Partnership Profile December 2017
Forward-Looking Information and Non-GAAP Measures This presentation may contain forward-looking statements within the meaning of securities laws. Forward-looking statements can be identified by words such as believes, expects, intends, anticipates, forecasts, estimates and other words or expressions of similar reference to future periods. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. As such, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward looking statements include but are not limited to: the potential impact of any final federal tax reform, change in customer base and contract profile; failure of announced dropdowns from TransCanada to close and anticipated dropdowns from TransCanada to materialize; failure of acquisitions to be immediately accretive to cash per common unit generated from operations; changes in availability of natural gas from existing supply basins; and other risks inherent in an investment in us as discussed in our most recent Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission. Any forward-looking statement made in this presentation speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may occur from time-to-time and it is not possible to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. We use the non-gaap financial measures EBITDA and Distributable cash flow as a supplement to our GAAP financial statements. EBITDA is an approximate measure of our operating cash flow during the current earnings period. Distributable cash flow provides a measure of distributable cash generated during the current earnings period. It measures our earnings before deducting depreciation and amortization and it includes cash distribution from our equity investments less income from those equity investments. These measures are performance measures presented to assist investors in the evaluation of our business performance. We believe these measures provide additional meaningful information in evaluating our financial performance and cash generating capacity. These non-gaap financial measures are provided as a supplement to GAAP financial results and are not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. A reconciliation to the most closely related GAAP measures is included in our most recent Management s Discussion and Analysis filed with the SEC. These measures do not have any standardized meaning prescribed by GAAP. They are, therefore, considered to be non-gaap measures and are unlikely to be comparable to similarly titled measures presented by other entities.
TC PipeLines, LP (TCP) Investment Proposition Track Record of Delivering Long-Term Value 13% average annual return since 1999 Disciplined Growth Anticipate dropdowns from TransCanada together with organic growth from our portfolio of natural gas assets Low-Risk Energy Infrastructure Assets Almost entirely underpinned by long-term, ship-or-pay contracts Solid Financial Position Conservative balance sheet Investment grade credit ratings Strong History of Distribution Increases
TC PipeLines, LP (NYSE:TCP) Portfolio of eight natural gas pipelines Growing industry, clean fuel Serves regionally diverse basins and customer bases Limited variability FERC regulated with long-term, ship-or-pay contracts No commodity price exposure Very little volume risk Financial flexibility and liquidity Solid balance sheet Investment grade credit ratings MLP of TransCanada Corporation TransCanada views TC PipeLines as a core element of its strategy and a meaningful financing option as it executes its sizable capital growth program Broad footprint provides key links between low-cost natural gas supply and key markets
2017 Accomplishments Significant growth in our asset base with $765 million dropdown acquisition of 49.3 percent of Iroquois and 11.8 percent of PNGTS Further diversified our geographic footprint and access to key markets Achieved continued rate stability across our portfolio Obtained positive results in rate reviews at Great Lakes and Northern Border Issued $500 million of ten-year senior unsecured notes at a competitive interest rate of 3.90 percent to partially fund dropdown transaction Contracted strong volumes on GTN, Great Lakes and Northern Border Advanced Portland XPress Project Held a successful open season and proceeding with PNGTS expansion Advancing significant growth while achieving continued stability for our pipeline assets
Key Focus Areas and Future Opportunities Advance Portland XPress project Low-cost, brownfield compression to increase capacity to ~0.3 Bcf/d Capex approximately $80 million In-service dates phased-in over 3 years beginning November 2018 Near-term organic opportunities from WCSB Realize benefits from additional contracts on GTN and Great Lakes GTN substantially contracted to 2020 and beyond Seek further opportunities for growth across our natural gas business Continue to develop network of critical gas infrastructure
