other laws and regulations; competitive factors in the pipeline, natural gas and NGLs industries; the availability of capacity on downstream pipelines in the delivery markets we serve; the impact of North American and international energy market conditions on our customers; the availability of energy commodities; the operating performance of our pipeline assets; and fluctuations in interest rates. This list is not exhaustive. We cannot predict the impact of any particular risk, uncertainty or influencing factor on a forward-looking statement because we would need to assess it at that time in light of information available then. Each risk, uncertainty and influencing factor is independent of the others and each one, or a combination, may lead to different results. Although we believe that the expectations conveyed by the forward-looking information are reasonable based on information available to us on the date we prepared this MD&A, we can give no assurances about future results. Readers should not place undue reliance on the forward-looking information, as actual results achieved may vary materially from the information in this MD&A. In addition, we made the forward-looking statements in this MD&A on April 26, 2018 and we have no obligation to publicly update or revise any forward-looking information. This cautionary statement expressly qualifies all forward-looking information in this MD&A. Page 13

15 Glossary of Terms Accounting Terms General and Operational Terms AFUDC ASC Allowance for funds used during construction Accounting Standards Codification ACE Alliance Chicago Exchange delivers natural gas transported by the System to downstream markets after the NGLs have been extracted at Aux Sable ASU ARO EBITDA FASB U.S. GAAP Accounting Standards Update Asset Retirement Obligation Earnings before net interest, income taxes, depreciation and amortization Financial Accounting Standards Board Generally accepted accounting principles in the United States of America Operating Income Total revenue less total expenses, excluding net interest expense and other income Units of Measure mmcf mmcf/d million cubic feet million cubic feet per day ATP Alliance Trading Pool is the Canadian trading pool allowing receipt and delivery shippers to trade gas Alliance Canada Alliance Pipeline Limited Partnership (the operator of the Canadian portion of the System) Alliance U.S. Alliance Pipeline L.P. (the operator of the United States portion of the System) Aux Sable CFO EMA Aux Sable Liquid Products L.P. (the owner of an NGL extraction facility that connects to the terminus of the System) Chief Financial Officer Executive, Managerial and Administrative service agreement between Alliance Canada and Alliance U.S. bcf/d billion cubic feet per day General Partner Alliance Pipeline Ltd. manages Alliance Canada and is allocated 1% of net income and loss Page 14

16 GHG HCDP IT MD&A NEB NGLs Greenhouse gas Hydrocarbon Dewpoint Interruptible Transportation Management s Discussion and Analysis National Energy Board Natural Gas Liquids which includes ethane, propane, butane and condensates Partners Enbridge Income Partners Holdings Inc. and an affiliate of Pembina Pipeline Corporation are collectively known as the Partners of Alliance Canada and are equally allocated 99% of net income and loss Trust U.S. WCSB YTD As required by the NEB, Alliance Canada collects abandonment funds through a pipeline abandonment transportation surcharge as defined in the Tariff and these funds are set aside in an abandonment trust (Trust) until such time that the funds are required to settle pipeline abandonment related expenditures. United States of America Western Canadian Sedimentary Basin Year-to-Date PITS Services Offering System Tariff Toll Receipts Priority Interruptible Transportation Services The at-risk transportation service model that commenced on December 1, 2015 Collectively, the System refers to the portions of the pipeline owned by Alliance Canada and Alliance U.S. Tariff means the schedule of tolls, terms and conditions, and rules applicable under the NEB Act to provide transportation service by Alliance Canada to shippers Transportation revenue collected from shippers, excluding noncash fuel revenue Page 15