Strong GP in TransCanada (TSX, NYSE:TRP) One of North America s Largest Natural Gas Pipeline Networks 56,900 miles of pipeline 653 Bcf of storage capacity Transports approximately 25% of North America s natural gas demand Premier Liquids Pipeline System 3,000 miles of pipeline Transports 20% of Western Canadian exports One of the Largest Private Sector Power Generators in Canada 11 power plants, 6,100 MW Enterprise value over C$100 billion Portfolio of complementary energy infrastructure assets
Assets Highly Interconnected to TransCanada s Asset Portfolio TransCanada s NGTL System expanding to serve growing WCSB production Export capacity from Alberta and British Columbia to step up by 650 MMcf/d between 2018 and 2020 This capacity increase is approximately matched with corresponding contracts on GTN TransCanada s Mainline load attraction service TBO contract on Great Lakes for 711,000 Dth/d commenced on November 1, 2017 Potential for follow-on offerings TransCanada s Mainline capacity enhancements in Eastern Canada Portland XPress Project (~$80 million) to proceed concurrent with upstream capacity expansions Great Lakes access to Michigan natural gas storage fields Provides key connection for TransCanada s ANR system and Mainline customers TCP benefits from GP s initiatives on upstream pipelines
TransCanada s Funding Program Through 2020 $Billions 30 TransCanada s 2018 2020 Outlook 25 20 Dividends & NCI Distributions DRP Proceeds Portfolio Management, ATM (as appropriate) & Other Hybrid Securities & Preferred Shares Senior Debt, Commercial Paper & Cash Numerous Levers Available to Fund Near-Term Capital Program Cash flow from operations Dividend Reinvestment Plan Access to capital markets including: 15 10 5 Capital Program (including development costs & maintenance capital) Funds Generated from Operations Senior debt Hybrid securities and preferred shares Portfolio management including possible dropdowns to TC PipeLines, LP Potential further project recoveries At-The-Market (ATM) program, as appropriate 0 TCP is a key element of TransCanada s financial strategy
TC PipeLines Anticipates Future Dropdowns from TransCanada TCP is TransCanada s sole MLP vehicle Expect assets to be offered to the Partnership on a fairly methodical basis over time Natural gas pipelines well-positioned with access to multiple supply basins and large market centers Great Lakes to benefit from WCSB production through Mainline TBO contract Millennium connects Appalachian natural gas supply to New York City market ANR benefits from rate case settlement - includes $837 million of maintenance capital for reliability and modernization projects, reflected in its rates June 1 $765 million acquisition of 49.3% interest in Iroquois and TransCanada s remaining 11.8% interest in PNGTS
Substantial North American Natural Gas Resource WCSB 2017-1,018 Tcf 2007-165 Tcf Reserve Estimate 2017 2007 Rockies / San Juan 2017-497 Tcf 2007-299 Tcf Mid-Continent / Permian 2017-454 Tcf 2007-274 Tcf Appalachian 2017-991 Tcf 2007-207 Tcf Gulf Coast 2017-591 Tcf 2007-339 Tcf Reserve Estimates in the WCSB and Appalachian Basin Have Grown Significantly Source: TransCanada, U.S. Energy Information Agency, U.S. Potential Gas Committee, various Canadian Regulatory Agencies and various Canadian Professional Organizations
Relationship to WCSB Historical cost base significantly more competitive than greenfield development WCSB is one of the lowest cost basins in North America Rolled-in economics Quicker access to market TransCanada s Mainline fully contracted for winter 2017/2018 moving gas to eastern markets Looking to expand capacity to offer increased transportation path for growing WCSB production Increasing production connected to our GTN, Northern Border and Great Lakes pipelines Creating opportunities for continued growth Continued growth and long-term sustainability of our pipelines
Natural Gas Production Estimates by Major Basins WCSB 2027 18 Bcf/d 2017 15 Bcf/d 2007 17 Bcf/d Rockies / San Juan 2027-10 Bcf/d 2017-10 Bcf/d 2007-13 Bcf/d Mid-Continent 2027 14 Bcf/d 2017 13 Bcf/d 2007 9 Bcf/d Daily Production 2027 2017 2007 Appalachian 2027 44 Bcf/d 2017 25 Bcf/d 2007 2 Bcf/d Permian 2027 10 Bcf/d 2017 6 Bcf/d 2007 4 Bcf/d * Note: the production figures represented here are not inclusive of all North American producing regions Gulf Coast 2027 24 Bcf/d 2017 21 Bcf/d 2007 23 Bcf/d TCP s pipeline assets benefit from growing production Source: TransCanada as at June 2017
Relationship to U.S. Northeast Gas Supply Marcellus / Utica strong gas supply growth TransCanada s strong incumbency position in U.S. Northeast driving opportunities for our pipeline systems Westward flows moving onto the Great Lakes and ANR systems Access to high quality storage Connections to large mid-west markets Eastward flows moving to Canada, New York and New England markets Access to PNGTS and Iroquois Strong winter markets High seasonal pricing Additional investment opportunities are expected to connect growing supply to market Increased natural gas at Dawn hub encouraging downstream expansion on pipelines such as PNGTS
Diversified Sources of Cash Flow 2017 Distributable Cash Flow * For Nine Months Ended Sep 30 Diversified cash flow base Eight pipelines in multiple markets includes recent acquisition of Iroquois pipeline interest 92% of cash flow from long-term contracts * Distributable Cash Flow is a non-gaap measure. Please see the reconciliation to net income in the appendix. Includes Iroquois cash distribution for three months ended June 30 and September 30 and pro forma cash distribution for three months ended March 31. Premium, geographically diverse natural gas pipeline network
Maintenance Capital $ Millions 70 60 50 40 30 20 TCP s share of maintenance capital expected to range between ~$50 million and $60 million in 2017 through 2019 Expenditures are the result of: Increased utilization due to higher natural gas flows Pipeline integrity work Capital spend expected to become part of rate base and earn a return on and of capital 10 0 2017E 2018E 2019E Maintenance capital expected to be recovered in future rate cases
Strong and Diverse Customer Mix Transportation Customers by Credit Quality * 73% 19% 8% Investment Grade Non-investment Grade Unrated Diverse customer mix includes utilities, large producers, marketers and power generators * As of June 2017
Solid Financial Position Investment grade credit ratings Solid capital structure Indicative of quality assets within portfolio Recent reaffirmation of credit ratings; Baa2/Stable from Moody s and BBB-/Stable from S&P Liquidity and flexibility Credit facility of $500 million; $270 million available as at December 1, 2017 Right to request increase in credit facility by $500 million Closed $500 million 10-year public debt offering at 3.90% on May 25, 2017 Solid distribution coverage
TC PipeLines, LP Value Attributes What we have Broad geography Multiple basins Aggregation of supply WCSB and Marcellus/Utica supply our significant pipelines Historic cost base vs expensive new builds What this means Not dependent on one field, basin, market or producer Competitive supply growth Rolled in gathering and transportation costs Benefit of lower Canadian dollar for Canadian natural gas Our assets are more competitive in all of our markets Well positioned in the market
TC PipeLines, LP Value Attributes What we have Ship or pay contracts What this means No commodity risk Very little volume risk Diversified, creditworthy customer base LDCs, utilities, major producers Minimal counterparty exposure Revenue security Last mile advantage Minimal bypass risk Enduring contracts and value creates long-term value
Well Positioned for Growth Stable cash flow from pipeline asset base Reliable and resilient infrastructure Disciplined investment approach Execute business opportunities within our footprint with focus on long-life critical energy infrastructure Develop or acquire assets that provide stable cash distributions with a low-risk profile Growth opportunities Dropdowns from TransCanada Organic growth / recontracting opportunities Additional contracting on GTN of ~600 MMcf/d to 2020 from planned upstream pipeline expansions TransCanada s 10-year Mainline TBO contract on Great Lakes for 700 MMcf/d Portland XPress Project expected to expand the pipeline s capacity to ~0.3 Bcf/d Third party acquisitions Current portfolio Pipeline System TC PipeLines, LP Ownership (%) Bison 100 GTN 100 Great Lakes 46.45 Iroquois 49.3 North Baja 100 Northern Border 50 PNGTS 61.7 Tuscarora 100
TC PipeLines, LP Investment Proposition Track Record of Growing Cash Distributions 18 consecutive years of distribution increases 6% increase in quarterly distribution in July, 2017 With anticipated growth, expect future distribution increases Low-Risk Energy Infrastructure Assets Diverse portfolio of FERC-regulated interstate natural gas pipelines Substantially backed by long-term, ship-or-pay contracts with strong counterparties Investment grade credit ratings Growth Opportunities MLP of industry leader TransCanada Corporation Dropdowns from TransCanada and organic expansions provide future growth opportunities Core holding for long-term investors
Appendix
Third Quarter 2017 Financial Results (unaudited, millions of dollars except per common unit amounts) Three months ended 30-Sep 2017 2016 Net income attributable to controlling interests 54 58 (a) Net income per common unit basic and diluted (b) $0.61 $0.65 (c) Cash distributions paid (74) (65) Class B distributions paid - - Cash distributions declared per common unit $1.00 $0.94 EBITDA (d) 103 102 (a) Distributable cash flow (d) 65 69 (a) Weighted average common units outstanding (millions) (e) 69.4 66.1 Common units outstanding, end of period (millions) (e) 69.6 66.6 (a) (b) (c) (d) (e) Recast information to consolidate PNGTS for all periods presented as a result of additional 11.81 percent in PNGTS that was acquired from TransCanada on June 1, 2017, increasing the Partnership s ownership interest in PNGTS to 61.71 percent. Prior to this transaction, the Partnership owned a 49.90 percent interest in PNGTS that was acquired from TransCanada on January 1, 2016. Net income per common unit is computed by dividing net income attributable to controlling interests, after deduction of net income attributable to PNGTS former parent and amounts attributable to the General Partner and Class B units, by the weighted average number of common units outstanding. Net income per common unit prior to recast. EBITDA and Distributable cash flow are non-gaap financial measures. The reconciliations of these measures to the most directly comparable GAAP measure, Net Income, are available on our website under the supplemental schedules published as part of our third quarter earnings release. Under the ATM program, the Partnership issued 622,241 and 2,165,162 units during the three and nine months ended September 30, 2017, respectively.
Third Quarter 2017 Financial Results (unaudited, millions of dollars) Three months ended 30-Sep 2017 2016 (a) Transmission revenues 100 103 Equity earnings from unconsolidated affiliates 27 22 Operating, maintenance and administrative (24) (23) Depreciation (25) (24) Financial charges and other (23) (18) Net income 55 60 Net income attributable to non-controlling interest (1) (2) Net income attributable to controlling interests 54 58 (a) Financial information was recast to consolidate PNGTS for all periods presented as a result of the additional 11.81 percent in PNGTS that was acquired from TransCanada on June 1, 2017, increasing the Partnership s ownership interest in PNGTS to 61.71 percent. Prior to the recast, net income attributable to controlling interests was $58 million reflecting our 49.90 percent ownership in PNGTS. After the recast, which reflects our 61.7 percent ownership in PNGTS, net income attributable to controlling interests was the same at $58 million as the reconciling item of net income attributable to PNGTS former parent, reflecting the 11.81 percent interest not then owned by the Partnership, was only $ nil million for the three months ended September 30, 2016.
TC PipeLines, LP Unit Performance 90.00 80.00 70.00 13% Average Annual Return 60.00 50.00 40.00 30.00 20.00 10.00 0.00 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 * Assumes initial investment at May 25, 1999; distributions reinvested on payment date
North American Natural Gas Demand Bcf/d 140 120 History Forecast 100 80 60 Electric Generation Industrial 40 Commercial 20 Residential 0 Pipe/Plant Fuel 2005 2010 2015 2020 2025 2030 Source: TransCanada 27 Bcf/d of demand growth over the next decade driven by LNG exports, gas-fired power generation and industrial demand
Regional Demand Growth Over the Next Decade Natural gas demand forecast to grow significantly Across the spectrum, including LNG along the Gulf Coast and potentially in British Columbia Opportunity for TransCanada and TC PipeLines to provide a seamless connection along our pipelines to growing markets Gulf Coast Central and Northeast U.S. West coast Mexico Growing market demand creates opportunities for growth All in Bcf/d Source: TransCanada
West Coast Pipelines (100% TCP Ownership) Stable, consistent financial position Revenues underpinned by long-term, ship-or-pay contracts GTN: substantially supported by long-term contracts through 2023 North Baja: contracts maturing between 2022 and 2031 Tuscarora: fully contracted through 2020 Potential growth from power generation, LNG export and delivery of natural gas into Mexico TransCanada s NGTL expansion plans create downstream opportunities for GTN without need for extensive capital outlay Additional contracts of ~600 MMcf/d expected to step up between 2018 and 2020
Mid-West: Northern Border and Bison (50% and 100% TCP Ownership respectively) Northern Border Revenues substantially contracted Ongoing success in longer-term contract renewals Reached a settlement-in-principle with shippers; expects to file with FERC in early December 2017; not expected to have a material financial impact to TCP Recent S&P rating affirmation of corporate credit rating at BBB+; outlook revised to positive from stable Emerging Bakken shale play creates valuable opportunities Bison Revenues fully contracted through January 2021 Ship-or-pay contracts paid for transportation service regardless of volume of natural gas shipped Assessing future opportunities post initial contract expiration in 2021
Mid-West: Great Lakes (46.45% TCP Ownership) Critical regional infrastructure Shorter-term, short-haul and bi-directional contracts Gas storage interconnections with total regional storage capacity of ~650 Bcf Competitive path for WCSB natural gas volumes in a changing market environment Long-term transportation agreement with TransCanada s Mainline to transport 711,000 Dth/d for 10-year contract period; associated with the Mainline s new long-term fixed price service Commenced November 1, 2017 Filed rate settlement with FERC 27% rate reduction expected to be more than offset by revenues from increased contracting Provide long-term rate stability Positioned for future WCSB growth and potential TransCanada Mainline expansion Opportunities with Marcellus and Utica gas
U.S. Northeast: PNGTS (61.7% TCP Ownership) FERC-regulated interstate natural gas pipeline Operated by TransCanada Steel-in-the-ground advantage and a critical link in meeting New England and Atlantic Canada s energy needs Supported by long-term contracts Well positioned for expansion Portland XPress Project (~$80 million) to proceed concurrent with upstream capacity expansions on TransCanada s Canadian pipelines Signed Precedent Agreements with several LDCs in New England and Atlantic Canada to renew expiring capacity and expand the system up to 0.3 Bcf/d; subject to regulatory approvals Project in-service dates are being phased in over a three-year period beginning November 1, 2018
U.S. Northeast: Iroquois (49.3% TCP Ownership) FERC-regulated interstate natural gas pipeline Transports gas from a number of supply areas: WCSB via TransCanada s Mainline Marcellus via various pipeline interconnects Dawn hub Key market connections into New York City Serves LDCs and electric power plants Strategically positioned to transport Marcellus gas Potential expansion opportunities Supported by long-term contracts 98% investment grade rated based on Iroquois top ten customers on a firm transportation basis Rate certainty to September 2020 TransCanada holds nominal ownership of 0.7% and Dominion Midstream holds a 50% interest
TransCanada s ANR Pipeline System One of the largest FERC-regulated interstate natural gas pipeline systems in the U.S. Owns significant capacity in strategic natural gas storage facilities in Michigan Wholly owned by TransCanada Transports natural gas from Texas and Oklahoma on its southwest leg to the upper midwest and bi-directional between the Gulf of Mexico / Louisiana and the upper midwest on its southeast leg Approximately 2.0 Bcf/d of long-term contracts at maximum rates on southeast portion of system ANR benefits from rate case settlement which includes $837 million of maintenance capital for reliability and modernization projects reflected in ANR s rates Key connection to Great Lakes and other of TransCanada s Canadian pipelines
TransCanada s Columbia Pipeline Network Competitively positioned over Appalachian basin 96% of revenues are derived from firm transportation contracts TCO Pool TCO pool provides access to liquid trading hub Columbia Gas Transmission Strong base business undergoing significant expansion to connect growing Marcellus/Utica supply Columbia Gulf Transmission System reversal and expansion offers path to the Gulf Coast Millennium Pipeline (47.5% interest) Connects Pennsylvania supply to New York market Midstream Business State-regulated pipelines and mineral rights
TransCanada s Keystone XL Project In Development Bullet pipeline design providing direct access to the U.S. Gulf Coast Competitive tolling NEB approval received Keystone XL Keystone Patoka Wood River U.S. permits progressing U.S. Presidential Permit received Montana and South Dakota state approvals received Nebraska state approval received and under review Commercial support expected Cushing Houston Lake Charles Port Arthur Subject to Final Investment Decision Expect to begin construction in 2018 Construction expected to take approximately two years
Partnership Profile December 2017